Statkraft AS Annual Report 2017 CONTENT
4 About Statkraft 4 Letter from the CEO 5 Statkraft in facts and figures 7 Power plants and district heating plants 8 Statkraft around the world
9 Report from the Board of Directors 9 The Board of Directors of Statkraft 10 Report from the Board of Directors 34 Declaration from the Board and CEO 35 Statkraft Group Management
36 Corporate Governance
44 Financial Statements 44 Group Financial Statements 45 Statement of Comprehensive Income 46 Statement of Financial Position 47 Statement of Cash Flow 48 Statement of Changes in Equity 50 Notes
100 Statkraft AS Financial Statements 101 Income statement 102 Statement of Financial Position 103 Statement of Cash Flow 105 Notes 123 Auditor’s Statement
130 Corporate Responsibility Statement 131 Social disclosures 134 Environmental disclosures 137 Economic disclosures 140 Auditor’s Statement
141 Alternative performance measures
144 Key figures
Highlights of 2017: Official openings of Ringedalen hydropower plant in Norway and Andershaw wind farm in UK. The annual Statkraft conference and the international Exchange conference gathered Norwegian and international executives. Statkraft and Norfund agreed to swap shares in the jointly owned international hydropower assets. Continuous dialogue with stakeholders was upheld, like in Turkey where downstream impacts were discussed with local farmers. A new outlet from Nedre Røssåga hydropower plant has given new life to areas that have been dry for 60 years. Statkraft and Södra decided to build a demonstration plant for advanced biofuel, through their joint venture Silva Green Fuel.
3 STATKRAFT AS ANNUAL REPORT 2017 Letter from the CEO
Another year with record high global growth within renewable In line with our strategy, we are about to complete the exit energy has passed. Global climate challenges have forced from offshore wind through the divestment of the wind farms technological, economic and political changes that together Sheringham Shoal and Dudgeon and the two projects Dogger contribute to this growth and create great business Bank and Triton Knoll. These transactions significantly improve opportunities. our investment capacity.
Founded on Norwegian nature and clean hydropower, After 15 years of cooperation, Statkraft and Norfund have Statkraft is well positioned to take part in this development and agreed to proceed separately. For Statkraft, this means further to significantly contribute to the realisation of the climate development of generation assets in South America and South related UN Sustainable Development Goals. A profitable and Asia within hydro, wind and solar power, well adapted to local eventful 2017 gave further contributions to a solid foundation market conditions and supported by own market operations. for growth. Statkraft’s owner issued a new long-term dividend expectation 2017 was characterised by significant management and which entails that Statkraft will pay a dividend of 85 per cent of employee engagement and proactive attitude towards health realised profit from Norwegian hydropower activities and 25 and safety. Our commitment towards caring for people, which per cent of realised profit from other business activities. This is at the core of Statkraft’s culture, has been reinforced. The change is positive for the strategic development of Statkraft operational performance was good in 2017, but we had too and will improve the predictability and investment capacity in low availability for some of the power plants. the years to come.
In 2016 we introduced a performance improvement Based on these developments, Statkraft has started a process programme to reduce costs and improve efficiency. The to revise our strategy and investment plans. Our commitment programme has realised substantial cost savings in 2017 and I to act in a sustainable, ethical and socially responsible manner am confident that we will reach the target of NOK 800 million will continue to be a foundation for our strategy. In the years to in reduced annual costs. The success of the programme is come, I expect Statkraft to play an even stronger role in the based on high involvement of employees. transition to a low-carbon future and increased electrification of societies based on green, smart and profitable energy In the Nordics, we are reinvesting in our hydropower assets to solutions. safeguard the value and flexibility of these plants. At the same time, Statkraft eyes new business opportunities like advanced biofuel, hyperscale data centres and charging infrastructure for electrical vehicles.
Another key priority for us is to successfully deliver the construction of the Fosen project, Europe’s largest onshore wind project to date, in a socially responsible manner and on Christian Rynning-Tønnesen time and budget. President and CEO
STATKRAFT AS ANNUAL REPORT 2017 4 Statkraft in facts and figures
Statkraft in facts and figures shows that the Group delivered strong results from operations. Statkraft’s power generation was back to a more normal level after record high generation in 2016. Higher Nordic power prices and contribution from market activities were the main drivers behind the increase in both the underlying EBITDA and the ROACE.
Significant gains from transactions further contributed to a solid profit before tax for the year. In accordance with the strategy, the project activity level has been scaled down in recent years and this was reflected in the level of investments for the year.
Statkraft had no fatal accidents or serious environmental incidents in 2017, but there was a slight increase in the TRI-rate.
Power generation (TWh) Statkraft’s production is determined by production capacity, demand, access to resources (hydrological balance and wind), spark spread (margin between power and gas price) and 62.6 66.0 energy management. In 2017 the Group’s power production was at a normal level and totalled 62.6 TWh, plus 1.1 TWh of 2017 2016 district heating.
Serious environmental incidents Injuries (per million hours worked)
0 0 5.2 4.9 2017 2016 2017 2016
There were no serious environmental incidents in the Group in In 2017 there were no fatal accidents in relation to work for 2017. However, 187 minor environmental incidents were Statkraft. 48 serious incidents (incidents with, or with the registered (233 for 2016). Most of the minor environmental potential for, serious consequences) were registered (1 and incidents in 2017 were related to minor breaches of emission 40 for 2016, respectively). The indicator for total recordable regulations for biomass plants and minor oil spills to water and injuries (TRI) per million hours worked was 5.2 in 2017, an ground with little or no impact on the environment. increase of 6% compared to 2016.
5 STATKRAFT AS ANNUAL REPORT 2017 ROACE, underlying (per cent) The Group had a return on average capital employed (ROACE) of 10.5% in 2017, 2.2 percentage points higher than in 2016. The improvement was primarily related to higher operating profit, mainly due to higher Nordic power 10.5 8.3 prices and increased contribution from market activities.
2017 2016 X EBITDA, underlying (NOK billion) Capital employed (NOK billion) ion)
14.4 12.7 104.0 101.1 2017 2016 2017 2016
EBITDA (operating profit before interest, tax, depreciation and Capital employed was NOK 104.0 billion in 2017, an increase amortisation) was NOK 14.4 billion in 2017, an increase of of NOK 2.9 billion compared to 2016. NOK X1.7 billion compared to 2016. The increaseX in EBITDA X from 2016 was primarily related to higher Nordic power prices and higher contribution from market activities.
Profit/loss before tax (NOK billion) Investments (NOK billion)
15.7 5.2 3.9 5.7 2017 2016 2017 2016
In total, the Group invested NOK 3.9 billion in 2017. The Group’s financial result was NOK 15.7 billion in 2017, Approximately half of the total investments were made in an increaseX of NOK 10.5 billion compared to 2016. Gains new generatingX capacity, predominantly related to the from divestmens and positive unrealised value changes from Fosen onshore wind farms in Norway and the Devoll energy derivatives were the main drivers of the increase. hydropower plants in Albania. Maintenance investments were primarily made in connection with hydropower in the Nordic region.
Cash flow from operations (NOK billion) Net interest bearing debt (NOK billion) Cash flow from operations (NOK billion) FFO/Net debt 8.4 8.4 24.8 32.5 2017 2016 2017 2016
Higher taxes paid in 2017 offset the increase in underlying Net interest bearing debt totalled NOK 24.8 billion at the end EBITDA.X Thus, cash flow from operations was NOK 44 million of the yearX compared to NOK 32.5 billion at the beginning of higher than in 2016. the year.
STATKRAFT AS ANNUAL REPORT 2017 6 Power plants and district heating plants
c Pro-rata1 Consolidated power plants c POWER GENERATION No. of plants Capacity (MW) No. of plants Capacity (MW)
c Hydropower 331 15 656 261 14 099
Norway 231 12 899 170 11 612
Sweden 59 1 267 59 1 267
Germany 10 262 10 262
UK 3 49 3 49
Albania 1 72 1 72
Turkey 2 122 2 122
Brazil 10 159 5 155
Peru 9 442 9 442
Chile 3 213 1 57
Nepal 1 34 1 60
India 2 136 - -
Wind power 15 991 12 947
Norway 3 245 3 245
Sweden 4 546 4 546
Brazil 4 98 4 120
UK 4 103 1 36
Gas power 5 2 390 5 2 390
Germany 5 2 390 5 2 390
Bio power 2 43 2 43
Germany 2 43 2 43
Total power generation 353 19 080 280 17 478
No. of No. of DISTRICT HEATING Capacity (MW) Capacity (MW) locations locations Norway 13 625 13 671
Sweden 4 164 4 164
Total district heating 17 789 17 835
1) Statkraft equity share in all power plants (pro-rata share of direct and indirect ownership), including those in partly-owned companies
7 STATKRAFT AS ANNUAL REPORT 2017 Statkraft around the world
TOTAL NUMBER OF POWER PLANTS/ STATKRAFT’S CAPACITY SYMBOLS: FACILITIES = Hydropower Power Power = Wind power generation 353 generation 19 080 MW = Gas power District District = Bio power heating 17 heating 789 MW = District heating
=Trading and origination
NORWAY 13 769 MW
SWEDEN 1 977 MW
THE NETHERLANDS
UK 152 MW GERMANY 2 694 MW
FRANCE TURKEY 122 MW
USA San Francisco ALBANIA 72 MW NEPAL 34 MW
BULGARIA SERBIA
INDIA 136 MW
PERU 442 MW
BRAZIL 257 MW CHILE 213 MW
Statkraft can trace its origins back to 1895, and has developed The overview of consolidated plants shows the capacity of the from a national company, focused on developing Norwegian plants that Statkraft fully consolidates in its financial reporting hydropower resources, into an international company diversifying according to IFRS. The difference between consolidated capacity also into other sources of renewable energy. Today, with a total and direct ownership (the pro-rata columns in the table) is mainly consolidated power generation of 63 TWh in 2017, Statkraft is the due to Statkraft’s investments in the companies BKK and Agder second largest power generator in the Nordics and Europe’s Energi, all classified as equity accounted investments according to largest supplier of renewable energy. IFRS.
The Group’s 353 power plants have a total installed capacity of 19 080 MW (Statkraft’s share). Hydropower is still the dominant technology, followed by natural gas and wind power. Most of the installed capacity is in Norway. Statkraft also owns shares in 17 district heating facilities in Norway and Sweden with a total installed capacity of 789 MW.
STATKRAFT AS ANNUAL REPORT 2017 8 The Board of Directors of Statkraft
From the left: Vilde Eriksen Bjerknes, Halvor Stenstadvold, Ingelise Arntsen, Asbjørn Sevlejordet, Thorhild Widvey, Peter Mellbye, Bengt Ekenstierna, Hilde Drønen and Thorbjørn Holøs
Thorhild Widvey Halvor Stenstadvold Hilde Drønen Born 1956, Norwegian Born 1944, Norwegian Born 1961, Norwegian
Member since: 2016, chair of the board Member since: 2003, vice chair of the board Member since: 2014, board member Member of the Compensation Committee Chair of the Audit Committee Member of the Audit Committee Current board positions: Board member: Kværner, Main work experience: Orkla: EVP. Oslo Stock Current board positions: Board member: DOF Subsea Pacific Lutheran University in Tacoma. Exchange, Borregaard, Orkla Media, The Research and various subsidiaries in the DOF ASA Group. Main work experience: Minister of Culture. Council of Norway: chair. The Ministry of Government Main work experience: DOF ASA: CFO (present). Minister of Petroleum and Energy. Administration and Consumer Affairs: State secretary. Bergen Yards AS (today Bergen Group ASA): CFO. The Ministry of Foreign Affairs: State Secretary. Møgster Group: various positions. The Minister of Fisheries: State Secretary.
Peter Mellbye Bengt Ekenstierna Ingelise Arntsen Born 1949, Norwegian Born 1953, Swedish Born 1966, Danish
Member since: 2016, board member Member since: 2016, board member Member since: 2017, board member Member of the Compensation Committee Current board positions: Chair: Wrams Gunnarstorp Member of the Audit Committee Current board positions: Chair: Wellesley petroleum, Castle. Board member: Adamsson Kommunikation. Current board positions: Board member: Export Credit Otovo. Board member: TechnipFMC, Qinterra, Main work experience: Beken: Senior advisor Norway, Nammo. Chair of the nomination committee of Competentia, Halfwave, Resoptima. (present). Several CEO positions within E.ON Group; Innovation Norway. Main work experience: Statoil: EVP. Norwegian E.ON ES, E.ON Gas, Sydkraft Bredband and Baltic Main work experience: Aibel: EVP. Sway Turbine: CEO. Export Council, Norwegian Ministry of Trade Cable. Sydkraft Elnät: COO. Statkraft: EVP. Arthur Andersen Business Consulting/ and Commerce: various positions. Bearing Point: Director: Sogn og Fjordane Energiverk: CEO. Kværner Fjellstrand: CFO and various positions.
Vilde Eriksen Bjerknes Thorbjørn Holøs Asbjørn Sevlejordet Born 1975, Norwegian Born 1957, Norwegian Born 1960, Norwegian
Member since: 2014, employee-elected board member Member since: 2002, employee-elected board member Member since: 2014, employee-elected board member Employee in Statkraft since: 2001 Member of the Audit Committee Member of the Compensation Committee Current work position: Statkraft: Vendor Manager IT. Employee since: 1976, Skagerak Energi Employee in Statkraft since: 1978 Current board positions: Chair: EL og IT Forbundet Current work position: Statkraft: Head union Vestfold/Telemark. Vice chair: LO/Grenland representative, Mechanical maintenance worker. Current work position: Skagerak Energi: Head union representative.
9 STATKRAFT AS ANNUAL REPORT 2017 Report from the Board of Directors
Statkraft had a solid underlying EBITDA of NOK 14.4 billion in 2017, an increase of 14% from 2016. The increase was driven by higher Nordic power prices and contribution from market activities. The power generation returned to a more normal level from the record high level seen in the preceding year. 2017 was positively influenced by significant gains from transactions, and profit before tax ended at NOK 15.7 billion and a net profit of NOK 11.7 billion was recognised.
STATKRAFT AS ANNUAL REPORT 2017 10 Key points Higher Nordic power prices and contribution from market activities drives underlying performance Significant gains from divestments boosts net profit New dividend expectation and exit from offshore wind improve investment capacity
Health, safety and environment performance improvement programme is currently being undertaken to strengthen competitiveness. A key objective is to To act in a sustainable, ethical and socially responsible manner is improve performance and reduce controllable costs by 15% by the a foundation for Statkraft’s strategy and the company works end of 2018, compared with the actual cost levels in 2015. continuously towards the goal of zero injuries and avoiding Substantial cost reductions have already been achieved, providing environmental incidents. confidence that the target of NOK 800 million will be reached.
Statkraft works systematically to avoid injuries and damage in all Statkraft is close to completing the exit from offshore wind. The activities. All serious incidents are subject to investigation and offshore wind activities have been profitable, but further results from these are used to facilitate and transfer learning development would have required a larger financial capacity than across the organisation. In 2017 there were no fatal accidents in Statkraft currently has. The exit will allow for stronger focus on relation to work for Statkraft. other renewable energy sources in the future. The Group experienced no serious environmental incidents in 2017. During the last 15 years, Statkraft and Norfund have developed hydropower in emerging markets through the joint venture SN Values Power. SN Power is currently focusing on selected Southeast Asian markets, Africa and Panama. In 2017, this cooperation was The values shall govern Statkraft’s actions as a business and concluded through an asset swap whereby Statkraft acquired provide guidance for the employee conduct: Norfund’s minority position in Statkraft’s activities in South Competent. Use knowledge and experience to achieve America and India/Nepal, whilst Norfund acquired Statkraft’s 50% ambitious goals and to be recognised as a leader. share in SN Power. The transaction provides Statkraft with a Responsible. Create value, whilst showing respect for employ- stronger geographical focus on selected regions and is part of the ees, customers, the environment and society. strategy to build industrial scale in international operations. Innovative. Creative thinking, identify opportunities and develop effective solutions. Changing markets The global demand for electricity is increasing, primarily driven by These core values apply to all employees and others who economic growth in emerging markets. Traditionally, fossil fuels represent Statkraft. have dominated the electricity sector in most countries. However, the share of renewables is growing, and more than half of the new Strategy generation capacity is expected to be based on renewable Statkraft has its headquarters in Oslo, Norway, and has grown technologies in the coming decade. A key driver for the growth in from being a supplier of energy to Norwegian industry and general renewable technologies is reduced costs for solar and wind consumption to become Europe's largest generator of renewable power, which make these technologies increasingly competitive energy, with a presence in several international markets. Statkraft compared with conventional ones. has established hydropower generation positions in Europe, South America and India/Nepal, wind power generation in the Nordic In 2015, the process towards a global response to climate change market, the UK and Brazil, and gas power in Germany. Statkraft took a major step forward with the Paris Agreement, which aims to expand the portfolio to include more wind and solar power, introduced voluntary greenhouse gas emission obligations for as well as hydropower. Statkraft has a strong position within nearly all countries, including emerging economies. Whilst the market operations in Europe, and has also trading activities in current US administration has announced its intention to step out Brazil and India. Statkraft is an important partner for the of the agreement, the commitment is strong in all other parts of Norwegian power-intensive industry and a significant player within the world. The EU is planning to strengthen the European district heating. emission trading system, and China is gradually taking a leading role on the international scene. Meeting the Paris obligations will Foundation for profitable growth require a higher use of renewable energy, so whilst only a few Falling technology costs and an increasing deployment of solar countries dominated the renewables scene up to a few years ago, and wind power with very low marginal costs have had a large renewable solutions are now a major part of investments and impact in many energy markets. Most markets are characterised energy policy in all markets. by an increasingly competitive environment where new players and new business models are entering the sector. In order to The competition in the power sector is increasing. Competitive adapt to new market conditions and provide a basis for further auctions are more frequently used to contract new capacity, and growth, a main focus for Statkraft is to consolidate activities in the modular nature of solar energy is increasingly paving the way order to improve performance and competitive strength. A for distributed power generation. Around 50% of the global solar
11 STATKRAFT AS ANNUAL REPORT 2017 capacity added over the next five years is expected to be solar generators and is currently a leading player within this field distributed. In addition, low cost IT systems have accelerated the in Germany, the UK and the Nordic market. pace of innovation related to consumer-centric business models, and more specialised players have emerged within the distributed Attractive positions in growth markets energy value chain. This is challenging the business model of Statkraft has succeeded in establishing positions in several traditional utilities, which need to increase cost efficiency and markets with high power consumption growth, and where adapt to the new market conditions in order to remain competitive. renewable energy is expected to cover a major part of this growth.
Statkraft’s competitive position Strategic focus areas Unique hydropower assets Statkraft’s ambition is to strengthen its position as a leading Statkraft’s power plants have low variable costs and long international supplier of renewable energy. The strategy for each lifespans. The average production cost for the European strategic focus area is outlined below. hydropower assets is well below the cost of other conventional technologies. These plants are highly flexible and have a total European flexible generation hydro reservoir capacity of about 40 TWh, equating to 23% of the European flexible generation consists of the majority of the total European reservoir capacity. Based on solid market Group’s hydropower business in the Nordic region, continental knowledge and integrated business processes, the power plants Europe and the UK, as well as gas fired power plants in Germany. enable Statkraft to optimise power generation in relation to short, Statkraft will operate, maintain and develop its existing medium and long-term price fluctuations in the power market. hydropower portfolio to maximise the long-term value of the assets. A considerable share of the Nordic hydropower plants are Statkraft is a major hydropower generator and has expertise in ageing, and large reinvestments are planned to safeguard the key technical disciplines, especially within operation and quality and value of these plants. maintenance. The Group is a large buyer of electro-mechanical hydropower equipment, providing opportunities for economies of Market operations scale. Statkraft has considerable upgrading activities, in which the The European power market is undergoing major changes and company has broad experience and comprehensive expertise. new specialised companies are entering other parts of the value chain with new value propositions to the customer. In the future, Strong wind power position Statkraft expects to see changes in the value chain with Statkraft is the largest owner and operator of wind power increasing requirements to remain competitive. Statkraft does not generation facilities in the Nordic region and has substantial have large end-customer activities, but in the UK and Germany experience within development, construction and operation of Statkraft is testing business models within electricity retail and wind power plants. Statkraft also has wind power assets in the UK distributed energy. Statkraft intend to increase the company’s and in Brazil. energy trading activities and explore new business opportunities in a changing European market. Statkraft also aims to develop Integrated business model and market expertise market operations in selected international markets where it owns Statkraft has extensive experience from deregulated European assets. power markets and has developed leading expertise within market analysis, production optimisation of flexible power plants and International power energy trading. Statkraft has a comprehensive system for Statkraft has restructured the Group's international power collection and processing of hydrological and other market data in activities and established integrated operations for the activities in the European power market. Efficient data collection, models, Southeast Europe, South America and India/Nepal. The objective systems and processes to prepare forecasts and utilise market of this is to exploit the Group's competitive advantage in variations provide important competitive advantages. Statkraft has operations, maintenance, power optimisation and energy trading. an integrated business model whereby market analyses form the Statkraft will focus on profitable growth and achieving scale in basis for maintenance planning, power optimisation and market selected markets which will enable effective deployment of operations, both in the short and the long term. The purpose of Statkraft’s core capabilities. Investments in hydropower, onshore this is to utilise Statkraft's market expertise in combination with the wind and solar power will be evaluated. flexibility of the power plants to maximise generation when power prices are high. Wind power Statkraft has an attractive position within onshore wind power in Statkraft's market presence in Continental Europe and the UK the Nordics and in the UK. A key priority is to successfully deliver provides market information and insight which is important also in the construction of the Fosen project, Europe’s largest onshore order to understand power prices in the Nordics, as the markets wind project to date, on time and within budget. The focus going are becoming increasingly connected. The international position is forward is to ensure excellence in operations and maintenance of therefore important in order to optimise Norwegian and Swedish wind farms. hydropower plants. District heating Statkraft has developed a market-oriented organisation with broad Statkraft delivers more than 1 TWh per year from 13 locations in experience from deregulated markets. Within market operations, Norway and four in Sweden. Statkraft will continue to develop the Statkraft has demonstrated that the company is able to adapt to profitability of the existing portfolio and expand deliveries from changes in market conditions. Statkraft has established a existing plants in Norway and Sweden. significant position within market access services for wind and
STATKRAFT AS ANNUAL REPORT 2017 12 New business development in Norway compared with 2016. The average spot price (base) for 2017 was Statkraft is exploring commercial opportunities arising from the 34.2 EUR/MWh, 18% higher than in 2016, and almost on par with energy transition to reduce greenhouse gas emissions in Norway. the average in 2012-2016. The transport sector emissions will need to be reduced significantly. Two of Statkraft’s initiatives are focused on this area. The power prices in the UK increased in 2017 compared with Statkraft and Agder Energi hold a majority ownership share in the 2016 due to higher fuel prices. The power prices increased less fast charger operator Grønn Kontakt. In a partnership between than the fuel prices. This was mainly due to a strong growth in Statkraft and Södra, Silva Green Fuel is developing a renewables production in 2017. The average spot price (base) for demonstration plant for industrial scale production of second 2017 was 51.7 GBP/MWh, 5% higher than in 2016 but 5% lower generation biofuels. Initially, the plant will use feedstock from the than the average in 2012-2016. The pound sterling continued to forestry industry, but all biodegradable material may potentially be weaken against the euro and was on average 7% weaker used. Statkraft is also facilitating establishment of hyperscale data compared with 2016. centres in Norway. Power consumption in the Nordic region is relatively high per capita compared with other European countries. This is due to a In addition to these focus areas, Statkraft is also an active owner combination of cold winters, high share of electrical heating and a of regional energy companies in Norway and will support relatively large percentage of power intensive industry. The development of sustainable energy solutions and value creating demand for power in 2017 was slightly higher than in 2016, both in restructuring processes. Norway and the Nordic region. Total generation was 148 TWh in Norway, on par with 2016. The total generation in the Nordic Power markets and generation region was up 2% to 398 TWh. Norway had a net export of power Most of Statkraft’s power generation is in the Nordic region where corresponding to about 10% of generation, while the Nordic region 88% of the generation took place in 2017. In addition, the Group overall had a net export of about 3%. has consolidated generation1 in Germany, the UK, Turkey, Albania, Brazil, Peru, Chile and Nepal. Statkraft is also involved Other power markets through associated companies and joint ventures in several of The generation mix of the Turkish power system remains these countries. dominated by gas and coal producers. The power price for base- load was 164 TRY/MWh in 2017, which was an increase of 15% All these markets are influenced by global trends such as fuel compared with previous year. However, because of continuing prices, climate policies and climate change, lower costs for solar depreciation of the Turkish lira against the euro, the base-load and wind power and increasing potential for distributed energy. price decreased from 42 EUR/MWh in 2016 to 39.9 EUR/MWh in 2017. The European power market Power markets in Europe are influenced by stagnating demand The Albanian power generation remains fully based on and subsidy schemes. This has triggered considerable new hydropower. The hydrological year in the country and region was renewable capacity in markets where the demand has stagnated. very dry. Albanian power balance was dependent on the import of electricity, which for some period exceeded 75% of the local The average system price on Nord Pool for the year was power demand. Hence, the electricity was traded with a significant 29.4 EUR/MWh, 9% higher than in 2016 and close to the average premium against the markets in central Europe, resulting in price price for 2012-2016. Whereas the price of fuel and continental levels of 55-60 EUR/MWh. The expected launch of the Albanian power prices lifted the Nordic prices, the effect was partly offset power market in 2017 was postponed by the government to the by inflow approximately 7% above normal and a strengthened end of 2018. hydro balance, especially towards the end of the year. Due to low temperatures during the spring and delayed snow melting, the In Brazil, a dry hydrological situation led to significantly higher prices were relatively high during parts of April and May. Prices spot prices, averaging 323 BRL/MWh in 2017 (101 USD/MWh). fell towards the second half of the second quarter, due to a This was more than treble the average price in 2016 combination of high inflow and wind power generation. During the (94 BRL/MWh, 27 USD/MWh). Statkraft assets were negatively second half of the third quarter, the system price had a significant affected by the weak hydrology, with below average generation increase as Swedish nuclear power generation was low, at around resulting in a need to purchase power to meet contractual 50% of installed capacity at its lowest. While there were some obligations on long-term PPAs. spikes in the fourth quarter, due to a combination of low wind power generation and low temperatures, the overall price was The spot prices in Peru continued at low levels due to relatively low as a result of a strong hydrological balance. overcapacity and limited demand growth. The average price in 2017 of approximately 9.7 USD/MWh was more than German power prices increased in 2017, mainly driven by higher 10 USD/MWh lower than in 2016, by far the lowest on record. The fuel prices. Particularly January saw strong power prices as low production from Statkraft’s assets was, however, hedged at higher wind and cold weather coincided with reduced nuclear power prices. Economic and electricity demand growth expectations generation. For the year as a whole, power prices increased less remain conservative as a consequence of a slowdown in the than the marginal cost for coal and gas plants. This was mainly mining sector. due to a substantial increase in German wind power generation
1 Consolidated generation: The generation from investments which Statkraft fully consolidates in the financial statements.
13 STATKRAFT AS ANNUAL REPORT 2017 The dry hydrological situation in Chile improved somewhat during extensive analysis and generation expertise, this contributes to 2017, but reservoirs were still below normal levels. Despite consistent management of the Group’s water resources. The continued dry hydrological conditions, increasing penetration of Group has an advanced energy management process and aims to solar and wind power put pressure on the spot prices in the have generation capacity available in periods with high demand. Central Interconnected System. The average price for 2017 was Statkraft’s large reservoir capacity with a combination of seasonal 59 USD/MWh, slightly lower than for 2016 (61 USD/MWh), and and multiple-year reservoirs enable the Group to manage the significantly lower than in 2015 (91 USD/MWh). Statkraft’s water resources in a perspective spanning more than one year. generation was partially sold through long-term contracts at higher Accordingly, generation can be kept high in peak-price periods price levels. and lower in low-price periods.
Power prices in India increased almost 25% to around 43 USD/MWh in 2017, from 34 USD/MWh in 2016. The market faced increased demand combined with supply constraints due to shortages in coal supply during the second half of the year. This resulted in higher prices. The generation from Statkraft’s assets were mainly hedged for the wet season, but some additional value was extracted from the price increase.
Statkraft’s power generation Statkraft is the largest power generator in Norway and the second largest in the Nordic region. Statkraft is also Europe’s largest supplier of renewable energy.
Statkraft-owned generation capacity - direct and indirect ownership shares
Inflow above normal led to a strengthening of the Nordic hydrological resource situation during 2017. At year-end, the overall reservoir water levels in the Nordic region were 103% of the normal level. This corresponded to 86 TWh, which is 71% of the maximum reservoir capacity of 121 TWh.
In 2017, the Group’s power generation totalled 62.6 TWh (66.0 TWh), plus 1.1 TWh of district heating (1.1 TWh). Hydropower generation totalled 57.4 TWh, which was 6% lower than the record high level in 2016. Wind power generation increased by 15% from the preceding year. Gas power and bio power generation was unchanged. Statkraft’s generation is determined by capacity, demand, access to resources (hydrological balance and wind), spark spread 37.6 TWh (40.3 TWh) of the power generation was sold in the (margin between power and gas price) and energy management. spot market. This corresponds to 60% of the total generation in At the end of 2017, the consolidated installed capacity2 was 2017 (61%). 18 313 MW, with hydropower contributing 14 099 MW, gas power Statkraft is a major supplier to the power intensive industry. In 2390 MW, wind power 947 MW, bio power 43 MW and district 2017, the volume delivered under long-term contracts amounted heating was 835 MW. Furthermore, Statkraft has ownership to 21.7 TWh, 35% of total generation, of which the majority was interests in associated companies and joint operations with delivered to industries in the Nordic region. The high contract generation capacity. In total, the Group has ownership interests in coverage has a stabilising effect on Statkraft’s revenues. Most of plants with a total installed capacity of 19 080 MW power the contract volume for Nordic industries runs until 2021. generation and 789 MW district heating (Statkraft’s pro-rata share of direct and indirect ownership). In Norway, Statkraft is required to cede a share of the power generation to counties and municipalities where the power is The demand for power varies throughout the day and year, and produced, so-called concessionary power. Explained briefly, the the power markets are dependent on capacity that can be price for this power corresponds to the average production cost adjusted according to the demand. Statkraft has a large with a small margin, which is significantly lower than the market percentage of flexible generation capacity, and combined with price for power. The concessionary power volume amounted to 3.3 TWh (3.5 TWh) in 2017. This corresponds to 7% of the
2 Consolidated installed capacity: The capacity that Statkraft fully consolidates in the Norwegian hydropower generation in 2017. financial statements.
STATKRAFT AS ANNUAL REPORT 2017 14
15 STATKRAFT AS ANNUAL REPORT 2017 Statkraft’s activities
Key figures - consolidated operations
Statkraft European flexible Market International Wind District Industrial Other Group Group generation operations power power heating ownership activities items
Power production Installed capacity (MW) 5) 17 478 14 281 - 1 028 827 - 1 342 - - 1), 2), 3), 4) 1), 2), 3) 2), 4)
Production (TWh) 5) 62.6 50.4 - 4.5 2.2 - 5.4 - -
District heating Installed capacity (MW) 835 - - - - 697 138 4) - - Delivered volume (GWh) 1 045 - - - - 925 120 - -
End-user sales Energy delivered, through grid to end-user (TWh) 7.3 - - - - - 7.3 - - Volume delivered, to electricity customers (TWh) 15.5 - - - - - 15.5 - -
Income statement (NOK mill.) Net operating revenues, underlying 23 296 14 508 1 985 1 400 929 580 4 101 964 -1 170 EBITDA, underlying 14 432 10 151 1 070 418 447 326 2 443 -398 -25 Operating profit/loss, underlying 10 770 8 447 1 059 -350 81 155 1 868 -464 -25 Operating profit/loss 17 040 10 704 1 175 425 3 213 151 1 879 -480 -25
Balance sheet (NOK mill.) Total assets 169 183 58 533 375 27 108 8 165 3 510 25 449 16 241 29 803 Investments 3 895 1 170 199 967 512 137 886 23 1
1) Excluding Baltic Cable (600 MW). 2) Excluding pumped-storage hydropower. 3) Including Emden 4 and Robert Frank which are in cold reserve. 4) Skagerak Energi's share. 5) Includes the share of consolidated companies.
Based on the revised strategy, International hydropower changed is periodically reviewed and used as a basis for resource its name to International power from the start of 2017. allocation and key performance review.
The Group’s operating segments are in accordance with how the Areas not shown as separate segments are presented under the CEO makes, follows up and evaluates decisions. The operating heading Other activities. segments are based on the internal management information that
STATKRAFT AS ANNUAL REPORT 2017 16 European flexible generation European flexible generation is by far the largest segment meas- 60 GWh renewable energy annually. ured in terms of installed capacity, assets, net operating revenues Statkraft has entered into a new long-term sales contract with and results. The assets are generally flexible with the majority of Eramet in Norway. The contract run from 2021 to 2030 with a the capacity related to hydropower in Norway and Sweden. The total volume of 8 TWh. segment also includes plants in Germany, the UK and Baltic Increased need for flexibility in the German market and Cable - the interconnector between Sweden and Germany. improved outlook for future gas to power margin has led to a reversal of impairment of NOK 914 million for gas-fired power The segment’s revenues stem primarily from sales in the spot plants. market and from long-term contracts, mainly to power intensive It was decided to decommission the gas-fired power plant at industry in Norway. The segment also delivers concessionary Kårstø in Norway. power. Multiple-year reservoirs in Norway and the flexibility of the The Supreme Court concluded on the Sønnå Høy case with power plants enable optimisation of the power generation based the consequence that AS Saudefaldene is the taxable owner on the hydrological situation and power prices. Norwegian of the hydropower plant. The Supreme Court verdict led to a hydropower is therefore optimised over longer time periods than reversal of previously expensed payable income tax, resource one year. In order to mitigate risk in relation to uncertainty of rent tax, property tax and related interest. future prices and generated volumes, Statkraft hedges generation revenues through physical bilateral contracts and financial power Financial performance trading. The hedged percentage of generation varies with market Higher Nordic power prices, good energy management and development expectations and generation volumes. availability and lower property tax had a positive impact on the segment’s underlying EBITDA which increased by 7% The volume sold in the spot market can vary significantly between compared with 2016, to NOK 10 151 million. years, depending on the hydrological situation, e.g. inflow and reservoir filling, and generation optimisation decisions. The The segment’s underlying net operating revenues increased by management of multi-year reservoirs and flexible power plants NOK 322 million compared with 2016 despite 7% lower normally enable Statkraft to achieve a higher average price for the generation. The increase was primarily driven by higher Nordic power produced than other companies in Norway. The energy power prices. On average the Nordic system price was 9% management is measured through the key performance indicator higher than in 2016. While the segment had a record-high Norwegian hydropower generation in 2016, the generation was “Realised price margin Norwegian Hydropower”, which measures back to a more normal level in 2017. The lower Norwegian the volume weighted average price achieved by Statkraft hydropower generation was partly offset by higher generation in compared to the other producers in Norway. The results have Sweden. historically shown energy management performance to be approximately 5% better than the competitors over a rolling five- The segments total generation was 50.4 TWh in 2017 (54.4 year period. TWh), of which 47.6 TWh from the Nordic hydropower plants (51.6 TWh). 29.5 TWh, 59% of total generation, was sold in the Production costs in connection with hydropower are relatively low spot market. A large share of the generation is sold on long- in comparison with other types of power generation facilities. The term contracts and this has a stabilising effect on the segment’s low production costs are partly offset by higher tax rates for revenues. In 2017, contracted volume was 18.1 TWh, on par Norwegian hydropower generation through resource rent taxation with 2016 and corresponding to 36% of total the generation. of 34.3% in 2017 and relatively high property taxes in Sweden. To The remaining volume was concessionary sales at statutory ensure that Statkraft maintains its long-term competitiveness, prices. costs are followed up through benchmarking and key performance indicators measuring cost per kWh. In 2017, the operating cost for The underlying operating expenses were 7% lower than in all assets in the segment / seven-year average generation was 2016. The main reason for the decrease was lower property tax in Norway and Sweden. The reduction in Norway was related to 12 øre/kWh. lower power prices reducing the tax base and the reduction in Sweden was related to a lower tax rate. Availability is an important factor in optimising hydropower reve- nues, and Statkraft uses the key performance indicator “Market- The segment showed an operating profit for the year of adjusted availability”3 to measure whether Statkraft’s power plants NOK 10 704 million, an increase of NOK 6175 million from 2016. are available to produce when it is most profitable to do so. The The operating profit was positively impacted by reversal of most critical factor affecting this KPI which can be influenced is previous year’s impairment for gas-fired power plants and how effectively plant maintenance and refurbishments are planned Saudefaldene hydropower plant totalling NOK 1300 million and and executed. Inflow and market prices are important external positive unrealised value changes from energy derivatives factors affecting the results. The market adjusted availability for amounting to NOK 1173 million. Impairment for German pump- the hydropower in the segment generally varies between 96 and storage hydro plant and increased dismantling provision for the 99%. Kårstø gas-fired power plant had a negative impact amounting to NOK 216 million. The operating profit for 2016 was negatively Important events in 2017 impacted by impairments of assets of NOK 2802 million and Statkraft opened the Ringedalen hydropower plant in Norway. negative unrealised value changes from energy derivatives of It has an installed capacity of 23 MW and will generate around NOK 371 million.
3 Market adjusted availability: 1-(∑lost productioni [MWh]/∑ installed capacityi [MWh])x(1/reporting period [h])
17 STATKRAFT AS ANNUAL REPORT 2017 Market operations International power Market operations is Statkraft’s interface to markets where energy International power operates in markets with anticipated high and energy-related products are traded. The segment is also growth and an increasing need for energy. Statkraft is focusing on responsible for developing new customer-oriented business selected markets where Statkraft can add value in a clear models in Europe and in selected countries where Statkraft owns industrial role. Statkraft aims to expand the portfolio to include assets. Market operations includes trading, origination and market more wind and solar power, as well as hydropower. The segment access activities, as well as a dynamic asset management has assets in Southeast Europe, South America and South Asia. portfolio holding a varying amount of asset-backed positions to Some of the investments are made in collaboration with local generate profit. This business has grown over the last years and partners or international investors. has led to a significant geographical expansion with presence in many European countries, Brazil, Peru, USA (California) and Important events in 2017 India. Statkraft and Norfund swapped shares in their jointly owned assets. Statkraft bought Norfund’s 18.1% shareholding in Trading activities include trading standard financial contracts and Statkraft IH Invest and sold the 50% shareholding in SN structured products, whilst origination includes customised Power to Norfund with a gain of NOK 2091 million. The gain agreements for industry and commerce. Statkraft monitors included a deferred gain from an earlier restructuring and performance in trading and origination through the key currency effects. performance indicator “Trading and origination ROCE”. The return Statkraft sold the shares in the Turkish project company Çetin in 2017 was higher than both the target and the 2016 result. Enerji with a gain of NOK 76 million. The project has previously been impaired. The dynamic asset management portfolio is monitored at Group Statkraft’s long-term price expectations for certain markets level and the portfolio outperformed the added value target for have seen a negative development due to declining 2017. The contribution was also at a higher level than in 2016. technology costs. This led to impairments for the segment of NOK 1188 million in equity accounted investments and The segment provides market access services for Statkraft’s own NOK 1362 million in consolidated operations, of which only assets in Europe, as well as to external generators of renewable the latter is adjusted for in the underlying figures. The energy. The aim of these services is generation and revenue impairments were predominantly related to assets in Chile. optimisation. Financial performance Statkraft’s analysis activities play an important role for Market The underlying EBITDA was NOK 418 million, a decrease of operations. The analysis activities are based on collection and NOK 777 million compared with 2016. The decrease was processing of hydrological, meteorological and market data. This primarily related to the impairments in equity accounted data is used to estimate future market prices. investments.
Market operations is also responsible for exploring and developing The segment's net operating revenues decreased by NOK 834 new business models, primarily targeting customer solutions in the million to NOK 1400 million due to impairments in equity distributed energy market. accounted investments, production stop for the Kargi hydropower plant in Turkey and negative market effects from dry hydrology in Important events in 2017 Brazil. The decrease was partly offset by improved contribution Statkraft closed its first power purchase agreement (PPA) from SN Power, full-year effect of the Banja hydropower plant in under the new French support mechanism for renewable Albania and improved hydrology in Turkey, Nepal and Chile. energy. Statkraft started trading activities at the Polish power The power generation was 4.5 TWh in 2017, an increase of 5% exchange Towarowa Gielda Energii and entered into three compared with 2016. More than 80% of the generation was sold power purchase agreements (PPAs) for Polish wind farms. on long-term contracts. The large share of contracted volume has a stabilising effect on the segment’s revenues. Financial performance The segment’s underlying EBITDA of 1070 MNOK was 914 The underlying operating expenses were 4% higher than in 2016, MNOK higher than in 2016. The increase was mainly due to mainly as a result of an increase in depreciation due to full-year higher contribution from market access activities in the UK, effect of the Banja hydropower plant in Albania that came into origination and long-term contracts in Brazil, partly offset by lower production in the second half of 2016 and revised estimates of contribution from Continental trading. useful lifetime for assets in Nepal and Peru. The increase in depreciation was partly offset by reduced number of employees. The segment’s operating expenses increased 10% compared with 2016, primarily as a provision for an onerous contract recorded in The segment’s showed an operating profit for 2017 of NOK 425 2015 was reversed in 2016. million (operating loss of NOK 819 million). The figure in 2016 was negatively impacted by impairments of NOK 1377 million. The segment showed an operating profit for the year of NOK 1175 million (operating loss of NOK 758 million).
STATKRAFT AS ANNUAL REPORT 2017 18 Wind power District heating The wind power segment focuses on onshore wind power, and District heating operates in Norway and Sweden and distribute has operational wind farms in Norway, Sweden and the UK. The heating and cooling to 13 000 customers. The revenues are in revenues come from power sales and support schemes. general influenced by power prices, waste prices, grid tariffs and taxes. Waste, biomass, oil and gas are the energy sources in the The production costs associated with wind power are followed up production of district heating. through the target figure “Variable cost per kWh”4. The cost in 2017 was within the target. At Group level, performance is measured through the key performance indicator “EBITDA margin”. In 2017, the margin was Availability is followed up through the target figure «Market- slightly below the target. adjusted availability»5. The availability in 2017 was slightly lower than the target. Important events in 2017 A new contract with the municipality of Trondheim for waste Important events in 2017 handling of 40 000 tons per year was signed. Statkraft divested the 40% shareholding in the Sheringham Shoal offshore wind farm with a gain of NOK 2634 million. Financial performance Statkraft divested the 50% shareholding in the Triton Knoll The segment’s underlying EBITDA continued the growth seen offshore wind project with a gain of NOK 426 million. over the past few years and the underlying EBITDA for 2017 Statkraft divested the 25% ownership interest in the Dogger ended at NOK 326 million, an increase of 17% compared with Bank offshore wind projects with a gain of NOK 256 million. 2016. The increase was due to a combination of higher district Statkraft signed an agreement to divest the 30% shareholding heating prices, higher revenues from waste handling and lower in the Dudgeon offshore wind farm for GBP 555 million. The operating expenses. transaction is expected to be closed in the first quarter in 2018 and will complete the offshore wind exit strategy. Both the delivered district heating volume and the waste handled volume was on par with 2016, but higher achieved Financial performance prices on both factors contributed to an improvement in net The segment had an underlying EBITDA of NOK 447 million in operating revenues of NOK 28 million, an increase of 5%. 2017, an increase of NOK 271 million compared with 2016. The EBITDA was influenced by higher generation and lower Operating expenses were 5% lower than in 2016, primarily due operating expenses. to improvement of existing business.
The underlying net operating revenues were NOK 929 million in The segment showed an operating profit for the year of 2017, 25% higher than in 2016. The consolidated generation NOK 151 million (NOK 89 million). increased by 18% to 2.2 TWh. The majority of the increase was related to the Nordic wind farms, in addition to the full year effect from the Andershaw wind farm in Scotland. Share of profit in equity accounted investments contributed to the operating revenues with NOK 213 million, an increase of NOK 172 million, primarily due to the Dudgeon offshore wind farm that came into operation in 2017.
Operating expenses decreased 9% compared with 2016, mainly due to reduced manning.
The segment showed an operating profit for the year of NOK 3213 million (operating loss of NOK 781 million). The operating profit was positively impacted by the gains from the divestments of offshore wind assets.
4) Variable cost per kWh: All variable production costs/normalised production volume. 5) Market Adjusted Availability is calculated as the reduction from 100% availability that the estimated lost production relative to the maximum theoretical production represents.
19 STATKRAFT AS ANNUAL REPORT 2017 Industrial ownership Industrial ownership includes management and development of Statkraft’s shareholdings in Norway, and includes the companies Skagerak Energi, Fjordkraft, BKK, Agder Energi and Istad. The first two companies are included in the consolidated financial statements, whilst the other three companies are reported as associated companies. Skagerak Energi’s activities are concentrated around power generation, distribution grid operations, district heating operations, electrical entrepreneur activities and natural gas distribution. Fjordkraft’s activities are primarily related to the sale of electricity to private households and companies.
Important events in 2017 The shareholders in Fjordkraft initiated a process aiming for an Initial Public Offering (IPO). Agder Energi decided to invest in the Åseral Nord project in Vest-Agder. The generation is expected to increase by 42 GWh per year. BKK divested the 300/420 kV powerlines Mongstad-Kollsnes and Fana-Kollsnes to Statnett for NOK 1430 million with effect from January 2018. Skagerak Energi sold 51% of Skagerak Naturgass.
Financial performance The segment’s underlying EBITDA of NOK 2443 million was 35% higher than in 2016. The increase was primarily due to higher power prices and higher revenue from end-user and grid activities.
The segment’s consolidated power generation in 2017 was 5.4 TWh, slightly lower than in 2016. However, this was more than offset by higher power prices and increased revenues from grid activities in Skagerak Energi and end-user activities in Fjordkraft. The net operating revenues increased 22% compared with 2016 to NOK 4101 million.
Operating expenses increased 6% compared with 2016, primarily related to increased activity in Fjordkraft.
The segment showed an operating profit for the year of NOK 1879 million (NOK 1259 million).
STATKRAFT AS ANNUAL REPORT 2017 20 Financial performance6 operating profit”. Income statement elements after the operating profit are analysed in accordance with the recorded result. An increase in Nordic power prices, combined with higher contribution from market activities, led to an improvement in the Return on investments Group’s underlying EBITDA. The positive effect of this was partly Statkraft achieved a return on average capital employed offset by lower generation as the Norwegian hydropower (ROACE)7 of 10.5% in 2017. This was 2.2 percentage points generation returned to a more normal level after record high higher than in 2016. The improvement was primarily related to generation in 2016. Operating expenses were slightly lower due to higher operating profit, mainly due to higher Nordic power prices lower property taxes in Norway and Sweden. and increased contribution from market activities. The average capital employed was on par with 2016. Gains from divestments and positive unrealised value changes from energy derivatives impacted the result for the year and 2017 Underlying operating revenues ended with a profit before tax of NOK 15 693 million and a net profit of NOK 11 732 million. At the end of 2017, the Group’s Statkraft’s revenues are generated through spot sales, contractual equity was NOK 91 776 million, NOK 8257 million higher than at sales to the industry, financial trading, grid activities, district the end of 2016. heating and power sales to end-users. In addition, the group delivers concessionary power. The fundamental basis for In the following, the emphasis will be on presentation of the result Statkraft’s revenues comprises power prices, energy optimisation from the underlying operations for items up to and including the and generation. The generation revenues are optimised through operating profit. Unrealised value changes from energy financial power trading, and the Group engages in trading derivatives, gains/losses from acquisitions/divestments of activities and energy trading. business activities and impairments and related costs are explained in the section ”Items excluded from the underlying
7) ROACE (%): (Operating profit adjusted for unrealised value changes from energy derivatives, gains/losses from acquisitions/divestments of business activities and 6) Figures in parentheses show comparable figures for 2016 impairments and related costs x 100 / average capital employed.
