CITY OF REYKJAVIK BUDGET AND FIVE YEAR PLAN

Transcription

1 CITY OF REYKJAVIK BUDGET AND FIVE YEAR PLAN Approved by the City Council on December 6th 2016

2 Table of Contents 1. Economic Conditions and Assumptions Goals and Principal Results... 3 Reykjavik Group... 3 Reykjavik Municipal Five Year Plan Reykjavik Group Reykjavik Municipal... 14

3 1. ECONOMIC CONDITIONS AND ASSUMPTIONS Over the past few years, economic conditions of Iceland have improved dramatically. GDP growth has been robust, unemployment has been low, and household disposable income has increased considerably following new collective wage agreements. At the same time, the Icelandic Krona has appreciated which has kept inflation at a low rate. Reykjavik's 2017 budget and five-year plan is primarily based on the National economic forecast of Statistics Iceland from May 27th Statistics Iceland updated its forecast on November 4th which led to a revision in Reykjavik's budget assumptions for the consumer price index and wage rate index for the year Housing prices and the employment level in Reykjavik is estimated by Reykjavik's Financel Office and assumptions on aluminium prices are based on forward prices in the market. Table 1 Reykjavik's Budget Assumptions % change from previous year Private final consumption Govenment final consumption Gross fixed capital formation Exports of goods and services Imports of goods and services Gross domestic product Employment level in Reykjavik Consumer price index Exchange rate index Wage rate index Aluminum price The economic forecast of Statistics Iceland assumes a continued stable growth of the Icelandic economy over the five-year plan period. There are however signs of overheating in the economy which might intensify during the next few years and cause GDP growth, employment, wages and real estate prices to rise above what is assumed in the economic forecast. Such developments might increase the City's tax revenues and reduce its social support expenses beyond what is assumed in the Budget and the Five Year Plan. Further overheating in the economy would however increase risk of an economic downturn, which would have the reverse effects on the City's tax revenues and social support expenses. If history is any indication, the next few years might see a more volatile economic cycle than what is assumed by Statistics Iceland. It will be imperative for the City to be alert to ever-changing economic conditions, to show continued prudence and to manage its operations in such a way as to reduce possible negative effects of an economic downturn. Key items in the income statement and statement of cash flows of Reykjavik Municipal (A operations) for the 2017 budget are described below. 1) Paid municipal income tax is estimated ISK 73,102M in 2017 where the tax rate is 14.52%. The income tax forecast for the Budget and Five Year Plan is primarily based on estimated employment level in Reykjavik and increases in the wage rate index listed in the prior table, and it assumes an unchanged tax rate during After accounting for contributions to the Municipal Equalisation Fund, postpaid income tax, income tax amortization and related items, it is expected that net municipal income tax revenues will amount to ISK 65,677M. Sensitivity analysis suggests that a 1% increase in wages translates to a ISK 550M increase in net municipal income tax revenues and a 1% increase in the employment level translates to a ISK 500M increase in net municipal income tax revenues. 1