21 STATKRAFT AS ANNUAL REPORT 2017 Net operating revenues totalled NOK 23 296 million in 2017, 6% NOK 10 770 million, respectively. The Group’s EBITDA and higher than in 2016. The Market operations segment had a operating profit are to a large degree generated by the European substantial increase due to better results for market access flexible generation segment, which contributed 70% (74%) and activities, origination and long-term contracts in Brazil. The two 78% (84%) of the total, respectively. segments with Nordic hydropower production, European flexible generation and Industrial ownership, increased their net operating Items excluded from the underlying operating profit revenues as a result of the higher Nordic power prices. The Wind power segment had a positive development due to new wind Items excluded from the underlying operating profit power capacity in the UK, whereas the District heating segments’ NOK mill. 2017 2016 revenues increased as a result of better prices on both heating Unrealised value changes from energy derivatives 1 289 -1270 Gain/loss from acquisitions/divestments of business and waste handling. International power had a decrease in net 5 481 16 activities operating revenues as impairments in equity accounted Impairments and related costs -500 -4 808 investments in Chile were recognised in 2017. Total adjustments 6 270 -6 062
Underlying operating expenses In total, unrealised value changes from energy derivatives, In total, the Group’s operating expenses decreased by 2% gains/losses from acquisitions/divestments of business activities compared with 2016. The decrease was primarily related to lower and impairments and related costs had a positive effect in 2017 of costs of property tax in Norway and Sweden. The reduction in NOK 6270 million (NOK -6062 million). Norway was related to lower power prices reducing the tax base and the reduction in Sweden was related to a lower tax rate. Unrealised value changes from energy derivatives adjusted for in the underlying operating profit amounted to NOK 1289 million Underlying EBITDA and underlying operating profit (NOK -1270 million). The primary contributors to the positive effect were embedded derivatives for bilateral industry contracts, which Underlying EBITDA increased 14% from 2016 and underlying showed a positive development of NOK 1173 million as a result of operating profit increased 18%, to NOK 14 432 million and
STATKRAFT AS ANNUAL REPORT 2017 22 a weaker NOK against EUR. Derivatives acquired for risk Taxes reduction purposes had a positive development of NOK 116 The recorded tax expense was NOK 3961 million (NOK 5402 million, primarily as a result of lower UK forward prices at the start million). The tax expense was reduced mainly due to lower results of the year and realisation during 2017. from net currency effects, and changes in unrecognised deferred tax assets. The majority of Statkraft’s tax expense was related to Gains/losses from acquisitions/divestments of business activities Norway. excluded from the underlying profit amounted to NOK 5481 million in 2017 (NOK 16 million). The gains were predominantly related to The pre-tax result in 2017 was NOK 15 693 million, an increase of the divestment of offshore assets in the Wind power segment NOK 10 470 million compared with 2016. The increase was driven totalling NOK 3319 million and divestment in the International by the following items without effect on the tax expense: power segment amounting to NOK 2167 million. In addition, there Gains from divestments of business activities were divestments in other parts of the group with a total negative Gains from reclassification of currency translation effects from effect of NOK 5 million. other comprehensive income Gains related to changes in value of equity instruments Net effect of impairments and related costs excluded from the Reversal of impairment in Germany underlying profit were NOK -500 million in 2017 (NOK -4808 million).This was mainly related to impairments of assets in Income tax payable amounted to NOK 1804 million, a decrease of International power totalling NOK -1392 million. Impairments NOK 958 million compared with 2016. This was mainly due to amounting to NOK -187 million were recognised in the Wind lower result from net currency effects. Resource rent tax payable power segment. The net effect of impairments and reversal of amounted to NOK 2451 million, an increase of NOK 202 million. previous year’s impairments for the European flexible generation This was mainly due to higher Nordic power prices and higher tax segment had a positive effect of NOK 1084 million. The district rate. The majority of Statkraft’s tax expense was related to heating segment had a small impairment of NOK 4 million. Norway.
Financial items The effective tax rate was 25.2%. Effects from tax exempt gains and changes in unrecognised deferred tax assets were offset by Financial items resource rent tax levied on Norwegian hydropower production. NOK mill. 2017 2016 Interest income 374 323 Cash flow Other financial income 83 58 The Group generated a cash flow from operating activities of Financial income 456 380 NOK 8415 million in 2017 (NOK 8371 million). Interests expense -1 234 -1 301 Other financial expenses -214 -110 Net cash income8 was NOK 12 700 million (NOK 10 390 million). Financial expenses -1 449 -1 411 A positive profit before tax was partly offset by negative changes Net currency effects -2 079 2 847 in working capital, cash collateral9 and paid taxes. Other financial items 1 724 321 Net financial items -1 347 2 137 Cash flow from investing activities amounted to NOK 4309 million (NOK -6817 million). This was mainly related to investments in Net currency effects property, plant and equipment of NOK -3610 million (NOK -5331 NOK mill. 2017 2016 million), loans paid to joint ventures and associates of NOK -1616 Currency hedging contracts and short term million (NOK -1526 million), repayment of loans of NOK 2248 currency positions -348 1 600 million (NOK 593 million) and cash received from sale of shares of Loans in foreign currency -1 502 939 NOK 7309 million (NOK 25 million). Internal loans, joint ventures and associates -229 308 Net currency effects -2 079 2 847 Cash flow from financing activities amounted to NOK -5780 million (NOK -3217 million). This was related to cash received from new The increase in financial income was primarily related to debt of NOK 5250 million (NOK 4642 million), repayment of debt increased interest income from loans to equity accounted of NOK -7941 million (NOK -7632 million), dividend and capital investments and dividend from a financial investment in Brazil. decrease paid to non-controlling interests of NOK -1037 million (NOK -226 million) and dividend to Statkraft SF of NOK -2052 Financial expenses were higher, mainly due to reversal of a million. financial obligation in 2016, partly offset by lower interest rates. Statkraft monitors its ability to meet future liabilities through the 10 Net currency effects were negative, predominantly as a result of a target figure “Short-term liquidity” , and at the end of 2017, the weaker Norwegian krone against euro and pound sterling. target figure was within the target range of 1.5 to 4.0.
Other financial items included gains from obligations linked to equity instruments and recycling of accumulated foreign currency 8 Net cash income: Cash flow from operating activities excluding taxes paid and cash effects from equity accounted investments. effects from transfer of the major business activities in Statkraft 9 Cash collateral: Security related to market operations and financial derivatives. Treasury Centre in Belgium to Statkraft AS in Norway. 10 Short-term liquidity: (OB liquidity capacity + forecast incoming payments next 6 months) / (debt due and dividend next 6 months + (limit x forecast disbursements from operations / Investments next 6 months).
23 STATKRAFT AS ANNUAL REPORT 2017 Financial structure Financial strength and rating The main objectives of the Group’s capital structure management It is important for Statkraft to maintain its credit rating with the two are to maintain a reasonable balance between solidity and the major rating agencies Standard & Poor’s and Moody’s. Statkraft ability to expand, and to maintain a strong credit rating. The most AS has a current credit rating of A- (stable outlook) from Standard important target figure for the Group’s management of capital & Poor’s and Baa1 (stable outlook) from Moody’s. See note 6. structure is the long-term credit rating. Investments In accordance with the Group’s strategy, the project activity level has been scaled down in the last couple of years.
At the end of 2017, net interest-bearing debt11 amounted to NOK 24 844 million, compared with NOK 32 453 million at the In total, Statkraft invested NOK 3895 million in 2017 (NOK 5657 beginning of the year. million), of which approximately 60% was invested in Norway. Approximately half of the total investments were made in new Long-term interest-bearing debt from Statkraft SF to Statkraft AS generating capacity. Maintenance investments were primarily amounted to NOK 400 million at the end of the year. made in connection with hydropower in the Nordic region. Investments in new capacity were predominantly related to the Current assets, excluding cash and cash equivalents, amounted Fosen onshore wind farms in Norway and the Devoll hydropower to NOK 25 697 million (NOK 20 041 million) and short-term plants in Albania. interest-free debt was NOK 9679 million (NOK 11 918 million) at the end of 2017.
At the end of the year, Statkraft’s equity totalled NOK 91 776 million, compared with NOK 83 519 million at the start of the year. This corresponds to 54% of total assets (50%).
11 Net interest-bearing debt: Gross interest-bearing liabilities – bank deposits, cash and cash equivalents and similar excluding restricted funds – short-term financial investments.
STATKRAFT AS ANNUAL REPORT 2017 24 Risk management District heating operations are also exposed to market risk due to fluctuations in fuel prices (biofuel, electric power, gas, oil, Statkraft is exposed to risk throughout the value chain. The most industrial waste-heat recovery) and the price to customers. In important risks are related to prices, operation and maintenance Norway, the customer price is influenced by the alternative price activities, project execution, financial risk and financing, regulatory of power, so that net exposure to price changes is relatively frameworks and technology development. limited. In Sweden, all customers have a heat product where the price is adjusted according to an index combined by the bio Corporate risk process index, oil index and consumer price index. Risk management is an integrated part of Statkraft’s governance model through a risk-based approach to target setting, Financial risk prioritisations and follow-up of the business and staff areas. The The central treasury department coordinates and manages the day to day risk management is a line responsibility. The Group's financial risk associated with foreign currencies, interest rates overall risks are reviewed and followed-up by the corporate and liquidity, including refinancing and new borrowing. The management and are reported to the Board of Directors. Statkraft Group is exposed to currency risk through: has a central Investment Review Unit that performs an Integration between the Nordic and the Continental power independent quality assessment prior to investments, sales and markets acquisitions. The Group's energy trading in different currencies Financing Financial impact of key uncertainty factors Other cash flows related to foreign subsidiaries and associated companies
Market risk Currency and interest risk are regulated by means of mandates. Financial risk Forward currency contracts, interest rate swaps, forward interest Operational risk rate agreements and debt in foreign currency are the most important instruments when mitigating these risks. The liquidity risk in Statkraft is related to the deviation between the maturity Key uncertainty factors with impact on Statkraft’s financial performance. Projections for a typical year based on historical variance. The diagram does not profile of financial liabilities and the cash flows generated by the cover non-financial impacts. assets. The liquidity risk is mainly handled through preferential borrowing sources, credit facilities and minimum requirements Market risk in energy markets for the Group's cash and cash equivalents. Statkraft is exposed to significant market risk in relation to the generation and trading of power: Statkraft is exposed to credit and counterparty risk through energy Both power prices and generation volumes are impacted by trading, long-term contracts and investment of surplus liquidity. weather conditions and precipitation volumes plus The credit rating of all counterparties is evaluated before contracts generation, consumption and transmission conditions in the are signed, and exposure vis-à-vis individual counterparties are electricity markets. limited by mandates based on their credit rating. Market risk in the Power prices are also affected by fuel prices such as gas, energy markets and other financial risk, as well as exposure in coal and oil, in addition to the price of carbon emission connection with the issued mandates, are followed up by quotas, support schemes, demand growth and the independent middle-office functions and regularly reported to the introduction of new technologies. Corporate Management and the Board of Directors.
Statkraft mitigates market risk in the energy markets by trading Operational risk physical and financial instruments in multiple markets, as well as All processes throughout the value chain are exposed to entering into bilateral long-term power contracts. Increased operational risk. The operational risk is highest within integration of the energy markets is having a significant impact implementation of our investment projects and operational on business models and risk management. Consequently, activities. This may result in: Statkraft places significant emphasis on identifying the Injury to employees, contractors or third parties relationships between the various markets. The Group's hedging Harm to the environment strategies are regulated by defined limits on the positions’ Compliance breaches and weakened reputation volume and value, and by criteria for evaluating new contracts Damage and losses related to own and third-party against expected revenues and downside risk. The portfolio is production plants and other assets constantly adjusted in relation to updated perceptions of future Financial loss prices and the company’s own generation capacity. Statkraft's first priority is to execute development activities and Statkraft's activities in energy trading and services consist of operations in a responsible manner. Statkraft does not tolerate both trading with standard products on energy exchanges and any act of economic crime and works actively to counter it. A sale of services or products adapted to the individual customer. series of prevention activities against corruption and fraud are Risk is handled through mandates covering raw materials, being implemented to build a strong compliance culture with high geographical areas and duration. A risk management function ethical performance. Implementing risk management in the early ensures objectivity in the assessment and handling of risk. stages of the development of an investment project is an important success factor. Statkraft has insurance coverage for
25 STATKRAFT AS ANNUAL REPORT 2017 all significant types of damage or injury, in part through the partners and suppliers. Corruption is a risk in several of the Group’s own insurance company Statkraft Forsikring. Statkraft countries where Statkraft is present. Statkraft strives to ensure manages operational risk through detailed procedures for compliance in all activities and has zero tolerance for corruption. activities in all operational units and various types of contingency plans. Furthermore, Statkraft has a comprehensive system for Changing environment registering and reporting risks, hazardous conditions, Climate change, technological development and changed undesirable incidents and damage and injuries. Such cases are consumer behaviour is of importance for all the risks described analysed continuously to prevent and limit any consequences, above and are important drivers for changes in framework and to ensure that we can follow up causes and implement the conditions and political decisions. The increased uncertainties of necessary measures. the energy markets represent both threats and opportunities. To exploit these opportunities, Statkraft strives to adapt to the All projects in Statkraft carry out systematic risk assessments. changing environment by: This takes place through each project by: Developing skilled leaders Having an allocated project reserve for larger investments Having sufficient flexibility and adaptability in the business Implementing follow-up and reporting of factors of models and decision processes importance for both project development and execution Continuously monitoring technology development and Evaluating and planning measures to manage risk in the identifying potential business opportunities or threats. project Internal control Major attention is devoted to the development of sound systems Statkraft’s management system, “The Statkraft Way”, ensures a for learning, establishing barriers and ensuring compliance to good control environment and contributes to achieving the avoid delays, cost overruns and undesirable incidents during Group’s goals. Internal control requirements have been project planning and execution. incorporated into the relevant internal control area, e.g. HSE, ethics, corporate responsibility, ICT and financial reporting. Estimates of the possible financial consequences of the total operational risk, as well as significant individual risks that are central drivers to the Group's overall risk profile, are included in the reporting of overall risk at Group level.
Regulatory, country and partner risk Statkraft's activities in Norway are influenced by framework conditions such as taxes, fees, concessions, grid regulations, changes in mandatory minimum water level and other requirements stipulated by the Norwegian Water Resources and Energy Directorate (NVE). In addition there are the general terms and conditions stipulated for the energy industry that must be adhered to. These framework conditions can influence Statkraft's generation, costs and revenues.
The framework conditions in the individual countries in Europe are a result of international processes that will be important for Norwegian and other European power plants. With its international involvement, Statkraft is also directly exposed to national framework conditions, tax levels, licence terms and public regulation in those countries in which it operates. Statkraft therefore emphasises the uncertainty in relation to the future development of these factors when making investment Internal control over financial reporting decisions. Possible changes in the political landscape are Statkraft has a system to ensure reliable and timely financial considered, and maintaining an open dialogue with decision- information in the monthly, quarterly and annual reports (Internal makers in relevant arenas is highly prioritised. Control over Financial Reporting - ICFR). The ICFR is based on the COSO 2013 framework for internal control, published by the Statkraft is also exposed to significant country risk, especially in Committee of Sponsoring Organizations of the Treadway emerging countries and partner risk. Statkraft assesses risk for Commission. each country individually and compares countries in each region. Partner risk is assessed at an early stage in order to confirm the All subsidiaries are required to comply with the ICFR necessary integrity and management structure. Statkraft is requirements as described in “The Statkraft Way” and in committed to ensuring that all parts of the Group comply with the Statkraft’s finance manual. The same applies for associated Group’s policy and procedures, and all employees are companies, joint operations and joint ventures where Statkraft is responsible for proper corporate conduct. The standards have responsible for the bookkeeping and financial reporting. If a third been set out and made available in the management system party is responsible for the bookkeeping and the statutory “The Statkraft Way”. The standards are also communicated to all
STATKRAFT AS ANNUAL REPORT 2017 26 reporting of the partly owned company, the responsible segment projects. The aim of the project is to find a solution for hydropower shall perform compensating controls. to start its production immediately when the sun does not shine and the wind does not blow, to potentially avoid fossil reserve The Board of Directors has the overall responsibility for a well- power plants. Statkraft will head the task “Reference sites” where functioning ICFR system in the Group. The activities related to data from hydropower plants will be collected to provide ICFR are performed in the Group’s Governance, Risk and computational basis for development of turbine, electrical system Compliance (GRC) system, BWise, which was implemented in and for considering environmental impacts. Statkraft will also take 2015. BWise makes it possible to efficiently monitor real time part in several other tasks, including energy scenarios tailoring. status of control performance throughout the entire organisation. Statkraft Ventures The main elements of the ICFR system are: Statkraft Ventures search for investments in new downstream Risk assessment and evaluation of control design business models, with an annual investment capacity of EUR 10 Continuous performance and monitoring million. So far, Statkraft Ventures has invested in six start-ups. Testing of control performance Reporting of ICFR to the Audit Committee constituted by the In addition to making investments, Statkraft Ventures connects Board of Directors new innovative firms with various business units within Statkraft.
In 2016, Statkraft started implementation of a fraud prevention Research and Development programme system to prevent and detect fraud in processes related to Statkraft’s Research and Development programme is multi-year procurement, accounting, tax and treasury. The system has a and spans across relevant business areas. It focuses on strategic risk-based approach and will make use of methodology already and operational topics within hydro and wind power. The R&D in place for the ICFR system. budget was somewhat downscaled in 2017 as part of the ongoing performance improvement programme. New Business Development and R&D Statkraft runs business development and R&D activities across Corporate Responsibility the company with the clear ambition of utilising and Statkraft is committed to act in a sustainable, ethical and socially strengthening competitive advantages. The main activities are: responsible manner. Statkraft carries out activities that support a global transition towards a low-carbon, climate-resilient economy Operational Improvement projects by providing renewable and sustainable energy solutions. These projects address daily challenges and usually yield quick Statkraft’s goal is to have sustainable and safe operations where results. These projects are run by line management and focus on people, communities, the environment and the assets are increasing value capture of existing plants and equipment. protected.
Market Development activities In order to fulfil these commitments, Statkraft takes guidance from These activities pursue opportunities that arise in a dynamic globally recognised initiatives and standards, including the energy market, and normally have a short development time. OECD’s Guidelines for Multinational Enterprises and the IFC These activities expand our products and services in a market or Performance Standards on Environmental and Social expand existing business to new geographies. Sustainability. Statkraft is a member of the UN Global Compact and adheres to its ten principles relating to human rights, labour New Business Development activities rights, environment and anti-corruption. These activities explore areas where Statkraft can establish a new industrial role. The focus is on core markets and Norway in Statkraft has identified Goal 7 on “Affordable and Clean Energy” particular. The main initiatives are currently: and Goal 13 on “Climate Action” as being the UN Sustainable Biofuel, to mature technology for production of second Development Goals (SDGs) to which Statkraft’s business aims at generation biofuel from forest feedstock, in cooperation with contributing the most. Statkraft also contributes to the Södra. The plan is to build a demonstration plant at Tofte, implementation of several of the other SDGs. Norway, and then a commercial scale plant. Electric vehicle charging by developing commercial Statkraft’s external reporting on initiatives and performance within business models based on the ownership in Norway’s corporate responsibility is in accordance with the Global Reporting second largest operator, Grønn Kontakt Initiatives (GRI) Standards. Data centres - developing sites and selling them on to global data centre operators Below is a summary of Statkraft’s work and results in the Exploring initiatives that utilise Norwegian competitive corporate responsibility area in 2017. advantages of affordable, renewable power, such as hydrogen and other power-intensive processes Management of corporate responsibility Corporate responsibility is an integral part of Statkraft’s HydroFlex strategy and decision-making. A clear tone from the top and Statkraft is part of the NTNU-based project HydroFlex, which has commitment to create a responsible culture in the organisation received funding from the EU Commission’s Horizon 2020. The is the foundation for a sound management of corporate four-year project was awarded in competition with over 130 other responsibility. The Board has adopted a Code of Conduct
27 STATKRAFT AS ANNUAL REPORT 2017 which describes fundamental principles for sustainable, ethical • Leadership and commitment through Corporate and socially responsible behaviour. The Code of Conduct Management’s commitment statement and line applies to all companies in the Statkraft Group and to all management’s active role in the HSE improvement program individuals who work for Statkraft, regardless of location. • Implementation of Life-saving rules to improve prevention of Statkraft’s business partners are expected to adhere to serious and fatal injuries. equivalent corporate responsibility standards as Statkraft. • Implementation and use of leading KPIs to increase Statkraft’s corresponding requirements for the Group’s management and employee engagement in health and suppliers are described in Statkraft’s Supplier Code of safety. Conduct. • Awarding the CEO’s HSE Award for the second time to inspire activities that improve health and safety results. Corporate responsibility is an individual, managerial and line • Developing and implementing improved HSE training responsibility in Statkraft, and systems are in place to provide programmes for operations and projects. employees and managers with necessary guidance and advice • Sharing and learning through a new intranet portal and the to uphold desired behaviour. Principles and requirements HSSE (Health, Safety, Security and Environment) network, related to corporate responsibility are included in Statkraft’s enabling more effective HSSE work. management system. The system facilitates a structured and uniform handling of the Group’s corporate responsibility. It is The rate of lost-time injuries (LTI) was 2.8 (3.1) among Statkraft’s regularly reviewed and updated, as appropriate, so as to tailor employees and contractors, while the rate for all types of injuries it to new expectations and challenges. Aspects of corporate (TRI) was 5.2 (4.9). In total 124 (128) injuries were registered, of responsibility performance are monitored through the use of which 67 (81) were lost-time injuries, among the Group’s scorecards at group and business area levels and in regular employees and contractors. business reviews. Corporate responsibility issues are also included in the Corporate Audit’s scope of work. Sick leave in Statkraft is at a stable low level and was 3.5% in 2017 (3.0%), which represents a satisfactory result.
Statkraft’s employees are requested to report concerns or Security breaches of the rules through the line organisation or to Corporate Statkraft has a comprehensive approach to security topics and Audit. Reporting can be made anonymously through a whistle- follows international good practice for security management. blowing channel which is managed by Corporate Audit. The Countries where Statkraft is present are followed up on security whistle-blowing channel is also available for external parties via matters through a risk-based approach. Statkraft’s web site. In 2017, a total number of 57 (46) concerns were reported. The concerns were mainly related to the areas of business ethics and human resources. The reported concerns are Statkraft works continuously to strengthen efforts within the field of assessed and followed up according to Statkraft’s requirements: security. Measures include enhanced group alignment within Of the reported concerns some are closed after an initial security management and improved reporting of security incidents evaluation by the line management or by Corporate Audit. Others and observations. Statkraft has also continued to improve its are further followed up with necessary measures being taken in operational abilities to both detect and handle IT security the relevant line organisation, while in some cases a corporate incidents. investigation is needed to clarify facts. Corporate Audit is responsible for performing such investigations in Statkraft. In 198 security incidents were reported in 2017. 156 of these were IT 2017, Corporate Audit initiated 5 (4) investigations. security incidents, whereof nine were high potential incidents that were detected and blocked at an early stage.
Health and safety Emergency response Caring for people is at the heart of Statkraft’s culture and we work continuously towards the goal of zero injuries. Leadership Improved processes for emergency response management commitment, a proactive attitude towards health and safety, were implemented in 2017. The continuous strengthening of robust planning of projects and clear safety expectations are Statkraft’s emergency preparedness, in particular through crucial to achieving this objective. updates of emergency response plans, training and next-of-kin handling has been a priority in 2017. In 2017 there were no fatal accidents in relation to work for Statkraft. 48 (40) serious incidents (incidents with, or with the Environment and climate potential for, serious consequences) were registered. The serious Statkraft's electricity generation is mainly based on hydropower incidents resulted in four (five) serious injuries. Serious incidents and wind power. Both technologies are known to have low are investigated according to defined procedures in order to carbon emissions, but as with any form of energy generation, ensure learning across the organisation. Most of the serious they leave a footprint on ecosystems and the landscape. accidents and near-accidents in 2017 were associated with Terrestrial and aquatic ecosystems may be altered by Statkraft’s driving, energised systems and work performed at heights. activities leading in cases to degradation of habitat. For example, bird collisions and habitat degradation due to wind Statkraft’s HSE improvement programme, “Powered by Care”, farm development or low water levels in river stretches due to continued in 2017 focusing on these key elements: hydropower operations may lead to negative impacts on the environment.
STATKRAFT AS ANNUAL REPORT 2017 28 In Norway, the long-term concessions are revised every 30 adopted into the company’s hydrological and price forecasting years with the aim of improving environmental performance in models. Statkraft has adapted regional climate models to assess the regulated rivers (Revision of Terms). When concluding on future changes in precipitation, temperature and discharge, the new concessional terms, Norwegian authorities strive to which will affect water values and generation possibilities. balance environmental improvements with the potential impacts to flexibility in the national power supply and reduced flood Climate change impacts outside the Nordics are assessed in control. During 2017 Statkraft has been engaged in 12 ongoing hydrological impact studies focusing on future water availability revision processes. Another 12 revisions involving Statkraft for power generation, expected changes in production profile, assets may be initiated in the period between 2018 and 2021. ecosystem services and the environmental impacts. Operational The national implementation of the EU Water Framework and investment decisions in all regions are based on Directive is one of the relevant inputs for the revisions. assessments that include climate change considerations.
In Sweden, the implementation of the Water Framework Directive In 2017, Statkraft’s electricity consumption was 944 (918) GWh, (WFD) is linked to an ongoing process aiming at renewing the and the emissions of greenhouse gases were 818 000 (773 400) environmental legislation for hydropower. The new legislation tonnes of CO2 equivalents. CO2 emissions covered by ETS aims at removing the obstacles to the WFD implementation (Emissions Trading System) are compensated with European contained in the current legislation. Based on a 2016 cross- Emission Allowances (EUAs). Statkraft’s consumption of parliamentary Energy Agreement, the hydropower industry is electricity is neutralised by GoOs (Guarantee of Origin), while expected to finance in total its adaptation to EU WFD CERs (Certified Emission Reduction) are used to compensate requirements. Together with eight other large hydropower for non-ETS emissions of CO2. The carbon intensity of companies, Statkraft is running a project to achieve this target by Statkraft’s power generation was 14 kg CO2/MWh in 2017. setting up a voluntary Hydro Environmental Fund. The fund owners will over a 20 year period contribute in total SEK 10 billion In 2017, Statkraft’s operations generated 15 400 (17 000) that will be used to facilitate the implementation of the WFD. The tonnes of hazardous waste, which was treated in accordance new legislation, and the Water Fund, are expected to enter into with applicable regulations. force and be established in 2018. Human rights and social issues Statkraft undertakes a broad range of environmental initiatives in Statkraft’s policy commitment on human rights is reflected in its Code relation to biodiversity, both in terrestrial and aquatic of Conduct and the company’s work on human rights is based on the ecosystems. Examples of such efforts include site specific internationally recognised United Nation’s Guiding Principles on operation of the power plants taking local environmental impacts Business and Human Rights. into account, such as improving spawning and shelter habitats, fish restocking, roe planting, construction of fish passages and Statkraft’s salient human rights issues relate to local community improvement of weirs. acceptance, including indigenous peoples, labour rights, health and safety and security arrangements. In 2017, Statkraft continued to There were no serious environmental incidents in the Group in prioritise these areas in its work on human rights management. 2017. However, 187 (233) less serious environmental incidents Statkraft continuously works towards strengthening the integration of were registered. Most of these were related to minor breaches human rights into governing documents and processes, for instance of emission regulations for biomass plants and minor oil spills to those relating to social management, procurement and security water and ground with little or no impact on the environment. arrangements. New governing documents and tools were developed in 2017 on rights of indigenous peoples, labour rights in the supply Statkraft supports a global transition towards a low-carbon chain, land acquisition or land use, and security arrangements. economy by providing renewable and sustainable energy solutions. Statkraft’s future growth will be in renewable energy, A training programme was rolled out in 2017 at senior management and Statkraft is climate-neutral through compliance with the and country head levels, as well as for specific functions or European Emission Trading Scheme and according to the UN geographies that relate to Statkraft’s salient human rights issues. initiative Climate Neutral Now (CNN). Statkraft has a positive impact on the realisation of the UN SDG 13 on Climate Action, Statkraft became member of the Nordic Business Network for which is a critical pillar to achieving sustainable development Human Rights, a professional network for global companies, which and a pre-requisite for the realisation of other SDGs. At the works with human rights impacts in their organisations and supply same time, Statkraft manages in a responsible manner the chains. negative impacts that Climate Action related activities may generate. In 2017, Statkraft continued to actively consult and engage in discussions with rights holders and other stakeholders relating to the Statkraft’s assets have a high degree of longevity, and the planned hydropower projects on the Pilmaiquén River in Chile company conducts its core activities with a long-term (Osorno and Los Lagos). Statkraft aims at obtaining a better perspective, including the effects of climate change, which may understanding of the potential impacts, and is undertaking further influence both operations and business opportunities analysis, alongside continuous stakeholder engagement. significantly. The possible effects of climate change on Statkraft’s Nordic hydropower assets have been thoroughly Agreement on mitigating measures and compensation for extra analysed. Half the effects of climate change, as forecast till works during the construction phase has been entered into with the 2035, have already manifested themselves and have been
29 STATKRAFT AS ANNUAL REPORT 2017 Northern Group at Fosen wind farm in Norway. There has been a In 2017 a Personal Data Protection project was launched, aimed dialogue also with the Southern Group, but an agreement could not at strengthening knowledge, competence and the internal control be reached. Court hearings are scheduled in May 2018 for framework needed to ensure an adequate handling of personal determining compensation to both groups with respect to the data. operational phase of the respective wind farms, as well as for the construction phase with respect to the Southern Group. The Employees and organisation Southern Group disputes the validity of the concession for the As part of the ongoing performance improvement programme, Storheia wind farm. The case stands before the courts. Statkraft conducted a workforce restructuring in 2017 including a significant reduction of full-time equivalents and a number of changes Statkraft works to enhance direct and indirect benefits and in the organisational structure. This was implemented based on development opportunities for stakeholders. Interventions are a result transparent processes and in close dialogue with employee of consultations with all affected stakeholders in accordance with representatives with the aim of securing the right competence to good international practices and standards, based on the IFC deliver on strategy while maintaining fair treatment of all employees. Performance Standards on Environmental and Social Sustainability. About 200 leaders were trained in change management as part of Statkraft’s effort to provide solid support for the employees during this In 2017, core activities have included the completion of resettlement organisational change. and compensation programs for the Banja hydropower project in Albania. This was especially relevant in light of the filling of the Statkraft’s employee engagement survey was conducted in reservoir and commencement of operations of the plant. Work September 2017 with a record high response rate of 92%. The continues regarding livelihood restoration for Banja and the survey showed high and stable motivation and satisfaction. The upcoming resettlement for the Moglicë hydropower project upstream result on total score for employee engagement was 72% which is the on the Devoll River. At the Kargi hydropower plant in Turkey, a same level as recent years and above the Global Employee and mitigation programme to improve irrigation systems downstream of Leadership Index Norway. the intake dam is being implemented. Statkraft continued to develop its position as an attractive employer Business ethics and anti-corruption work both among graduates and more experienced candidates. Norway is Statkraft works actively and systematically to prevent corruption the largest market in terms of employment, and Statkraft has and unethical practices in all business activities and further sustained a strong position as the sixth and seventh most attractive development of the Compliance programme took place in 2017. employer among engineering and natural sciences students in the The Compliance programme covers the areas of corruption, fraud, Universum Survey and Karrierebarometeret. money-laundering, sanctions and export control, as well as personal data protection and competition law. New governing In Statkraft’s people performance process, the company strategy and documents covering all of these areas as well as new practical targets are structured and cascaded into individual targets or guidelines were developed in 2017. These have been adapted to development plans for respective employees or teams. The people the company’s risk profile and responds to applicable laws and performance process is an integral part of how to work in Statkraft requirements, as well as relevant international standards. and 97% completed the goal and development dialogues in 2017.
Compliance related risk assessments are conducted regularly, Statkraft offers training in core business processes such as with the most frequent updates for higher risk business units. In operations and maintenance, energy management and project 2017, work was initiated to review and improve the methodology management, as well as business ethics, safety, and leadership used for compliance risk assessments. In addition, specific risk through the Statkraft Academy. assessment work was initiated in the area of anti-money laundering and competition law, complementing similar reviews of As a result of Statkraft‘s strengthened position in South America, a other topics. number of integration activities were implemented in Chile and Brazil during 2017. Building on business and systems integration, these Statkraft has rolled out mandatory business ethics and anti- activities contributed to a strengthened implementation of Statkraft’s corruption training to all staff in the Group, with the exception of management system, with a special focus on the Code of Conduct, Skagerak Energi and Fjordkraft which have their own including on compliance and human rights. The programs have been programmes. The Board of Directors has also conducted a similar offered to all employees in Brazil and Chile, and will continue training programme. In 2017 a new training programme was throughout 2018. developed, building on lessons from previous training efforts and results from risk assessments. Statkraft has a structured and close collaboration with local employee representatives and trade unions. In addition to cooperation at the A new “tone from the top” initiative was launched in 2017 with a national level, Statkraft has established a works council (Statkraft focus on further strengthening management involvement and European Works Council, SEWC), with employee representatives promotion of an ethical culture. New performance indicators are from Norway, Sweden, Germany and the UK. being introduced, along with more regular lessons learning discussions on compliance in all leadership teams, and more Wherever it operates, Statkraft supports and respects internationally frequent communication by senior managers on the topic of recognised labour rights. Relevant ILO conventions and EU business ethics. directives have been included in the SEWC agreement with EPSU (European Federation of Public Service Unions), the federation for European unions within the energy industry. In countries not covered
STATKRAFT AS ANNUAL REPORT 2017 30 by SEWC, Statkraft respects the employees’ freedom of association Reference is also made to the separate description of corporate and collaborates with union representatives in accordance with governance in the annual report. collective bargaining agreements, legal requirements, international standards and prevailing industry best-practice for each location. Corporate Audit Corporate Audit is an important part of the organisation in terms Statkraft aims to foster a diverse workforce, where a strong of evaluating and improving the effectiveness of the combination of backgrounds and mind-sets help the company organisation's governance, risk management and internal innovate and deliver high performance. Equal treatment is a core control. The Head of the Corporate Audit reports functionally to tenet of Statkraft’s recruitment and HR policy. Statkraft has a the Board of Directors and administratively to the CEO. recruitment policy that requires diversity among the candidates for all Corporate Audit’s responsibilities are defined by the Board of leadership positions, with both men and women represented in final Directors and its activities are performed with the following evaluations. Women are prioritised to participate in leadership and objectives: talent development measures. • Increase awareness and drive continuous improvements related to governance, risk management and internal control Statkraft will continue to focus on diversity and inclusion in a broad • Anchor responsibility and ownership in such a way that manner in 2018, piloting new initiatives that are tailored to the agreed solutions are implemented challenges of our industry and geographic locations. To increase • Share experiences across the organisation gender diversity, Statkraft has set targets to reach 25% female • Follow-up implementation of audit recommendations representation in management positions and 30% in senior management positions by 2020. Corporate Audit is authorised to obtain full, free, and unrestricted access to any of Statkraft records, physical properties and At the end of 2017, 25% (25%) of the Group’s employees were personnel pertinent to carrying out audit engagements. All women, and the share of women in management positions was employees are requested to assist Corporate Audit in fulfilling its 22% (22%). The percentage of women in Statkraft’s Board of roles and responsibilities. The Head of Corporate Audit has free Directors is 44% (44%). The share of women among new and unrestricted access to the Board of Directors and the Audit employees in 2017 was 22% (24%), and 32% of the employees Committee. The Audit Committee and the Head of Corporate attending leadership development programs were women. The Audit hold a minimum of one meeting per year without the average salary for women compared to the average salary for presence of the Group administration. The Head of Corporate men in Statkraft was 0.93 (0.90), and the corresponding figure for Audit is responsible for Statkraft’s whistle-blowing system and is managers was 0.92 (0.90). the first recipient of all concerns reported directly through the whistleblower channel. In cases where an investigation is At the end of 2017, the Group had 3309 (3484) full-time required, this is the responsibility of the Head of Corporate Audit. equivalent employees. The Group had employees in 16 (16) countries and 38% (40%) of the employees were located outside The work of the Board of Directors of Norway. The average length of service was 12.0 (11.6) years Ingelise Arntsen joined the board as a new member in June 2017, and the employee turnover was 5.7% (6.6%). replacing Helene Biström.
Corporate Governance The Board of Statkraft AS held ten board meetings in 2017. The Board has a strong focus on operations and ongoing development Efficient and transparent management and control of the business projects. A significant part of the work of the Board of Directors in form the basis for creating long-term value for the owner, 2017 was discussions and alignment of the Group’s strategy. employees, other stakeholders and society in general, contributing towards sustainable and lasting value creation. The distribution of The Board has an Audit Committee consisting of four board roles between the Norwegian state as the owner, the Board of members. The Audit Committee held seven meetings in 2017. The Directors and the Management of the company shall inspire Audit Committee acts as a preparatory and advisory working confidence among stakeholders through predictability and committee in respect of the Board's administrative and credibility. Open and accessible communication from the company supervisory tasks in the areas of: ensures that the Group maintains a good relationship with society • Preparation of the Board's follow-up of the account reporting in general and all stakeholders affected by the company’s process and external financial reporting activities in particular. • Monitoring of the systems for internal control and risk management related to financial reporting, including the Statkraft follows the Norwegian State’s principles for sound financial reporting consequences of the major risk exposures corporate governance, described in the White Paper Meld. St. 27 in the company (2013-2014) “Et mangfoldig og verdiskapende eierskap” (“Diverse • Monitor that the Company has adequate compliance and value-creating State ownership”), and is subject to reporting processes and procedures to prevent and detect violations of requirements relating to corporate governance according to laws, regulations and internal requirements within areas such Section 3-3b of the Accounting Act. Furthermore, Statkraft applies as fraud and corruption and/or other areas which may have the Norwegian Code of Practice for Corporate Governance (NUES) financial reporting consequences. within the framework established by the company’s organisation The Board also has a Compensation Committee consisting of the and ownership. chair of the Board and two of the board members. The
31 STATKRAFT AS ANNUAL REPORT 2017 Compensation Committee held three meetings in 2017. The Going concern mandate of the committee is as follows: In accordance with the provisions of the Norwegian Accounting • Once a year prepare the board’s treatment of items relating Act, the Board of Directors confirms that the annual financial to the CEO’s salary and conditions of employment statements have been prepared on the assumption that the • Prepare the Board’s statement on executive pay and other company is a going concern, and that it is appropriate to make compensation paid to senior executives that assumption. • Prepare the Board’s treatment of all the fundamental issues relating to salary, bonus systems, pension and employment agreements and similar for the executive management in Profit allocation Statkraft The parent company Statkraft AS had a net profit of NOK 19 538 • Deal with specific issues related to compensation for million in 2017 (NOK 1371 million). employees in the Statkraft Group to the extent that the Committee deems that these concern matters of particular The board of Statkraft SF proposes a dividend of NOK 6040 importance for the Group’s reputation, competitiveness and million. The dividend will be disbursed from Statkraft SF, and in attractiveness as an employer order to provide Statkraft SF with sufficient ability to disburse • The CEO shall consult the Compensation Committee dividend, the Board of Statkraft AS proposes the following regarding the salaries for the corporate executives and Head allocation of the annual profit in Statkraft AS: of Corporate Audit before they are decided upon Profit allocation Amounts in NOK mill. Net annual profit in Statkraft AS' company accounts 19 538
Appropriation of profit for the year and equity transfers: Allocated dividend from Statkraft AS to Statkraft SF 6 100 Allocated to other equity 13 438
The proposed dividend is deemed to be prudent based on Statkraft AS’ equity and liquidity.
STATKRAFT AS ANNUAL REPORT 2017 32 Outlook
Efficient operations and development of Norwegian and Swedish Statkraft will continue to develop new business opportunities in hydropower assets continue to be a key priority. Statkraft’s flexible Norway such as advanced biofuel and hyperscale data centres. hydropower plants and large reservoir capacity enables Statkraft New opportunities in Europe, South America and India are also to optimise the power generation based on the hydrological being explored and developed within hydro, wind and solar power. situation and power prices. The owner’s new long-term dividend expectation and Statkraft’s Statkraft has a high share of long-term contracts that have a exit from offshore wind power has significantly contributed to stabilising effect on revenues and net profit. The majority of these improve the investment capacity. Statkraft has a solid foundation long term contracts will expire in 2021 and Statkraft has therefore for further growth in renewable energy. started to enter into new long-term contracts.
Another key priority is to successfully deliver the construction of the Fosen wind project on time and within budget.
The Board of Directors of Statkraft AS Oslo, 14 February 2018
Thorhild Widvey Halvor Stenstadvold Hilde Drønen Chair of the Board Deputy chair Director
Peter Mellbye Ingelise Arntsen Bengt Ekenstierna Director Director Director
Vilde Eriksen Bjerknes Thorbjørn Holøs Asbjørn Sevlejordet Director Director Director
Christian Rynning-Tønnesen President and CEO
33 STATKRAFT AS ANNUAL REPORT 2017 Declaration from the Board and CEO
We confirm to the best of our knowledge that the consolidated financial statements for 2017 have been prepared in accordance with IFRS as adopted by the EU, as well as additional information requirements in accordance with the Norwegian Accounting Act, and that the financial statements for the parent company for 2017 have been prepared in accordance with the Norwegian Accounting Act and generally accepted accounting practice in Norway, and that the information presented in the financial statements gives a true and fair view of the Company’s and Group’s assets, liabilities, financial position and result for the period viewed in their entirety, and that the board of directors’ report gives a true and fair view of the development, performance and financial position of the Company and Group, and includes a description of the key risks and uncertainties the companies are faced with.
The Board of Directors of Statkraft AS Oslo, 14 February 2018
Thorhild Widvey Halvor Stenstadvold Hilde Drønen Chair of the Board Deputy chair Director
Peter Mellbye Ingelise Arntsen Bengt Ekenstierna Director Director Director
Vilde Eriksen Bjerknes Thorbjørn Holøs Asbjørn Sevlejordet Director Director Director
Christian Rynning-Tønnesen President and CEO
STATKRAFT AS ANNUAL REPORT 2017 34 Statkraft Group Management
From the left: Irene Egset, Steinar Bysveen, Christian Rynning-Tønnesen, Hallvard Granheim, Hilde Bakken, Jon Vatnaland and Jürgen Tzschoppe.
Christian Rynning-Tønnesen Irene Egset Hallvard Granheim Born 1959, Norwegian Born 1966, Norwegian Born 1976, Norwegian
Group management since 2010 Group management since 2016 Group management since 2014 Position: CEO Position: CFO Position: EVP Market Operations and IT Employee in Statkraft since 2010-, 1992-2005 Employee in Statkraft since 2008 Employee in Statkraft since 2012 Education: MSc NTH, Trondheim Education: MSc NHH, Bergen Education: MSc NHH, Bergen Norwegian Army officer education Former positions: Statkraft: EVP Corporate Staff, Former positions: Statkraft: EVP & CFO, Former positions: Norske Skog: CEO and CFO. SVP Financial Reporting and Strategic Finance, SVP Financial Reporting, Accounting and Tax. Statkraft: CFO and other executive positions. SVP Finance Wind Power and Technologies. Deloitte: Director, Advisory & Auditor. McKinsey: Consultant. Statoil: various positions. Norske Skog: VP Energy Sourcing & Trading. Esso Norge: Refinery commercial coordinator. Current board positions: Board member: Klaveness. Chair: VCOM. Advisory board member: Det Norske Veritas.
Hilde Bakken Jon Vatnaland Jürgen Tzschoppe Born 1966, Norwegian Born 1975, Norwegian Born 1968, German
Group management since 2010 Group management since 2017 Group management since 2015 Position: EVP Power Generation Position: EVP Corporate Staff Position: EVP International Power Employee in Statkraft since 2000 Employee in Statkraft since 2009 Employee in Statkraft since 2002 Education: MSc NTH, Trondheim and TU Delft, Education: Cand. polit. sociology and Ph.D. innovation Education: Ph.D. Electrical engineering, RWTH Aachen Netherlands studies, UiO. Former positions: Statkraft: EVP Market Operations Former positions: Statkraft: EVP Corporate Staff Former positions: Statkraft: SVP Strategy in Wind and IT, SVP Continental Energy. MD Statkraft Markets and various positions within the Generation and Power and Technologies, MD Statkraft UK ltd, Senior GmbH and Knapsack Power GmbH & Co. KG. Market business. Norsk Hydro: various mgmt. and advisor Corporate Strategy. McKinsey: Engagement mgr. Enron: Power Trading Europe Associate. engineering positions Current board positions: Board Member: Energi Norge, IAEW Aachen: Chief engineer. Current board positions: Board member: Yara TIK Centre at UiO. International, Oslo Energy Forum.
Steinar Bysveen Born 1958, Norwegian
Group management since 2010 Position: EVP Wind Power, District heating and Projects Employee in Statkraft since 2010 Education: MSc NTH, Trondheim. Business studies BI. Former positions: Statkraft: EVP Wind, Technology and Strategy, EVP Production and Industrial Ownership, EVP Corporate Development. Energi Norge: CEO. Industrikraft Midt-Norge: MD. Current board positions: Chair: Skagerak Energi, Fosen Vind DA. Deputy chair: BKK. Board member: Agder Energi.
35 STATKRAFT AS ANNUAL REPORT 2017 Corporate Governance
The corporate governance statement clarifies the distribution of roles between the Norwegian state as owner, the board and the management in the company.
Efficient and transparent management and control of the business (Diverse and value-creating ownership), and is subject to reporting forms the basis for creating long-term value for the owner, requirements relating to corporate governance according to employees, other stakeholders and society in general, and as a Section 3-3b of the Accounting Act. Furthermore, Statkraft applies result, contributes to sustainable and lasting value creation. The the Norwegian Code of Practice for Corporate Governance distribution of roles shall inspire confidence among stakeholders (NUES) within the framework established by the company's through predictability and credibility. Open and accessible organisation and ownership. communication from the company ensures that the Group maintains a good relationship with society in general and, in Information that Statkraft is obliged to provide pursuant to Section particular, with all stakeholders affected by the company’s 3-3b of the Accounting Act relating to corporate governance has activities. been taken into account in this statement and follows the systematics laid down in the recommendation where applicable. A Statkraft follows the Norwegian state's principles for sound detailed description of how Section 3-3b, second paragraph of the corporate governance as described in the White Paper, Meld. St. Accounting Act has been applied follows below: 27 (2013-2014) Et mangfoldig og verdiskapende eierskap
1. an indication of the recommendation and corporate management regulations that the enterprise is subject to or has otherwise chosen to adhere to Section (1) of the statement: Corporate governance statement 2. information as to where recommendations and regulations as mentioned in No. 1 are publicly available - The recommendations which Statkraft follow are available at www.nues.no, in Meld. St. 27 (2013-2014) Et mangfoldig og verdiskapende eierskap (white paper on the government’s governance), and in the Norwegian state's principles for sound corporate governance. - Statkraft's code of conduct is available on Statkraft's website. 3. reasons for any non-compliances in relation to recommendations and regulations as mentioned in No. 1 - NUES’ recommendations for the Sections (3) Equity and dividends, (4) Equal treatment of shareholders, (5) Freely negotiable shares, (6) General meetings, (7) Nomination committee, (12) Remuneration of executive personnel and (14) Take- overs, are not relevant for Statkraft as a wholly state-owned company. These items have, however, been covered in line with the requirements applying to Statkraft as a wholly-owned state company. 4. a description of the main elements of the enterprises and, for entities required to prepare financial statements, possibly also the group's systems for internal control and risk management in connection with the financial reporting process - The statement's Section (10) Risk management and internal control 5. provisions in the Articles of Association that in part or in full do not comply with provisions in Chapter 5 of the Public Limited Liability Companies Act - The statement's Section (6) Enterprise meeting and general meeting 6. composition of the board, corporate assembly, supervisory board and control committee; or working committees for these bodies, as well as a description of the main elements in the applicable instructions and guidelines for the bodies and the work of any committees - The statement's Section (8) Corporate assembly and board of directors: composition and independence, and Section (9) The work of the board of directors 7. the provisions of the Articles of Association that govern nomination and replacement of board members - The statement's Section (8) Corporate assembly and board of directors: composition and independence 8. the provisions of the Articles of Association and authorisations that give the board authority to decide that the enterprise will repurchase or issue own shares or equity certificates - The statement's Section (3) Equity and dividends
A statement concerning follow-up of the items in the Norwegian Code of Practice for Corporate Governance is provided below.
STATKRAFT AS ANNUAL REPORT 2017 36 (1) Corporate governance statement
Statkraft is organised through a state enterprise, Statkraft SF. The described in the White Paper, Meld. St. 27 (2013-2014) Et activity in Statkraft SF is, for all practical purposes, restricted to mangfoldig og verdiskapende eierskap (Diverse and value- owning all shares in Statkraft AS. Statkraft SF and Statkraft AS creating ownership), and is subject to reporting requirements have an identical board of directors and management. Statkraft relating to corporate governance according to Section 3-3b of the AS is the parent company for an underlying Group structure. Accounting Act. Statkraft adheres to the Norwegian Code of Practice for Corporate Governance (NUES) within the framework established by the The Norwegian state’s principles for sound corporate governance company's organisation and ownership. Statkraft follows the from the Governance White Paper are as follows: Norwegian state’s principles for sound corporate governance,
1. All shareholders shall be treated equally. 2. There shall be transparency in the state’s ownership exercise and the company’s operations. 3. Ownership decisions and resolutions shall be made at the general meeting. 4. The board is responsible for elaborating on explicit objectives and strategies for the company within the constraints of its articles of association; the state sets performance targets for each company. 5. The capital structure of the company shall be appropriate given the objective and situation of the company. 6. The composition of the board shall be characterised by competence, capacity and diversity, and shall reflect the distinctive characteristics of each company. 7. The board assumes executive responsibility for administration of the company, including performing an independent supervisory function vis-à-vis the company’s management on behalf of the owners. 8. The board shall adopt a plan for its own work, and work actively to develop its own competencies and evaluate its own activities. 9. Compensation and incentive schemes shall promote value creation within the company and be generally regarded as reasonable. 10. The company shall work systematically to safeguard its corporate responsibility.
The company's value base is described in Statkraft's Code of Companies Act to the effect that the general meeting cannot adopt Conduct, and the guidelines for ethics and corporate responsibility a higher dividend than that proposed or accepted by the Board of have been designed on the basis of this code. The company's Directors, does not apply to wholly owned state companies. annual report includes a statement on corporate responsibility. In 2017, the Norwegian government announced a new dividend (2) Activities expectation for Statkraft as part of the proposal for the revised State budget. The owners dividend expectations is that Statkraft The objective of Statkraft AS, alone, or through participation in, or pays a dividend of 85 per cent of realised profit from Norwegian cooperation with other companies, is to plan, engineer, construct hydropower business and 25 per cent of realised profit from other and operate energy facilities, conduct physical and financial business activities. Realised profit is the profit before tax, minus energy trading, and perform naturally related operations. Statkraft payable taxes and adjusted for unrealised effects and minority AS is registered in Norway and its management structure is based interests. Dividends received from equity accounted investments on Norwegian company legislation. Statkraft is also subject to the are included in realised profits. The Norwegian hydropower Norwegian Securities Trading Act and stock exchange regulations business is defined in the notes to the annual report. The Board of associated with the company’s debt obligations. Directors maintains a continuous focus on adapting the company's objectives, strategy and risk profile to the company's capital Objectives and framework for the activities in Statkraft are set out situation. Statkraft's investments are financed through a in parliamentary documents and resolutions by the Parliament combination of retained capital, borrowings and any new equity (Stortinget), see www.regjeringen.no and www.stortinget.no. contributed by the owner. See Note 6 in the annual report for more information about the company's capital structure management. (3) Equity and dividends
Statkraft AS’ share capital totals NOK 33 600 000 000, divided (4) Equal treatment of shareholders and among 200 000 000 shares of NOK 168 each. The company's transactions with related parties shares can only be owned by Statkraft SF. Statkraft engages in transactions with companies that are closely Capital increases are processed through the enterprise meeting of related to Statkraft's shareholder, the Norwegian state. All Statkraft SF and the general meeting of shareholders in Statkraft transactions are based on regular commercial terms and AS. principles.
The State as the shareholder is free to set the dividend in its The instructions to the Board of Statkraft state that neither board wholly owned companies. The provision of the Limited Liability members nor the President and CEO may participate in the
37 STATKRAFT AS ANNUAL REPORT 2017 processing or resolution of issues that are of substantial personal The Norwegian Parliament (Stortinget) has decided that its or financial interest to them or closely related parties. Any persons members should not be appointed to offices in companies that are in such a situation must, on their own initiative, disclose any subject to the Parliament's control. It is also assumed that interest they or their closely related parties may have in the ministers will resign from such offices when elected into the resolution of an issue. The same follows from the Group’s ethical Government and also cannot be selected for new offices. The guidelines. same applies to state secretaries.
(5) Freely negotiable shares There are provisions stipulating that senior officials and civil servants employed in a ministry or the Central Administration in Shares in Statkraft AS can, according to the Articles of general, who deal with matters concerning the enterprise as part Association, only be owned by the state-owned enterprise of their job, or that are working in a ministry or other Central Statkraft SF. Administration agency that regularly processes matters of significance for the company or the industry sector in question, (6) Enterprise meetings and general cannot be elected to the company's board, see the White Paper, Meld. St. 27 (2013-2014) Et mangfoldig og verdiskapende meetings eierskap (Diverse and value-creating ownership). The President The Norwegian state exercises its authority as the owner in the and CEO and senior executives of Statkraft are not members of enterprise meeting of Statkraft SF. In accordance with the Articles Statkraft's board. of Association of Statkraft SF, Statkraft SF cannot attend and vote in a general meeting in Statkraft AS without a preceding decision Board members are normally elected for terms of two years and in an enterprise meeting.. The enterprise meeting and the can be re-elected. following general meeting are held annually by the end of June. The auditor attends the enterprise meeting and the general (9) The work of the board of directors meeting. The Board of Directors usually meets six to ten times a year. The chair of the Board of Directors will hold board meetings as often Before the Board of Directors makes a decision in matters as is required. The Board of Directors has stipulated board assumed to be of significant importance for the purpose of the instructions with guidelines for the work and case processing of enterprise/company, or which will significantly change the the board. The instructions also cover the President and CEO. character of the activities, the matter must be put before the The instructions define the work scope, duties and authorities of ministry representing the state's ownership in accordance with the the President and CEO in more detail than follows from the State Enterprise Act. legislation.
(7) Nomination committee The Board of Directors prepares an annual agenda for its work, Statkraft SF and Statkraft AS have no nomination committee. The with a special emphasis on goals, strategies and implementation. election of the board members appointed by the owner in Statkraft The Board of Directors holds an annual strategy conference. The SF will take place in the enterprise meeting. Statkraft SF and President and CEO prepare background material for such Statkraft AS have identical boards. conferences in the form of strategic, economic and financial plans.
(8) Corporate assembly and board of The Board of Directors informs the boards of subsidiaries of matters of potential significance for the subsidiary in question. directors: composition and independence The Board of Directors evaluates its own performance and expertise annually. The State Enterprise Act stipulates that state-owned enterprises shall be governed by a board and a chief executive officer. The Board of Directors has appointed a Compensation Committee Pursuant to the Limited Liability Companies Act, Statkraft AS has consisting of the Board chair and two of the other members. The entered into an agreement with its employees’ trade unions Compensation Committee prepares the board’s deliberations on stipulating that the company will not have a corporate assembly. the wages and other benefits paid to the President and CEO - as Three of the board's nine members are elected by the employees well as matters of principle related to wage levels, incentive based on the agreement that the company will not have a schemes, pension terms, employment contracts and similar for the corporate assembly. company’s executives. The remuneration for the Head of Corporate Audit is stipulated by the board. The State emphasises competence, capacity and diversity based on the company's distinctive character when the State selects The board’s Audit Committee comprises four of the Board of people to sit on the companies' boards. The goal is for the board Director’s members. The committee shall function as a of each company, to collectively represent the desired expertise preparatory body for the board's management and supervision based on the company’s objective, business area, challenges and work, and at least one member of the Audit Committee shall have the State's ownership goals. Emphasis is e.g. placed on selecting experience in accounts management, financial management or representatives with broad-based experience from commerce and auditing. The background and expertise of the individual board industry for companies with commercial goals. members is available on Statkraft’s website («The Board»).
STATKRAFT AS ANNUAL REPORT 2017 38 An overview of the members' participation in board meetings is The head of the Corporate Audit acts as notification body for available in Note 37 of the annual report. unethical or illegal matters. In cases where an investigation is required, this is the responsibility of the head of corporate audit. (10) Risk management and internal control The internal control concept includes compliance with the company's value base and guidelines for ethics and corporate Risk management is an integrated part of all activities in Statkraft, responsibility. Important functions to ensure that risk management and managers at all levels of the organisation are responsible in and internal control are an integrated part of the activities in this regard, including subsidiaries, joint ventures and contractors. Statkraft include the Group's internal auditing, the Compliance Risk management is regulated by mandates, specification Officer function, the Group risk function, the Group's Investment documents and guidelines. Follow-up of risk and risk management Review unit and the Group’s internal control in connection with are incorporated in the daily business operations. financial reporting. The Investment Review unit (IRU) ensures an independent risk assessment in relation to individual investments Risk management and internal control are integral parts of the and across the project portfolio. Board of Directors work. The board has the overall responsibility for Statkraft having suitable and efficient systems in place for risk Risk management is an integrated part of governance through a management and internal control. In order to ensure this, the risk-based system for the corporate management's follow-up of Board of Directors shall: the business areas. A centralised Group risk function has been Review the Group’s most important risk areas at least once established. The function is independent of the commercial a year operations. The Group's risk function monitors Statkraft's overall Ensure that the systems are adequately established, risk at the Group level and reports to the CFO. The Group's implemented and followed up, e.g. through processing of overall risk profile is concluded upon by the Group management reports submitted to the board by the President and CEO and is reported to the Board of Directors. and the internal audit function Ensure that risk management and internal control are Internal control of financial reporting integrated in the Group's strategy and business plans The Group's CFO is responsible for the process for internal control over financial reporting in Statkraft. The Internal Control in Furthermore, the Board of Directors shall ensure that the the Financial Reporting (ICFR) work is based on the COSO 2013 President and CEO have: framework for internal control, published by the Committee of Stipulated instructions and guidelines for how the Group's Sponsoring Organizations of the Treadway Commission. risk management and internal control will be carried out in practice Statkraft has a Financial Manual which is available to all Established adequate control processes and functions employees on the Group's intranet portal. The manual shall Ensured that Statkraft's risk management and internal control ensure that the financial reporting process requirements set by the are carried out, documented, monitored and followed up in a Group's management system, “The Statkraft Way”, are complied prudent manner with. This includes a description of the reporting process, the internal control system, reporting instructions, financial reporting Statkraft's management system, "The Statkraft Way", defines the principles, reporting calendar and course calendar. The Group's ground rules and ensures a sound control environment information in the manual is continuously kept up to date and all for fulfilling the management's goals and intentions. The Statkraft documents are updated at least once a year. Way is based on ISO principles for quality and environmental management systems. The Group’s management system and the Finance Manual form an important basis for the work with ICFR. Statkraft has a system Statkraft’s corporate audit function is an independent function for ICFR to ensure reliable and timely financial information in the which assists the Board of Directors and management in monthly, quarterly and annual reports. All subsidiaries are assessing whether the group’s most significant risks are required to comply with the ICFR requirements in the Finance sufficiently managed and controlled. The purpose of corporate Manual. The same applies for associated companies, joint audit is to enhance and protect organisational value by providing operations and joint ventures where Statkraft is responsible for the risk-based and objective assurance, advice, and insight related to book-keeping and financial reporting. If a third party is responsible the organisation's governance, risk management and internal for the book-keeping and statutory reporting of the partly owned control. The Audit Committee and Corporate Audit hold a company, the responsible segment shall perform compensating minimum of one meeting per year without anyone from the controls. Group's administration being present. The activities related to ICFR are performed in the Group’s Internal audits are conducted according to an annual rolling plan. Governance, Risk and Compliance (GRC) system, BWise. The audit work shall be carried out in accordance with the Through BWise, the Group is able to efficiently monitor real time International Standards for Internal Auditing (IIA). The annual status on control performance throughout the whole organisation. corporate audit report is submitted to the Board, which also approves the audit plan for the coming year. Corporate Audit also presents a semi-annual report to the Audit Committee. Implementation of the recommendations from Corporate Audit is regularly followed up.
39 STATKRAFT AS ANNUAL REPORT 2017 The main elements of the ICFR system are:
1. Risk assessment and evaluation of control design The Group's ICFR Network performs an annual assessment of the Group's risk of including errors in the financial reporting. The result of this risk assessment is documented in a financial reporting risk map presenting the likelihood of the risk to occur, and the consequence in the financial report given that the risk occurs. The risk map is presented to the Audit Committee. Business and support processes for handling the financial reporting risks are identified and assessed. The purpose of this work is to verify whether Statkraft has appropriate controls in place to mitigate these risks sufficiently. For the identified controls, it is described how these shall be performed, documented and reviewed. In addition, it is described who is responsible for implementing them. All the activities are performed in BWise, and the control descriptions in BWise are available for all employees through the Finance Manual. 2. Reporting of ICFR to Audit Committee Twice a year, key elements within the ICFR system are reported to the Audit Committee. The result of the yearly assessment related to control design and operational effectiveness is reported in March. 3. Continuous performance and monitoring For each control, it is defined how often the control shall be performed and who is responsible for performing and reviewing the control in BWise. The controls shall be performed monthly, quarterly, half yearly or yearly. Managers are responsible for compliance with the control descriptions and ICFR requirements. Responsible managers perform an assessment on design and operational effectiveness of all controls annually. BWise makes it possible to perform real time monitoring of control performance throughout the whole organisation, and gives easy access to control documentation on entity, segment and group level. 4. Test of control performance Quarterly and on a sample basis, the ICFR department together with ICFR monitors from all segments/areas, review the quality of control performance and compliance with the control descriptions. The result of this testing is presented to control performers and reviewers, and reported to management. 5. Reporting of ICFR to Audit Committee The Group’s financial reporting risk assessment is reported in September. If a material breach of the ICFR requirements has occurred, this will be reported to the Audit Committee.
Statkraft prepares four monthly and quarterly internal reports Each year, the Group releases four quarterly financial statements which analyse the performance and forecasts for the Group and and one annual financial statement. The accounts are prepared in the segments. The reports are reviewed and quality assured by accordance with statutory and regulatory requirements and are the segment management, CFO and corporate management. presented on the basis of applicable accounting principles and Special emphasis is put on analysis of financial performance, within the deadlines stipulated by the Board of Directors. For each market developments, production and investments. The internal quarter, special reporting instructions are prepared and reports are continuously reconciled with the Group's consolidated communicated to the segments. The principle documents for income statement and consolidated balance sheet. The results in financial reporting and the reporting instructions, set clear the business areas are also measured and followed up through requirements for allocation of responsibilities as regards score cards consisting of financial, operational and organisational preparation and assuring the quality of information. In addition, target figures. risk assessment and control measures have been established on multiple levels in connection with each individual presentation of the accounts.
Internal meetings where the CFO and the segments participate are held each quarter to review the risk factors of the segments, significant accounting items and other issues. The meetings also include risks in relation to financial reporting, both in the short and long term. The drafts of accounts that are made public are reviewed by the corporate management to ensure that the information reflects the underlying operations. In addition, the Audit Committee of the Board of Directors performs a preparatory review of the quarterly accounts and annual accounts, focusing on valuation items, significant incidents and non-recurring items. For each quarter, the Audit Committee receives an accounting memo describing these types of items. The external auditor participates in all meetings of the Audit Committee.
STATKRAFT AS ANNUAL REPORT 2017 40 (11) Remuneration of the board of directors Statkraft publishes a financial calendar listing key publication dates. The financial calendar, press releases and stock exchange The owner stipulates the remuneration for the Board of Directors. notices, investor presentations, quarterly and annual reports and The remuneration is not related to the company's results. other relevant information are published on Statkraft's website.
Shareholder-elected board members normally do not perform any Statkraft emphasises transparent and honest communication with additional tasks for the company. To the extent that the members all stakeholders. The information the company provides to its of the board perform tasks for the company, this must be clarified owner, lenders and the financial markets in general shall provide with the other board members in advance. Board of Directors sufficient details to permit an evaluation of the company’s remuneration is described in Note 37 in the annual report. underlying values and risk exposure. The owner and the financial markets shall be treated equally, and information shall be (12) Remuneration of executive personnel communicated in a timely manner.
Statkraft adheres to the Norwegian state's guidelines for employment terms for managers in state enterprises and (14) Take-overs companies. The Articles of Association for Statkraft AS stipulate that the shares can only be owned by Statkraft SF. The Board of Directors will contribute to a moderate, but competitive development of executive remuneration in Statkraft. (15) Auditor The board’s Compensation Committee prepares the board's deliberation of the wages of the President and CEO and the rest The enterprise meeting appoints the auditor based on the Board of the company’s Executive Vice Presidents. The President and of Directors proposal, and stipulates the auditor’s fee. Statkraft SF CEO and corporate executives shall receive both a fixed salary and Statkraft AS use the same auditor. The auditor serves until a and a variable payment. The variable salary has a maximum new auditor is appointed. disbursement that complies with the owner's guidelines, see Meld. St. 27 (2013-2014) to the Storting. The entering into pension The board and the auditor hold at least one meeting annually agreements adheres to the current guidelines issued by the where the President and CEO and other Group executives are not owner. present. The Audit Committee evaluates the external auditor’s independence and has established guidelines for use of the The Board's declaration regarding executive wages and other external auditor for consultancy purposes. remuneration to executive employees can be read in Note 37 in the annual report. As part of the ordinary audit, the auditor presents an audit plan to the Audit Committee including a summary of the audit from last (13) Information and communication year. The auditor reports in writing to Statkraft's Audit Committee concerning the company's internal control, applied accounting The Board of Directors has stipulated guidelines for financial principles, significant estimates in the accounts and any reporting and other information. Statkraft SF publishes its annual disagreements between the auditor and the administration. The financial statement. Each year, Statkraft AS releases four Board of Directors is briefed on the highlights of the auditor's quarterly financial statements and one annual financial statement. reporting.
41 STATKRAFT AS ANNUAL REPORT 2017 The largest power plant in Germany is a virtual power plant, connecting more than 1 300 small- scale installations, generating electricity from wind and solar power.
This production is managed from our dispatch centre in Düsseldorf. Today, Statkraft markets approximately 15 000 MW for third parties in six countries.
STATKRAFT AS ANNUAL REPORT 2017 42 The Fosen project consists of six wind farms with a combined capacity of 1000 MW.
The construction is well on its way, and all the wind farms will be operational by 2020.
43 STATKRAFT AS ANNUAL REPORT 2017 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY
44 Group Financial Statements Group STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS Financial expenses Financial income Financial Operating profit/loss (EBIT) Operating expenses expenses Other operating fees Property taxandlicence Impairments and amortisation Depreciation costs andpayroll Salaries Net operatingrevenuesandotherincome costs Transmission Energy purchase Gross operatingrevenuesandotherincome income Other operating accountedinvestments Share ofprofit/lossin equity Sales revenues Profit and loss NOK million Statkraft AS Group Statement of ComprehensiveIncome Of which owners Of whichowners oftheparent interest Of whichnon-controlling Comprehensive income Other comprehensiveincome pensions Income taxrelated toestimate deviation pensions Estimate deviation Items inothercomprehensiveincomethatwill notoverprofit/loss: recycle effects Currency translation ofintheyear disposed effectsrelatedtoforeign operations currency translation Reclassification andnetinvestmenthedges relatedtocashflowhedges ofinstruments Income taxfromrecycling financial hedges andnetinvestment instrumentsrelatedtocashflow hedges offinancial Recycling accountedinvestments incomeinequity comprehensive Items recordedin other instruments infairvalue offinancial Income taxrelated tochanges instruments infairvalue offinancial Changes Items inothercomprehensiveincomethatrecycleoverprofit/loss: OTHER COMPREHENSIVEINCOME Of whichowners oftheparent interest Of whichnon-controlling Net profit/loss Tax expense Profit/loss beforetax Net financialitems items Other financial Net currencyeffects 45 14, 22,23 4, 22,23 4, 14,24 4, 12,20 19, 20 19, 20 15, 16 12, 20 Note 21 19 19 18 17 13 STATKRAFT REPORT AS ANNUAL 2017 4 4 4 -13056 -37546 15693 17041 30097 68968 62550 11113 10648 11826 11732 -3961 -1347 -2079 -1449 -3846 -1341 -3662 -3707 -1326 -1084 -2491 1724 6490 1470 -500 -465 -355 -170 -200 2017 456 667 -73 -96 -94 49 42 -17 535 -29 093 20 621 50 987 49 448 -3 951 -3 733 -3 555 -4 851 -5 402 -1 411 -3 894 -1 733 -4 808 -3 452 -3 648 -1 273 1 235 5 223 2 137 2 847 3 086 1 065 2016 -320 -117 -178 217 445 321 380 474 -17 -52 -62 - - 6 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY 675 532 3 858 8 961 3 047 2 653 6 637 7 308 7 747 9 446 2 247 3 423 4 079 1 805 8 407 4 764 1 387 5 137 19 438 10 219 27 349 58 411 17 360 83 519 31 886 52 885 10 531 30 226 103 303 139 282 166 630 166 630 31.12.2016 598 593 962 918 1 101 3 694 4 010 9 086 6 888 3 313 4 368 4 023 2 871 6 537 3 591 9 814 2 539 2 799 36 285 53 136 24 271 13 410 15 372 14 217 39 914 59 219 28 966 91 776 169 183 103 193 129 269 169 183 Director Director Director 31.12.2017 Hilde Drønen Bengt Ekenstierna Asbjørn Sevlejordet 30 31 28 31 21 32 28 21 22 23 25 28 26 27 28 29 21 16 30 Note 4, 24 46 Director Director Deputychair Ingelise Arntsen ThorbjørnHoløs President and CEO Halvor Stenstadvold Oslo, 14 February 2018 Christian Rynning-Tønnesen The Board of Directorsof Statkraft AS Director Director Peter Mellbye Thorhild Widvey ChairtheBoard of Vilde Eriksen Bjerknes STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT Derivatives Current liabilities liabilities Equity and Taxes payable Interest-free liabilities allocated capital employed to Other interest-free liabilities Derivatives Long-term liabilities Short-term interest-bearing liabilities Pension liabilities Provisions allocatedcapital to employed Other provisions Long-terminterest-bearing liabilities Non-controllinginterest Equity Deferredtax liabilities EQUITY AND LIABILITIES Paid-in capital Retained earnings Cash and cash equivalents (including restricted cash) Current assets Assets Inventories Receivables Short-term financial investments Derivatives Other non-currentfinancial assets Derivatives Non-current assets Deferredtax assets Intangible assets Property, plant and equipment Equity accounted investments NOK million ASSETS Statement of Financial Position of Financial Statement Group AS Statkraft CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS Investments in property, plant and equipment andequipment Investments inproperty,plant CASH FLOWFROM INVESTING ACTIVITIES Cash flowfromoperating activities Taxes investments fromequityaccounted Dividend inshort-termitems Changes inlong-term items Changes invalue changes Unrealised loans currencyeffectoninternal Realised accountedinvestments Share ofprofit/lossin equity investments andequityaccounted Gain/loss fromsale ofshares activities Gain/loss fromsale ofbusiness andimpairments amortisation Depreciation, assets ofnon-current Gain/loss on disposal Profit beforetax CASH FLOWFROM OPERATING ACTIVITIES NOK million Statkraft AS Group Statement of CashFlow generated by operating activities. The cash flow statement is divided into net statement starts with the Group’s profit before taxes in order to show cash flow The cash flow statement has been prepared using the indirect method. The SIGNIFICANT ACCOUNTING POLICIES 5) information. 4) 3) dateofNOKmillion. andpayment 66 capitalisation differencesbetween andtiming ofNOK33million liabilities decommissioning capitalised of NOK76million, 2) down. were closed activitiesinthesubsidiary business 1) Restricted cash overdraftfacilities Unused committedcreditlines Unused 31.12 cashequivalents Cash and 01.01 cashequivalents Cash and equivalents rateeffectsoncashand Currency exchange Net changeincashandequivalentscash Cash flowfromfinancing activities interest tonon-controlling related decreasein subsidiary andcapital Dividend paid toStatkraftSF Dividend of Repayment debt New debt CASH FLOWFROM FINANCINGACTIVITIES Cash flowfrominvesting activities inothercompanies investments regarding Considerations offromthirdparties Repayment loans Loans to third parties outflowfromthe Group assetpurchase,netliquidity and Business combinations inflowtotheGroup activities,netliquidity Divestment business ofjointarrangement Reclassification ofassets Proceeds from sale non-current Included in cash and cash equivalents are NOK 129 million related to joint operations asofyearend2017. tojointoperations million related are NOK129 cashandequivalents Included in Statkraft netinthecashflow.Seenote5formore in IHInvestASfor ofSNPowerAS.Theamountispresented the18.1%shareholding sale Statkraftbothcash and received ofOffshore WindLtd. toreclassification Dudgeon from theGroup due Netcashdeconsolidated Investments in the cash flow in 2017 are NOK 175 million lower than investments (excluding investments in shares) in the segment reporting. This is due to capitalised borrowing costs toborrowing reporting.Thisisdue capitalised inshares)the segment investments thaninvestments (excluding million lower in2017are NOK175 Investments inthecash flow fromStatkraftSA portfolioin2017 TreasuryCenter toStatkraftAS. related to transferofloan The major ofNOK2003million oftranslation differences currency Includes reclassification 5)
3) 1) 2) 4) 47 flow from operating activities. dividends from equity accounted investments are presented as provided cash presented under financing activities. Receipts and payments of interest and Dividends disbursed to the owner and to non-controlling interests are cash flow from operating activities, investing activities and financing activities. 14, 22,23 Note 24 21 24 20 24 29 29 29 31 31 5 5 4 5 5 A+B+C STATKRAFT REPORT AS ANNUAL 2017 C A B 15693 10083 14217 -1616 -3610 -4843 -1810 -1144 -5151 -5780 -1037 -2052 -7941 7309 8415 1169 4162 2041 7308 6945 5250 4309 2248 -148 -330 -110 2017 558 186 -36 88 73 70 - - 11016 -1663 -3217 -7632 -6817 -1526 -5331 -2564 -1312 -1216 2015 7308 9056 4642 8371 8260 5223 -226 -148 -404 -368 -474 2016 593 545 300 -85 -59 -15 58 25 31 -8 - - FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY - - 6 49 20 42 -96 -36 -52 -17 Total 890 445 245 667 equity -179 -320 -825 -200 -170 -355 2 140 1 235 1 300 1 470 -5 386 -4 851 -3 733 -1 830 -2 491 83 519 11 732 10 648 91 776 88 340 ------1 7 -4 37 37 Non- -94 -12 -36 -62 -11 250 217 138 -396 -465 -226 -825 7 747 3 591 8 443 -1 036 -2 620 interests controlling - - - - 6 42 61 20 -59 -13 890 445 245 -201 -170 -355 -133 -117 -309 -138 1 470 1 063 2 620 2 140 1 198 1 300 -2 491 -4 350 -5 101 -3 950 -1 604 75 771 11 826 11 113 88 185 79 898 of parent to owners Attributable - - - - 6 42 61 20 -59 -13 890 445 245 equity -201 -170 -355 -133 -117 -309 -138 1 470 1 063 2 620 1 198 -2 491 -3 018 -5 101 -3 950 -1 604 17 360 11 826 11 113 28 966 22 787 Retained ------6 Accu- mulated 6 063 1 063 4 635 -2 491 -1 428 -5 101 -5 095 11 158 translation differences ------61 20 -59 -13 Other 890 245 equity -133 -117 -189 -138 2 620 -3 018 -1 604 12 957 11 826 11 755 25 204 14 622 1) ------SIGNIFICANT ACCOUNTING POLICIES ACCOUNTING SIGNIFICANT Divdends proposedapproval at the time of of the financial statements are classified as equity. Dividends arereclassified as currentliabilities once they have been approved by the General Assembly. 42 Other 786 445 -201 -170 -355 -874 -309 1 470 1 198 1 333 -1 659 -2 993 reserves 48
------capital Paid-in 2 140 1 300 -1 332 58 411 59 219 57 111 2) capitalNOK 2140 of millionowner from took placein (NOK 1300million 2017 in2016).
share
3) 3) Other reserves is mainly related to cash flowhedges andnetinvestment hedges. Statkraft reassessed its arrangements with onenon-controlling shareholder and reclassified a receivable towardssuch shareholder825 of NOK millionnon-current to a from assets A conversion of loan to STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT On 27 June2017 Statkraft’s generalassembly approveda disbursementNOK 4350 of million as dividend SF. For the current year the boardhas to Statkraft proposedto paya dividend of NOK 6100 million. GENERAL INFORMATION GENERAL The parent company has a sharecapital of NOK 33.6 billion,divided into200 million shares, each with a par valueof NOK 168. Allshares have the same voting rights and are ownedSF, whichisaNorwegian by Statkraft state-owned company, establishedand domiciled in Norway.Statkraft SF is whollyowned by the Norwegian state, throughthe Ministry of Trade, Industry andFisheries. Capital increase Balance asof 31.12.2017 1) 2) reductionnon-controlling of interests in equity. 3) Change in optionrecognised in equity Businesscombinations/divestments Transactionwith non-controlling interests Income tax relatedto estimatedeviation pensions period Total comprehensive income for the Dividend and Groupcontribution Currencytranslation effects not recyclethat will over profit/loss: Items in OCI Estimate deviation pensions Income tax from recyclingfinancial of instruments related to cash flow hedges and net investment hedges Currencytranslationoperations effects related to foreign disposed of the year Income tax relatedto changesof financial in fair value instruments Items recorded inother comprehensive income in equity accounted investments Recycling of financial related to cash flowhedges instruments and net investment hedges Items in other comprehensive income that recycle over Items in other comprehensive income that recycle profit/loss: Changes in fair valueof financial instruments Capital increase Balance asof 31.12.2016 Net profit/loss Change in optionrecognised in equity Transactionswith non-controlling interests Reclassification of loanto non-controlling interests Capital increase injoint from other shareholders ventures Total comprehensive income for the period Total comprehensive income for the Dividend and Groupcontribution Currencytranslation effects not recyclethat will over profit/loss: Items in OCI Estimate deviation pensions Income tax relatedto estimatedeviation pensions Items recorded inother comprehensive income in equity accounted investments Reclassificationcurrencytranslation effects related to foreign operationsin disposed of the year Items in other comprehensive income that recycle over Items in other comprehensive profit/loss: Changesof financial in fair value instruments Income tax relatedto changes in fair valueof financial instruments Balance asof 01.01.2016 Net profit/loss NOK million Statement of Changes in Equity in of Changes Statement Group AS Statkraft CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS Note 21 Note 20 Note 19 Note 18 Note 17 Note 16 Note 15 Note 14 Note 13 Note 12 Statement ofcomprehensiveincome Note 11 Note 10 Note 9 Note 8 Note 7 Note 6 Financial risk andinstruments Note 5 Note 4 Note 3 Note 2 Note 1 General statements financial Index ofnotestotheconsolidated Statkraft AS Group Notes Income taxes statement intheincome effectsrecognised Unrealised items Financial expenses Other operating fees Property taxandlicence Pensions equivalents numberoffull-time Payroll costs and Impairments income Other operating purchase andenergy Sales revenues accounting Hedge instruments Financial liquidity risk Credit riskand Analysis of marketrisk Market riskintheGroup ofcapitalstructure Management transactions other and Business combinations Segment information events Subsequent estimatesandjudgements Key accounting accountingpolicies significant andsummary of General information Page 58 54 53 53 77 76 75 75 75 73 72 70 69 69 68 64 62 61 60 59 50 49 Note 39 Note 38 Note 37 Note 36 Note 35 Note 34 Note 33 Other information Note 32 Note 31 Note 30 Note 29 Note 28 Note 27 Note 26 Note 25 Note 24 Note 23 Note 22 Statement offinancial position Consolidated companies Consolidated parties Related of and theBoard Directors tomanagement Benefits paid executive auditors Fees paid toexternal Leases and obligations Pledges, guarantees disputes and Contingencies Other interest-freeliabilities debt Interest-bearing Provisions cashequivalents Cash and Derivatives Receivables Inventories assets Other non-current financial jointarrangements Associates and equipment Property, plantand assets Intangible STATKRAFT REPORT AS ANNUAL 2017 Page 97 96 93 92 92 91 90 89 89 88 87 87 86 85 85 82 80 79 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY are joint arrangements where the participants who have have who participants the where arrangements joint are are companies or entities where Statkraft has joint control control joint has Statkraft where entities or companies are are companies or entities where Statkraft has significant significant has Statkraft where entities or companies are Income statement, statement of financial position, statement of equity, cash cash equity, of statement position, financial of statement statement, Income the of respect in information comparative provide notes and statement flow period. previous CURRENCY FOREIGN currency, functional company’s the in accounts their prepare Subsidiaries operates. company the where country the in currency local the normally it and currency, functional its as (NOK) kroner Norwegian uses AS Statkraft statements. financial consolidated the for currency presentation the also is CONSOLIDATION PRINCIPLES CONSOLIDATION statements financial the of comprise statements financial consolidated The an is subsidiary A subsidiaries. its and AS Statkraft company parent the of is Control control. exercises investor, an as Statkraft, which in investee variable to, rights having or to, exposed being investor an by achieved the with into entered agreements or ownership of result a as returns each evaluates Statkraft exists, control whether considering When investee. ownership rights, voting interests, equity to regard with investment individual other and Statkraft by controlled options strength, relative and structure for qualify To agreements. operating and shareholder and shareholders over power its use to ability the have must investor an as Statkraft control, returns. its affect to investee the correlate to adjusted are statements financial subsidiaries’ the necessary, If inter- and transactions Inter-company policies. accounting Group’s the with are losses, and gains and profits internal including balances, company eliminated. achieves Group the when date the from consolidated are Subsidiaries ceases. control when consolidation the from excluded are and control operations Joint and assets the to rights contractual have activity business a over control joint operations, joint In operation. the to relating liabilities, the for obligations the of consent unanimous the require activities relevant the about decisions control. sharing parties consolidated the in recognised is operations joint in share Group’s The assets, JO’s in interest Statkraft’s with accordance in statements financial and realised of share proportionate The . expenses and revenues liabilities, between transactions intragroup from arising losses and gains unrealised eliminated. is operations joint and entities consolidated fully ventures Joint decisions company, venture joint a In investors. other several or one with which participants between unanimous be must activities relevant to related of analysis an on based investments its classifies Statkraft control. joint have assessment an includes This facts. underlying the and control of degree the and purchase strength, relative the and structure ownership rights, voting of individual Each shareholders. other and Statkraft by controlled rights sale and facts underlying in changes Upon assessed. is investment a still is this whether to as made be must assessment new a circumstances, tax, after profit/loss companies’ the of share Group’s The venture. joint from deviations any and value excess of amortisation for adjusted consolidated the in line separate a on presented are policies, accounting consolidated the in recognised are ventures Joint statement. income assets. non-current as presented and method equity the using accounts Associates consolidated the in recognised is associates in share Group’s The influence. financial same the on presented is and method equity the using accounts in shares as profit/loss the and sheet balance the in both item line statement ventures. joint RECLASSIFICATIONS AND FIGURES COMPARATIVE 50 Note 22 Note 23 Note 26 Note 28 Note 29 Note 30 Note 30 Note 35 Note Note 4 Note 5 Note 10 Note 11 Note 12 Note 12 Note 14 Note 14 Note 16 Note 21 Note General informationGeneralof significant and summary accounting policies Inventories Derivatives Cashand cash equivalents Provisions Concessionary power Leases Cashgenerating units (CGU) Pensions Income taxes Intangible assets Property, plantand equipment Statement of changes in equity Statement of cash flow Segmentinformation Business combinations and other transactions Financial instruments Hedge accounting Salesrevenue Public subsidies Impairment STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT GENERAL INFORMATION GENERAL Statkraft AS is a Norwegian limited liability company, established and and established company, liability limited Norwegian a is AS Statkraft in which SF, Statkraft by owned wholly is AS Statkraft Norway. in domiciled Trade, of Ministry the through state, Norwegian the by owned wholly is turn and Oslo in located is office head company’s The Fisheries. and Industry and Exchange Stock Oslo the on listed instruments debt has company the Exchange. Stock London the in prepared been have statements financial consolidated Statkraft’s and (IFRS) Standards Reporting Financial International with accordance Interpretations Reporting Financial International from interpretations EU. the by adopted as (IFRIC) Committee position, financial of statement income, comprehensive of statement The comparative provide notes and flow cash of statement equity, of statement period. previous the of respect in information historical the of basis the on prepared been have accounts consolidated The derivatives instruments, financial certain of exception the with principle, cost the at value fair at measured assets pension net of elements certain and date. sheet balance given consideration the of value fair on based generally is cost Historical services. and assets acquiring when or asset an sell to received be would that price the as defined is value Fair market between transaction orderly an in liability a transfer to paid is value fair of measurement The date. measurement the at participants valuation other whether or available being prices market upon contingent the value, fair determining When applied. been have techniques have would participants market that assumptions apply must management and assets of presentation and Measurement valuation. similar a in used accounts consolidated the presenting when value fair at measured liabilities realisable net measuring of exception the with policies, these on based are in value its measuring when and Inventories 2 IAS with accordance in value Assets. of Impairment 36 IAS with accordance in use as statements financial consolidated the to applied policies accounting The are policies accounting remaining the while below described are whole a applied been have policies The relate. they which to notes the in described stated otherwise unless periods, presented all in manner same the in form notes and statements the in policies accounting of descriptions The policies: accounting of description overall the of part Note 1 Note CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS ADOPTION OF NEW AND REVISED STANDARDS liability. current as presented are liabilities long-term to relating repayments year’s first The item. hedged the with together presented are accounting hedge in instruments hedging are that derivatives Some long-term. as classified are items other all below, mentioned items the of exception the With date. sheet balance the after months 12 within realised be to expected are they when short-term as classified are items sheet Balance CLASSIFICATION AS SHORT-TERM/LONG-TERM recognised in the income statement. monetary assets and liabilities denominated in foreign currencies are transactions and from the translation at year-end exchange rates of exchange gains and losses resulting from the settlement of such using the exchange rates prevailing at the transaction dates. Foreign Foreign currency transactions are translated into the functional currency controlling interest are not recycled to the income statement. income statement. The part of the currency translation effects related to non- recycled are presented as part of the gain or loss of the sale/disposal in the shareholdings in foreign companies. The currency translation effects that are and recycled to the income statement upon sale or loss of control of Currency translation effects are recognised as other comprehensive income using monthly weighted average exchange rates throughout the year. rate prevailing at 31 December; whilst the income statement is translated This means that balance sheet items are translated to NOK at the exchange translated into NOK in accordance with the current exchange rate method. the foreign subsidiaries, associated companies and joint ventures are When preparing the consolidated financial statements, the local currency of Note 1continued point in IFRS9.wasnotsignificantforStatkraft. point in time under The impact atanearlier berecognised will lossesonreceivables loss model. Credit lossmodeltoanexpected fromanincurred be achange going There will IFRS9. However,Statkraftnochangesfromapplying accounting. has hedge on applying opensformorepossibilities The newstandard share. shareby Forthiswillbe assessed existing shares. future investments forits comprehensive fair valuethrough other changes in recognise to income.Statkraftcontinue comprehensive will in profit/lossorother berecognised infairvalue shall towhetherchanges is anoption choose underIAS39.InIFRS income 9there othercomprehensive value through atfair forsale”were measured as“available classified Shares previously disclosures. inthe offinancial instruments impactontheclassification This hasonly an assets. measurementoffinancial havenoimpact on The newcategories for Statkraft are: relevant changed.Thecategories ofassetshave The categories financial IFRS fromimplementing 9. balances theopening adjusting figuresor needforrestatingcomparative instruments. Therewas no its significantimpact on financial thatitwill not have has concluded ontheeffectsofnewstandard and Statkraft finalised itsanalysis has effective from1January2018. IAS39.Thestandard is instrumentsandhasreplaced tofinancial applies IFRS 9Financial InstrumentsIssuedbytheIASBin2014.IFRS9 STANDARDS AND AMENDMENTS ISSUED BUT NOT YET EFFECTIVE financial statement of the Group. The adoption of these amendments did not have a significant impact on the standards: following the to amendment includes This effective. become have standards existing to amendments 2017 In Fair value through other comprehensive income Fair value through profit/loss Amortised cost IAS 12 (amendments) - recognition of deferred tax assets for IAS 7 (amendments) - disclosure initiative unrealised losses 51 and the pattern of revenue recognition. Hence, our tentative conclusion is Hence,ourtentative conclusion recognition. and thepattern ofrevenue obligations theassessmentofperformance in industry, including debated being forcontributionsfromcustomersare still the accounting regarding thatseveralissues Note,however, associates is not yet available. asinformationfrom subsidiaries estimate only reflects consolidated The NOK10million. inassetsofapproximately and increase 80 million NOK ofapproximately adecreasein equity with thecustomer,indicates oftherelationship overestimated lifetime onarecognition which is based estimate, ourpreliminary overtime.Underthispresumption, revenue as byStatkraft shouldbe recognized future deliveries tothecustomer and of togetherwith pricing whicharetobeevaluated represent payments thatthecontributionstoinfrastructure asset concluded we have tentatively Rather, obligation. aseparateperformance customer does not constitute fromthe assessmentisthatthecontribution Further, ourpreliminary assetinlinewithIAS16. as an that thetotalcostshouldbe recognized assessmentisthatStatkraft theinfrastructureand Our preliminary owns time. received, or over onthedayitis forasrevenue,either shouldbe accounted contribution inthecostofassetorif beaccountedforasareduction the should contributions whethersuch customer and IFRIC18,wehave assessed As IAS18 to thegridforelectricityordistrictheating. IFRS15replaces thecustomer ofinfrastructureconnecting inaid ofconstruction jurisdiction fromindifferent monetarycontributions customers The Groupreceives infrastructure: to fromcustomersrelated monetary contributions Recognition restated. be figuresfor2017will statementsfor2018,thecomparative the financial Whenpreparing NOK990million. amounttoapproximately arrangements relatedtothese revenues statements. For2017grossoperating netintheincome thatcontractsshouldbepresented agent and these that IFRSdetermined Statkraftisan user customers.Under 15,we have end- totheproducers’ own andfordelivery ofenergy energy renewable of offromproducers toforbothpurchase production agreements arrange into whichhasentered inNorway hasasubsidiary Industrial Ownership berestated. figuresfor2017will for 2018,thecomparative statements thefinancial Whenpreparing amounts toNOK7807million. revenues aspartofgrossoperating recognised 2017 the market premium forStatkraft. revenue For doesnotrepresentgross operating premium Hencethemarket obligation. aperformance as wehave not identified inStep1and2the“Five-step model” described meet therequirements ofthecontractsdoesnot thatthemarketpremiumcomponent determined IFRS15wehave i.e.grosspresentation. Under energy purchase, asrevenueand themarketpremiumcomponent Statkraft included has UnderIAS18, fromthegridcompanies. collects themarketpremium energyinGermany.Statkraftsubsequently ofrenewable production schemetoincrease isassociatedwithan incentive The marketpremium andamarketpremium. basedonbothspotprice compensation producers energy. Forsome ofthese contracts,Statkraftpaysthe renewable generatorsof enteredintocontractswithexternal Market Operation has onnetoperating revenues. changehasno impact purchase. Such areductionin energy revenues fromcustomers and gross operating in tosignificantreduction willlead contractswhich we have identified ourassessment, During roleasanagentorprincipal. assess theentities’ to newguidance reward.IFRS15alsoprovides focuses onriskand IAS18 andcontrol whereas obligations IFRS 15focusesonperformance Ownership: Industrial ofcontractsinMarketOperationsand Presentation certain ofIFRS15withrespectof: implementation impactedbythe aresignificantly Statkraft identified contracts which has and presentation. measurements IFRS15withrespecttorecognition, from implementing impact e.g.NordPool,wehave not identified onexchanges, generation ofpowerfrom Whenassessing sale scope ofthenew standard. iswithinthe ofpowerandsuch sale Statkrafts activityisgeneration main IAS underIFRS,including 18. requirements recognition current revenue all supersede standard will contracts withcustomers.Thenew revenue from forarising afive-stepmodel toaccount revenue establishes orservicestoacustomer.Toachieve this,IFRS15 transferring goods for entityexpectstobeentitledinexchange towhich an consideration atamountthatreflectsthe revenue an under IFRS 15istorecognise principle 1January2018.Themain on forfiscalyearsbeginning applied tocontractswithcustomers,andmustbe IASB in2014.IFRS15applies bythe IFRS 15RevenuefromContracts withCustomerswas issued Recognition of monetary contributions to ofcontributions fromcustomers related monetary Recognition revenuesfromsale tocustomers ofgrossoperating Presentation Ownership) Ownership) andIndustrial infrastructure (Impactsthesegments District Heating andIndustrialOwnership) (Impacts thesegmentsMarketOperations STATKRAFT REPORT AS ANNUAL 2017 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY consideration venture joint or associate its and investor an between IFRIC 22 (interpretation) - foreign currency transactions and advance advance and transactions currency foreign - (interpretation) 22 IFRIC assets of contribution or sale - (amendments) 28 IAS and 10 IFRS cycle 2014-2016 Standards IFRS to improvements Annual cycle 2015-2017 Standards IFRS to improvements Annual a have will Standards these of adoption the that expect not do Statkraft periods. future in Group the of statements financial the on impact material 14 on Directors of Board the by resolved were Statements Financial The 2018. February 52 The IASB issued IFRS 16 in 2016. IFRS 16 replaces IAS IAS replaces 16 IFRS 2016. in 16 IFRS issued IASB The STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT subject to uncertaintysubject to be changed might have and dependingthe on of those discussions.outcome Implementation 15: method IFRS willadopt IFRS 15 in 2018Statkraft using the full retrospective method. the 2017This imply that statementswill financial be restated to become comparable with the 2018presentation. financialstatement Leases 16 IFRS 17 and its interpretations, including IFRIC 4. IFRS 16 sets out the principles principles the out sets 16 IFRS 4. IFRIC including interpretations, its and 17 and leases of disclosure and presentation measurement, recognition, the for sheet on-balance single a under leases all for account to lessees requires will Statkraft 17. IAS under leases finance for accounting the to similar model from statements financial Group’s the on effects the analysing continue 2018. in 16 IFRS have IFRSs revised and new following the standards, these to addition In been yet not have cases some in and effective, yet not are but issued, been EU: the by adopted CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS as: statementprocesses such relatedtofinancial input formanagement theseassumptionsare critical Inaddition, related market developments. andthe longtermprice forecasts forpower ismanagement’s decisions makingbusiness bymanagement in One ofthekeyassumptions used SIGNIFICANT JUDGEMENT LONG TERM PRICE FORECAST FOR POWER AND OTHER AREAS OF circumstances. the under thatareheldtobereasonable other assumptions andvarious experience basesitsestimatesonhistorical Management thefinancial statements. reported in positionas andfinancial resultsofoperations,cash flows policies, ofaccounting thateffecttheapplication estimates and judgements mustmakecertain inStatkraft’sactivities,management inherent business statements.Duetothelevelofuncertainties thefinancial preparing elementin judgementsisacritical estimatesand The useofreasonable INTRODUCTION Note 2 There are no significant subsequent events. subsequent There areno significant Note 3 affect futuremarketsandrevenues. driversthatultimatelycould aslocaltrends,marketfluctuations and well global as analysing and processofmonitoring, interpreting continuous istheoutputofa withtheassets.Theannual update associated streamsbeyond2025 forandrevenue expectation future prices aswell the management’s basisforbothstrategicdecisions provides affectfuturemarketsandrevenues. The update trends, which will aswelllocal global andanalysing interpreting process ofmonitoring, istheoutputfromacontinuous where Statkraft operates.Thisupdate areas inthegeographical marketdevelopments the related expected updateofitslongtermpriceforecastsand Statkraft anannual performs Impairment testing of property, plant and testingofproperty,plantand Impairment obligations ofcertainfinancial Valuation contracts oflong termenergy Valuation inbusinesscombinations offairvalue Allocation Impairment testing of equity accounted testingofequityaccounted Impairment assets testingofintangible Impairment equipment investments Key accounting estimatesandjudgements Key accounting Subsequent events Subsequent Note 14,24 Note 14,22 Note 14,23 Note 10 Note 10 Note 5 53 reported in the financial include; thefinancial statements.Such areas reported in amountsare amaterialimpacton how policies may have where these policyinareas accounting theappropriate indetermining judgements managementmustapply Due toStatkraft’sbusiness activities, APPLICATION OF ACCOUNTING POLICY the carrying of; the carrying amounts in estimating areapplied totheabove,significant judgement In addition development. market theviewupon related term priceforecastsforpower and long theannual Managementapproves theCorporate recommendations, ontheexpert Based andotherstrategic considerations. asset valuations tobeused in in the analysis scenariosapplied theinput and challenge toprovideand Management is invited intheprocess.Corporate involved itsview by being Managementisforming management The Corporate prices. futurepower viewofboththemarketsandexpected abalanced provide consistency,and Theprocessaims toensure areexplained. deviations major toreferencesand benchmarked external The mainresults are the andrun by a team ofexperts across Group. The processisheaded suchas; elements considering themarkets, analysing when approachisapplied A fundamental Deferred taxassets Deferred Pensions Classification purchaseagreements of power Classification madetogetherwith of investments Classification revenue of energy Classification contracts of energy Classification Technological developments to reduce emissions ofclimategases toreduceemissions developments Technological regulations Political balances Future energy fuels, and ofcompetingtechnologies Cost levels third parties STATKRAFT REPORT AS ANNUAL 2017 Note 21 Note 16 Note 35 Note 24 Note 12 Note 10 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY includes management and development of One of Statkraft’s strategic goals is to be a leading
includes trading, origination, market access for
includes Statkraft’s development and operation of district includes other small-scale business and group functions.