4 2) Local property tax and plots lease revenues are expected Table 2 to be ISK 16.6B in 2017 where the tax and lease rates are Tax rate Property Plots lease presented in the Table 2. This entails an 11.4% increase in Residential 0.20% 0.20% revenues over the prior year due to a considerable increase of housing prices. After 2017, we assume a Commercial 1.65% 1.00% modest annual increase of housing prices and that the Public 1.32% 1.00% housing stock will grow according to expectations of residential and commercial housing construction in the city. We also assume that tax and lease rates will remain unchanged. Sensitivity analysis suggests that for a 1% price increase in the real estate market, the property tax and plots lease revenues will increase by ISK 45M for residential housing and by ISK 140M for commercial housing. Likewise a housing stock increase of 1000 new residential apartments increases property tax and plots lease revenues by ISK 75M and by ISK 330M for each new 100,000 square meters of commercial real estate. 3) Revenues (contributions) from The Municipal Equalisation Fund are expected to be ISK 6.6B in 2017, which represents a 9.2% increase from Revenues from the Municipal Equalisation Fund are due to services to persons with disabilities, ISK 5.0B, a special needs school for children with disabilities, ISK 1.3B, and music schools, ISK 0.3B. 4) Sale of building rights on City-owned land is expected to create revenues of ISK 2.9B in Most of these revenues are due to construction of residential housing. In addition, road construction fees are expected to amount to ISK 3.4B in Continued sale of City-owned real estate is assumed in accordance with the City Council's 2015 plan to streamline City operations. Revenues from these sales are expected to amount to ISK 1.3B in ) Total dividend payments of ISK 284M are assumed from the Associated Icelandic Ports, the Asphalt Station Hofði ltd. and Municipality Credit Iceland plc. Premiums for Guarantees payed to the City by Reykjavik Energy are expected to amount to ISK 838M but no dividend payments are assumed from Reykjavik Energy during the years ) Changes in the City's net accrued pension obligations between year-end 2016 and 2017 (obligations not covered by the pension fund's assets) are assumed to be ISK 5.9B. These net obligations are due to the Reykjavik Employees' Pension Fund (a closed pension fund). Since pension benefits in this fund are primarily linked to wage developments of public sector employees and the fund's assets are primarily linked to the Icelandic consumer price index, changes in net accrued pension obligations are heavily influenced by changes in wages and the consumer price index, as well as price movements in bond and equity markets. Sensitivity analysis suggests that if public sector wages go up by 1%, the City's net pension obligations will increase by ISK 1.0B, while a 1% increase in the consumer price index will decrease net pension obligations by ISK 0.7B. This shows that changes in net pension obligations can be quite volatile. The actuarial assessment of pension obligations can furthermore be influenced by changes in actuarial demographic assumptions, e.g. on life expectancy, which was the case in fiscal year 2015, when a change in the methodology of estimating mortality rate by the Icelandic Actuarial Society lead to a one-off ISK 6.5B increase in the City's net accrued pension obligations. In the Budget and the FiveYear Plan, no further changes to actuarial demographic assumptions are expected. In , changes in net accrued pension obligations are assumed to range from ISK B per year which is based on the economic assumptions listed in Table 1. 2

5 2. GOALS AND PRINCIPAL RESULTS REYKJAVIK GROUP The activities of the City of Reykjavik are divided into A and B operations, i.e. Reykjavik Municipal (A operations) and Reykjavik Group (A and B operations). Reykjavik Municipal comprises activities which are funded in part or in full through tax revenues. B operation companies are companies in which the City holds half of the shares or more and which are operated as financially independent units. The financial management of the City of Reykjavik is subject to the rules and regulations applicable to the finances of Icelandic local authorities. The Local Government Act no. 138/2011, which was enacted into law on January 1st 2012, states that a muncipality's operating activities, investments and disposal of assets and funds shall be such that it can fulfil its responsibilities now and in the future. To that end, municipalities shall adhere to the following financial rules: 1) The Equilibrium Rule: Over each three year period, the total operating expenses for the consolidated A and B operations shall not exceed the total regular operating revenues. 2) The Debt Rule: The total liabilities and obligations of the consolidated A and B operations must not exceed 150% of regular operating revenues. In a temporary provision to the Local Government Act no. 138/2011, municipalites that did not fulfil these rules on January 1st 2012 were required to set a realistic plan on how these goals could be reached. According to Regulation no. 502/2012 on financial guidelines and monitoring of municipal finances, these municipalities were allowed up to 10 years from January 1st 2013 to adjust their finances to the financial rules of the Local Government Act. A plan where these goals were set to be reached in 2019 for Reykjavik Group was passed by the City Council on October 29th During the ten-year adjustment period, Reykjavik City's compliance with the equilibrium rule and debt rule is assessed for Reykjavik Group without Reykjavik Energy (RE), in accordance with Regulation no. 502/2012 on financial guidelines and monitoring of municipal finances. On the 1st of January 2016, a new Act on Public Sector Finances was enacted into Icelandic law. This act proposes greater collaboration between state and local governments and places an increased emphasis on long-term planning and policy-making in public sector finances. On the basis of this act, the Icelandic Association of Local Authorities has agreed to aim for positive net lending by local governments as a whole over the period and to maintain prudent financial management by a cautious estimation of expected revenues, a realistic estimation of expenditure and by not entering into obligations which could threaten the sustainability of operations in the long term. On the following pages we show the principal results of the Budget and the Five Year Plan. The results for 2016 for Reykjavik Municipal are mainly based on the revised budget for that year while the results of B operation companies are based on their own projected outcome. 3