include eliminations and unallocated assets. includes Statkraft’s development and operation in onshore
Market operations smaller producers of renewable energy, as well as revenue optimisation and risk mitigation activities related to both the Continental and Nordic production. International power international provider of pure energy in growth markets. The business area International power is set up to accomplish this. The business idea for International power is to deliver a competitive return by developing, acquiring, owning and operating renewable assets in selected growth markets with strong focus on safety and profitability across the value chain. Wind power wind power. In 2017 the segment has been in a process to divest its offshore wind assets in accordance with the Group’s strategy. The segment operates in Norway, Sweden and the United Kingdom. District heating heating plants in Norway and Sweden. Industrial ownership Norwegian shareholdings within the Group’s core business, as well as the end-user business in Fjordkraft. The shareholders in Fjordkraft have initiated a process aiming for an Initial Public Offering (IPO). Other activities Group items 54 includes the majority of the Group’s
Segment informationSegment STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT hydropower business in Norway, Sweden, Germany and the United Kingdom, as well as the gas fired power plants, the subsea cable Baltic Cable and the bio-power plants in Germany. The Group reports operating segments in accordance with how the Chief Executive Officer makes, follows up and evaluates his decisions. The operating segments have been identified on the basis of internal management information that is periodically reviewed by the management and used as a basis for resource allocation and key performance review. The segment International hydropower changed name to International power in 2017. We are presenting the underlying operating profit/loss for each of the segments and for the Group. The definition of underlying operating profit has been amended in 2017. See section for Alternative Performance Measures for more information. The comparative figures are restated. “Other assets” for the segments consists of intangible assets, property plant and equipment and long-term receivables. For Statkraft AS Group “other assets” consists of all assets except equity accounted investments. The segments are defined as: European flexible generation Note 4 Note CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS Depreciation, amortisation andimpairments amortisation Depreciation, Total assets Other assets investments Equity accounted Balance sheet 31.12.17 (EBIT)Operating profit/loss relatedcosts Impairments and activities of business Gain/loss fromacquisitions/divestments derivatives changeenergy value Unrealised (EBIT),Operating profit/loss underlying otherincome,underlying revenuesand Net operating income,underlying revenuesand other Gross operating accountedinvestments Share ofprofit/lossin equity internal,underlying andother income Operating revenues external,underlying andother income Operating revenues 2017 NOK million Segments Accounting specification persegment Note 4 Investments inshares capacity Investments innew production otherinvestments investmentsand Maintenance andimpairments amortisation Depreciation, Total assets Other assets investments Equity accounted Balance sheet 31.12.16 (EBIT)Operating profit/loss relatedcosts Impairments and activities of business Gain/loss fromacquisitions/divestments derivatives changeenergy value Unrealised (EBIT),Operating profit/loss underlying otherincome,underlying revenuesand Net operating income,underlying revenuesand other Gross operating accountedinvestments Share ofprofit/lossin equity internal,underlying andother income Operating revenues external,underlying andother income Operating revenues 2016 NOK million Segments Investments inshares capacity Investments innew production otherinvestments investmentsand Maintenance continued AS Group 169184 155774 Statkraft Statkraft AS Group 166 630 147 192 13410 17041 10770 23296 62168 62241 Statkraft -4162 19 438 21 875 52 241 51 767 1964 1820 5481 1289 -8 260 -4 808 -1 270 -500 3 736 1 763 3 086 9 148 111 -73 158 474 16 - - generation generation European European European European 58533 58533 10704 14508 17084 16824 55 57 240 57 240 14 187 15 779 15 520 1053 1084 1173 8447 -4 554 -2 802 flexible flexible flexible flexible -620 1 154 4 529 7 701 117 260 -370 582 259 ------operations operations 33727 33720 25 843 25 953 1175 1059 1985 Market Market 103 375 289 116 -758 -900 -108 -12 179 124 142 980 91 86 -14 -2 56 55 5 2 5 - - - - 4 2 27108 25287 -2160 -1392 33 756 27 896 1821 2167 1400 1886 2522 national national national national -1 910 -1 377 -350 -744 1 250 5 860 2 234 2 559 2 429 power power 794 173 425 108 -819 Inter- Inter- 162 557 114 30 16 - - - - 12 660 8165 6394 1771 3213 3319 -553 -187 1 457 9 138 3 522 power power 500 929 974 213 706 -973 -781 -606 -191 Wind Wind 743 786 653 12 81 55 32 16 41 92 - - - - STATKRAFT REPORT AS ANNUAL 2017 3510 3510 heating heating District District -175 3 521 3 521 130 151 155 580 789 788 -190 142 111 552 767 765 -22 -4 13 89 7 1 ------2 ownership ownership 25449 15734 Industrial Industrial Industrial Industrial 25 360 15 381 9715 1879 1868 4101 8752 8219 -575 9 979 1 259 1 261 3 364 7 367 6 877 320 566 480 -544 301 387 432 11 53 58 -2 ------16241 16227 activities activities 24 060 24 042 -480 -464 964 964 853 134 Other Other -381 -381 -66 -16 -23 975 976 824 165 19 14 -74 -13 39 44 18 4 ------29803 29800 -1171 -2008 -1986 -1 160 -1 835 -1 802 9 854 9 850 Group Group items items -26 -26 -21 -52 -52 -33 -1 -1 -1 1 3 ------4 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY 886 198 254 Other 4 830 2 256 1 490 3 254 2 181 3 767 -2 949 22 753 24 873 - 9 39 UK 158 466 -525 1 277 8 016 8 502 1 195 18 411 17 778 1 - - 70 -85 242 2 134 2 149 1 634 1 391 22 504 21 866 Sweden 988 831 705 441 -116 1 762 8 296 2 703 2 182 11 877 14 620 13 591 Germany 512 509 988 7 872 1 183 5 768 Norway 25 297 15 730 57 269 21 924 14 659 57 046 “Related business” refer to all activities in the investments in the associated regional companies BKK AS, Agder Energi AS and Istad AS. The column Sum “Norwegian hydropower, excluding related business” represents the totals for the two subsidiaries after elimination of intercompany transactions and balances. The figures for Statkraft Energi AS are extracted from the segments European Flexible Generation and Market Operations, while the figures for Skagerak Kraft Group are extracted from the segment Industrial Ownership. The line “Profit after tax (majority share)” from Skagerak Kraft Group, is calculated based on Statkrafts ownership interest of 66.62%. The lines Net financial items and Tax expense show the financial items and tax related to the activities in the definition of “Norwegian hydropower”. The figures from the equity accounted investments in the associated companies BKK AS, Agder Energi AS and Istad AS have been extracted from the segment Industrial Ownership. See note 24. 56 3 456 2 291 3 634 1 925 Group 62 550 22 056 34 747 49 448 18 976 24 913 106 506 107 161 Statkraft AS continued STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT Selected financial figures from “Norwegian hydropower and related business” In the white paper Prop. 40 S (2014-2015) related to revised national budget, it was stated that Statkraft should disclose information related to the Norwegian hydropower activities (“Norwegian hydropower”). The table on the next page includes financial figures for the Norwegian hydropower, which have been extracted from the relevant operational segments. “Norwegian hydropower” includes all activities related to our Norwegian hydropower assets in the subsidiaries Statkraft Energi AS and Skagerak Kraft Group, which are subject to resource rent tax. Further, it includes Nordic dynamic asset management portfolio related to the assets defined above and the financial risk reduction portfolio in Statkraft Energi AS. Non-current31.12. assets as of customersregarding significant Information No external more of the Group’soperating customers account for 10% or revenues. Sales and trading Customer Other 2016 Sales revenues external Generation Customer Other Non-current31.12. assets as of 2017 Sales revenuesexternal Generation Sales and trading Geographical areasGeographical NOK million External sales are allocated revenues geographical on the basisthe of origingeneratingassetsoractivities. of Non-current consist of property, plant and equipment assets and intangibleassetsexcept tax and are allocated deferred on the basis of the country of origin for the production facilityoractivity. Specification perrevenue category Specification See note 12. area pergeographical Specification Note 4 Note CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS Note 4 Total assets Other assets investments Equity accounted Balance sheet 31.12.17 toStatkraft groupcontribution and Paid dividend Profit/loss aftertax(majorityshare) Profit/loss aftertax Tax expense items Net financial (EBIT)Operating profit/loss otherincome revenuesand Net operating income revenuesand other Gross operating accountedinvestments Share ofprofit/lossin equity 2017 NOK million Norwegian hydropower 3) 2) 1) Investments inshares capacity Investments innew production otherinvestments investmentsand Maintenance andimpairments amortisation Depreciation, EBITDA Total assets Other assets investments Equity accounted Balance sheet 31.12.16 toStatkraft group contribution and Paid dividend Profit/loss aftertax(majorityshare) Profit/loss aftertax Tax expense items Net financial (EBIT)Operating profit/loss otherincome revenuesand Net operating income revenuesand other Gross operating accountedinvestments Share ofprofit/lossin equity 2016 NOK million Norwegian hydropower 3) 2) 1) Investments inshares capacity Investments innew production otherinvestments investmentsand Maintenance andimpairments amortisation Depreciation, EBITDA Dividend paid paid toStatkraft Dividend after fromStatkraftAS contribution tax paid Energi andgroup Dividend Statkraft'sofafter share profit/loss tax paid toStatkraft Dividend afterfromStatkraftAS contribution taxpaid Energi andgroup Dividend Statkraft'sofafter share profit/loss tax continued Statkraft AS Statkraft Statkraft AS 169184 155774 166630 147192 21203 13410 11826 11732 17041 30097 68968 11346 19438 20621 50987 -4162 -3961 -1347 -8260 -5402 1964 1820 3736 1763 2138 3086 Group -117 -178 Group 111 158 474 -73 57 Statkraft Energi Statkraft Energi "Norwegian hydropower" from: hydropower" "Norwegian "Norwegian hydropower" from: hydropower" "Norwegian 10066 37930 37930 12943 15666 38000 38000 11774 14186 -4687 -1544 -4177 3758 4480 4480 9303 1070 8529 5038 2570 2570 6985 -763 -136 -239 950 452 22 AS AS ------2) 2) Skagerak Skagerak Kraft Skagerak Skagerak Kraft 1146 5358 5356 1571 1651 5454 5431 1146 1239 -191 -522 -188 -355 Group Group 232 350 955 103 716 527 -83 -88 95 76 23 59 57 85 4 1 1 1 - - - 3) 3) hydropower, hydropower, hydropower, hydropower, "Norwegian "Norwegian "Norwegian "Norwegian STATKRAFT REPORT AS ANNUAL 2017 business" excluding excluding 11212 43288 43287 10258 14514 17303 business" excluding excluding 43454 43431 12924 15411 -5210 -1732 -4531 1046 3834 4711 4830 1173 9245 5097 2627 2655 7513 related related -954 -218 related related -327 453 Sum 26 Sum 23 1 1 - - - Associated Associated companies Associated Associated companies regional regional regional regional 9 559 9 559 9 890 9 890 477 528 477 477 477 477 477 477 434 525 434 434 434 434 434 434 3) 1) 3) 1) related related business" related related business" Sum "Norwegian Sum "Norwegian Sum "Norwegian Sum "Norwegian hydropower and and hydropower hydropower and and hydropower 11688 52847 43287 10735 14991 17780 53344 43431 13358 15846 -5210 -1732 -4531 1046 9561 4362 5188 5307 1173 9679 9913 5622 3062 3090 7947 -954 -218 -327 477 453 435 26 - - FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY Skagerak Naturgass was previously 100% The subsidiary Vindpark Em AB and the wind farm On 23 March, Statkraft divested its shares in the joint The subsidiary Steinsvik AS was divested. There were no On 10 October, Statkraft divested its 50% share in the joint On 11 July, Statkraft divested its interests in the Cetin On 25 September, an agreement was entered into between Statkraft has signed an agreement to sell its 30% share in the On 14 December, Statkraft signed an agreement to divest its 40% SALE AND RESTRUCTURING OF BUSINESS IN 2017 There wereno significant business combinations,assetpurchases, new joint arrangements or sale of business in 2016. SN Power Statkraft and Norfund whereby Statkraft acquired the remaining 18.1% share in Statkraft IH Invest AS and disposed its 50% share in SN Power AS. In addition, Statkraft received a cash payment of NOK 1717 million. A gain of NOK 2091 million, which includes a deferred gain from an earlier restructuring and currency effects, was recognised as other operating income. See note 24. Scira share in the joint venture Scira Offshore Energy Ltd. which includes the Sheringham Shoal offshore wind project in the UK. The transaction was closed later in December and included a loan of NOK 1403 million from Statkraft AS provided to the joint venture. Total cash inflow from the transaction was NOK 6192 million. The transaction resulted in a gain of NOK 2634 million from sale of shares recognised as other operating income and a gain of NOK 43 million from settlement of loans recognised as other financial items. Triton Knoll venture Triton Knoll Offshore Wind Farms Ltd. to innogy Renewables UK Ltd. The transaction included a loan of NOK 331 million from Statkraft UK provided to the joint venture. Total cash inflow from the transaction was NOK 765 million. The transaction resulted in a gain of NOK 426 million recognised as other operating income. Forewind Ltd operation Forewind Ltd. which included the Dogger Bank offshore wind project in the UK. This resulted in a gain of NOK 256 million recognised as other operating income. Cetin Enerji hydropower project in Turkey. This resulted in a gain of NOK 76 million, mainly due to the reclassification of currency translation differences, recognised as other operating income. As part of the sales agreement, there is a contingent earn-out. The earn-out will be recognised when payments are received. Skagerak Naturgass AS owned by Skagerak Energi and consolidated as a subsidiary. 51% of the shares were divested and the entity was consolidated as an equity accounted investment after the transaction. There were no material effects on the financial statements. Steinsvik AS material effects on the financial statements. Vindpark Em AB Tollarpabjär were divested. There were no material effects on the financial statements. Dudgeon joint venture Dudgeon Offshore Wind Ltd. to a consortium led by China Resources Company Limited. The agreed purchase price for the shares is GBP 555 million. The transaction is expected to be closed in the first quarter of 2018. BUSINESS COMBINATIONS 2016 58 Business combinationsBusinessand transactions other STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT There wereno significant business combinations,assetpurchases or new joint arrangements in 2017. BUSINESS COMBINATIONS AND TRANSACTIONS IN 2017 BUSINESS COMBINATIONS AND TRANSACTIONS IN Consideration paid in businesscombinations isallocated to acquired assets and liabilities, based fair values.major on their estimated For acquisitions, usesStatkraft independent external advisors to assist in the determination of the fair value of acquired assets and liabilities. This type of valuation requires managementto makejudgements as regards valuationmethod, estimates andassumptions. Management’s estimates of fair value and useful lifeare based on assumptions supported by the Group’s experts, but with inherent uncertainty. As explained in Note 2, Statkraft’s long-term price forecast for power is a critical assumption used in estimating fair values of relevant assets and liabilities. ESTIMATES AND ASSUMPTIONS AND ESTIMATES SIGNIFICANT ACCOUNTING POLICIES ACCOUNTING SIGNIFICANT The combinations. business in applied is method acquisition The also is which date, transaction the on value fair at measured is consideration contingent and liabilities assets, identifiable of value fair when date the a of accounting the If measured. are transaction the in acquired liabilities which in period, reporting the of end the at incomplete is combination business the for values preliminary report will Group the occurred, transaction the the throughout adjusted are values Temporary liabilities. and assets information new reflect to order in year one maximum of period measuring if that date, acquisition the of as existed that circumstances about obtained new Correspondingly, date. that on valuation the affected have would known, and risk when is date transaction The recognised. be can liabilities and assets date. closing the with coincides normally and transferred been has control the or value fair at either recognised are interests Non-controlling The liabilities. and assets net identifiable the of share proportionate and cost between differences Any transaction. each for done is assessment are liabilities contingent and liabilities assets, acquired for value fair cost the when statement income the in recognised or goodwill as recognised goodwill. on tax deferred for recognised are provisions No lower. is incurred. when statement income the in recognised are costs Transaction If business combinations are achieved in stages, the existing ownership interests is recognisedpoint at fair valueat the in time when controlis Suchtransferred to Statkraft. a change in the carrying value of the investment is recognised intheincome statement. associated of acquisition of recognition the to applied principles The the to applied those as same the general in are ventures joint and companies subsidiaries. of acquisition Note 5 Note CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS Net interest-bearing liabilities Net interest-bearing cash restricted cashequivalents, excluding Cash and investments Short-term financial debt Short-term interest-bearing debt Long-term interest-bearing NOK million Overview ofcapitalincluded inof management capital structure requirements. dividend the owner’s and thanthoserelating tothemarket’s expectations capital structure other of withregardtothemanagement requirements subject toanyexternal fromvariouscapital markets.TheGroup is not financing obtain external to from/totheowner.TheGroupendeavours payments ofshare capital and liabilities andrepaymentoflong-term ofthedraw-down primarily ofthecapital structure consist The toolsforlong-term management rating. astrong credit whilstmaintaining ability to expand debt/equityratio,its betweenthecompany’s balance areasonable maintain managementofitscapital structure is to The mainaims oftheGroup’s Note 6 Management ofcapitalstructure Management 59 from Moody’s.Statkraft’stargetistomaintainitscurrentrating. outlook) &Poor’sandBaa1 (stable of A-(stableoutlook) fromStandard rating.Statkraftcreditrating structure islong-term credit AShasa managementofcapital The mostimportanttargetfigure fortheGroup’s ofcapitalstructurein2017. management the governing targetsandguidelines changesintheGroup’s There were no Note 29 31 31 STATKRAFT REPORT AS ANNUAL 2017 -14147 24915 36285 3694 -918 2017 32511 31886 -7250 8407 -532 2016 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY Statkraft incurs currency risk in the form of
Origination activities include buying and selling Statkraft’s interestrateexposure Statkraft’s is relatedto its debt
Statkraft is exposed to two main types of risk as regards the finance activities: foreign exchange risk and interest rate risk. Statkraft therefore employs interest rate and foreign currency derivatives to mitigate these risks. Interest rate swaps, currency and interest rate swaps and forward exchange rate contracts are used to achieve the desired currency and interest rate structure for the company’s debt portfolio. Forward exchange rate contracts and debt in foreign currency are also used to hedge cash flows denominated in foreign currency. Statkraft’s methods for managing these risks are described below: Foreign exchange risk transaction risk, mainly in connection with energy sales revenues, investments and dividend from subsidiaries and associates in foreign currency. Balance sheet risk is related to shareholdings in foreign subsidiaries, joint operations and equity accounted investments. Statkraft’s settlement currency at the Nordic power exchange Nord Pool is EUR, and all power contracts traded intheNordic powerexchange Nasdaq are denominated inEUR.In addition most of Statkraft’s bilateralpower purchase agreements in Norway and allpower purchaseand abroad sales are denominated inforeign currency. The objectiveStatkraft’s hedging of is to secure the NOK valueof future cashflows exposed to changes in foreign currency rates. The currencyexposure in Statkraft is treated in accordance with the company’s treasury strategy. Economic hedging is achieved by usingfinancial derivatives and debt inforeign currencies as hedging instruments. Few of these hedging relationships fulfiltherequirements of hedge accounting. Interest rate risk portfolio. The managementof interestrateriskisbased on a balance between keepinginterestlow cost over time and contributing to stabilisethe Group’s cashflows with regards to interest rate changes. The interest rate risk is monitored by having durationshall as measure. Statkraft at all times keep the average durationof its debt portfolio within the range2to 5 of years. Compliance with the limit for currency and interest rate risk is followed up continuously by the middle-office function. Responsibility for entering into and following up the various positions has been separated and is allocated to separate organisational units. realise profit on changes in the market value of energy and energy-related products. The market risk in these contracts is mainly related to future prices for power, coal, gas and oil products. Contracts in the trading portfolios are recognised at fair value. Origination portfolios both standard and structured products. Structured products are typically power contracts with tailor made profiles, long-term contracts or power contracts in different currencies. Trading transportation capacity across borders and virtual power plant contracts are also included within the origination activities. Quoted, liquid contracts pertaining to system price, area prices and foreign currency are primarily used to reduce the risk involved in trading structured products and contracts. The majority of the contracts in the portfolio have a duration of up to five years, though some contracts run until 2031. The contracts are recognised at fair value. Statkraft has various trading, and origination portfolios that are managed independently of the Group’s expected power production. Statkraft has allocated risk capital to these activities. Clear guidelines have been established limiting the types of products that can be traded. The mandates are adhered to by applying specified limits for Value-at-Risk and Profit-at-Risk. Both methods calculate the maximum potential loss a portfolio can incur, with a given probability factor over a given period of time. The credit risk and operational risk are also quantified in relation to the allocated risk capital. RISK RATE INTEREST AND EXCHANGE FOREIGN OF DESCRIPTION 60
These
, coal, gas and oil 2 products, as well as 2 Statkraft has entered into physical power sales The trading activities involve buying and selling
Market risk in the Group risk Market STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT standardised and liquid products. Power and CO contracts may include an embedded derivative for instance in the case of a currency or raw material exposure. Embedded derivatives in physical sales contracts are recognised at fair value. Other contracts entered into for own use are excepted from recognition in the balance sheet and are recognised in the income statement as part of normal purchase and sale. Nordic and Continental dynamic asset management portfolios Statkraft has one Nordic and one Continental dynamic asset management portfolio, managed in Oslo and in Düsseldorf, respectively. The objective of these portfolios is to optimise portfolio revenues and reduce the risk levels in Statkraft as a whole. Statkraft performs financial trades in order to generate values in futures and forward markets, in addition to physical production and trading. Mandates to enter into financial contracts are based on volume thresholds related to available production. The risk is quantified using simulations of various scenarios for relevant risk factors. The management portfolios consist mainly of financial contracts for power, CO products. The contracts are traded on energy exchanges and by bilateral contracts. In general, the time horizon for these contracts is less than five years. The contracts are measured at fair value. Trading portfolios Statkraft is exposed to significant market risk in relation to the generation and trading of power. Revenues from power generation are exposed to volume and power price risk. The company has an advanced energy management process and aims to have production capacity available in periods with high demand. Statkraft manages market risk in the energy markets by trading physical and financial instruments in multiple markets. The production revenues are optimised through financial power trading. The company is also engaged in other trading activities. Risk management in energy trading in Statkraft focuses on total portfolios rather than individual contracts. Internal guidelines controlling the level of market exposure have been established for all portfolios. Responsibility for the continual monitoring of granted mandates and frameworks lies with independent organisational units. The frameworks for trading in both financial and physical contracts are continually monitored. The Group has trading activities in Oslo, Trondheim, Stockholm, London, Amsterdam, Düsseldorf, Istanbul, Tirana, Rio de Janeiro, San Francisco, New Dehli and Lima. A description of the energy portfolios in Statkraft can be found below: Bilateral contracts agreements with industrial customers in the Nordic region. These contracts stabilise Statkraft’s revenues. The bilateral industrial contracts have different durations. The price of some of these sales obligations are indexed to foreign currency and raw materials such as metals. green certificates, gas and oil products are traded. The contracts in the trading portfolio have maturities ranging from 0 to 4 years. The aim is to DESCRIPTION OF MARKET RISK RELATED TO PRICES ON ENERGY ENERGY ON PRICES TO RELATED RISK MARKET OF DESCRIPTION COMMODITIES AND RISK AND RISK MANAGEMENT OF FINANCIAL INSTRUMENTS INSTRUMENTS FINANCIAL OF MANAGEMENT RISK AND RISK GENERALLY a has and areas many in risk entail that activities in engaged is Statkraft management risk Group’s The risks. market Group’s the to approach unified and ability Group’s the on based risk right the assuming upon based is policy plans. development and strength financial expertise, risks, take to willingness for opportunities and threats identify to is management risk of purpose The reasonable provide to level risk overall the manage to and Group, the met. be will objectives Group’s the that assurance and energy of prices to relate primarily will risk market Statkraft, In section following The currency. foreign and rates interest commodities, and risk, market of types various the of description detailed more a contains managed. are these how Note 7 Note CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS Diversification effects Diversification effects Total marketriskbeforediversification activitiesanddistrictheating Market riskinend-user gridrevenues Market riskindistribution currencypositions Market riskininterestratesand portfolios andOrigination Market riskinTrading risk,spotpriceriskandhedging) optimisation (volume Market riskinenergy NOK million Specification risk of market methods. statistical using calculated are interrelatedness their and instruments/prices underlying the in Uncertainty year. a of course the during date sheet balance the at positions of risk market the with connected results, expected from deviations i.e losses, potential all covering of probability 95% a have shall risk market for targets Statkraft’s Board. the and management Group to reporting of part as level Group at as well as portfolios business and areas business the of follow-up the in both used are which calculations, these in included is risk Market (value-at-risk). level confidence given a with results net expected from deviations as risk quantifies Group The heating. district and business end-user and revenues grid distribution positions, rate interest and currency portfolios, Origination and Trading its optimisation, energy within risk market up follows Statkraft Note 8 2) rateandcurrencyswaps. combined interest interestrateswapsand adjustments in exchangeratecontracts,interest maturityofforward yearsalsotakeintoaccount allocated swaps.Thesplitbetween interestrateandcurrency the currencyeffectofcombined 1) Total fixedinterest2016 Total fixedinterest2017 Debt inCLP/CLF Debt inBRL Debt inGBP Debt inUSD Debt inEUR Debt inNOK NOK million Fixed interestratedebtportfolio 2) swaps. interestrateand currency combined 1) rate, average interest CLP/CLF Nominal rate, average interest BRL Nominal rate, average interest GBP Nominal rate, average interest USD Nominal rate, average interest EUR Nominal rate, average interest NOK Nominal Specification of interestbycurrency 2) debtportfolio. currency structure fortheGroup’s toachieve the desired currencyswaps,since Statkraftusesthesederivatives interest rateand ratecontractsand combined effectsforward exchange ofbycurrencyincludes fromallocated swaps.Specifications debt interestrateandcurrency the currencyeffectofcombined 1) Total Debt inCLP/CLF Debt inBRL Debt inGBP Debt inUSD Debt inEUR Debt inSEK Debt inNOK NOK million Specification of debtbycurrency effectasapercentage Diversification Total marketrisk Management of foreign exchange risk and interest rate risk are presented in more detail innote7. inmoredetail riskandinterestratearepresented ofexchange Management foreign exchangeratecontractsand thecurrencyeffectofforward debt,certificateloans, allocated long-terminterest-bearing debt,first-yearinstalment on interest-bearing Includes long-term innote7. inmoredetail riskandinterestratearepresented ofexchange Management foreign and exchange rate contracts,interest swaps allocated forward debt,certificateloans, long-terminterest-bearing debt,first-yearinstalment on interest-bearing Includes long-term innote7. inmoredetail riskandinterestratearepresented ofexchange Management foreign exchangerate contractsand thecurrencyeffectofforward debt,certificateloans, allocated long-terminterest-bearing debt,first-yearinstalment on interest-bearing Includes long-term Analysis Analysis of market risk 1) 2) 1) 2) 1) 2) 0-1 year 23 142 16 403 2 662 9 377 3 651 61 189 428 97 taken into account. into taken is rates exchange currency and rates interest prices, power e.g. between correlation the where risk, market total and areas specified the in risk market total between difference the as emerges effect diversification The year. last from decreased has which million, 3221 NOK at calculated was 2017 December 31 of as risk market Total areas. the between and areas individual the within both correlation, account into takes also analysis The mandates. the of utilisation maximum expected an or exposure actual of form the take can exposure The calculations. the in reflected is year current the to relating uncertainty the only year, one beyond exposures with contracts For year. one is calculations the for period time The Future interestrateadjustments 1–3 years 2 775 6 076 3 055 2 783 166 72 0 0 3–5 3–5 years 1 417 849 144 600 94 10 0 0 5 years and more 5 yearsand STATKRAFT REPORT AS ANNUAL 2017 13 284 10 918 14 566 37 894 19 716 6.00% 8.10% 0.50% 5.90% 2.60% 4.00% 3 221 3 631 1 185 2 336 7 274 6 250 2 662 11% -410 2017 2017 2017 312 374 357 501 968 763 50 30 29 - 0 38 253 37 894 19 716 13 284 38 253 18 216 12 058 6.40% 8.40% 0.70% 5.90% 2.60% 4.40% 2 662 1 275 5 308 3 617 4 059 1 226 2 714 11% -442 2016 2016 2016 Total 501 968 763 483 904 50 30 39 9 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY 2016 532 8 961 9 684 7 308 -1 408 10 219 36 704 35 296 2017 918 4 368 -1 322 10 559 15 372 14 217 45 434 44 112 25 28 27 29 31 Note Statkraft has entered into agreements relating to interim cash settlement of the market value of financial derivatives with counterparties (cash collateral). Counterparty exposure in connection with these agreements is considered to be very low. Similar agreements have also been established for individual counterparties for financial energy contracts. Cash collateral is settled on a weekly basis and will therefore not always be settled at period end. There could therefore be an outstanding credit risk at the period end. In order to reduce credit risk in connection with investments, bank or parent company guarantees are sometimes used when entering into such agreements. The bank which issues the guarantee must be an internationally rated commercial bank which meets minimum rating requirements. When parent company guarantees are used, the parent company is assessed by using ordinary internal credit assessments. Subsidiaries will never be rated higher than the parent company. In cases involving bank guarantees and parent company guarantees, the counterparty will be classified in the same category as the issuer of the guarantee. The individual counterparty exposure limits are monitored continuously and reported regularly to the management. In addition, the counterparty risk is quantified by combining exposure with the probability of the individual counterparty defaulting. The overall counterparty risk is calculated and reported for all relevant units, in addition to being consolidated at Group level and included in the Group risk management. Statkraft’s gross credit risk exposure corresponds to the recognised value of financial assets, which are found in the various notes to the balance sheet. The extent to which relevant and significant collateral has been provided, is presented below. 62 Credit riskandCredit risk liquidity STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT Net exposure credit risk Gross exposurecredit risk Exposure reduced by cash collateral: Cash collateral Receivables Short-term financial investments Cash and cash equivalents NOK million Gross exposure credit risk: Other non-currentfinancial assets Derivatives The counterparty risk for financial energy contracts which are settled through an energy exchange is considered to be very low. For all other energy contracts entered into, the limits are stipulated for the individual counterparty using an internal credit rating. The counterparties are allocated to different categories. The internal credit rating is based on financial key figures. Bilateral contracts are subject to limits for each counterparty with regards to volume, amount and duration. Statkraft has netting agreements with several of its energy trading counterparties. In the event of default, the netting agreements give a right to a final settlement where all future contract positions are netted and settled. If a contractual counterparty experiences payment problems, specific procedures are applied. See note 10 for more information. Investment of surplus liquidity is mainly distributed among institutions rated BBB (Standard & Poor’s) or better. For investment of surplus liquidity, the limits are stipulated for the individual counterparty using an internal credit rating. GENERAL INFORMATION ON CREDIT RISK RISK CREDIT ON INFORMATION GENERAL Credit risk is the risk that Statkraft incurs losses due to the failure of a counterparty to honour its financial obligations. Statkraft is facing credit risk when entering into transactions with financial institutions and to providers of clearing services. Credit risk arises from transactions involving interest bearing securities, bank deposits, derivative transactions, incoming guarantees and committed undrawn credit lines. In addition, Statkraft assumes counterparty risk in connection with energy trading and physical sales. The total risk of counterparties not being able to meet their obligations is considered to be low. Historically, Statkraft’s losses on receivables have been limited. Note 9 Note CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS Interest payments otherloans and loansinsubsidiaries Instalments onexternal markets raisedinnon-Norwegian Instalments onloans market loansfromtheNorwegian Instalments onbond Instalments ondebt fromStatkraftSF NOK million Maturity schedule,externallong-termliabilities facilities. bank committed available and trading energy with connection in guarantees to relating requirements hand, in cash minimum to relating requirements requirements, reserve liquidity figures, target liquidity short-term of reporting forecasts, liquidity tools: following the employing by minimised is risk liquidity activities.The callsrelated totrading payments tocovermargin Statkraft alsousescash derivatives. financial and contracts power financial both trading with connection in collaterals by payments cash to relation in risk liquidity assumes Statkraft Furthermore, assets. its by generated flows cash the with coincide not do obligations financial its of terms the because risk liquidity a assumes Statkraft obligations. payment current its meet to funds insufficient has Group the that risk the is risk liquidity Group’s The GENERAL INFORMATION ON LIQUIDITY RISK Note 9continued Total derivatives 2016 Total derivatives 2017 Total derivatives currencyderivatives Interest rate-andforeign Energy derivatives NOK million showninthetable below. periods allocated tothetime values are ofthecashflows,non-discounted the timing aredecisive fortheunderstanding contractualdue dates value, where withnegativemarket sheet.Forderivatives asderivativesinthebalance arepresented derivatives, which numberoffinancial The Grouphasasignificant Allocation ofnon-discounted valueofderivativesperperiod 2016 Total maturityschedule 2017 Total maturityschedule 0-1 year 0-1 year 7467 3264 1092 1968 3773 4490 1470 3020 204 63 - - flows. cash Group’s the in volatility the reduce Guarantees contracts. power financial trading with connection in exchanges energy by required collateral the in fluctuations handle to established been have Guarantees flows. cash Group’s the in volatility against buffer a as act to also and risk, refinancing e.g. cover to facilities credit unused and placements financial term short- hand, in cash available of consisting reserve liquidity satisfactory a for desire Statkraft’s to relating objectives The scorecard. balanced Group’s the in included is obligations, future its cover to ability Statkraft’s reflects which capacity, liquidity short-term for figure target individual An liquidity. surplus Group’s the of investment the as well as needs financing future plan to prepared are forecasts Liquidity 1–2 years 1–2 years 3107 7772 1084 4912 1000 1369 1414 1115 376 400 299 2–3 years 2–3 years 7293 3811 3000 628 183 664 663 605 58 - - 3–4 years 3–4 years STATKRAFT REPORT AS ANNUAL 2017 3802 1687 616 272 800 182 318 256 62 - - 4–5 years 4–5 years 1648 9132 6861 1500 586 185 100 213 218 -5 - 5 years and 5 yearsand later 5 years and 5 yearsand later 20622 18352 14654 1632 1555 1393 620 880 752 750 - FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY energy contracts
Physical are financial assets which are not not are which assets financial are are measured at fair value on initial recognition recognition initial on value fair at measured are
Judgement is made when determining whether a power purchase Fair value hierarchy The Group classifies fair value measurements by usingafairvalue hierarchy which reflects the importancetheinput of used in the preparation of the measurements.Thefairvalue hierarchy has the following levels: Level 1: Non-adjusted quoted prices in active markets for identical assets or liabilities. Level 2: Other data than the quoted prices included in Level1, which are observable for assets or liabilities either directly,i.e. as prices,orindirectly, i.e. derivedfrom prices. Level 3: Data for the asset or liability which is not based on observable market data Level3consistsinvestments of in shares andenergy derivativeswhere observable data doesnotcover the whole contract period. Observable data (quotedfutures)for energy derivatives will normally be available five for years aheadIf the durationthecontractislonger of time. of than the period whereobservable datathiscontractisalevel exists, 3 contract. Energy contracts withinthelevel 3 category mainly consists of physicaland financial energy contracts and embedded derivatives from bilateral power sales contracts. A significanttheembedded part of derivatives consists of foreignexchange derivatives. These are not affected by estimated future powerprices. The discounted cashflow method is used. Valuation of energy derivatives within level3isbased Statkraft’s long-term price forecast and on observable market data for the short-term where this is available. Prices are intrapolated for the period between short and long- term. As a main rule, the cash flows arediscounted with a risk-freerate. For embedded derivatives a credit spread will be includedrate. in the discount the same over the entire term of the instrument. If an impairment loss is is loss impairment an If instrument. the of term entire the over same the statement. income the in recognised is loss the occurred, have to assessed sale for available as held Assets 3) long-term strategic classifies Statkraft categories. above the of any in included value fair at measured initially are assets The category. this in shareholdings assets the Subsequently, costs. transaction attributable directly with together other in recognised value in changes with value fair at measured are income. comprehensive liabilities Financial 4) periods, subsequent In costs. transaction attributable directly including interest effective the using cost amortised at measured are liabilities financial entire the over same the remains interest effective the where method, rate instrument. the of term JUDGEMENT ACCOUNTING hasStatkraft a significant volumeenergy contracts. A characteristic with of energycontractsisthat they canbe for as financial accounted instruments, leasesorascontractswith customers, depending on the terms and conditions. Leases agreement contains a lease. A power purchase agreement contains a lease if its fulfilment depends andthearrangement on a specific asset conveysa right to control the useof the underlying Further details asset. on leases are disclosed in note 35. “Own use” contracts within energy trading are entered ownthe purpose of the receipt or into for Statkraft’s use if delivery of the power is in accordance with Statkraft’s expected purchase, sale or usagedo requirements. Thesecontracts not qualify for recognition in the balance will sheet. “Own use” contracts typically haveastable customer base(for example bilateral industry contracts) and arealways settled by physical delivery. Non-financial energy are not covered by the “ownuse” contracts that exemption,shall arederivatives be accountedasif they (financial for instruments). This willfor physical typically applycontracts to purchases and salespower of and gas. Management has reviewed the contracts that are accounted for as financialinstruments, and those contracts that are not coveredbythedefinition as a resultof “own use” exemption. ASSUMPTIONS AND ESTIMATES 64 Financial instruments used
Within energy trading, financial
are financial receivables or debt that is not quoted quoted not is that debt or receivables financial are
in energy trading
Financial instruments Physical power sales contracts which are considered to be ready ready be to considered are which contracts sales power Physical are purposes use own for into entered not are and cash to convertible value. fair at measured are products energy-related sell and purchase to contracts Financial embedded and derivatives stand-alone Both derivatives. as classified at recognised and contract host the from separated are that derivatives value. fair derivatives. rate interest and Currency trading. for held assets financial Other STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT 1) Financial instruments valued at fair value through profit or loss or profit through value fair at valued instruments Financial 1) value. fair at are instruments of recognition Initial receivables and Loans 2) upon value fair at measured are receivables and Loans market. active an in In costs. transaction attributable directly of addition the with recognition initial cost amortised at measured are receivables and loans periods, subsequent remains interest effective the where method, rate interest effective the using SIGNIFICANT ACCOUNTING POLICIES ACCOUNTING SIGNIFICANT the to party a becomes Statkraft when recognised are instruments Financial assets financial of recognition Initial instrument. the of provisions contractual on classified are liabilities and assets Financial value. fair at are liabilities and categories the into instruments the of purpose and nature the of basis the receivables”, and “loans loss”, or profit through value fair at assets “financial liabilities”. “financial and assets” financial “available-for-sale instruments are used in the Trading and Origination activities. The Trading and Origination activities are managed independently of the Group’s energy production. Their main objectives are to achieve profit from changes in the market value of energy- and energy-related financial products, as well as profit from non-standard contracts. Financial instruments are used as part of the Group’s financial hedging strategy for continuous optimisation of future revenues from the expected production volume. Financial instruments in energy trading mainly consist of financial and physical agreements relating to purchase and sale of power, gas, oil, coal, carbon quotas and green certificates. Derivatives recognised in the balance sheet are shown as separate items and are measured at fair value with changes in value recognised in the income statement. As the Group’s future own production of power does not qualify for recognition in the balance sheet, the effect of changes in value of financial energy derivatives may have major effects on the income statement without necessarily reflecting the underlying business activities. Financial instruments in financial activities in financial activities primarily consist of loans, interest rate swaps, combined interest rate and currency swaps and forward exchange contracts. Financial derivatives are used as hedging instruments in accordance with the Group’s financial hedging strategy. The hedging objects are considered to be assets in foreign currency, future cash flows or loan arrangements measured at amortised cost. For selected loan arrangements where the interest rate has been changed from fixed to floating (fair value hedging), hedging of some net investments in foreign units and cash flows, hedging is reflected in the financial statements. Because not all financial hedging relationships are reflected in the financial statements, changes in value for financial instruments may result in volatility in the income statement without fully reflecting the financial reality. GENERAL INFORMATION INFORMATION GENERAL Financial instruments account for a significant part of Statkraft’s total balance sheet and are of material importance for the Group’s financial position and results. Most of the financial instruments can be plased into the two main categories; energy trading and financial activities. In addition, Statkraft has other financial instruments such as accounts receivable, accounts payable, cash, short-term financial investments and equity investments. Financial instruments Note 10 Note CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS major financial institutions. financial major and exchanges commodity relevant from prices forward using valued are These coal. and products petroleum gas, metal, as such materials raw against indexed is price contract the where contracts energy has Statkraft unavailable. are prices closing official where prices regional for used are models Separate exist. such where exchanges, energy on rates closing official the using valued are contracts These prices. area to refer contracts power Several exchanges. energy on quoted rates closing official from basis the on stipulated is curve price market The date. sheet balance the on curve price market a of basis the on stipulated is flow cash expected the contracts, power bilateral other For date. sheet balance the on rates contracts Power value. fair of determination the in applied been have that parameters and assumptions of description a is Below instruments. fairvalueoffinancial these factorscould affectthereported to relating in assumptions risk,creditriskandvolatility. Changes as liquidity ofinputssuch considerations include fairvalues. Judgements establishing in isrequired adegree ofjudgement but where this is not feasible, marketswherepossible, aretakenfromobservable inputs tothesemodels flow(DCF)model.The thediscounted cash including techniques valuation ismeasuredusing pricesinactivemarkets,theirfairvalue on quoted recognised measuredbased positioncannot be inthestatementoffinancial When the fair values of financial assets and financial liabilities that is Description of contracts and assumptions used statements. effects ontheGroup’sfinancial tohaveanymaterial ofinvestmentsarenotconsidered in fairvalue these industry.Changes withintherelevant ofmarketconditions best knowledge onmanagement’s level3isbased ofinvestmentsinshareswithin Valuation Note 10 continued Total interestratederivatives Currency and Energy derivatives Financial liabilities at fair value Total Other sharesand securities Available-for-sale financialassets Total notes, bonds Money marketfunds,certificates,promissory investments Short-term financial interestratederivatives Currency and Energy derivatives Financial atfairvalue assets NOK million 2016 Total interestratederivatives Currency and Energy derivatives Financial liabilities at fair value Total Other sharesand securities Available-for-sale financialassets Total notes,bonds Money marketfunds,certificates,promissory investments Short-term financial interestratederivatives Currency and Energy derivatives Financial atfairvalue assets NOK million 2017
Energy exchange contracts are valued at official closing closing official at valued are contracts exchange Energy 65 Note Note 28 28 25 29 28 28 28 28 25 29 28 28 discounting expected future cash flows. cash future expected discounting by valued are securities Other liquid. are securities the and available shareholdings and Shares bonds and Certificates contracts. the to counterparties the by made calculations against reasonableness of test a to subject is value present net Estimated extrapolated. is rate exchange forward the which from rates, exchange quoted on based is contracts exchange currency forward of valuation The ECB. from rates exchange quoted and rates interest market observed of use the through value present to flows cash future expected discounting by determined is swaps, currency and rate interest combined and swaps derivatives rate interest and Currency derivatives certificate Environmental liabilities. and assets as classified contracts bilateral external all to applies This relevant. is risk credit the where cases in curve rate interest market the to added is surcharge credit A rates. interest swap publicised the of basis the on stipulated is curve rate interest market The derivatives. discounting for basis the as used is rate) interest (swap curve rate interest market The rates. exchange calculate to used is parity interest the question, in period time entire the for quotes no are there If currency. foreign in denominated contracts of valuation the in used are (ECB) Bank Central European The from rates exchange foreign Quoted currencies. different in prices have contracts energy Several Green certificate derivatives are valued at forward price. Forward Forward price. forward at valued are derivatives certificate Green CO prices are not applicable if the prices are fixed. are prices the if applicable not are prices quotas. (CER) Reduction Emission Certified and quotas (EUA) Allowance Fair value measurement at period-end using: measurementatperiod-end Fair value using: measurementatperiod-end Fair value 2 1568 1036 4509 3154 contracts are priced based on the forward price of EU EU of price forward the on based priced are contracts Level 1 Level 1 Level -364 -181 -182 532 918 437 -85 -85 90 90 22 22 - - - - are valued at listed prices. listed at valued are -4792 -2372 -2420 -5799 -2430 -3370
6041 2416 3604 8726 2541 6186 Level 2 Level 2 Level are valued at quoted prices where such are are such where prices quoted at valued are 20 ------STATKRAFT REPORT AS ANNUAL 2017 The fair value of interest rate rate interest of value fair The -1787 -1787 -2105 -2105 2627 2627 1396 1396 Level 3 Level 3 Level 248 248 278 278 ------Fair value Fair value 10236 14632 -6942 -2553 -4389 -7990 -2430 -5560 2416 7268 3154 2541 8019 338 338 532 299 299 918 20 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY - -2 2016 44 2016 381 -19 -82 Total 367 594 413 100 391 -462 -304 -569 -300 -111 -431 6 831 1 583 7 335 1 226 1 178 7 288 1 064 1 088 1 088 -7 351 -2 762 -1 408 -6 348 -1 730 -9 212 26 123 -1 364 -1 453 Fair value -23 620 -54 742 10% increase - -2 2016 381 - 7 -400 -304 -569 96 6 740 1 583 7 335 1 226 1 178 7 288 2017 -7 050 -2 762 -1 408 -6 126 -1 730 -9 212 26 031 -378 -791 -199 -119 -375 -21 673 -52 211 1 131 -1 168 -1 787 -2 105 -3 020 -1 787 fair value Recognised value 10% reduction Financial liabilities at - 8 5 20 20 -4 2017 44 -39 -25 Note -445 -158 -718 2 223 1 366 8 201 3 959 1 931 1 039 2 875 1 674 3 614 2 875 -7 349 -2 332 -1 322 -2 175 -1 950 -6 749 11 062 29 781 -1 253 fair value -28 156 -50 679 Fair value Financial assets at - -4 2017 -39 -400 -158 2 223 1 366 8 201 3 959 1 931 1 039 -7 050 -2 408 -1 322 -2 172 -1 950 -6 749 11 062 29 781 -26 427 -48 679 Recognised value 25 25 27 27 27 27 29 31 31 31 31 31 31 31 31 31 32 32 32 Note 66 1) 3) 2) Amount differs from note 25 since pensionassetsare not included in note 10. Amount differs from note 27 since prepaidtaxesand indirect taxes arenotincluded in note 10. Amount differs from note 32 since indirect taxes are not included innote 10. 1) 2) 3) Accounts payable SF Interest-free debt to Statkraft Other interest-free liabilities Total First year’s instalmenton long-term debt Short-term interest-bearing debt to Statkraft SF Credit facilities Other interest-bearing short-term debt Bonds issued in the Norwegian market Debt issued in non-Norwegian markets External debtin subsidiaries and other debt Debt connected to cash collateral Total atamortised liabilities cost Financial Long-terminterest-bearing SF debt to Statkraft Short-term loansto equity accounted investments Receivables relatedcash to collateral Other receivables Cash and cash deposits Long-termloans to equity accounted investments Bonds and other long-term receivables Accounts receivable Assets and liabilities recognised at amortisedcostAssets liabilities and NOK million assetsFinancial at amortised cost STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT Net effect from power prices The effects are not symmetrical dueto volume flexibilityinreduce the contracts that the downside. Net realised gain (+)/loss (-) for 2016 3 Sensitivity analysis of factors classified to Level NOK million Moved to/from Level3 Closing balance 31.12.2016 Opening balance01.01.2016 Unrealised changes currency in value, incl. translation effects Additions or realisations Moved to/from Level3 Closing balance 31.12.2017 Net realised (+)/loss (-) for 2017 gain NOK million Opening01.01.2017 balance Unrealised changes in value, incl. currency effects translation Additions or realisations Total Level3 measured at fair value based on Assets liabilities and Total unrealised changes in value changes Total unrealised NOK million Energy contracts Financial items Note 10continuedNote CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS Interest-free liabilities allocated tocapitalemployed allocated Interest-free liabilities debt Long-term interest-bearing (currentandnon-current) Total derivatives interestswaps Currency and Energy derivatives NOK million Financial liabilities Receivables (currentandnon-current) Total derivatives interestswaps Currency and Energy derivatives NOK million Financial assets 2017 NETTING AGREEMENTS Note 10 continued offsetting is permitted within the jurisdiction of the counterparty. counterparty. the of jurisdiction the within permitted is offsetting such that provided terminated, is agreement an when set-offs allowing by loss credit to exposure mitigate to serve further agreements master The maturity. and currency same instance for as such met, are conditions certain when parties two the between flows cash offsetting involve and payments of netting permit agreements netting master the general, In parties. two the between conditions and terms standard the setting agreements master of types various on based counterparties with agreements has Statkraft transactions, spot and futures derivatives, energy For simultaneously. liability the and asset the realise or basis net a on settle to intends and liability, the and asset the offset to right enforceable legally a has Statkraft when position financial of statement the in net presented are liability financial a and asset financial A similar. or agreements netting are there where instruments financial of exposure) (net value net and amounts booked amounts, gross of reconciliation a show tables The tocapitalemployed allocated Interest-free liabilities debt Long-term interest-bearing (currentandnon-current) Total derivatives interestswaps Currency and Energy derivatives NOK million Financial liabilities Receivables (currentandnon-current) Total derivatives interestswaps Currency and Energy derivatives NOK million Financial assets 2016 Note Note 32 31 28 28 27 28 28 32 31 28 28 27 28 28 Gross amount Gross amount Gross amount Gross amount -15609 -31886 -20259 -17706 -14969 -36285 -31517 -29088 256 21 087 34 547 31 297 15 002 23 586 20 -2430 -2553 2 541 2 416 67 Amount offset Amount offset Amount offset Amount offset -23528 -23528 -13318 -13318 528 23 528 23 318 13 318 13 the table above. table the in row same the on presented therefore are non-current, and current both derivatives, The derivative. corresponding the of lifetime the of regardless assets/liabilities, current as presented and counterpart per net booked are pledged or received collaterals Cash liabilities. and assets in separated are derivatives rate interest and currency energy, the tables, the In loan. a on instalments and payments interest forthcoming cover to account bank restricted a on side a set cash be also can collateral Financial bank. a normally counterpart, to/from payments collateral cash typically is collateral Financial position. financial of statement the in contract each for gross booked are derivatives rate interest and Currency position. financial the of statement the in offsetting of criteria the meet itself in not does netting close-out Such agreement. the on defaulted has or bankrupt is party a if instance for occur can Termination -5884 -5078 5 884 5 078 ------36285 -10531 -31886 372 15 559 10 219 10 -9086 -7990 -2430 -5560 -6942 -2553 -4389 2 541 8 019 9 684 2 415 7 268 Booked Booked amount amount Booked Booked amount amount balance sheet balance sheet balance balance sheet balance sheet balance agreements agreements agreements agreements not offsetin not offsetin not offsetin not offsetin STATKRAFT REPORT AS ANNUAL 2017 Netting Netting Netting Netting Netting Netting ------Financial collateral Financial collateral Financial collateral Financial collateral -1931 -1030 -1187 1 322 1 181 1 361 1 292 received received pledged pledged -151 -901 -210 -935 -253 141 69 - - - - -10531 -31675 -36134 219 10 372 15 Net value Net value Net value Net value -5755 -1618 -4136 -9086 -6058 -1400 -4658 8 323 1 125 7 199 9 237 1 360 7 878 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY - 2016 2016 476 136 -181 -848 -136 -1 144 Financial
-5 15 2017 2017 -94 213 219 -105 -224 As a general rule, the Group does not use hedge
the transfer of the business activities the effects from the net investment the businessactivitiesthe transfer of the effects -1484hedge (NOK million) othercomprehensive were recycledfrom incometo income statement. Cash flow hedging accounting of cash flows hedged. There are some minor exceptions related to debt in a subsidiary and a jointoperation. POLICIES ACCOUNTING SIGNIFICANT Financial instruments designated as hedging instruments instruments that are designated as hedging instruments or hedged items in hedge accounting are identified on the basis of the intention behind the acquisition of the financial instrument. In a fair value hedge the value change will meet the corresponding change in value of the hedged item, and presented in the same line item in the financial statement. The value changes for cash flow hedges and hedges of net investments in foreign operations will be recognised in other comprehensiveentered income.debt on rates exchange in changes from resulting losses and Gains in directly recognised are entity foreign a in investments net hedge to into upon statement income the to recycled and income, comprehensive other entity. foreign the of disposal The critical terms of the hedging object and hedging instrument are deemed to be approximately the same, and 90–110% hedging efficiency is assumed. The inefficiency is recognised in the income statement. 68 2) GBP 220 million in 1) Three loan arrangements are treated as fair value
Hedge accounting The value represents the fair valueof financial Changes instruments. in fair value are recognised in other comprehensiveincome. The value represents the currency effects from financial Currency effects are recognised instruments. in othercomprehensive income. There is not recognised any ineffectiveness in STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT Net gain(+)/loss(-) onhedging objects, in relation to the hedged risk Hedge inefficiency 2017 or 2016. on fair value hedging Other information NOK million Net gain(+)/loss(-) onhedging instruments Total fair valueof hedging instruments 1) 2) NOK million Hedging instruments used value hedging in fair Hedging instruments used flow hedging in cash Hedging instruments used investments in foreign in net operations Fair value of hedging instruments Fair value of hedging hedges. Issued bonds have been designated as hedging objects in the hedging relationships, and the associated interest rate swaps have been designated as hedging instruments. The hedging objects are issued fixed-interest rate bonds with a total nominal value of EUR 850 million. The hedging instruments are interest rate swaps with a nominal value of EUR 850 million, entered into with major banks as the counterparties. The agreements swap interest rate from fixed to floating 3-month EURIBOR. Hedging of net investments in foreign operation synthetic debt in Statkraft AS is designated as hedging of the net investment in Statkraft UK Ltd. Debtin is syntheticallyconstructed GBP usingdebt together with combined in NOK currency interest rate and swaps or forward exchange rate contracts. The currency effects of this debt are recognised in other comprehensive income. The accumulated effect of the hedging is that NOK 369 million is recognised in other comprehensive income as a negative effect at the end of 2017. The effect of the hedging for the year 2017 is NOK 105 million recognised in other comprehensive income as a negative effect. EUR 1000 million of Statkraft AS’ external debt was designated as hedging of the net investment in Statkraft Treasury Centre. major The businessTreasury SA were transferred to activities in Statkraft Centre AS, andthenetinvestmentStatkraft hedge wasdiscontinued. As a result of GENERAL INFORMATION GENERAL Fair value hedging Note 11 Note
CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS Generation -revenues Generation sales NOK million Germany). Norway and Peru and the subsea cable Baltic Cable (between Sweden and Other activities include Fjordkraft. activities mainly relate to the Nordic, British and German markets. End-user origination portfolios, market access and end-user activities. Market access Customers financial risk reduction portfolios and dynamic asset management portfolios. Sales and trading and green certificates. includes spot sales, bilateral industry contracts, concessionary sales contracts Statkraft’s physical power generating assets and district heating. The category Generation categories: The Group’s sales revenues and energy purchase are divided into four GENERAL INFORMATION Note 12 operating expenses. operating 1) Total income other operating Miscellaneous activities ofbusiness Gain fromacquisitions/divestments plants Income fromrentalofpower NOK million Note 13 1) adjustedSales revenues forenergypurchase -total Energy purchase -total Sales revenues Other -net Other -energypurchase Other -salesrevenues Customers -net purchase Customers -energy Customers -sales revenues trading-net Sales and trading-energypurchase Sales and trading-salesrevenues Sales and - Generation net -purchase Generation energy Includes revenues from environmental certificates of NOK 90 million in 2017 (NOK 207 million in2016). (NOKmillion in2017 207 certificatesofNOK90million fromenvironmental Includes revenues Income from power plants that are leased to third parties are presented in other operating income, while expenses related to the operations in the power plants are recognised under under arerecognised inthepower plants relatedtotheoperations expenses income,while inotheroperating topartiesarepresented plantsthatareleased third Income frompower sales revenues and energy purchase mainly consists of grid activities in include sales revenues and energy purchases related to includes sales revenues and energy purchase related to Other operating income Other operating purchase andenergy Sales revenues includes trading portfolios, financial energy contracts, 1) 1) 69 environmental certificates. sales revenues. See note 26 for more details about accounting policies for production in accordance with IAS 20. The change in value is recognised as Environmental certificates from physical and financial contracts. See note 20 for more information. presented as sales revenues together with unrealised changes in fair value Realised revenues portfolios are presented net as sales revenues. gross in the income statement. Realised gains and losses from trading Energy revenues to the buyer and the consideration can be measured reliably. when the risk and control over the goods have substantially been transferred Revenues SIGNIFICANT ACCOUNTING POLICIES from the sale of energy products and services are recognised are recognised upon delivery, and generally presented from physical and financial trading in energy contracts are Note 5 are accounted for at fair value at the time of STATKRAFT REPORT AS ANNUAL 2017 -37546 -32568 20648 22056 25005 62550 34747 -2804 -1408 3456 1525 2291 2179 -766 652 2017 6490 5511 461 518 2017 -29 093 -24 897 20 355 49 448 24 913 18 608 18 976 -3 249 1 345 1 925 3 634 -579 -368 2016 1065 386 16 559 489 2016 16 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY iscalculated as future expected cash flows discounted by minimal project execution is uncertain expectedlong-term power prices market prices areapplied asabasis for estimating future revenues. balance sheet date, estimated revenues are basedon Statkraft’s long-termprice forecast for power, as described in note 2. intrapolated. Thedifference betweenbook value andrecoverable amount is Marketoutlook is declining, regulatoryenvironment areunclear or Structural in market conditions changes that leadto changes in the Impairmenthas beenassessed loss in earlier periods For the short-term period, five years, observable typically the first For the long-term period, typically ten years subsequentof the For the period betweenshort-termand long-term period the prices are situationsare present: ASSUMPTIONS AND ESTIMATES use Value in usingarequired rate of return equal to the market’s required rate of return for corresponding assets in the sameindustry. expenses The operating are derivedthecurrent year’s expensesand from budget. next year’s Restructuring that the Group has not yet committed to or activities significant investments that will enhance future performance the asset’s in the CGU beingisnotincluded. tested, Expected maintenance investments are included for commissionedplants. power Provision for decommissioningisnotusually included in the value in use calculation. When determining the value for property, plant andequipment in use under construction, remaining investments approved by Statkraft’s management are included. when assessing value in use The recoverableAssumptions applied amount is sensitive forecast for power,expected to the long-term price production volumes, and the discount rate. Power prices: volumes TheproductionProduction volume discounted used in the cash flow analyses is the long term expectedproduction volumeany for given site, taking into account all expected technical, hydrological and wake losses. The volume estimate is a combination of information from turbine suppliers, internal third-party consultants and Statkraft’s estimates. Discount rate Calculated valuein on nominal use is based discount rates after tax, whereas the tax effects are considered in the calculated cash flows. This means that the recoverable amountcalculated areequal to the theoretical before tax model. The discountratesapplied takeinto account the risk profileof the asset or asset classin the relevant market. when assessing fair value less cost to sell A fair Assumptions applied valuelessto sell cost approach is applied for assets operating in a market wherean active market for comparableThisisapplied assets exists. for onshore wind assets in the UK, wherethefairvalue of the CGUs was derivedcomparable from onshore windtransactions in the UK market. The valuation model applied is based on multiplesannual for power production. 70 The individual biomasspower plants.
The individual wind power plant.
A gasA power plant normallyCGU unless constitutes a
Each plant together with associated infrastructure including Impairments
Power plants located in the same water resource and
STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT Special attention is given to assets where one or more of the following Gas power plants power Gas two or more plantsare controlledand optimised togetherrevenues so that are not independentof each other. heating District transmission lines. plants power Biomass JUDGEMENTS ACCOUNTING Indicator assessmentaccordance In with the ordinary reporting procedures, impairment of the carrying value of an asset is reviewed on a quarterlybasis. Indicators that might give rise to an impairment loss are analysed and discussed by the segments and group’s specialists. If indicators are identified, calculations will be made andcarryingvalue is if higher than recoverable amount, an impairment loss is recognised in the financial statement. Analogue procedures are performed regarding reversal of earlier impairment. The Audit committee areinformed of any impairment issues onaquarterly basis. managed together to optimise power production. plants power Wind Segment is the lowest CGU level testinggoodwillGoodwill used when for impairment. investmentsEquity accounted are tested for impairmentwhen there are indications of possible An impairment loss in value. loss is recognised if the recoverable amount, estimatedasthehigher of fair value lesscost to sellor valuein use, is below the carrying value. Previously impaired non-financial assets, except goodwill, are reviewed for possible reversal of the impairment at each reporting date. For the purposesof assessing impairmentare grouped losses, assets at the lowest level which there is separately for identifiable cash flows (cash- generating(CGUs)). The highestlevel units reported of a CGU is a areoperating CGUs in Statkraft identifiedasfollow: segment. Hydropower SIGNIFICANT ACCOUNTING POLICIES ACCOUNTING SIGNIFICANT assets that are and intangible equipment Property, plant, depreciated/amortisedare reviewedfor impairment of every at the end quarter. When thereare indicators that future earnings justify the cannot carryingvalue, recoverable the amount is calculated to consider whether an allowance for impairment must be made. The recoverable amount is the highertheasset’s fair value less costs of disposal of value inuse. and its Intangible with indefinite assets useful life are not amortised, but tested for impairment a year andwhen once indicate events or circumstances that the asset might be impaired. Note 14 Note
CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS segment. TheassetsareapartoftheWindpower byNOK187million. impaired were Wind inNorwayand Sweden farms theNordicWindprojects in segment. flexible generation European Theassetisapartofthe byNOK197million. Germany wasimpaired plantin Pump-storage hydropowerplant Apump-storage segment. flexiblegeneration The assetisapartoftheEuropean addition,themarketdevelopment. duetotheverdictand, in recognised was lossofNOK386million the future.Areversalofimpairment propertytaxforStatkraft leadtolower in will Høy powerplant. This ruling statedthatofSønnå the Supreme Court Statkraftisnottaxableowner of Reversal impairment on hydropowerplants inNorwayAverdict NOK266million. inachangeofapproximately tax) will result point(after inthediscountrateof1percentage Anincrease 118 million. NOK achangeofapproximately point(aftertax)willresult in percentage thediscountrateof1 Adecrease in NOK1378million. approximately of willresultin a change inthefuturepowerprice of10% decrease A NOKmillion. ofapproximately 2007 resultinachange 10% will inthefuturepowerprice of andcostofcapital.Anincrease power prices infuture sensitive tochanges inuseareparticularly The estimatedvalues before tax). 7.7% rateaftertaxof(representing anominal discount 5.6% based on valueinuseis Calculated segment. flexible generation the European margin.Theassetsarepartof outlookforfuturegastopower an improved marketand in the German powergeneration needforflexible increased due to wasrecognised lossofNOK914million reversal of impairment of Reversal impairment on gas-firedpowerplants in GermanyA 728 million. NOK achangeofapproximately point(aftertax)willresult in percentage thediscountrateof 1 Anincrease in NOK1010million. of approximately resultinachange rateofpoint (aftertax)will in thediscount 1 percentage NOKmillion. Adecrease ofapproximately 430 resultinachange 10% will thefuturepowerpriceof andcostofcapital.Achange in power prices infuture sensitive tochanges inuseareparticularly The estimatedvalues before tax). 7.8-9.5% discountrateaftertaxof6.8-7.3%(representing a nominal on valueinuse is based prices.Calculated expectedlong-term was lower indicator power.Themain impairment part ofthesegmentInternational million. The assets are with NOK1219 was impaired under developement, projects twohydropower plantand hydropower consists ofoneoperating which Hydropower plantsin investmentin Chile, Chile ThePilmaiquén Intangible assets, property, plantandequipment IMPAIRMENT IN 2017 loss Total impairment investments Equity accounted assets,plantandequipment property ofimpairmenton intangible Reversal assets,property,plantandequipment Intangible NOK million Impairment lossrecognisedin theincomestatement Note 14 continued 71 International powersegment. International Theassetsareapartofthe withatotalofNOK52million. impaired were Malana andAllainplantsinIndia DuhanganTwohydropower expense. asfinancial recognised and byNOK117million loan fromStatkraftwasimpaired A shareholder 352 million. NOK achangeofapproximately point(aftertax)willresult in percentage rateof1 Anincreasein the discount NOK478million. of approximately resultinachange rateofpoint (aftertax)will in thediscount 1 percentage NOKmillion. Adecrease ofapproximately 282 resultinachange 10% will thefuturepowerpriceof andcostofcapital.Achange in power prices infuture sensitive tochanges inuseareparticularly The estimatedvalues tax). 8.6%before 7.8% (representing rateafter discount taxof useisbasedonanominal value in Calculated TheassetisapartofPower segment. power prices. the International expectedlong-term duetolower withNOK446million wasimpaired Chile Hidroelectrica LaConfluenciaS.A(HLC)TheinvestmentinHLC 462 million. NOK achangeofapproximately point(aftertax)willresult in percentage rateof1 Anincreasein the discount NOK618million. of approximately resultinachange rateofpoint (aftertax)will in thediscount 1 percentage NOKmillion. Adecrease ofapproximately 360 resultinachange 10% will thefuturepowerpriceof andcostofcapital.Achange in power prices infuture sensitive tochanges inuseareparticularly The estimatedvalues tax). 8.7%before 7.6% (representing rateafter discount taxof useisbasedonanominal value in Calculated TheassetisapartofPower segment. power prices. the International expectedlong-term due tolower withNOK689million was impaired inChile Hidroelectrica LaHigueraS.A(HLH)Theinvestmentin HLH Equity accounted investments Norway. at ofpowerplant Kårstøin the gas-fired relates todecommissioning Thismainly ofNOK30million. Other Therewereother impairments segment. TheassetisapartoftheInternationalpower million. byNOK66 Hydropower plant plantwasimpaired in Peru Ahydropower powersegment. the International million.Theassetsare a part of impaired by NOK101 wind farms were Hydropower plantsand wind in farms Brazil STATKRAFT REPORT AS ANNUAL 2017 -1300 1687 1187 1800 2017 Hydropower and plants Hydropower 4858 4669 189 2016 - FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY 2016 2016 446 386 212 2 604 3 648 3 639 3 484 2017 2017 445 398 300 3 397 3 310 2 564 3 707 A impairment lossof NOK A impairment Norway and Sweden plants in Hydropower 441 million was recognised for some smaller hydropower plants based in Norway132 and an impairmentseveral of NOK million hydro for minor powerplants based in Sweden. All hydropower of the assets are part segment European flexible generation.Calculated value in use is based on a nominalrateafter tax of 6.2% (representing discount 8.1% before tax) in both Norway and Sweden. The estimated value in use of the Norwegian powerplant is in particular influenced by increasedHøy case(see property tax relatedto the Sønnå note 33) and addition is in sensitive to changesinof capital. cost A change rate of one percentage in the discount tax) will point (after result in a change of approximately in value NOK 350 million. For assets based in Sweden analysesshowed the sensitivity changes minor impactfrom in assumptions. farm Brazil The production for one of the windWind in capacity farms are lower than previously expected. The valueinuse calculation shows an impairment58 million. The asset is part of the segment of NOK International power. District heating A Norwegian heating plant18 was impaired by NOK million. assetsIntangible Brazil Dueto the decision2016, in to restructure Enex in NOK Goodwill 78 million of Goodwill was impaired. investmentsEquity accounted SN Power and BKK Due to lower expected mid-term power prices for hydropower plants based Statkraft has recognised in Panama, impairment losses of NOK 76 million in SN Powerand NOK 65 million in BKK. Hidroelectrica La Confluencia S.A (HLC) The investment in HLC was impaired with NOK 48 million to lower due expected long-termpower prices. UKInvestLtd Due to lowerWind expected long-term prices in the UK market an indicator for impairment wasidentified and the assets were assessedfor impairment usingfairvalue less cost to sell. The valuation modelapplied was based on multiples for yearly powerproduced for assets with similar support regime. The carrying value per MWh of annual productionmedian for the assets was lower thanthe price range of £750- 800 perMWh, achieved in comparable transactions observed in the market, and no impairmentbooked. was therefore 72 Payrollcostsand number of full-time equivalents continued 1)
Pensioncosts are describedin further detail in note16. STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT Averagenumber of full-time equivalents Group Numberof full-time equivalents31.12. as of Other benefits Total 1) NOK million Salaries Employers'national insurance contribution Pension costs Note 15 IMPAIRMENT IN 2016 IN IMPAIRMENT equipment and Property plant the viewin Germany Statkraft maintains that plants Gas-fired power gas-firedgenerationisakeybridge technology the future energy for supplyin but based on operational Germany, analysis the revenues are expectedto bepostponed compared with earlierassumptions. This, together withindicationsthat capacity by cheaper prices might be set technologies expected than resulted in animpairment loss of NOK 1947 million. are part of the segment European The plants flexible generation. Calculatedin value use is based on a nominaltax of discount rate after 6.0% (representing 8.7% before tax). The estimated values in use are particularly sensitiveto changes in future gross margins cost of capital. A change inthefuturegross and margin of 10% will approximately result in NOK 930 million. A changein the discountrateof one percentage pointtax) will in (after result approximately 930 million. NOK Albania The DevollHydropower plants in project in Albania, which consists of the hydropower plants Banja and Moglice,was impairedwith NOK 1071 million.the segment International The assets are part of power. Main impairment indicators lowerexpected were long-term prices and updated market assessment. Calculated value in useisbased on a nominal discount rate after tax of 7.0% (representing 7.8% beforetax). The estimated values in use are particularly sensitiveto changes in future powerpricesin and cost of capital. A change the future power price of 10% will result in approximately 430 million. NOK A changein the discountrateof 1 percentagetax) will point (after result in approximately NOK 900 million. Nordic market Due to lower expected long-term prices in the Nordicthe market, hydropower plants and in the Nordic wind farms market were assessed for impairment using value in use calculations. farms Sweden A impairment585Wind in loss of NOK million was recognised for onshorewind based in Sweden. farms The assets are part of the Wind powersegment. Calculated value in use is based on a nominal discount rate after tax of 6.7% (representing 8.5% beforetax). The estimated values in use are particularly sensitiveto changes in future powerpricesin and cost of capital. A change the future power price of 10% will result in approximately 700 million NOK in change in valuein use. A changein the discount rate of one percentage point (after tax) will result in approximately NOK 400million inchange in value in use. Note 14 Note
CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS closed for new employees 1 January 2014. 2014. January 1 employees new for closed was (SPK) Fund Pension National the in scheme benefit pension The maturity. to held are bonds the that assumed is it simulation this In duration. 10-year or 5 3, 1, with bonds in invested were assets the though as simulated is assets fund pension the of management but asset-based, not is scheme SPK The state. Norwegian the by guaranteed are SPK the from benefits Pension scheme. the of financing the for responsible are and premium annual an (SPK) Fund Pension National entitlements. pension years’ three least at have they provided entitlement pension deferred a receive age retirement before leave who Employees 12G. to up salary, pensionable of 66% to amounting benefits pension provide schemes retirement the accrual, maximum At Scheme. Insurance National Norwegian the by provided benefits the with coordinated are benefits scheme Pension scheme. pension retirement early Norwegian the under 62 of age the from retirement early offer also companies the of majority The pensions. survivor and disability retirement, cover schemes benefit defined The pensions. service public governing framework regulatory the and Agreement Transfer Fund Pension Service Pension Public Norwegian the Act, Fund Pension Service Public Norwegian the with accordance in schemes pension occupational service public in participate companies Norwegian Group’s the in Employees companies. insurance in as well as funds pension own (SPK), Fund Pension National the in schemes pension their organised have schemes benefit defined Funded benefits proportionately reduced. Employees who have not made full contributions will have their retirement will normally be required to be paid over a period of between 30 and 40 years. employee’s salary. To be able to receive full retirement benefits, contributions retirement. The retirement benefit is normally set as a percentage of the scheme that defines the retirement benefits that an employee will receive on schemes benefit Defined coverage. risk entails also scheme contribution the pensions, retirement to addition In 12G. and 7.1G between salary pensionable the of 18% and (G), amount basic Scheme’s Insurance National the of 7.1 to up salary pensionable the of 6% are contributions The scheme. contribution defined a is 2014 January 1 from Norway in companies owned wholly in employees new for scheme pension Statkraft’s made. The payments are expensed as salaries and payroll costs. manager without incurring further obligations once the payment has been retirement benefit scheme where the Group pays fixed contributions to a fund schemes contribution Defined schemes. benefit defined and schemes contribution defined both cover and statutes, local with accordance in established been have schemes benefit pension Statkraft’s GENERAL INFORMATION Note 16 1) factorsformortalityanddisability Demographic basicamount (G) Insurance Scheme’s Adjustment oftheNational Adjustment ofcurrentpensions Salary adjustment projectedyield Discount rate and The following assumptionsare used The assumptions apply for Norwegian entities. Foreign entities apply assumptions adapted tolocalconditions. assumptions adapted entitiesapply entities.Foreign applyforNorwegian Theassumptions Pensions A defined benefit scheme is a retirement benefit
Companies with schemes in the SPK pay pay SPK the in schemes with Companies A defined contribution scheme is a
Norwegian companies in the Group Group the in companies Norwegian 1) 73 SIGNIFICANT ACCOUNTING PRINCIPLES entitlements. pension years’ three least at have they provided share, accrued the on based 12G, above scheme the for entitlement pension deferred a receive age pensionable before leave who agreement closed the of members Existing 2012. April 30 employees new for closed was agreement This 12G. exceeding income pensionable their of portion that of 66% to equivalent pension disability and retirement a with 12G exceed incomes pensionable whose employees all provides that agreement pension additional an into entered have schemes benefit defined Unfunded managers. asset external through properties and funds hedge members, to loans secured shares, foreign and Norwegian securities, interest-bearing foreign and Norwegian of portfolio diversified a in assets pension the placed have companies insurance companies insurance and funds Pension ESTIMATES AND ASSUMPTIONS on pension fund assets. during the period, the interest on the estimated liability and the projected yield other payroll costs, and comprises the total of the retirement benefits accrued The net retirement benefit cost for the period is included under salaries and income. comprehensive other in recognised are data base or assumptions actuarial in changes to attributable losses and Gains schemes that are covered by operations are classified as long-term liabilities. retirement benefit liabilities for underfunded schemes and non-funded andassets recognisedcurrent in the balance sheet at fair value. Net non- as classified are schemes overfunded for assets fund pension Net assets. plan the of value fair the by reduced benefit scheme is the present value ofare thethat futurebenefits retirement The liability recognised in the balance sheet which relates to the defined adjustments. salary and rate discount for assumptions in changes due mainly is year the during income comprehensive other in recognised gain actuarial The IAS rateinaccordance with 19. a reference interest as durations thatqualify markedwith relevant andliquid represents a deep - OMF).thatbonds Statkraftisoftheopinion market forcovered bonds(covered corporate onhigh-quality The discount rate is based year. the of end the at data salary and numbers staff on based are Calculations age. retirement until increases salary future expected for adjusted are sheet balance the in liabilities pension Net method. benefits accrued the using calculated are year the for entitlements pension accrued of value present and schemes benefit defined for entitlements pension accrued of value ofparameters.Present estimates acrossarange the useofjudgementand involves liabilities ofpension The calculation STATKRAFT REPORT AS ANNUAL 2017
Some Group companies in Norway Norway in companies Group Some
K2013/IR73 The pension funds and and funds pension The 31.12.2017 2.25% 1.50% 2.50% 2.40% K2013/IR73 31.12.2016 2.00% 1.25% 2.25% 2.30% FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY - - -1 % 49 68 2016 2016 2016 2016 2016 2016 2016 -24 -41 -30 -13% -11% 253 160 318 386 589 243 300 253 160 204 120 148 247 955 577 -120 -160 -127 1 852 2 732 6 368 5 254 1 115 1 947 2 247 6 541 6 957 4 896 5 254 3 722 5 254 2 262 1 % 12% 12% AdjustmentG of -6 -4 27 47 88 54 2017 2017 2017 2017 2017 2017 2017 -23 116 154 254 559 250 152 310 398 685 279 480 250 152 212 -148 -116 -186 5 653 1 243 3 850 5 653 2 357 1 838 2 802 6 749 5 653 1 096 2 059 2 539 6 957 7 433 5 254 -1 % -7% -17% 6% 1 % Salary adjustment 16% -1 % 25% 21% 1 % -23% -16% Discount rate 74 Increase (+)/decrease (-) in net pensiondefined cost benefit schemestheperiod for Increase (+)/decrease (-) in gross definedpension liability as of 31.12. Sensitivity analysis upon changes in assumptions Sensitivity analysis upon STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT Total pension cost - see note 15 Net pension cost defined benefit schemes schemes Defined contribution Employerpayments Interest expenses Projectedyield on pension assets Employee contributions Employers'national insurance contribution Pension cost recognised in the income statement Pension cost recognised Defined benefit schemes NOK million Present valueaccrued of pension entitlements for the year NOK million Accumulated actuarial gains and losses recognised in othercomprehensive income before tax 31.12 Other Fair valueof pension assets 31.12 other comprehensive income Actuarial gains and losses recognised in Pension assets comprise Equity instruments Interest-bearing instruments Total contributions Paid benefits Currencytranslation effects Fair valueof pension assets 31.12 Fair valueof pension assets 01.01 Net change in assets due to additions/disposals Projectedyield on pension assets Actuarialgains/losses Gross definedbenefit pension liabilities 31.12 pension schemes benefit pension assets for defined Movement in the fair value of NOK million Interest expenses Actuarialgains/losses Paid benefits Currencytranslation effects NOK million Defined pension gross benefit liabilities 01.01 Net change in liabilities due to additions/disposals Present valueaccrued of pension entitlements for the year Of which net pension asset - see note 25 Of which net pension liability liability benefit pension Movement in defined Present valueaccrued pension of entitlements for unfunded defined benefit schemes Employers'national insurance contribution Net pension liabilities in the balance sheet NOK million Present valueaccrued pension of defined entitlements for funded benefit schemes Fair valueof pension assets Net pension liability for funded defined benefit schemes Employees Pensioners and people with deferred entitlements liability benefit pension of net defined Breakdown Note 16continuedNote schemes defined benefit Membersof CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS Compensation payments Compensation operatedbythirdparties Power plants Materials services Purchase of third-party NOK million Note 18 3.9%. of rate interest an with million 8823 NOK was amount corresponding the 2016, In etc. funds and compensation annual 3.5%, of rate discount regulated a on based is amount estimated The million. 9056 NOK at estimated is position, financial of statement the in recognised not obligations, fee licence future Group’s the of value present The Norway. in plants hydropower to related mainly are fees Licence rate. tax lower a to related was Sweden in reduction the and base tax the reducing prices power lower to related was Norway in reduction The Sweden. and Norway in tax property reduced to due mainly 2016, with compared 2017 in lower were fees licence and tax Property Total fees Licence Property tax NOK million Note 17 translation effect of the investment is recognised theincome statementasnetcurrencyeffects. effect in translation oftheinvestment is recognised ofSTCthecurrentcurrency is completed, and securities.Until the liquidation lossesonderivatives incometonetgainsand recycled from other comprehensive currencyeffectsfromhedgeofSTC (-1484 MNOK)were translationeffectsfromtheinvestmentinSTC(2003 MNOK)and the net investment the cumulative toStatkraft activitiesin Statkraft Treasury Centre(STC)were transferred AS.Asaresultofthetransferactivities, In 2017,themajor business the business items Net financial andsecurities lossesonderivatives Net gains and Other financial items Net currencyeffects Total expenses Other financial costs borrowing Capitalised Other interestexpenses debt Interest expenses external Financial expenses Total income Other financial Interest income Financial income NOK million 2017 Note 19 1) Total expenses Other operating Insurance Travel Marketing IT Rent Purchase of third-party services mainly includes consultants, entrepreneur expenses and services. and other entrepreneur expenses consultants, servicesmainly includes Purchaseofthird-party Financial items Financial expenses Other operating fees Property taxandlicence 1) Fair value Fair value through 75 profit orloss 1204 -136 -839 -520 -520 19 19 - - - - Assessment basis Amortised -1410 -1260 -928 -214 -741 520 258 212 -49 76 46 cost 1341 1024 3 846 1353 317 2017 2017 139 159 145 346 365 131 256 419 533 Available for sale STATKRAFT REPORT AS ANNUAL 2017 37 37 37 ------162 142 142 Bank 19 ------1347 -2079 -1449 -1261 1724 -214 1733 1391 456 374 Total -49 3 894 1 334 341 76 83 2016 2016 657 139 161 116 245 351 141 263 487 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY Total 321 58 -56 -368 -579 Total 323 380 139 321 2 847 3 634 1 925 -110 -3 249 18 976 24 913 49 448 2 847 2 137 -1 384 -1 411 -24 897 -29 093 -368 -579 -186 - - - - - 4 128 1 925 2 290 -9 -9 Realised -3 586 19 402 25 762 51 216 16 -24 963 -29 497 Bank 160 160 167 2016 - - - 66 338 404 557 507 -426 -493 -849 -300 1 064 -1 768 ------4 4 4 Unrealised for sale Available Total -766 3 456 2 291 1 724 -1 408 -2 804 -2 079 22 056 34 747 62 550 -32 568 -37 546 - cost 41 -47 156 196 139 336 -895 -110 -913 1 053 Amortised -766 5 471 2 291 2 406 Realised -1 408 -3 276 -1 970 21 033 34 603 63 398 -32 567 -38 016 Assessment basis 2017 - - - 7 13 20 321 -489 -489 - - - 1 778 1 630 -1 144 472 471 76 -848 -109 -681 -791 profit or loss 1 023 -2 015 -1 168 Unrealised Fair valuethrough Unrealised effects recognised in the incomestatement Other financial items Total financial items effects Total unrealised Total energypurchase Net currency effects Generation Sales and trading Customers Other Other Total sales revenues NOK million Generation Sales and trading Customers STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT Note 20 Net financial items Net currency effects items Other financial Net gainsand losses on derivatives and securities Other financial expenses Total Financial expensesFinancial Interest expensesexternal debt Other interest expenses Capitalised borrowing costs Other financial income Total NOK million income Financial Interest income Note 19continuedNote 2016 CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS pooled with positive resource rent revenues for other power plants. power other for revenues rent resource positive with pooled be can plant power per revenues rent resource negative onwards 2007 From plant. power same the from revenues rent resource positive future against offset interest with forward carried be only can years earlier or year fiscal 2006 the from plant power per revenues rent resource Negative rate. interest normative a by multiplied assets, operating plant’s power the of value taxable the of basis the on year each set is allowance tax-free The deductible. are allowance tax-free a and depreciation expenses, operating Actual revenue. rent resource gross in included is certificates green from Income years. seven exceeding term a with contracts physical to subject power and power concessionary of deliveries for applied is price contract actual The hour. corresponding the for price spot the by multiplied hour, by hour production plant’s power individual the of basis the on calculated is revenue rent Resource plant. power each by generated revenue tax rent Resource paid. tax resource natural the against offset be can tax Income 13/MWh. NOK is rate tax The years. seven past the over output average plant’s power individual the of basis tax resource Natural forward. carried losses of effect tax the and values tax and accounting the between differences temporary of basis the on calculated are liabilities/assets tax Deferred year. the for income taxable the of basis the on calculated are payable Taxes liabilities/assets. tax deferred in changes and payable taxes comprises statement income the in expense tax The rate. tax adopted the applying tax Income tax. rent resource and tax resource natural tax, income ordinary to addition in includes, therefore expense tax Group’s The companies. energy of taxation for rules special the to subject are Norway in generation energy in engaged are that companies Group GENERAL INFORMATION Note 21 Tax included in receivables -seenote27 inreceivables Tax included tax Prepaid NOK million Tax included inreceivables sheet inthebalance Taxes payable taxespayable Previous years renttax Resource payable taxpayable Natural resource Income taxpayable NOK million Taxes payableinthebalancesheet theincomestatement Tax expense in contributions indeferred taxnetofgroup Change payable taxexpense Previous years taxpayable Withholding renttax Resource payable taxpayable) natural resource (including Income taxpayable NOK million The taxexpenseintheincome statement renttax Resource rate Income taxrate Nominal Norwegianratesinthestatement(deferredtax) tax balance sheet renttax Resource rate Income taxrate Nominal Norwegianratesinthe tax income statement is calculated in accordance with ordinary tax rules and by by and rules tax ordinary with accordance in calculated is Income taxes is a profit-dependent tax levied on the net resource rent rent resource net the on levied tax profit-dependent a is is a profit-independent tax that is calculated on the the on calculated is that tax profit-independent a is 77 For uncertain seenote33. For uncertain taxpositions aperiodoffiveyears. within expected to be utilised sheet iftheyare in the balance Other deferredtaxassetsarerecognised curves. and price normal production to thebasisofexpectationsrelated canbeusedisestimated on revenues resourcerent whichnegative oftenyears.Theperiod over within a period expectedtobeutilised sheetwiththeamount inthebalance recognised carryforwardsare toresourcerentrevenue Deferred tax assetsrelating thattheywillbeutilised. totheextentthatitisprobable are recognised taxassets judgment. Deferred ofdeferred taxassetsinvolves Recognition ESTIMATES AND ASSUMPTIONS rent. resource with connected tax deferred of calculation the affect not does therefore and for, calculated is it year the in difference permanent a as treated is tax rent resource for deductible allowance tax-free The tax. prepaid as recognised is and years, subsequent to interest with forward carried be can tax income exceeds that tax resource natural Any tax. rent resource with connected positions tax against offset be cannot payable tax income with connected positions tax Deferred tax. rent resource with connected assets tax deferred and liabilities tax deferred to applies same The period. same the in reverse to expected are these that provided assets tax deferred and liabilities tax Deferred equity. in recognised is transactions equity to related tax while income, comprehensive other in recognised also is income comprehensive other in recognised items to related Tax SIGNIFICANT ACCOUNTING POLICIES STATKRAFT REPORT AS ANNUAL 2017
are recognised net net recognised are 35.7 % 34.3 % 4010 2451 3961 2451 1804 -182 -133 128 614 817 23% 24% 2017 2017 2017 2017 2017 52 52 21 34.3 % 33.0 % 4764 2249 1478 5402 2249 2762 429 608 420 24% 25% -41 2016 2016 2016 2016 2016 99 99 13 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY 17 2016 49 -61 2016 675 320 276 962 278 293 -12 -21 317 -296 -124 -725 -423 -665 -244 -119 8 771 9 446 3 816 7 495 1 443 8 852 9 814 4 416 7 275 31.12.17 31.12.16 5 223 1 306 2 445 1 682 5 402 -2 531 -2 630 103.4 % ------8 8 -62 -62 18 2017 -64 -107 -105 -759 -129 3 766 2 934 3 961 25.2 % -1 594 15 693 companies companies and sale of and sale of Acquisitions Acquisitions - - - - 14 16 16 14 15 2017 -70 -49 -10 -45 -49 Other Other 255 255 301 276 313 318 income income comprehensive comprehensive 5 32 -98 -11 151 582 444 420 219 -152 -182 -460 -334 -721 -554 1 135 statement statement Tax expense Tax expense in the income in the income 293 675 438 614 278 -296 -687 -755 -665 8 771 9 446 4 397 6 693 8 137 1 298 9 435 4 416 7 275 01.01.16 01.01.17 -2 531 -2 564 78 1) 1) 2) 2) 2) 1) 1) 3) 1) The Group alsohas deferred tax assets not recognised in the balance sheet relatednegative to to negative resource rent tax carryforward. This amounted to NOK 811 million as of The Group alsohas deferred tax assets not recognised in the balance sheet. This mainlyrelates recognised to Germany with not deferredtax assets of NOK 1628million as of Tax free income is mainly to tax exempt gains related wind, related to divestments of offshore sale of SN Power andrecycling comprehensive of currency from other income. Change in unrecognised deferredassetsismainly tax relatedto Sweden and Germany. Other permanentdifferences are mainly non-deductible expenses and items included Items included in the profit andloss statement without tax effect. in the profit andloss statement Translation differences Changes in fair valueof financial instruments Total deferredtax recognised inother comprehensive income Deferred other comprehensiveincome tax recognised in NOK million Remeasurement of pension obligations 31.12.20171987 (NOK million as of 31.12.2016). 2) 31.12.20171110 (NOK million as of 31.12.2016) Total net deferredtax liability Of which presented as deferred tax assets Of which presented as deferred tax liabilities 1) Pension liabilities Other long-term items Tax loss carryforward/compensation Negative resource rent tax carryforward Current assets/currentliabilities Property, plant andresourceregime equipment not part of rent tax Property, plant andregime equipment part of resource rent tax NOK million Negative resource rent tax carryforward Total net deferredtax liability Of which presented as deferred tax assets Of which presented as deferred tax liabilities Property, plant andregime equipment part of resource rent tax Pension liabilities Other long-term items Tax loss carryforward/compensation NOK million Current assets/currentliabilities Property, plant andresourceregime equipment not part of rent tax Breakdown of deferred tax STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT Effective tax rate 1) 2) 3) without tax effect entaildepreciation and impairmenton excess values and changes invalue of equity instruments. Change in unrecognised deferred tax assets Other permanentdifferences Tax expense Change in tax rates Share of profit/loss inequity accounted investments Tax-free income Changesto previous relating years Effect on taxes of Resource rent tax Foreigntax rate differences NOK million tax Profit before expenseExpected tax rateof 24% at a nominal (25%) Note 21continuedNote tax rateand effective Norwegian tax rate of nominal Reconciliation CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS Accumulated amortisation/impairments ondisposals amortisation/impairments Accumulated ofimpairments Reversal Impairments Amortisation effects Currency translation Disposals assets Transferred to/fromnon-current Additions at Balance 01.01 2017 Nok million reason The goodwill”. “technical generate combinations business Some impairment. for annually tested are and amortised not are life useful indefinite an with assets intangible and Goodwill reliably. measured be can costs the and benefits economic future generate will asset the that probable is it when sheet balance the in recognised are goodwill, including assets, intangible to relating Costs losses. impairment accumulated and amortisation accumulated less cost at carried are assets Intangible SIGNIFICANT ACCOUNTING POLICIES Note 22 with NOK 42 million and NOK 92 million, respectively. Capitalised development costs in 2017 and 2016 were NOK 38 million and NOK 16 million. 16 NOK and million 38 NOK were 2016 and 2017 in costs development Capitalised respectively. million, 92 NOK and million 42 NOK with expensed are 2016 and 2017 in out carried activities development and Research sources. plants/energy existing with connection in activities development and research performs also Group the preservation, and optimisation energy of fields the within methods new develop and knowledge new gain to order In activities/projects. future for basis a provide could that areas other or technologies on knowledge further provide to intended are projects These projects. research general include sources energy new to relating activities Research technologies. and plants existing developing and sources energy new potential investigating on focused are activities development and research Group’s The DEVELOPMENT AND RESEARCH lifetime Expected useful 2) at Balance 31.12 asof31.12 amortisationand impairments Accumulated Cost 31.12 at Balance 31.12 ondisposals amortisation/impairments Accumulated Impairments Amortisation effects Currency translation orjointoperation ofasubsidiary Derecognition Disposals assetsandprovisions intangible between Reclassification assets Transferred to/fromnon-current fromcombinations Additions business Additions at Balance 01.01 2016 Nok million 1) at Balance 31.12 asof31.12 amortisationand impairments Accumulated Cost 31.12 at Balance 31.12 Impairments are mainly related to Enex in Brazil and gaspowerplants. toinBraziland German mainlyrelated Enex Impairments are inChile. to mainlyrelated goodwill Impairments are 1) 2) Intangible assets Intangible
See note for See note 14 further information.
See note for See note 14 further information. 79 Research and development and Research goodwill”. “technical a gives value nominal and value fair between difference The value. nominal the than lower normally is liability tax deferred a of value fair The value. fair at booked be cannot tax deferred that is this for asset. intangible identifiable an of development the from identified be can benefit economic future a that extent the to capitalised are costs Development
costs Goodwill Goodwill Goodwill Goodwill 1 051 2 042 1 051 1 453 1 453 2 094 1 453 1 550 -991 -333 -641 -121
-69 -45 -57 -29 STATKRAFT REPORT AS ANNUAL 2017 are expensed as incurred. incurred. as expensed are 69 83 -5 8 ------10–22 years 10–22 -1 283 -1 078 2 262 3 545 2 262 2 405 2 405 3 483 2 405 2 974 Other Other -157 -141 -135 -176 -428 228 -99 28 25 65 29 55 -2 -4 -6 1 5 - -1 719 -2 274 3 858 5 577 3 858 4 524 3 313 5 587 3 313 3 858 Total -262 -180 -233 -428 -335 -157 -168 Total 311 -11 -24 69 37 55 28 25 65 -4 1 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY - 76 -25 Total 470 773 -258 3 642 1 272 -1 091 -3 505 -1 465 18 230 -62 096 165 289 103 193 103 304 103 193 - - 40 -11 -98 -14 -37 Other 850 932 246 -290 -1 005 11 877 12 450 25 093 12 450 -12 643 - - - - - n/a -2 -9 76 under 217 Plants 4 639 2 130 4 813 7 048 4 813 -2 238 -2 235 construction - - 56 50 52 67 -75 -67 119 -104 -533 -3 926 -6 871 19 358 14 930 21 801 14 930 Properties, bridges and quay facilities mountain halls, buildings, roads, ------2 rights 386 -118 -920 1 157 Waterfall -1 310 17 620 18 123 18 123 19 433 18 123 - - etc. n/a -47 445 331 766 373 -460 -296 -1 280 -1 239 Turbines, 25 590 24 183 49 625 24 183 Property, plant and equipment is depreciated overits expected useful lifetime. Expecteduseful lifetime is estimated based on experience, historical accounting data and judgements,and adjusted intheevent is of any changes to the expectations. Residual valuesare estimates that are taken into account when calculating depreciation. Estimates of decommissioningobligations, which are included as part of the plant’s carryingamount, are subject to ongoing reviews. Depreciation is calculated on a straight-line basis over assets’ expected useful lifetime. Residual values are taken into account in the calculation of annual depreciation. Periodic maintenance is recognised in the balance sheet over the period until the time when the next maintenance is scheduled. The depreciation period is adapted to the licence period. Expected useful lifetime, depreciation methods and residual values are assessed annually. Property and waterfall rights are not depreciated, as the assets are deemed to have perpetual life if there is no right of reversion to state ownership. Waterfall rights are presented as property, plant and equipment as Statkraft has perpetual right to utilise the waterfall. ASSUMPTIONS AND ESTIMATES -25 442 generators - - 4 1 80 n/a -12 161 102 plants -264 -728 -145 5 355 24 220 28 694 42 289 28 694 -13 595 Regulation 1) Property, plant and plant Property, equipment 1) See note 14for further information 1) Cost 31.12 Accumulated depreciation and impairments as of 31.12 Balance31.12 at Balance31.12 at Book value 31.12 of assets with infinite useful lifetime Depreciation Impairments Reversal of impairments Accumulated depreciation/ ondisposals impairments Derecognition of a subsidiaryjoint operation or Capitalised borrowing costs Currencytranslation effects Additions Transferred between asset classes Transferred to/from intangible assets Disposals NOK million 2017 Balance01.01 at STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT SIGNIFICANT ACCOUNTING POLICIES ACCOUNTING SIGNIFICANT Investments in production facilities and other property, plant and equipment are recognised at cost less accumulated depreciation and impairment. Depreciation is charged from the time the assets are available for use. The cost of property, plant and equipment includes fees for acquiring or bringing assets into a condition in which they can be used. Directly attributable borrowing costs are added to the cost price. Expenses incurred after the operating asset has been taken into use, such as ongoing repair and maintenance expenses, are recognised in the income statement as incurred, whilst other expenses that are expected to increase future production capacity are recognised in the balance sheet. The estimate of decommissioning obligation is included in the carrying value of the relevant asset. As a main principle Statkraft starts capitalising costs when it is probable that the asset will generate future economic benefits and the cost can be measured reliably. Costs incurred for assets under construction are recognised in the balance sheet as plants under construction. Cost includes directly attributable costs including interest on loans. Note 23 Note
CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS Note 23 Waterfall rights transformers - gaspower plant - gasandsteamgenerators (offshore) - windturbines (onshore) - windturbines - transformer/generator installations - othermechanical valve) - generators (turbine, - pipetrenches etc. Turbines, generators - tunnelsystems - otherdams dams - riprapdams,concrete plants Regulation previousyears: compared with schedules changesindepreciation beennomaterial below.Therehave of assetsisprovided oftheexpectedusefullifetime various specification A moredetailed EXPECTED USEFULLIFETIME OF PROPERTY, PLANTAND EQUIPMENT information. more for 34 note See counterparties. to security as equipment and plant property, pledged has Statkraft COUNTERPARTIES TO SECURITY AS PLEDGED ASSETS Norway. in farms wind and Albania in plant hydropower a were projects largest The million). 3736 (NOK million 1964 NOK to amounted capacity new in Investments Norway. in plants hydropower to relate primarily investments The million). 1763 (NOK million 1821 NOK to amounted investments other and investments Maintenance investments. other and investments maintenance capacity, generating new in investments of consisted million, 65 NOK worth assets intangible and million) 76 NOK of costs borrowing capitalized (excluding million 3643 NOK worth equipment and plant property, of 2017 in addition The 2017 IN INVESTMENTS Cost 31.12 lifetime 31.12ofassetswithinfiniteuseful Book value at Balance 31.12 impairmentson disposals depreciation/ Accumulated Impairments Depreciation effects Currency translation costs borrowing Capitalised orjointoperation ofasubsidiary Derecognition Disposals assets Transferred to/fromintangible assetclasses Transferred between fromcombinations Additions business Additions at Balance 01.01 2016 NOK million Balance at Balance 31.12 asof31.12 andimpairments depreciation Accumulated
continued Depreciation period (years) period Depreciation perpetual 20-25 20-25 20-22 25 40 15 40 40 75 30 75 Regulation -10489 24220 34709 24220 24544 1371 -501 -655 -864 plants 326 81 -1 n/a - - - - - generators -26856 25590 52446 25590 27948 Turbines, -1927 -1414 1215 - water cooling systems - watercooling - smallwatercraft - constructionequipment - vehicles andequipment - furnishings - officeandcomputer equipment fixtures - miscellaneous - otherfixedinstallations - buildings voltage(grid) - switchgear,high - transformer(grid) Other equipment - communication centre - operating - controlequipment andquays - roads,bridges facilities - underground - land etc. roads, bridges halls,buildings, Properties, mountain -760 507 -45 16 50 n/a etc. - - - 17620 18299 17620 17620 18477 Waterfall -679 -521 -337 rights 1 ------buildings, roads, buildings, mountain halls, mountain quay facilities bridges and bridges Properties, 19358 25142 19358 19865 -5784 1105 -815 -487 -645 STATKRAFT REPORT AS ANNUAL 2017 284 -28 231 17 62 - - - construction -2386 -2518 -4337 4639 7025 4639 3575 8727 -554 -418 Plants 139 under -58 -37 24 96 n/a Depreciation period (years) period Depreciation - -11477 11877 23354 11877 11646 -855 -154 117 645 651 Other -89 -84 14 - - - - perpetual 103304 160975 103304 111207 -57671 20-25 10-20 25-50 35-40 17866 -4407 -3411 -3108 -2518 5343 -285 10 12 35 10 15 15 75 75 174 139 146 Total 8 5 3 5 24 - FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY 32 Total Total 508 611 138 445 -137 -545 -970 -558 -416 -170 5 622 3 154 1 167 4 779 2 502 -4 842 -1 240 19 388 19 438 19 438 13 410 3) 1 -2 -5 28 71 32 26 -54 Other 326 653 370 508 138 -145 -107 Other 3 954 1 416 1 022 3 954 3 108 3 448 -1 158 ------4 -2 -6 -2 46 23 40 46 11 -31 -15 853 853 876 -204 1 067 Wind UK Wind UK Invest Ltd. Invest Ltd. ------9 -1 46 67 Scira Scira -460 2 005 2 005 2 399 Offshore Offshore -2 060 EnergyLtd. EnergyLtd. ------6 SN SN 29 230 -308 -189 2 930 2 930 3 084 -2 853 Power AS Power AS ------29 82 -66 -66 207 314 186 314 Agder Agder -276 -300 4 040 1 978 4 040 3 914 1 912 4 117 EnergiAS EnergiAS The decisions about relevantof the return activities that significantly affect aretheelementsthe investments that requirethehighest degreeof orderjudgement.on In to conclude of control, Statkraft has the degree definedsystematicallyactivities the relevant valuedrivers and for each of its technologies,main type of addition in to an individual assessment per facts and circumstances. investment to reflect other For agreementswhich requires unanimous from the partners to consent direct the relevant activities of the investments, and where the other criterias is classifiedin IFRS 11 are met, the investment as a joint arrangement. Judgementin is required assessing whether arrangement a joint is a joint operation venture. Rightsand or a joint obligations arisingajoint from arrangement, including evaluated other facts and circumstances, are in order to classify the jointthrough arrangement. For investments structured a legaland facts circumstances, such as agreements entity, other between shareholdersagreements and between shareholders and the investee, must override form for a joint operation its legal established to exist. Entities to produce where power and the owners are committedto purchase all the powerproduced, as well as being responsible settlingof short term and for longterm financing of the company, arenormally classified as joint of the arrangement,operations. has rightsto the net assets When Statkraft the arrangement is a joint venture. as recognised are control joint have Statkraft which in plants power Co-owned operation. joint - - - - -14 -13 -14 -10 208 355 424 -252 -219 -224 82 5 656 2 182 1 818 5 656 5 513 2 168 1 818 5 272 BKK AS BKK AS 2) 2) 1) 1) 2) Associates and Associates ventures joint There has been an impairment in SN Power andBKK related to a hydropower plant in Panama,see note 14. The shares inHidroelectrica La Confluencia inOther hasbeen S.A presented impaired, see note 14. The shares inHidroelectrica La ConfluenciaHidroelectrica S.A, La Higuera and S.A Malana presented in Other has been impaired, seenote 14. “Other” includes 30% Statkraft’s owner sharein the wind farm Dudgeon Offshore Wind Ltd. with a carrying value895 NOK million.Thewind of farm is classifiedasheld for See note 5 for more information about the transactions in 2017. STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT 1) 2) Closing balance 31.12. Excess value31.12. Of which unamortised waterfall rights Dividend Currencytranslation effects Items recorded inother comprehensive income Investment/divestment Share of profit/loss Amortisationand impairmentof excessvalue Capital increase NOK million Opening balance01.01. 2016 2) 3) sale per 31 December 2017. Dueto the relative size of its carrying value the investment is not presented held for sale onasingle as assets line item in the statement of financial position. No impairment loss has been recognised.A shareholderloan348 of GBP millionthetransaction, is not part of but will beheld to maturity in 2018. Excess value31.12. Of which unamortised waterfall rights 1) Dividend Currencytranslation effects Items recorded inother comprehensive income Closing balance 31.12. Share of profit/loss Amortisationand impairmentof excessvalue Capital increase NOK million Opening balance01.01. Investment/divestment 2017 Judgementto assesstheclassification is requiredin of investments projects with third party owners. The degree of control overtheinvestee is one of the key elementsin the investmentshould the assessment to whether be accountedassubsidiary, for joint operation, joint ventureorassociate. To assess the degreecircumstances of control all facts and are evaluated. ACCOUNTING JUDGEMENTS ACCOUNTING SIGNIFICANT ACCOUNTING POLICIES ACCOUNTING SIGNIFICANT being from changes investment the where transaction a from gain/loss The associated or venture joint a as classified be to operation joint a as classified only statement financial consolidated Group’s the in recognised are company carrying the Hence, operation. joint the in interest parties other of extent the to addition In continuity. at booked is ownership remaining Statkraft’s of value or asset underlying the to relating obligations and rights contractual changed the in shift a to lead might agreement shareholders the in changes and debt participants the if apply to expected is this Statkraft, For method. accounting the for responsible not are and production the off-take to obliged not are entity. the by held obligation Note 24 Note Based on size and complexity, the following associated companies and joint ventures are considered material: CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS NOK million 2017 withIFRS12. inaccordance operations applyto100%ofthecompanies’ companies.Thefigures forsignificantassociated information summarisedfinancial tablepresents The following FINANCIAL INFORMATIONFOR SIGNIFICANTASSOCIATEDCOMPANIES arrangements. toandjoint related associates parentcompany guarantees guarantees and bank forinformation regarding andobligations guarantees See note34 Pledges, 2017.Seenote5. intheUK.Scirawasdivested Shoal Scira OffshoreEnergyLtd.ownstheoffshorewind farmSheringham (Scira) andBerryBurnin the UK. farmsBaillie Wind wind Alltwalis, UK Invest Ltd.(WUKI) ownstheland-based 5. in2017.See note markets.SNPower ASwas divested projectsin emerging hydropower of anddeveloper commercialinvestor isaleading services. The Group asotherenergy-related ofelectricpower, as well tradingandtransmission production, activitiesinclude Asia,AfricaandCentralAmerica. The Group’s marketsinSoutheast inemerging energy operations SN PowerAShasitsrenewable services. energy-related power,aswell other transmission ofelectric trading and itsactivitiesbeing production, inSouthernNorway, with core Agder EnergiAShasoperations jointmeteringofelectricity. districtheatingand andofferscustomersbroadband, contracting services, and ofpower.BKKalsosells consultation andtransmission electric production,sale withitscoreactivitiesbeing operationsin Western Norway, BKK AS has DESCRIPTION OF THE ACTIVITIES IN SIGNIFICANT ASSOCIATESANDJOINTVENTURES Note 24 continued Wind UKInvestLtd. GmbH & Co Windpark Kollweiler Statkraft SolutionsPteLtd. BLP Solar AS Silva Green Fuel PowerCompany Ltd. Malana S.A LaHiguera Hidroelectrica S.A LaConfluencia Hidroelectrica PowerLtd Dugar Hydro OffshoreWindLtd. Dudgeon Hydro Power Ltd. Duhangan Allain JOINT VENTURES Name statements. financial basisin the group onaline-by-line asjointoperations classified expensesofcompanies revenuesand itsshareofassets,liabilities, recognises statements. financial Statkraft theconsolidated theequitymethod in using andassociatesare recognised asjointventures classified Shares in companies JOINT VENTURES,ASSOCIATES OPERATIONS AND income Total comprehensive Net profit revenues Gross operating Long-term liabilities Short-term liabilities assets Non-current Current assets NOK million 2016 income Total comprehensive Net profit revenues Gross operating Long-term liabilities Short-term liabilities assets Non-current Current assets 1)
London Düsseldorf New Dehli Oslo New Dehli Santiago Santiago Pradesh Himachal London New Dehli office Registered 83 10207 19067 19862 BKK AS BKK AS 4277 5391 4030 1013 4240 9505 4493 1263 974 838 882 Energi Energi AS Energi Energi AS 11202 17423 10554 16526 9341 4747 2952 7973 5071 3561 Agder Agder 570 449 375 99 SN Power SN Power AS SN Power SN Power AS Shareholding STATKRAFT REPORT AS ANNUAL 2017 51.00% 20.00% 98.00% 51.00% 49.00% 50.00% 50.00% 50.00% 30.00% 43.12% 1821 8226 1991 -290 -315 681 162 ------Energy Energy Ltd. Energy Energy Ltd. 11627 Offshore Offshore 1390 7141 110 110 221 573 Scira Scira ------Voting share Invest Ltd. Invest Ltd. 51.00% 20.00% 98.00% 51.00% 49.00% 50.00% 50.00% 50.00% 30.00% 43.12% Wind UK Wind UK 1711 3296 1607 3237 311 220 227 373 211 220 21 21 45 45 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY 7.00% 4.79% 60.17% 52.10% 50.57% 50.00% 50.00% 46.70% 62.00% 88.00% 70.00% 82.50% 48.60% 65.00% 33.33% 50.00% 70.00% 50.00% 88.00% 73.10% 73.48% 45.50% 49.90% 35.00% 49.00% 49.00% 50.00% 49.00% 50.00% 49.00% 25.00% 50.00% 47.21% Voting share 4.79% 7.00% 49.00% 50.00% 49.00% 50.00% 49.00% 25.00% 50.00% 47.21% 60.17% 52.10% 50.57% 50.00% 50.00% 46.70% 62.00% 88.00% 70.00% 82.50% 48.60% 65.00% 33.33% 50.00% 70.00% 50.00% 88.00% 73.10% 73.48% 45.50% 49.90% 35.00% 49.00% Shareholding 84 Grimstad Caçador City Porsgrunn Porsgrunn Suldal Porsgrunn Berlin Berlin Kristiansand Registered office Tyssedal Oslo Vännäs Hagen Tysvær Sirdal Kristiansand Aurland Rauma Stockholm Sørfold Rennebu Eidfjord Askim Tinn Meløy Surnadal Vik Stockholm Suldal Kristiansand Bergen Skien Molde 2) 4) 3) See note 5. controlsII powerplant. Statkraft 71,4% of the production from the Tysso owns Statkraft 33.3% of Solbergfoss,butcontrols 35.6% of the production. owns Statkraft 8.74% of the shares inRøldal-Suldal AS, which in turn owns 54.79%theRøldal-Suldal Kraft of plants. Statkraft’s indirect shareholdingin4.79%. the power plantisthus STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT Noneof the companies haveobservable marketvalues in the form of listed market prices or similar. 1) 2) 3) 4) SkagerakNaturgass AS Statt-werk GmbH enQu GmbH Grønn Kontakt AS Laugstol AS VikingVarme AS Røldal-Suldal Kraft AS Energiog MiljøkapitalAS Istad AS NapeKraftverk AS Passos MaiaEnergética S.A. ASSOCIATES Agder Energi AS BKK AS Vikfalli Volgsjöfors Ulla-Førre Solbergfoss Stegaros Svartisen Svorka Kobbelv Kraftverkene i Orkla Sima Statkraft AgderDAStatkraft Energi Vind Aurlandsverkene Grytten Gäddede Kraftwerksgesellschaft Herdecke, GmbH & Co. KG Naturkraft AS Sira-Kvina DA Kraftselskap JOINT OPERATIONS Aktieselskabet Tyssefaldene Fosen VindDA Harrsele AB Note 24continuedNote Name CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS businesses. El-certificates received from own productions are as such not Generation and end-user business are organised as two separate lines of recognised as sales revenue. at the time of production or net realisable value. The change in value is one accounting period, the receivable is recognised at the lowest of fair value from when the el-certificates are awarded to when they are received exceeds awarded. Certificates are classified as inventory when awarded. If the period time of production. The asset is classified as a receivable until the certificate is receiving the grants, thus the certificates are accounted for at fair value at the Statkraft meets all the conditions set out by the government and is eligible for conditional to own production of power. It is considered to be likely that Government Assistance. Such certificates are recognised as grants for according to IAS 20 - Accounting for Government Grants and Disclosure of Certificates (ROCs), are considered as a government grant and are accounted Environmental certificates, including el-certificates and Renewable Obligation SIGNIFICANT ACCOUNTING POLICIES Note 26 Total Other sharesand securities Available forsale 1) Total otherlong-termreceivables Bonds and accountedinvestments Loans to equity Measured atamortised cost NOK million Note 25 Total Total Other Spare parts Inventories measuredatthelowerofcostpriceand netrealisablevalue Total certificates Environmental Inventories measuredatnetrealisablevalue NOK million The amount includes net pension assets.Seenote16. netpension Theamountincludes Inventories assets Other non-current financial 1) 85 amount. Other inventory is accounted for at the lowest of cost price and net realisable expected transaction cost. measured at net realisable value. Net realisable value is the sale price less Environmental certificates held for sale are classified as inventory and are approach. settle the liability at the balance sheet date in accordance with the net liability residual liability is measured at the fair value of the el-certificates necessary to the liability is measured according to the book value of the certificates. Any net realisable value. If the certificates are held to settle the emission liability, the ordinary course of business and are recognised at the lowest of cost and recognised as inventory in accordance with IAS 2 as they are held for sale in the certificates in the market. El-certificates purchased in the market are Group’s obligation for delivering certificates, the end-user business purchases used to settle the emission liability in the end-user business. To meet the Recognised value 2871 2712 2712 159 114 45 2017 4368 4068 1845 2223 299 2017 Cost price STATKRAFT REPORT AS ANNUAL 2017 2695 2695 Recognised value Recognised 2653 2478 2478 175 115 60 2016 8961 8623 1883 6740 338 2016 Cost price 2499 2499 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY 99 33 78 2016 381 Total Total Total 7 335 1 226 1 178 8 201 7 171 7 335 2 883 10 219 15 372 10 219 -30 -59 -89 -15 -49 -63 and impaired and impaired Receivables overdue Receivables overdue 52 42 2017 221 263 163 131 294 8 201 3 959 1 931 1 228 90 days 90 days 15 372 More than More than 20 567 435 400 420 1 002 90 days 90 days Less than Less than Receivables overdue by Receivables overdue by 86 7 443 6 754 6 787 2 781 9 567 14 197 Not yet due Not yet due 1) 2) 1) Receivables Interest-bearing receivables. Mainlyrelated to shareholder loanprovided to Dudgeon reclassifiedSee to short-term receivable. note 24. STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT Total Recognised as loss for the year 2016 NOK million Accounts receivable Other receivables Recognised as loss for the year Accounts receivable Other receivables Total Maturity analysis of receivables 2017 NOK million Receivablescash related to collateral Other receivables Total 1) 2) NOK million Accounts receivable to equityShort-term loans investments accounted Prepaid tax Note 27 Note CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS NOK million derivatives-netpositionCurrency and interestrate Total -Currentliabilities -Long-termliabilities -Currentassets -Non-currentassets Of this: Total Customers trading Sales and Generation NOK million Energy derivatives -netposition contracts. the of terms the during settlement cash current the for used be actually will rights off-set such and contracts, different of off-set the to right legal a is there provided net, presented are Derivatives sheet. balance the in gross presented are values negative and positive to respect with Derivatives liabilities. or assets under sheet balance the in lines separate on recognised are arrangements hedging to relating not Derivatives SIGNIFICANT ACCOUNTING POLICIES Note 28 If the service provider is not a financial notpartofStatkraft’s isnotafinancial institution, If theserviceprovider service. clearing onthecharacteristics ofexchange activities, depends calls,related totrading ofcashdeposit tocover margin Classification traded within a period of three months. The item also includes restricted cash. Cash and cash equivalents include certificates and bonds which are normally SIGNIFICANT ACCOUNTING POLICIES Note 29 Total -Currentliabilities -Long-termliabilities -Currentassets -Non-currentassets Of this: Total interestratederivatives Currency and Energy derivatives NOK million -net Derivatives position group Total -Currentliabilities -Long-termliabilities -Currentassets -Non-currentassets Of this: Total swaps interestrateand currency Combined ratecontracts Forward exchange Interest rateswaps Cash cashequivalents Cash and Derivatives 87 items, respectively. items, financial other and effects currency as statement income the in recognised are derivatives rate interest and currency of value fair in Changes respectively. purchases, energy and revenues sales as statement income the in recognised are derivatives energy of value fair the in Changes sheet. balance the in net presented are exchanges energy through traded contracts energy All presented under this line item. liabilities. Bank deposits, cash and similar from joint operations are also collateral) are recognised in the balance sheet as either receivables or Market settlements for derivatives connected with financial activities (cash cashequivalents. isclassifiedascash and cashdeposit service providers For asotherreceivables. other Statkraft, isclassified thecash deposit inthenameof holdsnobank accounts managementand daily cash -1072 -5383 -6888 -1101 -1505 2459 5938 2081 2459 1900 2570 6537 4023 2570 2459 1942 -177 -116 -924 2017 2017 2017 111 784 399 675 111 111 599 STATKRAFT REPORT AS ANNUAL 2017 -5137 -1805 -1047 -1506 -4090 2742 6637 3047 2742 2879 1608 2879 5829 1439 2879 2063 -137 -137 -137 -733 -299 2016 2016 2016 808 381 216 845 -29 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY - - 9 82 20 40 49 Sum Sum 2016 2016 2016 452 566 174 140 204 3 397 9 668 7 501 7 288 7 308 6 936 7 501 7 501 -1 108 -1 594 -4 622 - - 2) 3) 2) 3) 82 140 140 204 371 6 936 2 799 9 166 6 936 -4 621 -1 090 -1 594 Other provisions Other provisions 1) 1) ------8 -1 33 82 62 70 2017 2017 2017 -18 598 566 598 502 566 2 799 3 397 3 154 11 062 14 217 Each year, concessionary sales are made to local local to made are sales concessionary year, Each
Decommissioning Decommissioning
exist where the Group has a contract under which the unavoidable costs of of costs unavoidable the which under contract a has Group the where exist benefits economic the exceed contract the under obligations the meeting contract. the from received be to expected power Concessionary authorities at statutory prices stipulated by the Norwegian Parliament. The The Parliament. Norwegian the by stipulated prices statutory at authorities basis ongoing an on income as recognised is power concessionary of supply certain of case the In price. concessionary established the with accordance in regarding made been have agreements contracts, power concessionary between difference the for invoiced is Statkraft which in settlement financial are contracts concessionary Such price. concessionary the and price spot the future of value capitalised The statements. financial the in included not 34. note in disclosed and estimated is obligations power concessionary 88 Provisions are are Provisions
1) Obligations arising under onerous contracts are are contracts onerous under arising Obligations
1) 2) 3) Provisions Includedin other provisions in 2016are liabilities in connection with equity instrumentswhich were realised in 2017.addition In to this, a provision720 of NOK million was recognised in which Of NOK 2799 million is allocated to capital employed. In 2016 this amounted to NOK 3423 million. Decommissioningprovisions typically has the rightto time-limited arise when Statkraft concessions, and is mainlyrelated to gas-fired power plants in Germanyand wind Includes NOK 129 IncludesNOK millionand NOK 110 million respectivelyin2016 2017 and from companies as jointoperations. reported STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT
2) 2016 relatedCetin to hydropower plant in Turkey. The company was sold in 2017 and the provision was derecognised and includedthegain as a part of from the sale. See note 5. 3) Other movements Bookedvalue 31.12 1) power plants inSweden. Provisions booked during the year Provisions used/reversedduring the year Currencyrateeffect Reclassifications to/from other balance sheet items 2016 NOK million Bookedvalue 01.01. Reclassifications to/from other balance sheet items Other movements Bookedvalue 31.12 only recognised where there is an existing obligation as a result of a past past a of result a as obligation existing an is there where recognised only It arisen. has obligation an that probable 50% than more is it where and event, probability lower With provision. the measure reliably to possible be also must the unless statements financial the of notes the in stated be will conditions the amount an as recognised are Provisions low. very is payment of probability present the settle to required expenditure the of estimate best the is that date. sheet balance the at obligation contracts Onerous to considered is contract onerous An provisions. as measured and recognised Provisions booked during the year Provisions used/reversedduringthe year Currencyrateeffect 2017 NOK million Bookedvalue 01.01. Decommissioning Other provisions Total provisions NOK million Provisions, contingent assets and contingent liabilities contingent and assets contingent Provisions, SIGNIFICANT ACCOUNTING POLICIES ACCOUNTING SIGNIFICANT Note 30 Depositaccount related to powersales on energy exchanges Other restricted cash Total Book value of cash and cash equivalents pledged as security to counterparties cash equivalents Book value of cash and NOK million Cash and cash deposits funds, certificates, promissoryMoney market notes, bonds Total 1) Note 29continuedNote NOK million CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS NOK million debt Total interest-bearing Total andotherdebt subsidiaries External debt in markets innon-Norwegian Debt issued market intheNorwegian Bonds issued Debt toStatkraft SF Long-term interest-bearingdebt Total Other short-termdebt Debt toStatkraft SF Certificate loans Credit facilities tocashcollateral Debt connected long-termdebt First year’sinstalment on Short-term interest-bearingdebt NOK million Note 31 1) Mainly related to accruals in relation to trading activities. relationtotrading toaccruals in 1) Mainly related Total Other interest-freeliabilities liabilities Accrued interest-free Indirect taxespayable Accounts payable NOK million liabilitiesInterest-free allocatedto capitalemployed Note 32 1) debt31.12.2017 Total interest-bearing Other (nocasheffect) rates(nocash effect) inforeign exchange Changes of(nocasheffect) entities Deconsolidation (cashin-/outflow) Cash collateral of(cashoutflow) Repayment debt inflow) New debt (cash debt01.01.2017 Total interest-bearing Cash flowsfrominterest-bearingdebt Part of changes in thestatementofflow. Partofchangesin short-term items cash Other interest-freecurrentliabilities debt Interest-bearing 1) 1) 89 39979 36285 26427 40 293 39 979 2408 7050 3694 1322 2172 9086 1460 4696 1950 -7 941 5 250 2 119 400 158 979 2017 2017 364 39 -11 -95 4 - STATKRAFT REPORT AS ANNUAL 2017 10531 40293 31886 21673 1900 5926 1730 2762 7050 8407 1408 6126 974 400 304 500 2016 2016 69 - FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY 90 also received a requestinformation from the Securities and for Exchange Commission of Brazil (CVM) relatedthese to historical Contingencies and disputes STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT CONTINGENCIES In distribution grid business,differences between can arise revenueceiling the determined the Norwegian by Resources Water and Energy Directorate (NVE) and the amount actually invoicedcharges. the invoiced as grid rental amountislower If than the revenue ceiling,ashortfall andtheinvoiced of revenue arises, if amount is higher than the ceiling,arises. excess revenue of revenue will Excess/shortfall time as the actual even out over invoicing is adjusted. Revenues are recognised in the accountsbasedon actual invoicing. Accumulated excess/shortfall of revenue is recognised in future periods. DISPUTES The Group is involved in a numberlegal of proceedings invarious forms. Whilst acknowledging the uncertainties the Groupisof the opinion of litigation, that basedon currentlyavailable, the information will these matters be resolved individually without any adverse material effect, or collectively on the Group's financial For legal position. disputes, in which Group assesses it to be probable the likely (more than not) that an economicoutflow will berequired to settle the obligation, provisions have been onmanagement’s made based bestestimate. StatkraftTreasury Centre SA received AS a draft decisionreassessmentOn 9 October 2017, Statkraft from the Norwegian of a tax The reassessment tax authorities. income relates to the 2008-2014tax returns for the fiscal years regarding inBelgium. Treasury Centre(STC) the investment SA The main issuerelates in the Statkraft to STC’s capitalstructureand its compliance with the arm’s length principle. stronglythereStatkraft disagrees that is a legal basisany reassessment, and has made for all no provisions from the related to this case. If arguments Norwegian tax authorities would prevail, the financial exposure for the period 2008-2017 is estimated to be NOK 4 billion in additional tax payable interest and expenses.On 24April 2017, the major business activities in STC weretransferred AS in Norway. to Statkraft Brazil On 13 July 2015,Statkraft acquired controlling interest in the Brazilian company Desenvix Energias which Renováveis S.A. subsequentlychanged nameto EnergiasStatkraft Renováveis the past years, Brazil has experienced (SKER). Over severalbackground, severe corruptionthis On Statkraft initiated an cases. internal investigation subsidiary related to the acquired in 2015. Based ontheinvestigation, the company has contacted Brazilian authorities. It is at this stage not possible to predict if the outcome could have potentialnegative financial effects. The Brazilian Federal Prosecutor has been investigating potential crimes committed by representatives four main pension of the funds in Brazil and representatives of companes in which the pension funds invested, as well as any other individualhave whomay been involved in the alleged scheme, related to historical investments made by the pension funds, including FUNCEF, which invested in Desenvix in 2009 (now SKER) and 2010, and now owns 18.7%of SKER. The Prosecutor has concluded investigation the inrelation to FUNCEF and filedthecriminal lawsuit against the individuals, including the shareholdersof the FederalJackson andFUNCEF. In August, Judge in chargethecriminal former officers of of investigation issued a resolutionstatingno that information had beenfound relating SKER withthealleged illicit activities and therefore decided to release guarantees and other precautionary measures imposed onSKER. Additionally, a civillawsuitfiled has been against the pension funds andcompanies and individuals related to the pension fund’s investments,including SKER. SKER has recently investments. It is at this stage not possiblepredict to if the outcome of the case could have potential negativeon effects SKER. Note 33 Note CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS Other arrangements ofassociatesand joint guaranteeson behalf Parent company ofsubsidiaries guaranteeson behalf Parent company NOK million guarantees: off-balance-sheet The Statkrafthasthefollowing Group GUARANTEES underthisschemetotalsNOK375 bythelocalauthorities debt raised assecurity.Themortgage thepower plant topledge granted permission havebeen ofsuchrights,thelocal authorities/companies the acquisition costs.to Statkraftforashareoftheconstruction Tofinance in return paying offromplantsbelonging areentitled toashare the output power companies Under certain owned energy andpublicly localauthorities circumstances PLEDGES Note 34 The Statkraft Group has the following off-balance-sheet obligations: CONTRACT OBLIGATIONS Total guarantees jointarrangements associatesand insubsidiaries, Total guarantees jointarrangements byassociatesand Guarantees issued bysubsidiaries Guarantees issued 1) inStatkraftTotal guarantees AS Whereof the most material guarantees are regarding energy purchase of NOK 15 787 million and liabilities to suppliers ofNOKmillion. tosuppliers 1 061 andliabilities ofmillion purchase NOK15 787 energy guaranteesare regarding Whereof themostmaterial obligation is NOK 1422 million. A power purchase agreement with a 15 year horizon. The purchase NOK 889 million. Obligation regarding service agreements related to gas power plants of estimated at NOK 1349 million. operation of one hydropower plant which involves a responsibility A license agreement relating to the development, construction and Pledges, guarantees and and obligations Pledges, guarantees 1) 91
December 2017. December at31 Nofundswere drawn atamaximumofNOK600million. receivables intrade pledged being amountingtoNOK1000 million, overdraft facilities oflongtermdebt.Fjordkrafthasavailable toensurecompliance equipment assetsinStatkraftand Pledged IHInvestGroupconsistofproperty,plant mainlyintheStatkraftIHInvest subsidiaries, Group. in other 5865 million atotalof million,and NOK assets inStatkraftEnergiAStotalledNOK4892 ofthepledged 2017,thecarryingvalue debt.Asof31December pledged in atotalofNOKmillion have 2348 Inaddition,othersubsidiaries million. million. settlement, the estimated fair value at 31 December 2017 is NOK 424 and Energy of 11.48 øre/kWh. For the remaining contracts with financial of around 85.1 GWh and an average price from the Ministry of Petroleum At the end of 2017, the contracts with financial settlement had a total volume period of time. as indefinite. The parties can however agree on financial settlement for a financial settlement. Concessionary power contracts are normally regarded regardless of whether the settlement takes place upon physical delivery or accordance with stipulated concessionary power prices upon delivery, The Group recognises concessionary power as normal buying and selling in CONCESSIONARY POWER CONTRACTS 20534 16306 23649 3115 2646 1728 2500 469 2017 STATKRAFT REPORT AS ANNUAL 2017
27333 23429 17592 3904 2928 1766 4071 976 2016 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY - - 28 34 17 17 Total 2016 1 732 1 795 1 044 2 702 1 624 17 810 23 180 Sublease payments - - - 7 11 11 945 952 Variable lease the endof the period More than5years after 2017 829 2 349 1 669 15 845 20 693 17 26 13 11 636 679 178 202 Minimum lease Between 1 and 5 years after the end of the period ACCOUNTING JUDGEMENTS JUDGEMENTS ACCOUNTING agreementsPower purchase madewhen Judgement is determining whetherapower purchaseagreementalease. contains purchase A power agreement a leaseif its fulfilmentdepends contains on a specific asset and the arrangement conveys a right to control the useof the underlyingasset amounttheoutputapriceand Statkraft takes a significant is of at that neitherfixed equal to the current market price. nor 2 92 11 151 163 Within 1 yearof the endof the period Fees paidtoexternal auditors Leases 1) The main items infeesfor otherservices in 2017relate to assistance with a potential listingof Fjordkraft and of the sustainability the attestation report. The corresponding figure for Vehicles Other leases Total Lease-related rent expensed period in the and specifiedin the following manner: NOK million Property rentalagreements Other leases Total NOK million Property rentalagreements Vehicles STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT 2016 relates to assistance to map various existing processes and procedures, and the attestation of the sustainability report. Total 1) Other attestation services Tax consultancyservices Other services NOK thousand Statutory auditing DeloitteAS is the Statkraft Group’s auditorand audits all subsidiaries subject to auditingrequirements, except for Brazilian subsidiaries in 2016.Feespaid to externalauditors for the audit of the Brazilian subsidiaries for 2016 amounted2.2million. to NOK The total fees (excluding VAT) paid for auditing and other services were as follows: Note 36 Statkraft is offering market access to smaller renewable energy producers. Some of these contracts are defined as operating leases with variable lease payments, and are presented as energy purchases, see note 12. The lease agreements have durations ranging up to 20 years and the rent paid for 2017 was NOK 9446 million whereas the corresponding amount for 2016 was NOK 4529 million. Statkraft has no significant financial lease agreements at the end of 2017. SIGNIFICANT ACCOUNTING POLICIES ACCOUNTING SIGNIFICANT basis straight-line a on expense an as recognised mainly are leases Operating closely is use where plants production leased For term. lease the over consumption by measured are payments lease production, the with connected purchases. energy as presented and Note 35 Note The total of future minimum lease payments in relation to non-cancellable leases for each of the following period is: CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS NOK 2016 in thisperiod. expatriate agreement 2) 1) ExecutiveVicePresident Jon Vatnaland, ExecutiveVicePresident Jürgen Tzschoppe, Bakken,ExecutiveVicePresident Hilde VicePresident Steinar Bysveen, Executive President Granheim,Executive Vice Hallvard andCFO Irene Egset,ExecutiveVice President CEO Presidentand Rynning-Tønnesen, Christian NOK 2017 Salary andotherbenefits–executivemanagement CEO. (EVPs)andthePresident vice presidents comprisestheexecutive ofunitsreporttotheGroupmanagement, which supportfunctions.Themanagers these businessunitsand Statkraft into is organised Note 37 For 2017, the total pension costs for executive management were NOK 7 430 617. In 2016 the corresponding amount was 919. amountwas NOK 6719 thecorresponding wereNOK7430617. In2016 costsforexecutivemanagement For 2017,thetotalpension employee. hasbeenan executive which the individual schemereflectstheperiod during costforthepension The year’saccounting 3) 2) 1) ExecutiveVicePresident Jon Vatnaland, VicePresident Jon Brandsar, Executive ExecutiveVicePresident Jürgen Tzschoppe, Asbjørn Grundt,ExecutiveVice President Bakken,ExecutiveVicePresident Hilde VicePresident Steinar Bysveen, Executive President Granheim,Executive Vice Hallvard andCFO Irene Egset,ExecutiveVice President CEO Presidentand Rynning-Tønnesen, Christian NOK Pension costs–executivemanagement 209. 982 27 NOK was 2016 in amount corresponding The 882. 185 26 NOK to amounted management executive the to paid benefits other and salaries total 2017, For granted. been surety or loans any have nor provided, been has functions managerial normal beyond services special for compensation additional No above. shown those than other Group same the in companies other from benefits financial or compensation any received not has management Group The 4) 3) 2) 1) VicePresident Jon Brandsar, Executive Asbjørn Grundt,ExecutiveVice President Irene Egset,ExecutiveVice President ExecutiveVicePresident Jürgen Tzschoppe, Bakken,ExecutiveVicePresident Hilde VicePresident Steinar Bysveen, Executive PresidentandCFO Granheim,Executive Vice Hallvard CEO Presidentand Rynning-Tønnesen, Christian Jon Vatnaland was appointed Executive Vice President on 24 January, 2017. He also held the position as Managing director for Statkraft UK Ltd. until August 2017 and was an forStatkraftand was on director UKLtd.untilAugust 2017 theposition as Managing Healsoheld on24January, 2017. ExecutiveVicePresident wasappointed JonVatnaland in 2018. in2017, but disbursed Bonusearned Jon Vatnaland was appointed Executive Vice President on 24 January, on24January, 2017. ExecutiveVicePresident wasappointed JonVatnaland 4February2016. VicePresident on as Executive JonBrandsar resigned on4February 2016. ExectutiveVice President IreneEgsetwasappointed 4February2016. VicePresident on as Executive JonBrandsar resigned 2016. on16November asExecutiveVice President AsbjørnGrundtresigned 2016. Presidenton4February Executive Vice IreneEgsetwasappointed in 2017. in2016, but disbursed Bonusearned Benefits paid to executive management andtheBoardofDirectors tomanagement Benefits paid executive 2) 2) 4) 2) 3) 3) 1) 93 2062868 3219510 2616080 2647150 2542616 4978414 1679588 3430575 2711629 2702892 3068615 2417438 5144192 2208380 2930022 Salary Salary 369600 420375 474500 539500 552500 677875 386000 547000 473000 466000 550000 510000 883000 360000 Bonus Bonus Bonus - 1) 1) STATKRAFT REPORT AS ANNUAL 2017 1385858 1145485 1282081 2384012 822594 136896 273691 Benefits in Benefits in kind Benefits in kind 180154 166915 189585 213598 193630 173511 142117 196970 214003 193024 192069 188641 193057 2017 89130 72369 - - 1032592 1035227 2413137 and other benefits and other benefits and other 117804 926091 254496 849380 91192 2280749 3483079 2612622 3806800 3280165 3400248 3288746 5829800 2154718 4119692 3381599 3382895 3811639 3119507 6215832 2016 Salaries Salaries - FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY 8 3 5 6 6 5 6 5 5 5 10 10 10 10 10 10 10 11 10 10 11 10 Participation in Participation in board meetings board meetings ------31 000 24 950 49 900 31 000 31 000 24 950 15 500 Committee Committee Compensation Compensation ------Audit Audit 33 800 93 300 67 600 33 800 67 600 33 800 93 300 67 600 33 800 67 600 Committee Committee CEO’s salary and conditionsof employment. compensation paidto senior executives. salary, bonus pension systems, andemployment agreements and similartheexecutive for management in Statkraft. Grouptheextentthat the Committee the Statkraft to deems that these concernmatters of particular importancefor the Group’s reputation, competitiveness and attractiveness as anemployer. salaries for the corporate executivesand head of Corporate Audit before they aredecided upon. Onceayear prepare the board’s treatment of items relating to the Prepare the Board’s statement onexecutive pay and other Prepare the Board’s treatment of allthefundamental issuesrelating to Deal with specific issues related to compensation for employees in TheCEO shall consult the Compensation Committeeregarding the Organisation The boardof Statkraft has established a separate Compensation Committee. The mandatethecommittee of is as follows: Report on executive remuneration policy The CEO and corporate executives receiveboth a fixed salary and a variable payment. Fixed salary The fixed salaryisdetermined based on an assessment of the specific position and the market – as wellasan assessment against Statkraft’s policyof offering competitive terms, but not take a leading position. When deciding the annual salary regulation, the averagesalary of other increases employees are also considered. Board Board 94 281 000 281 000 242 000 170 500 140 500 484 000 341 000 281 000 281 000 140 500 281 000 281 000 281 000 281 000 140 500 242 000 311 000 281 000 140 500 140 500 140 500 281 000 remuneration remuneration 2) 3) 1) 3) 1) 1) 2) 1) 1) 3) Was appointed depuy chairin June 2016. Priorto this, Halvor Stenstadvold was director. Left the Board in June 2016. Was appointed board memberin June 2016. Was appointedin board member June 2017. Left the Board in June 2017. STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT The boardof Statkraft will contribute to a moderate, but competitive development of executive payin The principles Statkraft. and guidelinesfor executivesalary and other remunerations are formedaccordingly. In 2017 the only significant changein the guidelines, with respect to salaries and other remunerations, was a clarification of future practice regarding pension scheme arrangements for Executive Vice Presidents in the case of internal promotionsuch to a position. AS follows Statkraft the Ministry of Trade, Industry and Fisheries’s guidance for salary andother benefits to corporate management in state owned companies. Statkraft’s policy is to offer competitive terms, but not take a leading position.Upon deciding salaries and other remunerationsan in Statkraft, externalposition assessment system that ranks positions accordinga to recognized and widely used methodology is utilised. An annual survey is then conducted, evaluating how similarly ranked positions in the Norwegian labour market are compensated. This information,together with the general salary development in Statkraft, forms the basis for determining compensation. THE BOARD’S STATEMENT REGARDING SALARIES AND OTHER REMUNERATIONS TO SENIOR EXECUTIVES – 2017 The Board hasno remunerationagreements other thanthedirectors’ fee and remuneration for participation in committee work, norhave any loans or surety beengranted remuneration to directors of the Board. Total paidto the Board,Audit Committee and Compensation Committee in 2017 was NOK 2 792000, NOK 296 100andTherespective NOK 111 900, respectively. amounts in 2016 were NOK 2 651 500, NOK 296100 and NOK 96 400. 2) 3) Olav Fjell, chair Berit J. Rødseth, deputy chair Elisabeth Morthen, director 1) Thorbjørn Holøs, employee-elected director VildeEriksen Bjerknes, employee-electeddirector Asbjørn Sevlejordet, employee-elected director Hilde Drønen, director Peter Mellbye,director Helene Biström, director Bengt Ekenstierna, director NOK Thorhild Widvey, chair Halvor Stenstadvold, deputy chair 2016 Asbjørn Sevlejordet, employee-elected director Helenedirector Biström, 1) 2) Ingelise director Arntsen, Bengt Ekenstierna, director Thorbjørn Holøs, employee-elected director VildeEriksen employee-elected Bjerknes, director Thorhild Widvey, chair Halvor deputy chair Stenstadvold, Hilde Drønen, director Peter Mellbye,director 2017 NOK Note 37continuedNote in Board meetings as well as participation and Compensation Committee Audit Committee to the Board, Remuneration CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS accordance with established standards. withestablished accordance in communication coverageofbroadband phoneand newspapers, withacompanycar, arrangements elementsinclude Other variable Other variableelements development. andorganisational targetsonleadership of weighting individual and a30% of70%thesetargets weighting presidentshasacombined executive vice for thevariable pay onthesetargetswhile payisfullybased variable TheCEO’s performance. andoperational aswellfinancial objectives forstrategic targetsaredefined For theCEOandcorporate management, set againstadefined oftargets. performance of onanevaluation mayvaryfrom0to100%,based bonus achievement of25percentgrossbasesalary. The individual maximum potential has a remuneration thevariable For theCEOandcorporate management, indicators Operational iii) indicators Financial ii) andenvironment Careforpeople i) area ofresponsibility: ontheindividual’s isweighted scheme.Themeasurement remuneration inthevariable categoriesofKPIsincluded ofrelevant Below is a description remuneration. variable andindividual activities betweenvalue-creating clear link a process,establishing management tosupporttheperformance developed is schemeforStatkraft’sseniorexecutives remuneration The variable creation. forthegroup.Thetargetsaresettoensurevalue strategic ambitions driversand onthemostrelevantvalue indicatorsarebased performance indicators(KPIs)intheGroupscorecard. The key performance throughkey followed up targets.isreportedand defined Performance Strategicplatformand theGroup’soverall between clear relationship processtoensure aperformancemanagement Statkraft established has inthestrategy. objectives riskstoachievethe andmanage performance to driveoperational Thepurposeis goals. andindividual keyperformanceindicators based on fortheseniorexecutives scheme Statkraft avariable remuneration has Variable salary Note 37 continued different KPIswithstretchtargets forStatkraft;by value creation measured focus isonenhanced ofthecostbase.Alsofortheseindicators, main the development Statkraftupcostsbymeasuring plants.Moreover follows available Statkraft intimeswhere benefits from plants, i.e.theavailability ofthepower availability Statkraft theutility-adjusted measures performance. KPIsupoperational There areseveral tofollow bydifferentKPIsstretch measured with targets. for valuecreation Statkraft, market. Themainfocusistoenhance the measuredagainst andothermarketactivities are management fromenergy KPIs,whereStatkraft’saddedvalue through profitability performancefrommarketactivitiesismeasured Statkraft’s financial executive management. of forallmembers andsafetytargetsareincluded Common health impact. ofnegativeenvironmental andreduction employees Afocusisonhealth,safetyandsecurity risks for followed. main intheindustryare ethicalstandards social and environmental, legal, Within thiscategory Statkraftmonitorsthatrequired 95 as setoutinthisstatement. totheCEOforisNOK5154 000,withother terms Fixed salary paid 2018 Terms fortheCEO toemployees. isclosed new changed,and the arrangement has been executiveremuneration regarding of28June2004. The policy companies and instateowned enterprises conditions ofmanagers employment for the withtheguidelines areenteredintoin accordance agreements period.These withinthepayment receivesother income employee rulesifthe toestablished according payshallbereduced Severance monthly. shallbepaid period. The amount excessofagreednotice paymentofupto12months’salary in severance to isentitled a usesthisrightoftermination,theemployee employer If the forprotectionagainst dismissal. ActEnvironment (Arbeidsmiljøloven) theWork rights in waivestheemployee’s above. Theagreement thanmentioned deadline bytheemployerwith a shorter if noticeisgiven payfromtheemployer aspecialseverance signedguaranteeing have been agreements For theCEO,andtwomembersofcorporate management, ofnoticeis6months. period years ofemployment, the employer’s of noticeperiod 3 months. Aftermorethan 2 executives, there is a mutual ofnoticefortheCEOis6months.Forcorporate The mutualperiod arrangements Severance employees. is closed tonew andthearrangement beenamended has executive remuneration regarding retirementage. The policy theagreed-upon hours ofupto50% until ofpay–and working withasalary of75% the executive’s another position shouldbe offered If anyofthepartiesexercisethisright,executive withoutfurtherjustification. tofromhisexecutiveposition requested resign, toorbe hasamutualright torequest resign, executive or the company 62yearsofage,the hasreached where, atanytimeaftertheemployee ofaftertheage62.Theseareagreements change position regarding haveagreements ofcorporatemanagement The CEOandone member Position changeagreements ofhiredateinthecompany. regardless ofmanagement fornewmembers corporate madeapplicable shall be schemes promotionsassume thatthe12Grestraint forpension internal management.Statkraftwillforfuture CEO andfourmembers ofcorporate in2017the 12Gincluded schemeforincomeabove Members oftheclosed management. promotions tocorporate forinternal was also applied scheme.Thispractice intheclosedpension agreements kept theirpension GdateofhirepriortoApril30 2012 withasalaryabove 12 and Employees beenestablished. over 12Ghasalso relatingtosalaries coverage salaryover12G.Groupdisability ordinary issetatof salary 18% savings. Additional privatepension supplementary thatcanbeusedfor established salary systemhas been additional over12G,butan forannual salary pension scheme new retirement established in2012.There is no tonewemployees scheme was closed executives.This theCEOand corporate salaryover12G,including annual withan allemployees included 12Gin2003.Thescheme income above fundedoutofcurrentincome for scheme Statkraft a pension established 30-yearvesting period. SPK during the entire partof thattheyhavebeen salary,provided the rightto66%oftheirannual of65yearsattheearliest,with havearetirement age corporate executives period.Theother theentire30-year vesting been part of SPKduring thathehas salary,provided of66%hisannual receiveapension and will hasaretirementageof67years, The CEO,Christian Rynning-Tønnesen, Fund(SPK). intheGovernmentPension benefitplan closed defined ASandhas a Pensjonsforsikring inGjensidige contributionplan defined a Statkrafthasestablished subsidiaries, ownedNorwegian For wholly Pension plans STATKRAFT REPORT AS ANNUAL 2017 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY 16 32 2016 2016 324 348 409 1 518 7 207 1 120 1 259 4 694 4 350 35 24 2017 2017 959 309 373 607 3 577 6 100 1 318 5 616 1 239 The individuals stated innote of the executive 37 are members management arealso or the Board and partiesof Statkraft. related The table below shows transactions parties with related as classified jointassociatesor have not been ventures that eliminated in the consolidated financial statements. 96 Related parties STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT The energy purchase from Statoil shown above includes purchase of gas used either in the Group’s electricity production or resold on the market. Volumes and prices are based on long-term contracts negotiated at commercial terms. Transmission costs to Statnett are mainly grid tariff. The prices in this market are stipulated by the Norwegian Water Resources and Energy Directorate. Other transactions with related parties are conducted at commercial terms and conditions. Except for interest-bearing debt covered in note 31, there are no other significant balance sheet items between Statkraft AS and Statkraft SF. Statkraft also has transactions and balances with other enterprises controlled by the Norwegian state, but their size, neither individually nor combined, have significance for Statkraft’s financial statements. Tax expensesinclude: Taxes payable to Norwegian authorities DividendAS to Statkraft SF and Groupcontribution from Statkraft Financial expensesFinancial include: Interest expensesto Statkraft SF Operating expenses include: Property tax and licence fees to Norwegian authorities Net operating revenues includes: Energy purchases from Statoil TransmissionStatnett costs to NOK million Gross operating revenues include: Concessionary salesat statutory prices The shares in Statkraft AS are all owned SF, which is a companyThe shares inStatkraft AS wholly owned by Statkraft by the Norwegian State. Receivables end of the period at the Liabilitiesend of the period at the by the owner and companies controlled owner transactions with the Significant NOK million Revenues Expenses All subsidiaries, associates and joint arrangements 24 and stated in note Intercompanynote 39 arerelated Statkraft. balances parties of and betweentransactions consolidated companies are eliminated in Statkraft’s consolidated financialpresented statements and arenot note. in this Note 38 Note
CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS Statkraft EnergiAS SatisLtd. Statkraft ElektrikEnerjisiToptan Sti Statkraft CarbonInvestAS Statkraft AssetAS Holding Smøla Vind 2 AS VindAS Kjøllefjord Hitra Vind AS Name Shares inconsolidated subsidiaries Note 39 Statkraft IH Invest AS Statkraft GermanyGmbH Statkraft ForsikringAS AB Statkraft Financial Energy Statkraft EnerjiA.S. Statkraft VindAB Statkraft VärmeAB ASStatkraft USHolding Statkraft SwedenAB Statkraft MarketsBV Statkraft FranceSAS Statkraft BrasilAS B.V. Lange Runde Zonnepark GmbH Statkraft SolarDeutschland Statkraft MarketsGmbH Enerji A.S. Kargi Kizirlmak Çakıt EnerjiA.S. Statkraft VarmeAS Statkraft Tofte AS AB Baltic Cable Statkraft SödraVindkraftAB Statkraft SCAVindII AB Statkraft SCAVindAB Statkraft Leasing AB Statkraft USLLC Gidekraft AB Sh.A. Hydropower Devoll Statkraft InvestimentosLtda. Statkraft VenturesGmbH Statkraft TradingGmbH Statkraft SouthEastEuropeEOOD GmbH Statkraft MarketsFinancial Services KnapsackGmbH Statkraft Holding HerdeckeGmbH Statkraft Holding AS Stjørdal Fjernvarme Knapsack GmbH&CoKG Knapsack Power Statkraft SCAVindElnätAB Statkraft Energias Renováveis S.A. Statkraft EnergiasRenováveis Ltda. Statkraft Energiado Brasil Knapsack Power Verwaltungs GmbH Verwaltungs Knapsack Power Monel Monjolinho Energética S.A. Energética Monel Monjolinho S.A. Energias Renováveis Energen S.A. Seabra Energética S.A. Energética Novo Horizonte Energética S.A. Macaúbas S.A.Moinho S.A.Santa Rosa S.A.Santa Laura Ltda. Enex O&MdeSistemasElétricos S.A.Esmeralda Consolidated companies Consolidated WP WP WP Segment IP IP IP IP IP IP IP, MO IP IP IP MO MO MO MO MO MO EF EF EF EF MO MO OA MO IP IP IP DH DH OA EF MO, EF, WP MO MO WP WP WP WP WP WP DH MO MO EF EF, WP IP MO EF EF,OA IP IP IP IP IP 1) Turkey Turkey Norway Norway Norway Sweden Norway Turkey Norway Sweden Sweden Sweden Sweden Sweden Sweden Sweden USA Norway Sweden Sweden Albania Netherlands France Norway Norway Norway Norway Country Brazil Brazil Brazil Brazil Brazil Brazil Brazil Brazil Brazil Brazil Brazil Brazil Brazil Norway Norway Netherlands Germany Germany Germany Bulgaria Germany Germany Germany Germany Germany Germany Germany Norway Sweden Turkey 97 Istanbul Istanbul Trondheim Trondheim Oslo Malmö Oslo Istanbul Oslo Stockholm Stockholm Stockholm Stockholm Stockholm Stockholm Kungsbacka San Francisco Oslo Stockholm Stockholm Tirana Amsterdam Lyon Oslo Oslo Oslo Oslo office Registered Florianopolis Florianopolis Florianopolis Florianopolis Florianopolis Florianopolis Florianopolis Florianopolis Florianopolis Florianopolis Florianopolis Florianopolis Florianopolis Oslo Oslo Amsterdam Düsseldorf Düsseldorf Düsseldorf Sofia Düsseldorf Düsseldorf Düsseldorf Düsseldorf Düsseldorf Düsseldorf Düsseldorf Oslo Stockholm Istanbul Statkraft EnerjiA.S. Statkraft AS Statkraft VarmeAS Statkraft EnergiAS Statkraft EnergiAS Statkraft EnergiAS Statkraft AS Statkraft AS Statkraft AS Statkraft VindAB Statkraft VindAB Statkraft SCAVindAB Statkraft VindAB Statkraft VindAB Statkraft AssetAS Holding Statkraft AssetAS Holding ASStatkraft USHolding Statkraft AssetAS Holding Statkraft SwedenAB Statkraft AssetAS Holding Statkraft MarketsBV Statkraft AssetAS Holding Statkraft AssetAS Holding Statkraft AS Statkraft AS Statkraft AS Statkraft AS Parent company Statkraft Energias Renováveis S.A. Statkraft EnergiasRenováveis S.A. Statkraft EnergiasRenováveis S.A. Statkraft EnergiasRenováveis S.A. Statkraft EnergiasRenováveis S.A. Statkraft EnergiasRenováveis S.A. Statkraft EnergiasRenováveis S.A. Statkraft EnergiasRenováveis S.A. Statkraft EnergiasRenováveis S.A. Statkraft EnergiasRenováveis S.A. Statkraft EnergiasRenováveis Statkraft InvestimentosLtda. Statkraft InvestimentosLtda. Statkraft BrasilAS Statkraft IH Invest AS Statkraft AS Statkraft GermanyGmbH Statkraft GermanyGmbH Statkraft MarketsGmbH Statkraft MarketsGmbH Statkraft MarketsGmbH Statkraft MarketsGmbH GmbH&CoKG Knapsack Power KnapsackGmbH Statkraft Holding Statkraft MarketsGmbH Statkraft MarketsGmbH Statkraft GermanyGmbH Statkraft AS Statkraft AS Statkraft AS Statkraft EnerjiA.S. STATKRAFT REPORT AS ANNUAL 2017 Shareholding and and Shareholding voting voting share 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 99.99% 81.31% 85.00% 90.10% 90.10% FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY - - -85 374 986 2016 3.15% 2 257 9 079 6 821 2 525 57.07% 99.43% 66.62% 55.00% 67.00% 51.00% 95.00% 15 899 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% votingshare Shareholding and Skagerak Energi Group 38 -71 631 931 2017 2 817 9 141 7 272 2 464 16 414 N/A -49 118 2016 2 297 1 098 7 110 1 239 1) 34 045 26 935 Statkraft AS Statkraft AS Statkraft AS Statkraft UK Ltd. Statkraft UK Ltd. Statkraft Energy Ltd. Statkraft UK Ltd. Statkraft Pure Energy Statkraft Pure Energy Statkraft AS Statkraft AS Parent company AS Invest Statkraft IH HoldingAS Statkraft IH Statkraft Holding SingaporePte. Ltd. Statkraft Holding Ltd. SingaporePte. Statkraft Holding Chile Pte. Ltd. Statkraft Chile Inversiones Ltd. Electricas EmpresaEléctrica Pilmaiquén S.A. EmpresaEléctricaS.A. Rucatayo EmpresaEléctrica Pilmaiquén S.A. EmpresaEléctrica Pilmaiquén S.A. Statkraft Chile Inversiones Ltd. Electricas Statkraft Chile Inversiones Ltd. Electricas Statkraft Holding Ltd. SingaporePte. Statkraft Holding Ltd. SingaporePte. Statkraft HoldingLtd. Peru Pte. Statkraft Peru Holding S.AC. Statkraft Peru S.A. Statkraft Holding SingaporePte. Ltd. Statkraft Holding SingaporePte. Ltd. Statkraft AS Statkraft Industrial Holding AS Fjordkraft AS Statkraft Industrial Holding AS SkagerakEnergi AS SkagerakKraft AS SkagerakKraft AS SkagerakEnergi AS SkagerakEnergi AS SkagerakVarme AS SKIHI Group - - - - - N/A 252 940 2017 1 775 1 061 Brussels Brussels London London London London London London London Oslo Beograd Registered office Oslo Amsterdam Kathmandu Amsterdam Santiago Santiago Santiago Santiago Santiago Santiago Santiago Santiago Kathmandu Amsterdam Lima Lima Lima NewDehli NewDehli Oslo Oslo Trondheim Porsgrunn Porsgrunn Porsgrunn Hjartdal Porsgrunn Porsgrunn Skien 98 Belgium Belgium UnitedKingdom UnitedKingdom UnitedKingdom UnitedKingdom UnitedKingdom UnitedKingdom UnitedKingdom Norway Serbia Country Norway Netherlands Nepal Netherlands Chile Chile Chile Chile Chile Chile Chile Chile Nepal Netherlands Peru Peru Peru India India Norway Norway Norway Norway Norway Norway Norway Norway Norway Norway 1) MO WP MO IO IO IO IO IO IO IO IO OA OA MO WP, WP EF EF MO MO IP IP IP IP IP IP IP IP IP IP IP IP IP MO IO IO Segment IP IP IP IP IP Transrucatayo S.A 2) Hidrotransmisiondel Sur S.A. Inversiones Shaqsa S.A.C. EmpresaEléctricaS.A. Rucatayo Eléctrica del Sur S.A. Statkraft Chile Tinguiririca SCC Statkraft Market Services Chile S.A. Statkraft Peru S.A. EmpresaEléctrica Pilmaiquén S.A. Sauland Kraftverk AS Skien Fjernvarme AS GrunnåiKraftverkAS Statkraft Peru Holding S.A.C. Statkraft Chile Inversiones Ltd. Electricas SkagerakNettAS SkagerakVarme AS Statkraft India Pvt. Ltd. Statkraft India Pvt. Ltd. Statkraft Markets Pvt. Trondheim AS Kraft SkagerakKraft AS Statkraft Holding Nepal Ltd. Statkraft HoldingLtd. Peru Pte. Himal Power Ltd. Statkraft Holding Chile Pte. Ltd. Bryt Energy Storage Bryt Energy Ltd Rheidol 2008 Trustees Ltd. Statkraft Holding SingaporePte. Ltd. Statkraft Pure Energy Ltd. Andershaw Wind PowerLtd. Statkraft Energy Ltd. Fjordkraft AS SkagerakEnergi AS Statkraft IH HoldingAS Statkraft IH EF: European EF: flexible generation, Market operations, International IP: Power, WP: Wind power, DH: District heating, Industrialownership, MO: IO: OA: Other activities. Fjordkraft AS is owned Industrial by Statkraft Holding(3.15%), Skagerak EnergyAS (48%)(48.85%). AS and BKK AS SKIHI Group was established as a part of the restructuring of old SN Power in 2014 and is now owned 100% by Statkraft STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT - of which - of accumulated non-controlling interests Dividend disbursed to non-controlling interests Net cash flow from operating activities 1) - of which - of allocated to non-controlling interests Assets Debt Equity NOK million Gross revenues Total comprehensive income Significant non-controlling interests’ share of the Group’s activities interests’ share of the Group’s non-controlling Significant There are significant non-controlling shareholdings and SkagerakEnergi in SKIHI Group Group. However, inSeptember 2017 Statkraft increasedownership its in SKIHI Group up to 100%. Seenoteadditional 5 for information. Statkraft Western Balkans d.o.o. 1) 2) Statkraft Vind Holding AS Statkraft UK Ltd. Statkraft Brussel Sprl Statkraft Treasury Centre SA Statkraft Industrial Holding AS Name Note 39continuedNote
The Devoll hydropower project in Albania consists of two hydropower plants; Banja and Moglicë. The Banja plant was finalised in 2016.
The Moglicë plant is well on its way to open in 2019. The plants will then have a combined capacity of 243 MW.
99 STATKRAFT AS ANNUAL REPORT 2017 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY
100 Statkraft AS Financial Statements ASFinancial Statkraft STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS Profit forthe year Tax expense Profit beforetax Net financialitems andderivatives currency andunrealised Net realised securities andunrealised Net realised costs Financial income Financial associates and frominvestmentsinsubsidiaries Revenues Operating profit (EBIT) Operating expenses expenses Other operating Depreciation relatedcost Payroll and Operating revenues NOK million Statkraft AScompany parent Income statement Transfer from share premium account Transfer fromsharepremium capital Transfer fromotherpaid-in Transfer to/fromretainedearnings payable Dividends Appropriation ofprofit andfor theyear equitytransfers 101 7, 20,23 8, 23 8, 23 8, 23 8, 23 Note 5, 6 STATKRAFT REPORT AS ANNUAL 2017 15 15 15 15 10 23 9 8 13438 19538 19801 20277 22148 -2897 -1151 -1531 6100 1158 1019 1055 -263 -476 -688 -787 2017 -56 - - -1315 -1648 -4971 -1127 -1585 4350 1371 2296 2829 4926 3403 1052 -926 -532 -757 -768 2016 598 -16 -61 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY - 48 49 790 300 428 771 5 201 1 657 1 241 6 684 78 017 20 824 99 979 12 039 17 668 54 261 54 261 29 140 31 569 23 843 31 817 117 647 117 647 31.12.2016 - 9 540 250 754 886 718 1 602 6 816 20 909 29 327 78 973 15 794 95 566 26 290 11 985 39 029 56 402 13 375 69 777 33 887 35 491 134 595 134 595 Director Director Director 31.12.2017 Hilde Drønen Bengt Ekenstierna Asbjørn Sevlejordet 9 9 10 11 14 15 15 16 Note 19, 23 18, 23 19, 23 12, 23 13, 23 19, 23 19, 23 3, 17, 23 3, 17, 23 102 Director Director Deputychair Ingelise Arntsen ThorbjørnHoløs President and CEO Halvor Stenstadvold Oslo, 14 February 2018 Christian Rynning-Tønnesen The Board of Directorsof Statkraft AS Director Director Peter Mellbye Thorhild Widvey ChairtheBoard of Vilde Eriksen Bjerknes STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT Derivatives Other interest-free liabilities Short-term liabilities liabilities Equity and Long-term liabilities Short-term interest-bearing debt Taxes payable Equity Provisions Long-terminterest-bearing debt Derivatives EQUITY AND LIABILITIES Paid-in capital Retained earnings Current assets Assets Receivables Derivatives Cash and cash equivalents Derivatives Other non-currentfinancial assets Non-current assets Assets Deferredtax asset Property, plant and equipment Investments in subsidiaries, associates and joint arrangements NOK million Statement of Financial Position of Financial Statement parent AS company Statkraft CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS CASH FLOWFROM INVESTING ACTIVITIES Cash flowfromoperating activities Taxes paid received anddividend Group contribution effects withno cash andgroup contribution fromdividend Booked income inothershort-termitems Changes inlong-term items Changes invalue changes Unrealised ofshares Gain/loss on sale frompreviousyears ofwrite-downs Write-downs/reversal Depreciation ofproperty,plantandequipment Gain/loss on sale Profit beforetax CASH FLOWFROM OPERATING ACTIVITIES NOK million Statkraft AScompany parent Statement of CashFlow respectively. activities financing and investing operating, regular by generated flow cash show to order in year the for result company’s the with starts statement The method. indirect the using prepared been has statement flow cash The SIGNIFICANT ACCOUNTING POLICIES overdraftfacilities Unused commitedcreditlines Unused 31.12 cashequivalents Cash and 01.01 cashequivalents Cash and Net changeincashandequivalentscash Cash flowfromfinancing activities paid andGroup contribution Dividend of Repayment debt New debt incashpool Changes CASH FLOWFROM FINANCINGACTIVITIES Cash flowfrominvesting activities Divestments ofshares andassociates reductionin subsidiaries Capital associates and Investments insubsidiaries andassociates offromsubsidiaries Repayment loans associates and Loans to subsidiaries ofplantandequipment Proceeds from sale property, andequipment Investments inproperty,plant 103 Note 10 14 14 8 A+B+C STATKRAFT REPORT AS ANNUAL 2017 C A B -21891 10248 19801 10080 11985 -9150 -1178 -2696 -2052 -7693 7624 8306 1653 1000 5201 6784 5247 1802 1174 2641 -866 452 2017 -26 -45 80 56 86 -8 -5 7 -19986 -16810 11000 10387 15196 -7589 -3082 -1690 -3397 -1679 1000 5201 5471 4413 9329 7127 4962 2296 -270 2016 -42 -99 38 20 61 5 - - - - - FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY 116 117 117 117 118 118 119 120 120 120 120 122 122 Page Receivables Cash and cash equivalents Equity Provisions Interest-bearingdebt Other interest-free liabilities Derivatives Fees paidto external auditors Obligationsguarantees and Disputes Related parties Transactions Subsequent events Note 13 Note 14 Note 15 Note 16 Note 17 Note 18 Note 19 Note 20 Note 21 Note 22 Note 23 Note 24 Note 25 104 105 106 107 108 108 109 111 112 113 114 115 116 Page Significant policies accounting Market risk Analysisof market risk Hedge accounting Payrollcosts and number of full-time equivalents Pensions Other operatingexpenses Financial items Income Taxes Property, plant and equipment Shares insubsidiaries,associates and joint arrangements Other non-currentfinancial assets STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT Note 1 Note 2 Note 3 Note 4 Note 5 Note 6 Note 7 Note 8 Note 9 Note 10 Note 11 Note 12 Index of notes to Statkraft AS parent companyAS parent financial notes to Statkraft Index of statement Notes parent AS company Statkraft CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS accrual principle. principle. accrual the with accordance in place takes costs of expensing whilst earned, when place takes services and goods of sale from revenues of Recognition costs of expensing and income of recognition for Principles estimates. initial the from deviate may figures actual the but basis, the form rendered are accounts the when time the at estimate best The costs. and income liabilities, assets, of value book the affect that estimates estimates in Uncertainties VALUATION AND CLASSIFICATION PRINCIPLES of the overall description of accounting policies: The descriptions of accounting policies in the statements and notes form part GAAP). (Norwegian Norway in principles accounting accepted generally and Act Accounting the with accordance in prepared been have AS Statkraft for accounts annual The GENERAL INFORMATION Note 1 Long-term debt Cash and cash equivalents Receivables Note 11 Other non-current financial assets joint arrangements Investments in subsidiaries, associates and Property, plant and equipment Income taxes Research and development costs Pensions Statement of cash flow Significant accounting accounting policies Significant
The accounts are based on assumptions and and assumptions on based are accounts The Note 17 Note 14 Note 13 Note 12 Note 10 Note 9 Note 7 Note 6
105 the transaction date. date. transaction the at rate exchange the using translated are currency foreign in denominated Transactions cost. financial or income financial as statements financial the in net as presented are effects currency unrealised and Realised date. sheet balance the on rate exchange the at valued currency Foreign value. settlement calculating when used are estimates Best not. than likely more liabilities Contingent establishment. of time the at amount received nominal the at sheet balance the in recognised are loans Short-term value. fair and cost of lower the at valued are assets Current schedule. to according depreciated are life economic useful limited with assets Fixed exists. longer no impairment the for basis the when reversed is Impairment transitory. be to expected not is value in reduction the when impaired are but cost, at valued are assets Fixed liabilities. long-term and current classify to used are criterias Corresponding assets. current as classified are months 12 within repaid be will that Receivables assets. current as classified are assets Other assets. fixed as classified are use or ownership lasting debt and assets of valuation and Classification expenses. or revenues operating as treated are equipment and plant property, of sale from Gains/losses
Money items denominated in foreign currency are are currency foreign in denominated items Money
Contingent liabilities are recognised if settlement is is settlement if recognised are liabilities Contingent STATKRAFT REPORT AS ANNUAL 2017
Assets intended for for intended Assets FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY parties, which are used for short-term placements. - Statkraft’s interest rate exposure interestrateto its debt is relatedStatkraft’s
Interest rate risk managementportfolio. The interestrateriskisbasedof on a balance of keeping time and interest cost low over to stabilise contributing the Group’s regardscash flows withrateriskis rate changes. The interest to interest monitoredshall by having duration Statkraft at all times as the measure. keep the average durationof its debt portfolio2to 5 within the range of years. Compliance with the limit for currency and interest rate risk is followed up continuously by the middle-office function. Responsibility for entering into and following up the various positions has been delegated and allocated to separate organisational units. RISK LIQUIDITY Statkraft AS assumes a liquidity risk because the terms of its financial obligations are not matched to the cash flows generated by its assets. Statkraft AS has good borrowing opportunities from the Norwegian and international money markets and from the banking market. Drawdown facilities have been established to secure access to short-term financing. Liquidity forecasts are prepared as an important part of the daily liquidity management and for planning future financing requirements. The liquidity reserve is a tool for risk management and functions as a buffer in relation to the liquidity forecast. RISK CREDIT Credit risk is the risk of a party to a financial instrument inflicting a financial loss on the other party by not fulfilling its obligations. Statkraft AS assumes credit risk when placing surplus liquidity and when trading in financial instruments. Placement of surplus liquidity is mainly divided among institutions rated BBB (Standard & Poor’s) or better. There are established exposure limits with individual counter For financial derivatives, credit risk is reduced by using cash collateral. Cash collateral is settled on a weekly basis and will therefore not always be settled on 31 December. Therefore there could be an outstanding credit risk at year-end. 106 Statkraft AS manages Statkraft the Group’s currencyrisk.
Market risk Market STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT Statkraft incurs currency risk in the form of transaction risk, mainly in connection with energy sales revenues, investments and dividend from subsidiaries and associates in foreign currency. Balance sheet risk is related to shareholdings in foreign subsidiaries. There is also balance sheet risk related to investments in some associated companies. Statkraft’s settlement currency at the Nordic power exchange Nord Pool is EUR, and allNordic power contracts traded inthe powerexchange Nasdaq are denominated inEUR.In addition most of Statkraft’s bilateralpower purchase agreements in Norway and allpower purchaseand sales abroad are denominated inforeign The objectiveStatkraft’s hedging currency. of is to secure the NOK valueof future cashflows exposed to changes in foreign currency rates. The currencyexposureStatkraft is treated in accordance in with the company’s hedging treasury strategy. Economic is achieved by usingfinancial derivatives inforeign and debt currencies as hedging instruments. Few of the hedging relationships fulfil the requirements of hedge accounting. Statkraft is exposed to two main types of risk in regards to its finance activities: foreign exchange risk and interest rate risk. Statkraft therefore employs interest rate and foreign currency derivatives to mitigate these risks. Interest rate swaps, currency and interest rate swaps and forward exchange rate contracts are used to achieve the desired currency and interest rate structure for the company’s debt portfolio. Forward exchange rate contracts and debt in foreign currency are also used to hedge cash flows denominated in foreign currency. Statkraft’s methods for managing these risks are described below: Foreign exchange risk FOREIGN EXCHANGE AND INTEREST RATE RISK RATE INTEREST AND EXCHANGE FOREIGN RISK AND RISK MANAGEMENT OF FINANCIAL INSTRUMENTS IN IN INSTRUMENTS FINANCIAL OF MANAGEMENT RISK AND RISK GENERAL on based risk right the assuming upon based is policy management risk The strength financial expertise, risks, take to willingness and ability Group’s the The purposeplans. of riskdevelopment managementand policy is to identify threats and opportunities for the Group, and to manage the risk within an acceptable level. The central treasury function in Statkraft AS coordinates and manages the financial risks relating to currency, interest rates, credit and liquidity of the Group. A more detailed explanation of how these are managed will be provided in the following. Note 2 Note CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS Debt inEUR Debt inNOK NOK million Fixed interestratedebtportfolio rate, average interest GBP Nominal rate, average interest EUR Nominal rate, average interest NOK Nominal Specification of interestby currency structurefordebtportfolio. thedesiredcurrency company's Statkrafttoachieve currencyswaps,since usesthese derivatives interest rate and contracts and combined rate effectsforward exchange ofbycurrencyincludes fromallocated swaps.Specifications debt interestrateandcurrency ratecontractsandthecurrency effectsofcombined exchange 1) Total Debt inGBP Debt inEUR Debt inNOK NOK million Specification of debtbycurrency Note 3 Total repayment 2016 Total repayment schedule 2017 Total repayment schedule swaps interestrateandcurrency combined effectsrate contractsandcurrency of forwardexchange Currency effect ofallocated Other debt markets innon-Norwegian Debt issued market intheNorwegian Bonds issued back agreement) Instalments ondebt toStatkraftSF (back-to- NOK million Repayment schedule interest rateswaps. figures reflect thatStatkraftreceivesfixed interest from rateandcurrencyswaps. Negative combined interest ininterestrateswapsand contracts, interestrateadjustments rate forwardexchange accountmaturityofallocated yearsalso take into currencyswaps.Thesplitbetween effectinterestrateand rate contractsand the currency ofcombined 1) Total fixedinterest2016 Total fixedinterest2017 Debt inGBP The specification includes long-term interest-bearing debt, the first-year installment on long-term interest-bearing debt, certificate loans, the currency effect of allocated forward loans,thecurrencyeffectofallocated debt, certificate onlong-term interest-bearing debt,thefirst-yearinstallment long-terminterest-bearing includes Thespecification The specification includes long-term interest-bearing debt, first-year installment on long-term interest-bearing debt, certificate loans, the currency effect of allocated forwardexchange loans,thecurrencyeffectofallocated debt, certificate onlong-term interest-bearing debt,first-yearinstallment long-terminterest-bearing includes Thespecification Analysis Analysis of market risk 1) 1) 0-1 year 6198 2136 1968 168 - - - 1–2 years 1876 5965 4912 1000 -355 400 8 107 2–3 years 21885 15395 0-1 year 2662 9348 3385 3014 3000 3000 - - - - Futureinterestrateadjustments 1–3 years 3–4 years 2460 5733 2950 2783 800 800 800 - - - - - 3–5 years 4–5 years 35225 19545 13018 17576 1113 2662 7920 6861 1500 0.50% 2.60% 4.00% STATKRAFT REPORT AS ANNUAL 2017 -443 573 600 2017 2017 -27 2 - - 5 years and later 5 yearsand 5 years and later 5 yearsand 13524 15404 14654 9673 7274 6250 5667 750 - - - - 35131 35225 28395 35131 35225 19545 13018 35131 18047 11778 7050 2662 5306 0.70% 2.60% 4.40% -630 400 Total Total 2016 2016 10 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY - 89 60 504 229 2016 2016 2016 2016 -229 512 107 768 500 489 2 93 78 2017 2017 2017 2017 106 787 462 453 365 934 510 -932 are interest rate swapsare interest rate nominal with a respectivelyEUR value of 180 million and NOK 2900 million, entered banks into with major as the counterparties. The agreements 3-month rate from fixed to floating swap interest 6- and terms of the hedging or NIBOR. The critical month EURIBOR object and hedging instrument aredeemed to be approximately and 90– the same, 110%hedging efficiency is assumed. The inefficiency is recognised in the incomestatement. The hedges expire during the period2019-2022. 108 Statkraft AS treats some loantreats some arrangementsStatkraft AS as fair Payrollcostsand equivalents number of full-time Hedge accounting 1) Pensioncosts are describedin further detail in note6. STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT Averagenumber of full-time equivalents Numberof full-time equivalents31.12 of as Remuneration to the Chairman the Boardof Directors and are disclosed in note 37 in the Group accounts. Pension costs Other benefits Total 1) NOK million Salaries Employers'national insurance contribution Note 5 Hedge inefficiency Other information on fair value hedging Other information NOK million Net gain(+)/loss(-) inincome hedging statement on instruments Net gain(+)/loss(-) inincome hedging statement on objects, in relation to the hedgedrisk NOK million Hedging used instruments in fair value hedging Fair value of hedging instruments Fair value of hedging Fair value hedging valuehedges. Issued bondloans have been designatedashedging objects in the hedging relationships, andtheassociatedhave interest rate swaps beendesignated as hedging instruments. The hedging areissued objects fixed-interest bonds with a total nominal valueof EUR180 million and NOK 2900 million.The hedging instruments Note 4 Note
CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS January 2014. 2014. January 1 employees new for closed was SPK in scheme benefit pension The maturity. to held are bonds that assumed is it simulations In bonds. government Norwegian in invested were assets the though as simulated is assets fund pension the of management but based, asset not is scheme SPK The Act). Pension the of 1 (Section state Norwegian the by guaranteed are SPK the from benefits Pension (SPK). Fund Pension National the in scheme the of financing the for responsible is and premium annual an pays AS Statkraft scheme. pension retirement early Norwegian the under 62 of age the from retirement early offers also AS Statkraft accrual. maximum with 12G, to up income, pensionable of 66% to amounting benefits pension provide schemes retirement The pensions. survivor and disability retirement, cover schemes benefit defined The (SPK). Fund Pension National the in scheme benefit defined schemes benefit defined Funded reduced. proportionately benefits retirement their have will contributions full made not have who Employees years. 40 and 30 between of period a over paid be to required be normally will contributions benefits, retirement full receive to able be To salary. employee’s the of percentage a as set normally is benefit retirement The retirement. on receive will employee an that benefits retirement the defines that scheme benefit schemes benefit Defined covers. risk entails also scheme contribution the pensions, retirement to addition In 12G. and 7.1G between salary pensionable the of 18% and (G), amount basic Scheme’s Insurance National the of 7.1 to up salary pensionable the of 6% are contributions The scheme. contribution defined a is 2014 January 1 from employees new for scheme pension AS’ Statkraft costs. payroll and salaries as expensed are payments The made. been has payment the once company the for obligations further incurring without manager fund a to contributions fixed pays AS Statkraft where scheme benefit retirement schemes contribution Defined tjenestepensjon”). obligatorisk om (“Lov scheme pension occupational mandatory regarding act the of requirements the fulfills and to obligated is AS Statkraft GENERAL INFORMATION Note 6 Pensions
A defined benefit scheme is a retirement retirement a is scheme benefit defined A A defined contribution scheme is a a is scheme contribution defined A
Statkraft AS has organised their their organised has AS Statkraft 109 ESTIMATES AND ASSUMPTIONS assets. fund pension on yield projected - the and liability estimated the on interest the period, the during accrued benefits retirement the of total the comprises and costs, payroll and salaries under included is period the for cost benefit retirement net The equity. against directly recognised are data base or assumptions actuarial in changes to attributable losses and Gains liabilities. long-term as classified are operations by covered are that schemes non-funded and schemes underfunded for liabilities benefit retirement Net value. fair at sheet balance the in recognised and assets current non- as classified are schemes overfunded for assets fund pension Net assets. plan the of value fair the by reduced are that benefits retirement future the of value present the is scheme benefit defined the to relates which sheet balance the in recognised liability The SIGNIFICANT ACCOUNTING POLICIES entitlements. pension years’ three least at have they provided 12G, above scheme the for entitlement pension deferred a receive age pensionable before company the leave who agreement closed the of members Existing 2012. April 30 closed was agreement The 12G. exceeding income pensionable their of portion that of 66% to equivalent pension disability and retirement a with 12G exceed incomes pensionable whose employees all provides that agreement pension additional an into entered has AS schemes benefit defined Unfunded due to changes in assumptions for discount rate and salary adjustments. salary and rate discount for assumptions in changes to due mainly is year the during equity in directly recognised gain actuarial The OMF). – bonds (covered bonds corporate high-quality on based is rate discount The year. the of end the at data salary and numbers staff on based are Calculations age. retirement until increases salary future expected for adjusted are sheet balance the in liabilities pension Net method. benefits accrued the using calculated are year the for entitlements pension accrued of value present and schemes benefit defined for entitlements pension accrued of value Present STATKRAFT REPORT AS ANNUAL 2017 In addition to the above, Statkraft Statkraft above, the to addition In FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY -5 67 31 11 89 18 90 -15 321 425 107 737 303 336 729 182 2016 2016 2016 2016 2.30% 2.25% 1.25% 2.00% 1 040 31.12.2016 K2013/IR73 -5 17 68 31 11 89 -16 2017 2017 2017 2017 799 347 403 106 855 261 305 447 106 1 146 2.40% 2.50% 1.50% 2.25% 31.12.2017 K2013/IR73 110 STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT NOK million Accumulated actuarial gains losses recognised and directlyin equity before tax 31.12 Employers'national insurance contribution Net pension liabilities equity in Actuarial gains and losses recognised directly Fair valueof pension assets Net pension liability for funded defined benefit schemes Present valueaccrued of pension entitlements for unfunded defined benefit schemes Breakdown of net defined benefit pension liability benefit pension Breakdown of net defined NOK million Present valueaccrued of pension entitlements for fundeddefined benefit schemes Defined contribution schemes Defined contribution Employerspayments Total pension costs Employee contributions Employers'national insurance contribution Net pension cost defined benefitschemes Present valueaccrued pension of entitlements for the year Interest costs Projectedyield on pension assets Pension cost recognised in the income statement in the Pension cost recognised Defined benefit schemes NOK million Members of defined benefit schemes Membersof defined benefit Employees Pensionerspeople and with deferred entitlements Adjustment of the National InsuranceScheme’s(G) basic amount Demographic for mortality and disability factors Discount rate andDiscountrate projected yield Salary adjustment current pensionsAdjustment of Note 6 continuedNote used assumptions are The following CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS 1) Total expenses Other operating Insurance Travel expenses Marketing IT expenses Rent Materials services Purchase of third-party NOK million incurred. as expensed are costs of expensing for Principles SIGNIFICANT ACCOUNTING POLICIES Note 7 Purchase of third-party services mainly includes consultants and other andother services. includes consultants servicesmainly Purchase of third-party Other operating expenses Other operating 1) Expensing of costs takes place in accordance with the accrual principle, whilst own research and development expenses expenses development and research own whilst principle, accrual the with accordance in place takes costs of Expensing 111 688 143 126 272 2017 77 32 18 15 5 STATKRAFT REPORT AS ANNUAL 2017 757 132 138 121 286 2016 32 28 15 5 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY - -9 51 -20 2016 2016 2016 2016 2016 436 111 598 257 -209 -899 -186 3 403 3 403 1 892 2 963 4 926 2 829 -1 127 -4 962 -4 971 2017 2017 2017 2017 2017 -79 -87 -20 761 144 114 -107 -957 1 052 4 287 1 019 1 178 1 158 -2 072 -1 798 -2 897 -1 151 20 277 17 861 22 148 112 1) Financial items The write-downs/reversal of write-downs from previousyears and Enerji are related to the sharesin Germany GmbH Statkraft Statkraft A.S. STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT Net financial items Gains andlosses derivatives, realised Gains andlosses derivatives, unrealised Total Net realised and unrealised currency and derivatives NOK million Currencygains and losses, realised Currencygains and losses, unrealised In 2017 there has been nowrite-down or reversal of write-downsfrom previous years, of the shares in Statkraft Enerji A.S. In 2016 the sharesin Enerji werewritten Statkraft A.S. down with NOK 1079 millionbased investments on an assessmenttheassets, of and liabilities of the company, includingcurrency effects. 1) Basedonan assessment of impairmentGerman considerations of gas-fired power plants, valuationtrading andprevious of activities currency effects, years write-downs of NOK 1178 million have been reversed in 2017. In 2016, anassessment of the same parameters conluded with a write-down of NOK 3883 million. NOK million Write-downs/reversal of write-downs from previous years Gains andlosses on securities, realised and unrealised Total Total Net realised and unrealised securities NOK million Interest expenseto group companies Interest expensesexternal debt Other financial costs Total costsFinancial NOK million Interest income from group companies Interest income Other financial income Total income Financial Revenues from investments in subsidiaries and associates investments subsidiaries Revenuesfrom in NOK million Dividend from group companies Group contribution Note 8 Note CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS Tax effectofcontribution group onprofitfortheyear Income taxpayable NOK million Taxes payableinthebalancesheet theincomestatement Tax expense in indeferred tax Change payable taxexpense Previous years tax Withholding Income taxpayable NOK million The taxexpenseintheincome statement year. the for income taxable the of basis the on calculated are payable Taxes liabilities/assets. tax deferred in changes and payable taxes comprises statement income the in charge tax The rules. tax ordinary with accordance in calculated is that profits on tax to subject is AS Statkraft SIGNIFICANT ACCOUNTING POLICIES Note 9 Deferred tax Deferred tax (+)/deferred asset (-)asof31.12 equity directly in Recognised inincome Recognised tax Deferred tax (+)/deferred asset (-)asof01.01 taxrate Applied tax Total deferred tax(+)/deferred asset (-) andtaxlosscarryforward Total temporarydifferences liabilities Pension equipment Property, plantand Other long-termitems Derivatives Current assets/current liabilities NOK million Breakdown ofdeferredtax Effective taxrate Tax expense net Other permanent differences, intaxrates Changes years ofimpairment previous Impairment/reversal tax Withholding years relating toprevious Changes Tax-free income Effect ontaxesof (25%) atanominal rate of24% Expected taxexpense Profit beforetax NOK million Reconciliation ofnominalandtaxrate tax rate effective sheet inthebalance Taxes payable Income taxes 113 the future. Tax related to equity transactions is recognised in equity. in recognised is transactions equity to related Tax future. the in realised be will assets the that probable is it extent the to sheet balance the in recognised only are assets tax Deferred forward. carried losses of effect tax the and values tax and accounting the between differences temporary of basis the on calculated are liabilities/assets tax Deferred 19801 -2349 -4287 4752 -540 -790 -540 -855 -932 -598 -283 263 265 265 263 23% -15 -58 2017 2017 2017 2017 94 63 20 1% -3 -3 1 1 - - - - STATKRAFT REPORT AS ANNUAL 2017 -1245 -3290 -1738 1241 2296 -790 -790 -728 -877 -854 -425 446 102 926 574 474 926 446 474 24% 40% 2016 2016 2016 2016 -49 -76 31 49 9 5 5 5 - FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY - 8 -2 -56 Total 300 250 559 250 -309 - - - 4 4 4 4 4 -4 construction Plants under 4 4 -2 -56 297 247 556 247 -309 3–75 years Buildings, office equipment and other 114 Property, plant and plant Property, equipment Periodof depreciation Accumulated depreciation and impairment as of 31.12 Balance31.12 at Depreciationimpairment and Balance31.12 at Cost 31.12 Additions Transferred from plantsunder construction Disposals NOK million Balance01.01 at STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT SIGNIFICANT ACCOUNTING POLICIES ACCOUNTING SIGNIFICANT Property, plant and equipment are recognised in the balance sheet and depreciated on a straight-line basis from the time the property, plant or equipment starts regular operations. The acquisition cost consists solely of directly attributable costs. Indirect administration costs are excluded when recognising own hours in the balance sheet. Note 10 Note CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS company together with another party. another with together company a of control shares Statkraft where are arrangements Joint shares. voting the of 50% to 20 from controls or owns company the where exist to deemed normally is influence Significant influence. significant has AS Statkraft where companies are companies Associated shares. voting the of 50% than more owns company the when achieved normally is influence Controlling principles. operational and financial over influence controlling arrangements joint and companies associated subsidiaries, in Investment SIGNIFICANT ACCOUNTING POLICIES Note 11 Statkraft InvestAS Carbon Statkraft AS Asset Holding Smøla Vind2AS SpainS.L. andPhotovoltaics Energies Renewable VindAS Kjøllefjord Hitra Vind AS Shares insubsidiaries NOK million 2) 1) Total jointarrangements Total associates and Statkraft EnergiVind DA Agder Naturkraft AS Grønn KontaktAS andAssociates joint arrangements Total subsidiaries Statkraft sprl Brussels Statkraft d.o.o. Western Balkans AS Statkraft Holding Vind Statkraft UK Ltd. Statkraft CentreSA Treasury Statkraft IH InvestAS AS Statkraft Holding Industrial Statkraft GmbH Germany Statkraft AS Forsikring AB Statkraft Energy Financial Statkraft A.S. Enerji Statkraft AS Energi Statkraft EnerjisiToptan Elektrik Shareholders' agreements indicate joint control. indicatejoint agreements Shareholders' statements2017. financial unaudited Basedonpreliminary
Shares in subsidiaries, associates and joint andjoint arrangements associates Shares in subsidiaries, Subsidiaries are companies where Statkraft AS has has AS Statkraft where companies are Subsidiaries 2) Satıs¸ Ltd.Sirketi Registered office Registered Kristiansand Kristiansand Düsseldorf Stockholm Belgrade Brussels Brussels Istanbul Istanbul London Tysvær Malaga 115 Oslo Oslo Oslo Oslo Oslo Oslo Oslo Oslo Oslo Oslo in the balance sheet. balance the in investment the of value the from deducted are received disbursements the and capital invested of repayment represents part excess the purchase, the after profits retained of share the exceeds dividend the If accounting. of basis cash the with accordance in income as recognised are companies other from dividends while earned, when year the during income as recorded are subsidiaries from contributions group and Dividends exists. longer no impairment the for basis the when reversed is Impairment transitory. considered be cannot that reasons to due is value in reduction the when done is Impairment necessary. been has impairment unless shares the for cost at valued is investment The Shareholding and Shareholding voting voting share 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 70.00% 62.00% 50.00% 47.21% 99.90% Equity 31.12.2017 Equity 31.12.2017 15524 19039 11072 14157 14859 1717 1127 4706 392 259 117 709 23 19 90 15 24 -2 9 2 - - STATKRAFT REPORT AS ANNUAL 2017 1) Net profit 2017 Net profit2017 -2124 4310 2594 3472 -146 132 142 538 -13 -42 -15 10 61 -3 -2 6 2 2 - - - - 1) Carrying value Carrying 78973 78779 15957 18548 14295 13878 1060 5759 7420 1359 194 150 102 85 76 33 28 80 44 95 1 1 1 4 - FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY - 84 17 17 58 2016 2016 935 20 740 20 824 11 013 12 039 7 1 33 2017 2017 204 562 1 030 25 048 26 290 15 199 15 794 116 All long-term investments are treated in accordance with the lowest value principle.
1) Receivables Other non-current financial non-currentOther assets Short-term receivables from Group companiesshort-term loans, comprise dividends and groupcontribution from subsidiaries. The mainreason for last year increase is activities STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT As of 31 December 2017 no provision for bad debt has been identified. Total 1) taken overfrom Statkraft Treasury Center (seenote 23) Receivables relatedcash to collateral Group cash pooling receivable Short-term receivables from group companies Other receivables NOK million Accounts receivable SIGNIFICANT ACCOUNTING POLICIES ACCOUNTING SIGNIFICANT Accounts receivable and other receivables are recognised at nominal value after the deduction of expected loss. Loss allocations are made on the basis of individual evaluations of each receivable. Note 13 Loansto associates and joint ventures Other shares andsecurities Total NOK million Loansto Groupcompanies SIGNIFICANT ACCOUNTING POLICIES ACCOUNTING SIGNIFICANT Long-term share investments and shareholdings Note 12 Note CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS Note 15 overdraftfacilitiesofNOK1000 million. andunused ofNOKmillion Statkraft committedcreditlines 10080 AS has unused Total Money marketfunds,certificates cashdeposits Cash and NOK million 17). and 13 (note debt cashpool or receivable cashpool as either gross classified are items corresponding the and values, net as reported are subsidiaries to atterms theresidual timeshort with of loans bonds acquisition. and and deposits certificates Cashpool includes also equivalents cash and cash item line The SIGNIFICANT ACCOUNTING POLICIES Note 14 1) Total Other provisions liabilities Pension NOK million Note 16 Fisheries. state,throughtheMinistry ofTrade,Industryand Norwegian bythe inNorway.StatkraftSFowned anddomiciled is wholly established state-ownedcompany, ownedbyStatkraftSF,isaNorwegian rights and are which ofshareshavethesamevoting eachwithaparvalue NOK168. All million shares, into 200 ofdivided hasasharecapital NOK33.6 billion, The parentcompany 1) Equity asof01.01.16 NOK million Equity asof31.12.17 contribution Capital 2017 Dividends pensions Actuarial gains/losses Profit for2017 Equity asof31.12.16 contribution Capital 2016 Dividends pensions Actuarial gains/losses Profit for2016 Pension liabilities are described in further detail note6. infurtherdetail aredescribed Pension liabilities ofdebttoequity. carriedoutasconversion were Thecapital contributions Provisions Equity cashequivalents Cash and 1) 1) 1) Share capital Share capital 33 400 33 200 33 600 117 200 200 ------Paid-in capital Paid-in Share Share premium 20 862 21 077 22 802 account account -1 315 1 100 1 940 - - - - - Other paid-in 11985 3154 8831 capital 886 855 2017 2017 31 -16 16 STATKRAFT REPORT AS ANNUAL 2017 ------Retained 13 375 earnings -6 100 19 538 -3 019 1 371 1 629 -63 19 - - - 19538 5201 5181 -6100 69 777 54 261 55 922 -4 350 equity 2 140 1 300 1 371 2016 2016 Total 771 729 20 -63 42 19 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY 53 17 42 42 2016 2016 504 500 304 400 6 684 5 892 1 292 7 050 4 350 1 746 15 802 23 843 21 673 29 140 52 983 - 9 69 41 16 14 2017 2017 590 158 400 6 100 6 816 1 968 1 181 7 050 17 588 20 909 26 427 33 887 54 796 118 Funding costs and early redemption penalty or discount are recognised in accordance with the effective interest rate method (amortised Market settlements for derivatives connected with financial activities (cash collateral) are recognised in the balance sheet as receivable or
Other interest-free liabilities Interest-bearing debt STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT Total Dividends payable Debt to subsidiaries in Statkraft Group Other interest-free liabilities NOK million Accounts payable Indirect taxes payable Note 18 Statkraft’s net debt repayment in2017to NOK 2446 amounted million. Other changes are mainlyexplained by increasedgroup cash pooling debt and changes in exchange foreign currency rates on loans. Total interest-bearing debt Bonds issued in the Norwegian market Debt issued in non-Norwegian markets Other debt Total Long-term interest-bearing debt SF (back-to-backDebt to Statkraft agreement) Certificate loans companiesShort-term debt to Group Other short term debt Total First year’s instalment of long-termFirst year’s instalmentof debt Group cash pooling debt Debt relatedcash collateral to NOK million debt Short-term interest-bearing Short-term debt short-term debt. Cash collateral is a payment to/from counterparties as security for the net unrealised gains and losses that Statkraft AS has on interest rate swaps, combined interest rate and currency swaps and forward exchange contracts (see also note 13). SIGNIFICANT ACCOUNTING POLICIES ACCOUNTING SIGNIFICANT Long-term debt Note 17 Note cost) for fixed interest debt. The first year’s repayments relating to long-term debt are presented as current liabilities. CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS fair value. Changes in value are recorded in the income statement as net net as statement income the in recorded are value in Changes value. fair at valued are contracts rate exchange Forward policy. financial approved with line in derivatives currency uses AS Statkraft rates, currency derivatives Currency loans. underlying the with together accrued are swaps, rate interest cancelled from losses and Gains cancelled. normally are repaid been have that loans to connected derivatives rate interest Any maturity. before loans settling when statement income the in recognised are losses and Gains year. one than longer is term remaining the if liabilities long-term or assets non-current as classified are derivatives rate Interest receivables. or debts hedged on interest as way same the in accrued are instruments hedging as defined are that derivatives rate Interest result. financial the in included are gains or losses Unrealised principle. value lowest the with accordance in recorded are instruments hedging not are that derivatives rate Interest instrument. hedging a as classified been has derivative rate interest the whether on depends losses and gains of Recognition portfolio. debt Group’s the to exposure rate interest adapt derivatives rate Interest SIGNIFICANT ACCOUNTING POLICIES below. described as purpose the on depend will accounts and purposes, different for derivatives financial in trades AS Statkraft GENERAL INFORMATION Note 19 1) Total swaps interest rateand currency Combined ratecontracts Forward exchange Interest rateswaps derivatives Currency and interestrate NOK million –currentliabilitiesDerivatives Total swaps interestrateand currency Combined ratecontracts Forward exchange Interest rateswaps derivatives Currency and interestrate NOK million –long-term Derivatives liabilities Total swaps interestrateand currency Combined ratecontracts Forward exchange Interest rateswaps derivatives Currency and interestrate NOK million –currentassets Derivatives Total swaps interestrateand currency Combined ratecontracts Forward exchange Interest rateswaps derivatives Currency and interestrate NOK million –non-current Derivatives assets ofcurrencyandinterestratederivatives: valueandfair Accounting agreements Currency and interestrate Fair value does not include accruedinterests. notinclude Fairvalue does Derivatives
In order to hedge against fluctuations in the foreign foreign the in fluctuations against hedge to order In
Statkraft AS uses interest rate derivatives to to derivatives rate interest uses AS Statkraft 119 requirements for hedge accounting are achieved. achieved. are accounting hedge for requirements the whether on depending principle, value lowest the at or hedging as for accounted are and management risk of part are swaps, currency and rate interest combined of portion interest the including swaps, rate interest The Hedging principle. value lowest the with accordance in recorded are swaps currency and rate interest Combined derivatives. and currency unrealised and realised contracts. contracts. the to counterparties the by made calculations against reasonableness of test a to subject is value present Estimated extrapolated. is rate exchange forward the which from rates, exchange quoted on based is contracts exchange currency forward of valuation The ECB. from rates exchange quoted and rates interest market observed of use through value present to flows cash future expected discounting by determined is swaps, currency and rate interest combined as well as swaps, rate interest of value fair The ESTIMATES AND ASSUMPTIONS 4. note in found be can accounting hedge about information More risk. hedged to related is which value in change derivative’s financial the of value the for adjusted is liability or asset hedged the of value carrying The value. fair at recognised is derivative the sheet, balance the in liabilities or assets of hedging of event the In hedging. value fair for principles the with line in recorded is instruments hedging Carrying
The accounting treatment of financial derivatives designated as as designated derivatives financial of treatment accounting The 1602 1590 Value 718 100 571 754 754 31.12.2017 12 47 9 9 - - - - - value value 1602 1590 1577 718 100 571 849 754 866 702 Fair 12 47 90 5 9 - STATKRAFT REPORT AS ANNUAL 2017 1)
Carrying 1241 1657 Value 347 864 513 353 791 428 428 31.12.2016 30 48 48 - - - - value value 1241 1657 1225 347 864 513 353 791 844 413 428 340 837 Fair 30 48 3 1) FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY 451 451 2016 2 986 1 236 5 124 2017 187 488 543 2 316 3 534 120 Related parties Disputes Obligations guarantees and Fees paid to external paidtoFees auditors 1) Directly owned subsidiaries, see specification in note 11 Other group companies, see specification in note 24 and 39 to the Consolidated Financial Statements The parent company SF of the Group, Statkraft Associatedcompanies and joint arrangements,see specificationin note 11 Group management and the boarddirectors, of see specification in note 37 to the Consolidated Financial Statements AS sells Statkraft intra-groupservices from centralisedservice centres Dividends and group contributionsare accrued throughStatkraft AS’ own shareholdings AS is also Statkraft the borrower for the majorityof the Group’s external debts andistheowner of the cash pooling facilities. The centraltreasury function in AS coordinates Statkraft and manages the financialratesand risks relating to currency, interest liquiditytheGroup. of AS finances Statkraft subsidiaries, associates andjoint arrangements through loans. The main items in the fees for otherThe main items in services in 2017 the fees for relate to the attestation of the sustainability report. The corresponding figure for 2016 to assistance to map various relates existing STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT Transactionswith subsidiaries, associated companies and joint mainly arrangements relate to the following: All intra-group transactionsare conducted at market terms. Guaranteesrelated to group companies are listedin note 21. On 24 April 2017, AS bought the lending Statkraft portfolio Treasury CentreSA at market value and transferred alloperationsAS. from Statkraft to Statkraft AS hasreceived Statkraft dividends of NOK 14910 million in 2017. The share capital of Statkraft Treasury Centre SA was in 2017 and 2016 reduced by respectively2641 NOK million and NOK 15196million, therebyreducing the cost priceof the shares in the company. Note 23 The Company’s related parties considered are to be:
Statkraft AS hasreceivedreassessmentStatkraft a draft decision of a tax from the Norwegian tax authorities, regardingincome reassessment of tax returns for the fiscal years 2008-2014related to the investment in the Statkraft Treasury Centre SA (STC) in Belgium. Seenote 33 in the Group accounts for further information. Note 22 Statkraft AS hasguaranteesStatkraft andoff-balance-sheet obligations totaling NOK 20534 million.NOK 18806 Of this, million concerns parentcompany guarantees. AS leasesStatkraft office buildings in Lilleakerveien 4 and 6 in Oslo and Sluppenveienlessors 17B in Trondheim.The are Mustad Eiendomand AS Sluppenvegen15respectively. The lease agreements AS in Oslo expirein 2028 with an option ten plus to prolongfor ten years. The annuallease totals NOK 100 million for the Oslo premises. The lease agreement inTrondheim expiresin 2030 with an optionfor 5 years. The annual to prolong lease8 totals NOK million for the Trondheim premises. Note 21 Total 1) processesand procedures, the attestation of the sustainability and report. Other attestation services Tax consultancyservices Other services Deloitte AS is the Statkraft Group’s auditor. The total fees paid the Statkraft Group’s auditor. DeloitteAS is AS (excluding for auditingand VAT) were as follows: Statkraft other services for NOK thousand Statutory auditing Note 20 Note CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS Statkraft AS Energi Statkraft CentreSA Treasury Dividend and groupcontribution fromgroup companies(recognisedasfinancial income) Total Other Statkraft Markets GmbH Statkraft AS Energi Other operating expenses Total Other Statkraft AB Sverige Statkraft UK Ltd. Electric Empresa de Generacion Statkraft Markets GmbH Fosen Vind DA Statkraft AS Energi Operating revenues Income statement-NOKmillion below: withintheGrouparepresented balances Transactions and Note 23 continued Group cash pooling receivable Group cashpooling Vind AS Kjøllefjord Statkraft AS Brasil Current assets Derivatives Statkraft Markets GmbH Statkraft AS Energi assets Other non-current financial Other AS Loan to StatkraftAssetHolding Loan to StatkraftVarmeAS EnergiAS Loan to Skagerak Loan to StatkraftEnergiAS Non-current assets Balance sheet -NOKmillion Total Other Statkraft AS Energi Statkraft AS Asset Holding Statkraft SF Statkraft IH InvestAS Financial costs togroupcompanies Total Other Statkraft Markets GmbH Enerji Kargi Kizirilmak AS Skagerak Energi Statkraft AS Asset Holding Statkraft AS Energi Financial incomefromgroupcompanies Total Other Statkraft IH InvestAS Statkraft AS Asset Holding A.Ş 121 22148 14910 15761 1840 5139 2670 1116 4175 7800 210 945 223 491 109 872 113 137 162 175 239 2017 2017 49 71 66 35 42 44 48 62 20 18 35 27 46 1 4 1 1 9 9 9 - - - STATKRAFT REPORT AS ANNUAL 2017 20740 10800 8250 1300 3403 2462 132 118 390 134 547 178 250 104 837 112 996 262 495 2016 2016 17 17 14 26 32 76 33 79 10 13 89 43 47 31 62 56 7 ------FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY - 3 92 34 43 13 56 63 38 29 46 357 129 400 400 393 994 304 304 130 4 099 2 613 2 193 1 752 1 384 5 586 1 711 1 930 3 804 4 350 1 700 6 096 11 013 15 802 - - - 99 37 14 25 81 14 95 52 158 158 136 752 146 128 299 400 400 780 4 281 6 102 6 116 1 699 8 225 1 221 5 191 4 330 1 946 1 008 17 588 13 151 25 048 122 Subsequent events Transactions STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT There are nosignificant subsequent events. Note 25 In September Statkraft AS boughtthereminder(18,1%)Holding2017:In SeptemberNorfund via Statkraft Asset AS inaswap Statkraft of the shares inStatkraft IH Invest AS from with 50% of the sharesin AS has paidNOK 2 828 SN Power AS. Statkraft millionsfor the shares. For informationabout the transfer of the lending TreasuryCentresee SA, note 23. portfolio from Statkraft In January Statkraft AS sold its shares in the subsidiary Steinsvik Kraft AS. The loss from the transaction was NOK 14 million andwas booked as a financial item. 2016:There were no significant business combinations, asset purchasesorsale of business. Note 24 Other Current interest-free liabilities to Group companies Derivatives SF Statkraft Asset HoldingStatkraft AS Statkraft MarketsGmbH Statkraft EnergiStatkraft AS IH Invest AS Statkraft Debt to Statkraft SF Debt to Statkraft Current interest-bearingdebtGroup companies to Statkraft SverigeStatkraft AB TreasuryStatkraft Centre SA Other Group cash pooling debt Statkraft Asset HoldingStatkraft AS IH Invest AS Statkraft MarketsGmbH Statkraft Derivatives Current liabilities UKLtd Statkraft Statkraft MarketsGmbH Statkraft EnergiStatkraft AS Long-term liabilities SF (back-to-back agreement) Debt to Statkraft Long-terminterest-bearing debt Statkraft MarketsGmbH Statkraft EnergiStatkraft AS Other Derivatives Short-term receivables groupcompanies IH Invest AS Statkraft Statkraft Energi AS Statkraft Industrial HoldingStatkraft AS Asset Holding AS Statkraft Other Note 23continuedNote IH Invest AS Statkraft CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS Auditor’s Auditor’s Report 123 STATKRAFT REPORT AS ANNUAL 2017
FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY
124 STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS 125 STATKRAFT REPORT AS ANNUAL 2017
FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY
126 STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS 127 STATKRAFT REPORT AS ANNUAL 2017
FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY
128 STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS operations and maximise valuecreation. andmaximise operations tosafe is astrategicpriority ensure it andheat production, In allour power advantages. competitive isoneofStatkraft’s maintenance and operation expertisewithin Unique 129 STATKRAFT REPORT AS ANNUAL 2017
FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY
130 Corporate Responsibility Corporate STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS 1) for,seriousconsequences Incidents with,orwith potential Serious injuries Serious incidents 2) 1) Associates operations Consolidated Fatalities safety Health and disclosures Social statement responsibility Corporate 1) andsafetylegislation withhealth finesfornon-compliance Administrative andsafetylegislation with health finesfornon-compliance Judicial withhealthand safetylegislation sanctionsfornon-compliance Judicial Judicial sanctions andfines,health and safety 1) Sick leave,total Sick leave 4) 3) 2) 1) Statkraft, total Third parties Contractors Employees Injuries Activities where Statkraftownership Activitieswhere has20 -50% Statkraft Activitieswhere has>50% ownership. Fine to District Heating relatedtosafetyincident. FinetoDistrictHeating forworkassignments. treatmentorneed alternative inabsence, medical whichresulted injuries withoutabsence. Includes withand Work-related injuries, thedayofinjury. beyond inabsence extending haveresulted which Work-related injuries 20% ownership. whereStatkrafthas≥20%ownership. Includes activities Sick leave due to illness or injuries, as percentage of normal working hours. ofnormalworking aspercentage duetoillness or injuries, Sick leave treatmentbyadoctor. requiring injuries Recorded whereStatkrafthas≥20%ownership. Includes activities Third party Contractors Employees Third party Contractors Employees Of which long-term absence (more than 16 (morethan16 days) Of whichlong-term absence (16daysorless) Of whichshort-termabsence hoursworked permillion injuries Total recordable hoursworked permillion Lost-time injuries Injuries hoursworked permillion injuries Total recordable (TRI) injuries Total recordable hoursworked permillion Lost-time injuries (LTI) Lost-time injuries hoursworked permillion injuries Total recordable (TRI) injuries Total recordable hoursworked permillion Lost-time injuries (LTI) Lost-time injuries 1) 2) 1) 4) 1) 1) 2) 2) 3) 3) 131 Unit ofmeasurement Unit ofmeasurement Unit ofmeasurement Unit ofmeasurement Unit ofmeasurement NOK milion NOK milion TRI rate TRI rate TRI rate Number Number Number Number Number Number Number Number Number Number Number Number Number Number LTI rate LTI rate LTI rate % % % 0.05 STATKRAFT REPORT AS ANNUAL 2017 2017 2017 2017 2017 2017 3.4 2.0 1.5 3.5 5.2 2.8 3.8 2.2 6.6 78 40 48 46 27 1) 4 0 0 0 0 0 0 0 1 0 2016 2016 2016 2016 2016 3.3 1.5 1.5 3.0 4.9 3.1 4.2 2.8 5.6 71 42 40 57 39 5 0 0 0 0 1 0 0 0 0 0 2015 2015 2015 2015 2015 106 1.6 1.4 3.0 5.9 3.5 6.0 3.6 5.6 3.3 63 70 41 39 0 0 0 0 6 0 0 0 0 0 0 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY 7 8 73 88 81 53 37 97 61 15 44 23 26 20 25 14 23 26 15 20 17 29 50 26 16 22 55 4.6 6.6 222 725 845 2015 2015 2015 2015 0.91 0.96 0.91 0.77 0.89 10.8 0.97 0.96 1.05 0.85 1.07 4 119 2 327 6 6 2) 2) - 31 18 29 44 24 19 23 70 60 96 59 15 43 25 27 20 24 19 22 25 12 19 6.6 9.7 224 732 551 2016 2016 2016 2016 0.90 0.93 0.96 0.76 0.94 0.90 0.97 0.84 0.73 0.93 11.6 3 804 2 297 6 7 9 22 13 18 29 44 22 20 23 57 72 92 97 58 96 77 51 25 27 19 23 22 22 26 18 5.7 8.3 213 661 478 2017 2017 2017 2017 0.93 0.97 1.00 0.81 0.92 0.92 0.99 0.90 0.74 1.04 12.0 3 593 2 241 % % % % % % % % % % % % % % % % % % % % Ratio Ratio Ratio Ratio Ratio Ratio Ratio Ratio Ratio Ratio Years Years Number Number Number Number Number Number Number Number Ranking Ranking Ranking Ranking Scale 0-100 Unit of measurement Unit of measurement Unit of measurement Unit of measurement 132 1) 1) among 3) 1) 1) 1) Engineering professionals Businessstudents Engineering students Businessprofessionals Result Response rate In other Nordic countries In other European countries In the rest of the world In other European countries In the rest of the world In Norway In Norway In other Nordic countries In other European countries In the rest of the world In the rest of the world In Norway In other Nordic countries In Norway In other Nordic countries In other European countries Averageservice time Averageservice time for employeesresigned or dismissed Of which in other EuropeanOf which in other countries world Of which in the rest of the Of which in Norway NordicOf which in other countries Among part-timeemployees In Statkraft's BoardDirectorsIn Statkraft's of Among employees recruited reporting year in the Among managers recruited inthereporting year Among full-time employees In CorporateManagement In management positions Total From Statkraft’s internal From Statkraft’s annual organisation and leadershipevaluation survey. Statkraft’s score can becompared with the Global Employeeand Leadership Index Norway2017 result Evaluation postponedto 2017. Ranking among final-year students andprofessionals, defined as and measured in the annual Universum Graduate Survey for Norwayand the UniversumProfessionalfor Survey Averagesalary for women in relation to averagesalary men. for Excluding including retirements, and not ENEXin Brazil (2016). STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT 1) of 70. 2) 3) Norway. Employees who have completed the performance and career development review Ranking as preferred employer Statkraftas employer Organisation and leadership evaluation 1) Salary ratioamong managers Salary ratioamong employees Equal salary Gender equality Percentagewomen of Apprentices31.12 employed Traineesemployed 31.12 Nationalities represented among Statkraft's employees 1) Service time Full-time employees 31.12 turnoverStaff rate Employees 31.12 Labour practices Employees CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS 1) fines Administrative fines Judicial sanctions Judicial Judicial sanctions andfines, human rights 1) period during the reporting peoples of the rights indigenous ofviolations involving incidents Total number ofidentified Incidents of violationsinvolving rights ofindigenous peoples 1) peoples indigenous rightsof involving andconsultations engagement withongoing Number of projects Engagements andconsultations with indigenous peoples training. received ofemployees Rights)forwhich 100% forandHuman Principles Business ofPillar3theUNGuiding (thatpartofimplementation procedures are our or ourreportofconcern 2) 1) year humanrightsinthereporting training on thathavereceived Senior management inthereportingyear onhuman rights thatreceivedtraining Employees have onhumanrights devotedtotraining inthereportingperiod Number of hours Training onhuman rights Human rights Material judicial sanctions for discrimination, forced labour, child labour or violations of the freedom of association, indigenous peoples rights or labour rights. rightsorlabour peoples ofindigenous orviolations ofthefreedom association, labour forcedlabour, child fordiscrimination, sanctions Materialjudicial in2017. wasintroduced Thisindicator Chile. Sweden and consultationsin Norway, ongoing Including safety, aspectssuchasHealth and onhuman rights doesnotcovertrainings awareness.Thisnumber trainingand isa“specific”human rights here trainingconsidered Human rights in2017. wasintroduced Thisindicator 1) 1), 2) 1)
1) 133 Unit ofmeasurement Unit ofmeasurement Unit ofmeasurement Unit ofmeasurement NOK million NOK million Number Number Number Number Hours % % STATKRAFT REPORT AS ANNUAL 2017 2017 2017 2017 2017 100 217 13 0 0 0 0 8 2016 2016 10 0 0 0 2015 2015 0 0 0 9 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY 8 0 6 0 0 0 5 5 3) - - 13 61 12 46 2 101 408 2015 2015 2015 2015 2015 7 000 2 300 3 600 13 000 50 900 26 000 82 000 523 000 139 600 376 400 258 600 188 800 1 080 000 in the jointly 2 6 2 5 8 0 - - 33 23 12 23 46 13 367 120 140 2016 2016 2016 2016 2016 2 700 1 000 3 000 28 000 24 900 19 100 85 600 79 000 916 700 485 400 403 300 471 800 773 400 722 700 6 5 8 0 0 0 0 0 4) 32 13 14 19 46 13 40 390 900 2017 2017 2017 2017 2017 2017 83 2 800 2 800 30 000 23 500 26 900 94 500 79 800 543 700 568 200 818 000 763 900 153 200 815 200 2 188 400 1 614 700 kg kg Tonnes Tonnes Tonnes Tonnes Tonnes Tonnes Tonnes Tonnes Tonnes Tonnes Tonnes Tonnes Tonnes Tonnes Number Number Number Number Number Number Number Number Number Number Number Number Number Number kg/MWh kg/MWh kg/MWh Unit of measurement Unit of measurement Unit of measurement Unit of measurement Unit of measurement Unit of measurement 134 statement, in alignment with the reportingNorway). (Statistics practice to SSB statement, in alignment with the reportingNorway). (Statistics practice to SSB 2 2 2) 6) 2) emissionstheproduction from process.Includes share of production also Statkraft’s and emissions of CO 2 1) (scope 2) 4) (scope 1) 1) 2) 1) (scope 1) 3) (scope 3) 5) 1) 1), 2) from district heatingplants 2 1), 2) emissions 1) (scope 6 2) eqivalents, consolidated activities equivalents affiliated gas power from plants equivalents Heimdal from incineration plant from Heimdal incineration plant is not included in Statkraft's total CO from Heimdal incineration plant is not included in Statkraft's total CO 2 2 2 2 2 from fuel consumption from the Group’s machinery and vehicles. 2 Other Nordiccountries Other European countries Rest of the world Norway Of which in the rest of the world Of which in Norway Of which in other Nordic countries Of which in other European countries Anadromous fish Catadromous fish Impacted national salmonrivers Impacted protectedrivers Of which from fuel consumption Of which from electricity consumption Of which from businesstravel Of which from gas power plantsOf which from gas power (scope 1) plantsOf which from district heating Of which from SF Of which halon (scope emissions 1) -equivalent emissions heating production per MWh district -equivalent emissions generation, per MWh power total -equivalent emissions generation, per MWh power gas power emissions 2 2 2 6 Includesspecies definesasred list species by eitherInternational Union for ConservationNature of (IUCN) or national authorities. Includesred list species with habitat areas impactedbySkagerak Energi's operations. The increase in red list speciesismainly due to the inclusion of Brazil inthestatement. More detailed information on red list speciesispresented on pageCR 43 in Statkraft's report. Includessalmon, inland seatrout, grayling trout, and eel. Includessalmon in Norway and eel inSweden. Impact entails change of waterflow, water levels or other living conditionsfor fish. More detailed information related to impact on watercourses is presented on page 42in CR report. Statkraft's IncludesStatkraft’s shareof production anddirect fossil CO Emissions of CO Reporting of greenhouse gas emissionsper scope was introduced in 2017. Comprisestravel by air and car intheNorwegian operations. Statkraft’s share. Statkraft’s ownership is >50%. Emissions of CO CO 100%of Statkraft'selectricity consumption is certified renewable. STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT 2) 3) 4) 1) Red list species (fauna) Red list species with habitat in areasimpacted operations by Statkraft's in: controlled power plant Herdecke(Germany). Stocking of fish roe 1) 2) Restockingfishand of smolt 1) 2) Fish cultivation Impacts on watercourses Impacted river courses with: Biodiversity and impact on nature CO 1) 2) Relative greenhouse gas emissions CO CO Scope 1: Direct emissions Scope 2: Indirect emissions, consumption related to electricity Scope 3: Other indirectemissions 1) 5) 6) Greenhouse gas emissions per scope Halon emissions 1) 2) 3) 4) Emissionsof CO Emissionsof CO Emissionsof biogenic CO SF Climate gas emissions Greenhouse CO Emissionsof Environmental disclosures CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS Consumption Other fuelconsumption Fossil fuelconsumption Fuel consumption Electricity consumption Electricity consumption 1) sitesin,oradjacentto,protectedareas Operational Operational in,sites oradjacent to, protected areas 1) waste Non-hazardous waste Hazardous Waste Waste 2) 1) pipeleakages District heating Process water plants water,gaspower Cooling Use ofwater 1) Limited to natural parks and nature or wildelife reserves. orwildelife parksandnature Limited tonatural Usedfortreatmentofgasemissions. in2017. wasintroduced Thisindicator (forexamplegenerators). andmachinery offuelforvehicles Includes consumption Consists of filter dust and filtercake. Consists offilterdustand Engine fuel Engine plants Fuel oil,districtheating plants Fuel gas,districtheating powerplants Natural gas, gas Of whichotheroperations fordistrictheating Of whichelectricboilers power Of whichpumped-storage Of whichintherestofworld countries Of whichinotherEuropean countries Of whichinotherNordic Of whichinNorway Of which residual non-hazardous waste non-hazardous Of whichresidual atsource waste separated Of whichnon-hazardous waste Of whichotherhazardous plants Of whichfrombiopower plants Of whichfromwasteincineration plants Of whichusedin district heating powerplants Of whichusedin gas Bio fuel Waste forbiopower plants Waste fordistrictheatingplants 1) 2) 1) 1) 1) 135 Unit ofmeasurement Unit ofmeasurement Unit ofmeasurement Unit ofmeasurement Unit ofmeasurement Mill. Nm Number Number Number Number Number Tonnes Tonnes Tonnes Tonnes Tonnes Tonnes Tonnes Tonnes Tonnes Tonnes Tonnes Tonnes Tonnes GWh GWh GWh GWh m m m m m 3 3 3 3 3 3 1 900000 183 900 265 400 221 800 185 000 251 000 49 800 51 400 15 400 24 600 66 000 STATKRAFT REPORT AS ANNUAL 2017 8 493 1 813 5 750 1 600 7 900 6 900 2017 2017 2017 2017 2017 354 246 633 944 600 65 16 27 0 5 6 207 700 279 200 219 400 48 600 50 000 17 000 6 039 1 556 6 722 1 300 9 400 6 800 2016 2016 2016 2016 349 289 566 918 850 63 16 21 0 1 4 154 200 110 000 227 700 52 500 54 500 18 900 14 502 2 000 3 980 8 300 6 600 3 438 3 506 1 031 2015 2015 2015 2015 138 858 91 35 14 19 0 1 4 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY 0 0 0 0 B B A B+ 228 2015 2015 2015 0 0 0 0 B B A B+ 233 2016 2016 2016 0 1 0 1) B B- C+ A+ 187 2017 2017 2017 0,2 Rating Rating Rating Rating Number Number Number NOK million NOK million Unit of measurement Unit of measurement Unit of measurement 136 2) 1) 1) Products andservices Eco-efficiency Environmental management Breach of the concessional terms at Alta hydropower plant. Environmentalfrom the rating assessementto A+ (highest),where company Oekom Research Rating E- rating B- andabove AG. from is considered as leading by Oekom Research. An incident that results An incidentthat in permanentorsevere environmental damage(restitution time>1 year). causes An incidentthat a negativeenvironmental impact, but without permanent or severe environmental damage year). (restitution time<1 STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT 1) Judicial sanctions and fines, environment Judicial Judicial sanctions Judicial fines Administrative fines 1) Environmental assessment Environmental result, total assessment Most of the less serious envoronmentalincidents in 2017 were related to minorbreaches emission of regulationsbiomass plants andminor for oil spills to water andground with little or noimpact on the environment. Seriousenvironmental incidents Less serious environmental incidents 1) 2) Environmental incidentsand assessments incidents Environmental CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS Installed capacity per technology, generation pertechnology, power Installed capacity Installed pertechnologycapacity andgeography districtheating Installed effect pergeography, powergeneration pergeography, Installed capacity districtheating Installed capacity, powergeneration Installed capacity Installed pertechnologycapacity andgeography districtheatingproduction and Power generation disclosures Economic Capacity under development per geography, districtheating pergeography, development Capacity under powergeneration pergeography, development Capacity under powergeneration pertechnology, development Capacity under Capacity underdevelopmentpertechnology andgeography districtheating pergeography, development Capacity under powergeneration pergeography, development Capacity under districtheating development, Capacity under powergeneration development, Capacity under Capacity underdevelopmentpertechnology andgeography districtheating pergeography, Installed capacity powergeneration pergeography, Installed capacity Hydropower Other Nordic countries Norway Rest oftheworld countries Other European Other Nordic countries Norway Of whichbiopower Of whichgaspower Of whichwind power Of whichhydropower Norway Rest oftheworld countries Other European Other Nordic countries Norway Solar power Wind power Hydropower Norway Rest oftheworld countries Other European Other Nordic countries Norway Of whichsolarpower Of whichwind power Of whichhydropower Other Nordic countries Norway Rest oftheworld countries Other European Other Nordic countries Norway Bio power Gas power Wind power 2) 2) 1) 1) 1), 3) 1), 3) 137 Unit ofmeasurement Unit ofmeasurement Unit ofmeasurement Unit ofmeasurement MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW % % % % % % % % % % % % % % % % % % 11 857 14 099 17 478 STATKRAFT REPORT AS ANNUAL 2017 2 974 1 813 2 390 10.4 67.8 13.7 80.7 27.6 72.4 72.4 25.6 19.6 80.4 17.0 2017 2017 2017 2017 164 671 834 835 947 198 520 520 184 718 0.2 5.4 1.9 4.8 43 14 - 0 0 0 0 0 0 12 041 14 075 17 418 25,2 28,4 2 971 1 606 2 600 184 207 69.1 14.9 80.8 74.8 71.6 19.9 80.1 17.1 2016 2016 2016 2016 164 657 800 820 703 545 522 729 9.2 0.2 4.0 4.6 40 - 4) 4) 4) 4) 0 0 0 0 0 0 0 0 11 711 13 464 16 778 100.0 2 863 1 587 2 600 89.0 11.0 96.0 19.5 80.5 17.1 69.8 15.5 80.2 2015 2015 2015 2015 809 100 873 909 164 675 617 838 647 4.0 3.7 9.5 0.4 3.9 21 21 36 67 0 0 0 0 0 0 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY 2.5 0.5 0.3 1.1 7.2 1.3 3.4 0.8 0.2 4.4 0.9 0.5 2.3 6.0 421 683 2015 2015 2015 2015 56.3 53.1 99.1 94.7 44.4 94.3 78.9 12.9 80.1 19.9 -598 6 401 9 038 3 107 5 740 1 604 3 665 -3 376 15 439 10 740 10 740 53 094 37 655 0 0 80 2.3 2.2 0.3 1.1 6.1 3.2 3.9 0.9 0.2 3.5 3.3 0.5 9.2 4.8 5.9 -62 2016 2016 81.8 18.2 61.2 96.7 91.8 52.8 92.7 66.0 380 2016 2016 -117 7 581 8 909 8 260 8 467 8 909 3 202 -1 757 50 987 34 261 16 727 4.3 3.6 0.4 5.1 6.8 0 2.7 2.2 0.3 1.1 6.6 3.2 4.2 0.9 0.2 2017 2017 79.5 20.5 96.5 91.6 91.7 77.6 10.5 57.4 48.6 62.6 -94 456 2017 2017 2 052 5 747 9 774 4 162 3 262 1 804 22 639 68 968 42 717 26 251 22 089 22 639 % % % % % % % % % % % % TWh TWh TWh TWh TWh TWh TWh TWh TWh TWh TWh TWh Enhet Enhet NOK million NOK million NOK million NOK million NOK million NOK million NOK million NOK million NOK million NOK million NOK million NOK million NOK million NOK million NOK million Unit of measurement Unit of measurement 1) 1) 138 1) 5) 5) 2) 2) 1) 2) Change in equity Interest Dividend Taxes Gross salaries and benefits Norway Other Nordiccountries Norway Other Nordiccountries Other European countries Rest of the world Wind power Gas power Bio power Hydropower Norway Other Nordiccountries Other Nordiccountries Other Europeancountries Rest of the world Norway Of which gas powerOf which gas powerOf which bio Of which hydropower powerOf which wind Includesdividend SF. and Group contribution AS to Statkraft from Statkraft Includestaxes,propertylicence tax, fees andemployers’ contribution. IncludesStatkraft's shareholdings insubsidiaries where Statkraft has a majority interest. Includesprojects with an investment decision. Includesenergy purchases,transmission costs and operating expenses. Includesthejointly controlled Herdecke(Germany) power plant. The Cetin project is no longerincluded in the figures, as it was sold in 2017. Non-renewableproduction consistsof gaspower and sharedistrictheating of based on fossil fuel. ProductionHeimdal, at the incineration plant in Trondheim, is counted as 100% STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT 1) 2) The company Total wealthdistributed Lenders/owners Distribution of value created Distribution Employees Minority interests Valuesfor distibution 1) Depreciation, amortisation and impairment Net valueadded Financial income Share of profit from associates Gross operating revenues Paid to suppliers for goods and services Gross value added Value creation 1) 2) 3) 4) 5) renewable district heating production (allignedStatistics Norway, reporting with SSB, practice). District heating per geography Power generation pergeography Power generation and district heating production per technology and geography per technology production district heating Power generation and Power generation pertechnology District heating geography per Renewable power generation Renewable heating district Power generation pergeography District heating Power generation and district heating production per technology and geography and geography per technology production heating district and generation Power generation,Power total Contribution to society CORPORATE RESPONSIBILITY STATKRAFT AS GROUP FINANCIAL STATEMENTS 1) fines Administrative fines Judicial sanctions Judicial Judicial sanctions andfines, businessethicsand anti-corruption 2) 1) two years thelast in trainingon anti-corruption Statkraft's membersthathavereceived Board inthelasttwoyears corruption onanti- receivedtraining positions thathave inseniormanagement Employees inthelastthreeyears onanti-corruption thatreceivedtraining Employees have Training onanti-corruption andanti-corruption Business ethics 1) Total Taxes Statkraft Group are handled by Corporate Audit. In cases where a formal investigation is required, this is the responsibility ofCorporateAudit. the Head isrequired, this the responsibility aformalinvestigation byCorporateAudit.Incaseswhere Statkraft arehandled Group forthe highconsequences withpotentially ofconcerns.Concerns for reported toStatkraft’sprocedures handling areasaccording the respective business by arehandled uptheconcern.Mostofreportedconcerns tohowfollow isdoneinorder decide concernisreceived, a risk assessment When areported since 2008. 2) ethics and anti-corruption. 1) year Auditinthereporting initiatedbyCorporate Investigations concerns Total number ofreported Reported concerns(whistleblowing) thescopeofCodeConduct concernscovering Reported Material judicial sanctions for accounting fraud, corruption, anti-competetive behaviour, anti-trust and monopoly practices. monopoly behaviour, anti-trust and anti-competetive foraccounting fraud, corruption, sanctions Materialjudicial in2016. wasintroduced Thisindicator andFjordkraft. Skagerak Energi wascoverstheGroup,excluding Thisindicator sheet. inthebalance Taxespayable The format for this indicator was changed in 2016, but historical data related to whistleblowing is available and has been published inStatkraft'sreports published annual andhasbeen is available towhistleblowing buthistoricaldata related in2016, Theformatforthisindicatorwas changed andsafety,business health relatestothefullscopeofStatkraft'sConduct,e.g.human rights, environment, procedures Code Thescopeofthewhistleblowing Of whichintherestofworld countries Of whichinotherEuropean countries Of whichinotherNordic Of whichinNorway Of which related ethicsandanti-corruption Of whichrelated tobusiness 1) 2) 1) 2) 1) 1) 139 Unit ofmeasurement Unit ofmeasurement Unit ofmeasurement Unit ofmeasurement NOK million NOK million NOK million NOK million NOK million NOK million NOK million Percentage Percentage Number Number Number Number Number Yes/No STATKRAFT REPORT AS ANNUAL 2017 3 603 4 010 2017 2017 2017 2017 Yes 100 100 333 23 50 40 57 0 0 0 5 4 366 4 764 2016 2016 2016 2016 Yes 100 100 293 97 23 46 0 0 0 8 4 2 390 2 825 2015 2015 2015 279 100 90 92 56 - 0 0 0 FINANCIAL STATEMENTS GROUP STATKRAFT AS CORPORATE RESPONSIBILITY
140 STATKRAFT AS ANNUAL REPORT 2017AS ANNUALSTATKRAFT REPORT Auditor’s statement Auditor’s Alternative Performance Measures
As defined in ESMAs guideline on alternative performance measures (APM), an APM is understood as a financial measure of historical or future financial performance, financial position, or cash flows, other than a financial measure defined or specified in the applicable financial reporting framework.
Statkraft amended the definition of its underlying operating profit/loss with effect from the first quarter in 2017. The main update relates to the item “Unrealised value changes from energy derivatives”. From 2017, the only unrealised items that will be adjusted for are “Embedded derivatives in energy contracts” and “Derivatives acquired for risk reduction purposes” where the related items are carried at cost. In addition, the underlying operating profit will be adjusted for “Impairment loss and reversals of impairment loss” and “Gain/loss from acquisition/divestment of business activities”. The main reason for amending the definition is to report figures more in line with how management follow up the business activities. The unrealised items that are adjusted for are described more in detail on the next page.
From 2017 Statkraft has also amended the definition of capital employed. In the new definition, deferred tax assets and liabilities, pension liabilities, and liabilities related to equity instruments are no longer defined as capital employed. Further, there are some other minor items that are either allocated or deallocated to capital employed. The main reason for amending the definition of capital employed is to ensure more consistency of the elements in the calculation of Return of Average Capital Employed. Comparable figures are restated.
From 2018, Statkraft will integrate underlying EBIT into the Group’s statement of comprehensive income. Furthermore, Statkrafts share of profit and loss in equity accounted investments will from 2018 be recognised below the operating profit/loss on a separate financial statement line item in the statement of comprehensive income.
Statkraft uses the following APMs: EBITDA is defined as operating profit/loss before depreciation and amortisation. The APM is used to measure performance from operational activities. EBITDA should not be considered as an alternative to operating profit/loss and profit/loss before tax as an indicator of the company’s operations in accordance with generally accepted accounting principles. Nor is EBITDA an alternative to cash flow from operating activities in accordance with generally accepted accounting principles. EBIT is defined as operating profit/loss. The APM is used to measure performance from operational activities.
Items excluded from underlying operating profit/loss: Statkraft adjusts for the following three items when reporting underlying operating profit/loss:
1. Unrealised value changes from energy derivatives Embedded derivatives are excluded from underlying operating profit/loss since they only represent part of an energy contract and the other parts of these energy contracts are not reported based on fair market values. Derivatives acquired for risk reduction purposes are excluded. This is done to ensure that these hedges are reported consistently with the positions that are being hedged.
2. Impairments and related costs are excluded from underlying operating profit/loss since they affect the economics of an asset for the lifetime of that asset; not only the period in which it is impaired or the impairment is reversed.
3. Gain/loss from acquisitions/divestments of business activities is eliminated from the measure since the gain or loss does not give an indication of future performance or periodic performance from operating activities. Such a gain or loss is related to the cumulative value creation from the time the asset is acquired until it is sold.
Equity accounted investments are not adjusted for any of the three items described above.
Return on average capital employed (ROACE) is defined as underlying EBIT, excluding share of profit/loss in equity accounted investments, divided by capital employed. ROACE is calculated on a rolling 12 month average and is used to measure return from the Group’s operational activities as well as benchmarking performance.
Capital employed is the capital allocated to perform operational activities and is presented in a table on the next page.
Net interest bearing debt is used to measure indebtedness. The components are presented in a table on the next page.
Net cash income is defined as cash flow from operating activities excluding taxes paid and cash effects from equity accounted investments. This is used to measure cash flow from operations from consolidated business in the Group.
Net interest bearing debt-equity ratio is calculated as net interest bearing debt relative to equity.
EBITDA margin, underlying (%) is calculated as underlying EBITDA relative to underlying gross operating revenues.
Production cost, hydropower generation (Øre/kWh) is an APM that is used to measure the production cost per kWh for hydropower assets in the segment European flexible generation. The APM is calculated only for consolidated hydropower assets in the Nordics, Germany and the UK. Total production cost is divided by seven year average output from power plants under own management in the segment. The production cost does not include sales cost, net financial items or tax related to the assets. Nor is cost related to other technologies in segment European flexible generation or equity accounted investments included in the APM.
141 STATKRAFT AS ANNUAL REPORT 2017 ALTERNATIVE PERFORMANCE MEASURES
NOK million 2017 2016
RECONCILIATION OF BOOKED GROSS OPERATING REVENUES TO UNDERLYING Gross operating revenues, booked 68 968 50 987 - Unrealised value changes from energy derivatives 1 289 -1 270 - Gain from acquistions/divestments of business activities 5 511 16 Gross operating revenues, underlying 62 168 52 241
RECONCILIATION OF BOOKED NET OPERATING REVENUES TO UNDERLYING Net operating revenues, booked 30 097 20 621 - Unrealised value changes from energy derivatives 1 289 -1 270 - Gain from acquistions/divestments of business activities 5 511 16 Net operating revenues, underlying 23 296 21 875
RECONCILIATION OF OPERATING PROFIT/LOSS TO EBITDA Operating profit/loss (EBIT), booked 17 041 3 086 Items excluded from underlying operating profit/loss1) 6 270 -6 062 Operating profit/loss (EBIT), underlying 10 770 9 148 Depreciation and amortisation, underlying 3 662 3 557 EBITDA, underlying 14 432 12 705 EBITDA-margin (%) 23.2 24.3
RECONCILIATION OF CASH FLOW FROM OPERATING ACTIVITIES TO NET CASH INCOME Cash flow from operating activities 8 415 8 371 - Taxes paid -4 843 -2 564 - Dividend from equity accounted investments 558 545 Net cash income 12 700 10 390
FINANCIAL STATEMENT LINE ITEMS INCLUDED IN CAPITAL EMPLOYED Intangible assets 3 313 3 858 Property, plant and equipment 103 193 103 303 Other non-current financial assets 4 368 8 961 - Loans to equity accounted investments 2) -2 223 -6 740 - Bonds and other long-term investments 2) -299 -79 - Pension assets 2) -480 -300 - Other shares and shareholdings 2) -299 -338 Inventories 2 871 2 653 Receivables 15 372 10 219 - Receivables related to cash collateral 3) -1 931 -1 313 - Short-term loans to equity accounted investments 3) -3 959 -381 - Other receivables not part of capital employed 3) -15 5 Provisions allocated to capital employed -2 799 -3 423 Taxes payable -4 010 -4 764 Interest-free liabilities allocated to capital employed -9 086 -10 532 Capital employed 104 017 101 130 Average capital employed 4) 102 791 104 153
RECONCILIATION OF TOTAL ASSETS TO CAPITAL EMPLOYED Capital employed 104 017 101 130 Deferred tax assets 962 675 Equity accounted investments 13 410 19 438 Other non-current financial assets 2) 3 301 7 456 Derivatives, long term 4 023 3 047 Receivables 3) 5 905 1 689 Short term financial investments 918 532 Derivatives, short term 6 537 6 637 Cash and cash equivalents (including restricted cash) 14 217 7 308 Liabilities allocated to capital employed, see table above 15 894 18 718 Total assets as of the statement of financial position 169 183 166 630
RETURN ON AVERAGE CAPITAL EMPLOYED (ROACE) Underlying EBIT, 12 month rolling 10 843 8 673 Average capital employed 102 791 104 153 ROACE 10.5 % 8.3 %
STATKRAFT AS ANNUAL REPORT 2017 142 NET INTEREST BEARING DEBT Long-term interest bearing liabilities 36 285 31 886 Short-term interest bearing liabilities 3 694 8 407 Cash and cash equivalents (including restricted cash) -14 217 -7 308 Short-term financial investments -918 -532 Net interest bearing debt 24 844 32 453
NET INTEREST BEARING DEBT-EQUITY RATIO Net interest bearing debt 24 844 32 453 Total equity 91 776 83 519 Net interest bearing debt - equity ratio 21.3 % 28.0 %
PRODUCTION COST, HYDROPOWER GENERATION IN SEGMENT EUROPEAN FLEXIBLE GENERATION (EF) Net operating revenues, underlying 14 508 14 187 - operating profit, underlying 8 447 7 701 Operating expenses, underlying 6 062 6 486 - items in EF not related to hydropower generation 5) 1 476 2 071 = Production cost hydropower generation 4 586 4 415 7 year average generation (GWh) 48 407 48 457 = Production cost, hydropower generation in EF (Øre/kWh) 9.5 9.1
1) See note 4 for further details on the items. 2) The item is a part of other non-current financial assets in the statement of financial posistion, but not a part of capital employed. 3) The item is a part of receivables in the statement of financial posistion, but not a part of capital employed.
4) Average capital employed is based on the average for the last four quarters.
5) Includes cost related to other technologies, sales cost and other cost not directly related to hydropower generation.
143 STATKRAFT AS ANNUAL REPORT 2017 Financial key figures
Statkraft AS Group Unit 2017 2016 2015 2014 2013 From the income statement Share of profit/loss in equity accounted investments NOK mill -73 474 683 661 1 101 Gross operating revenues NOK mill 68 968 50 987 53 777 52 915 50 665 Net operating revenues NOK mill 30 097 20 621 20 773 26 466 25 347 EBITDA NOK mill 21 202 11 346 10 898 18 292 17 148 Operating profit NOK mill 17 041 3 086 4 497 14 221 14 103 Net financial items NOK mill -1 347 2 137 -5 318 -6 283 -11 592 Profit/loss before tax NOK mill 15 693 5 223 -821 7 937 2 511 Net profit/loss NOK mill 11 732 -179 -2 369 3 892 208 Items excluded from underlying business Unrealised value changes from energy derivatives* NOK mill 1 289 -1 270 n/a n/a n/a Gain/loss from acquisitions/divestments of business activities* NOK mill 5 481 16 n/a n/a n/a Impairments and related costs* NOK mill -500 -4 808 n/a n/a n/a Underlying business* Gross operating revenues NOK mill 62 168 52 241 n/a n/a n/a Net operating revenues NOK mill 23 296 21 875 n/a n/a n/a EBITDA NOK mill 14 432 12 705 n/a n/a n/a Operating profit NOK mill 10 770 9 148 n/a n/a n/a From the balance sheet Property, plant & equipment and intangible assets NOK mill 107 469 107 836 117 029 102 638 104 779 Equity accounted investments NOK mill 13 410 19 438 19 388 19 027 16 002 Other assets NOK mill 48 305 39 357 40 488 46 152 32 906 Total assets NOK mill 169 183 166 630 176 905 167 817 153 687 Total equity NOK mill 91 776 83 519 88 340 88 059 71 107 Interest-bearing debt NOK mill 39 979 40 293 44 606 36 744 40 377 Capital employed, basic 1) NOK mill 104 017 101 130 109 283 n/a n/a Cash flow Net change in cash flow from operating activities NOK mill 8 415 8 371 8 639 6 898 8 106 Dividend for the year to owner (incl. non-controlling interests) NOK mill 3 089 -226 5 157 74 3 094 Depreciation, amortisation and impairment NOK mill 4 162 8 260 6 401 4 071 3 045 Cash and cash equivalents NOK mill 14 217 7 308 9 056 12 663 7 685 Unused drawing rights NOK mill 12 124 13 031 15 200 14 200 14 200 Investments Maintenance investments 2) NOK mill 1 820 1 763 1 970 2 368 1 980 Investments in increased capacity, fixed assets 3) NOK mill 1 964 3 736 7 797 7 525 11 303 Investments in shareholdings 4) NOK mill 111 158 3 790 1 287 62 Financial variables Interest-bearing debt ratio 5) % 30.3 32.5 33.6 29.4 36.2 Equity ratio 6) % 54.2 50.1 49.9 52.5 46.3 Long-term rating - Standard & Poor’s A- A- A- A- A- Long-term rating - Moody’s Baa1 Baa1 Baa1 Baa1 Baa1 Key figures, accounts EBITDA-margin, accounts 7) % 30.7 22.3 19.2 33.7 32.4 EBITDA-margin, underlying 7) % 23.2 24.3 n/a n/a n/a ROACE before tax 8) % 10.5 8.3 n/a n/a n/a Net return on investments in equity accounted investments 9) % -0.5 2.4 3.5 3.5 6.9 Tax rate 10) % 25.2 103.4 -188.5 51.0 91.7 Key figures, upstream business Production cost hydropower** 11) 12) Øre/kWh 9.5 9.1 8.1 7.8 7.5 Production capacity*** TWh 61.9 61.3 58.7 53.7 51.2 Key figures, downstream business**** Energy delivered through grid to end-user 13) TWh 7.3 7.0 7.0 6.9 7.3 Distribution grid capital (NVE capital) 14) NOK mill 3 664 3 405 3 121 2 915 2 743 Total volume supplied, electricity customers TWh 15.5 14.6 13.3 12.6 13.0 Distric heating supplied TWh 0.9 0.9 0.8 0.8 1.0 Market variables System price, Nord Pool EUR/MWh 29.4 26.9 21.0 29.6 38.1 Spot price, European Energy Exchange EUR/MWh 34.2 29.0 31.7 32.8 37.8 Electricity consumption in the Nordic market TWh 388 386 379 375 382 Electricity generated in the Nordic market, actual TWh 397 389 394 385 380 Statkraft`s share of Nordic electricity production % 13.9 15.1 13.1 13.5 13.3 Statkraft has amended the definition of its underlying operating profit with effect from 2017. In addition, Statkraft has amended the definition of capital employed with effect from 2017. 2016 figures are restated. See section regarding Alternative Performance Measures for more information.
* See section regarding Alternative Performance Measures (APM) ** Includes production costs from hydropower assets in the segment European flexible generation *** Excluding gas-fired power and district heating. Annual mean generation. **** Key figures include consolidated companies (not equity accounted companies) in the Nordics 1) See section for Alternative Performance Measures for 6) Total equity * 100 11) Calculation method for 2015 and previous years. specification Total assets Production cost, incl. property tax and depreciation, excl. 2) Book value of maintenance investments to sustain 7) Operating profit before depreciation * 100 sales costs, overhead, net financial items and tax. This current generating capacity Gross operating revenues is divided with normal output from power plants under own management. 3) Book value of investments to expand generating 8) Operating profit excl. share of profit/loss in equity capacity accounted investments (rolling 12 months) * 100 12) New calculation method from 2016. This will increase Average capital employed, basic (rolling 12 months) the cost compared to previous calculation. 4) Purchase of shares as well as equity increase in other companies 9) Share of profit/loss in equity accounted investments * Production cost, incl. property tax and depreciation, excl. 100 sales costs, net financial items and tax. This is divided 5) Interest-bearing debt * 100 Equity accounted investments by 7 years average output from power plants under own Interest-bearing debt + equity management. 10) Tax expense * 100 Profit before tax 13) Preliminary estimate for the last year.
14) New definition based on return of capital. Figures for 2016 and 2015 are restated. Figures for 2014 and 2013 are based on previous definition.
STATKRAFT AS ANNUAL REPORT 2017 144 Non-financial key figures The following tables present Statkraft's most significant results within corporate responsibility for the period 2013-2017. More detailed results can be found in Statkraft's Corporate Responsibility Report.
Power generation and district heating production Unit 2017 2016 2015 2014 2013 Installed capacity, power generation 1) MW 17 478 17 418 16 778 16 401 16 041 Of which hydropower MW 14 099 14 076 13 464 13 273 12 886 Of which wind power MW 947 703 647 488 514 Of which gas power 2) MW 2 390 2 600 2 600 2 600 2 600 Of which bio power MW 43 40 67 40 40 Installed capacity, district heating MW 835 820 838 760 674 Capacity under development, power generation 1) 3) MW 718 729 909 1 262 1 673 Of which hydropower MW 184 207 873 1 016 1 172 Of which wind power MW 520 522 36 247 500 Of which solar power MW 14 0 0 0 0 Capacity under development, district heating MW 0 0 21 23 8 Power generation, actual 1) TWh 62.6 66.0 56.3 56.0 55.9 Of which hydropower TWh 57.4 61.2 53.1 53.4 52.6 Of which wind power TWh 2.7 2.3 2.5 1.7 1.4 Of which gas power 2) TWh 2.2 2.2 0.5 0.5 1.5 Of which bio power TWh 0.3 0.3 0.3 0.3 0.3 District heating production TWh 1.1 1.1 1.1 1.0 1.1 Renewable power generation 4) % 96.5 96.7 99.1 99.1 97.3 Renewable district heating 4) % 91.6 91.8 94.7 83.6 82.0 1) Includes Statkraft's shareholdings in subsidiaries where Statkraft has a majority interest. 2) Includes the jointly controlled Herdecke (Germany) power plant. 3) Includes projects with an investment decision. 4) Non-renewable production consists of gas power and share of district heating based on fossil fuel. Production at Heimdal, the incineration plant in Trondheim, is counted as 100% renewable district heating production (alligned with SSB, Statistics Norway, reporting practice).
Emissions and environmental incidents Unit 2017 2016 2015 2014 2013
Emissions of CO2 equivalents, consolidated activities Tonnes 818 000 773 400 258 600 258 600 469 600 Environmental incidents Serious environmental incidents Number 0 0 0 0 0 Less serious environmental incidents Number 187 233 228 159 127 Contribution to society Unit 2017 2016 2015 2014 2013 Distribution of value created Dividend 1) NOK mill 2052 0 1 604 5 600 0 Taxes 2) NOK mill 5 747 7 581 3 665 6 059 4 291 Interest NOK mill 1 804 -1 757 5 740 7 143 11 830 Employees NOK mill 3 262 3 202 3 107 2 667 2 788 The company NOK mill 9 774 -117 -3 376 -2 392 -274 1) Includes dividend and Group contribution from Statkraft AS to Statkraft SF. 2) Includes taxes, property tax, licence fees and employer's contribution. Reported concerns covering the scope of the Code of Conduct Unit 2017 2016 2015 2014 2013 Total number of reported concerns (whistleblowing) 1), 2) Number 57 46 - - - Of which related to business ethics and anti-corruption Number 40 23 - - - 1) The scope of the whistleblowing procedures relates to the full scope of Statkraft's Code of Conduct, e.g. human rights, environment, health and safety, business ethics and anti-corruption. 2) The format for this indicator was changed in 2016, but historical data related to whistleblowing is available and has been published in Statkraft's annual reports since 2008. Employees and recruitment Unit 2017 2016 2015 2014 2013 Employees per 31.12 Number 3 593 3 804 4 119 3 731 3 734 Percentage of women Total % 25 25 23 24 23 In management positions % 22 22 23 22 22 Among new employees % 22 24 26 25 23 Health and safety Unit 2017 2016 2015 2014 2013 Fatalities, consolidated operations 1) Employees Number 0 0 0 0 0 Contractors Number 0 1 0 3 1 Third parties Number 0 0 0 0 1 Fatal accidents, associated activities 2) Employees Number 0 0 0 0 0 Contractors Number 0 0 0 1 0 Third parties Number 0 0 0 0 0 Seious incidents 3) Injuries with serious consequences Number 4 5 6 - - Accidents with,or with potential for, serious consequences Number 48 19 12 - - Injury rate 4), 5) Employees Frequency 6.6 5.6 5.6 5.6 6.8 Contractors Frequency 3.8 4.2 6.0 5.4 6.3 Absence due to illness % 3.5 3.0 3.0 2.8 2.9 1) Activities where Statkraft has > 50% ownership. 4) Includes activities where Statkraft has > 20% ownership. 2) Activities where Statkraft has 20-50% ownership. 5) Injuries per million hours worked. 3) This indicator was introduced in 2015.
145 STATKRAFT AS ANNUAL REPORT 2017 Photos: Statkraft, Johnér
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