6 From 2015 to 2016, an improvement in operating results of ISK 24.0B is expected for Reykjavik Group. This improvement is mostly due to a considerable negative influence of calculated items on the operating results of In 2015, Reykjavik Energy expensed ISK 10.2B due to changes in the fair value of embedded derivatives in electricity sales contracts, and Reykjavik Municipal expensed ISK 14.6B due to an increase in net accrued pension obligations, which was mostly due to substantial wage increases in fiscal year 2015 and the one-off effects of a change in actuarial assumptions on future mortality rate. In 2017 we assume a surplus of ISK 19.9B before financial items and a surplus of ISK 14.6B after taking financial items into account. This surplus is mostly due to the expected surplus of Reykjavik Energy and the effects of increasing housing prices on the valuation of Reykjavík Social Housing's assets. Working capital provided by operating activities is a measure of Reykjavik Group's ability to reduce debt and to meet its capital expenditure needs. Over the past few years investments have been postponed to a great extent as the emphasis has been on reducing debt, in accordance with the City Council's plan from October 2012 to bring Reykjavik Group's debt below the level required by the Debt Rule of the Local Government Act. Investment expenditures are expected to rise above cash from operating activities in to meet an accumulated investment need, but it is expected that Reykjavik Group's capacity for debt reduction will increase again in 2019 and beyond. 4

7 Table 3 Gross investments (ISK M) Reykjavik Municipal 6,785 7,249 8,172 9,455 10,201 15,128 16,439 13,193 11,458 9,688 Orkuveita Reykjavikur (Reykjavik Energy) 3,201 3,530 5,761 10,436 13,231 14,077 16,504 13,928 14,776 11,636 Faxafloahafnir (Associated Icelandic Ports) 1, , ,863 1,855 2,065 1,748 1,380 1,092 Felagsbustadir (Reykjavik Social Housing) ,414 1,733 2,473 3,242 6,458 3,816 1,471 Sorpa bs (Capital Area Waste Disposal Company) ,135 2, Strætó bs (Metroplitan Bus Transportation Company) Other companies and inter-unit transactions Gross investments 12,240 12,204 17,160 23,530 27,908 35,721 40,856 36,284 32,019 24,384 Percentage of revenues 10.2% 9.4% 12.9% 16.3% 18.0% 22.0% 23.6% 19.7% 16.6% 12.0% Investments made by Reykjavik Municipal over the planning period are mostly centered around real estate construction and renovations totalling ISK 22.4B, as well as road construction and maintenance amounting to ISK 29.4B. Development of the Ulfarsardalur neighbourhood is a significant part of those investments or ISK 9.1B. Considerable investments are foreseen with Reykjavik Energy during the planning period. Investments are mostly in distribution systems and power plants. The investments of Associated Icelandic Ports are mostly due to harbour projects, both construction and maintenance. The largest project is the expansion in Sundahofn harbour which amounts to ISK 3.6B. During the planning period, Reykjavik Social Housing continues to follow the City Council's plan of an ambitious expansion of the City's social housing stock by apartments. The emphasis on debt reduction over the past few years is reflected in the fact that repayments of long-term loans have well exceeded new long-term borrowings during Over the period we expect more new long-term borrowings than in the previous years or to the amount of ISK 14-18B per year. Despite that, debt repayments will still be in excess of new long-term borrowings and net debt repayments will be ISK 2-4B per year. During we expect a reduced need for new long-term borrowings owing to reduced capital expenditures. During we expect net debt repayments to be ISK 38B as new long-term borrowings are expected to be ISK 67B while gross debt repayments are expected to be ISK 105B. 5

8 The above graph shows Reykjavik Group's ability to honor scheduled repayments of debt and other obligations. It also shows the degree to which working capital provided by operating activities can fund necessary investments of Reykjavik Group. During the period , working capital provided by operating activities was equal to scheduled repayments of debt and other obligations and investments could therefore not be funded by operating activities during that period. From 2015 and onwards liquidity has improved due to lower scheduled debt repayments and a strengthening of working capital provided by operating activities. A strong liquidity position of Reykjavik Group is necessary to lower its liquidity risk and to sustain its ability to support investment activity without excessive borrowing. In accordance with with Regulation no. 502/2012 on financial guidelines and monitoring of municipal finances, Reykjavik City's compliance with the equilibrium rule of the Local Government Act is currently assessed for Reykjavik Group without Reykjavik Energy. In , the aggregate operating results of Reykjavik Group without Reykjavik Energy yielded a deficit of ISK 0.8B which was mostly due to an increase in Reykjavik Municipal's net accrued pension obligations of ISK 14.6B in The aggregate 3 year operating results of Reykjavik Group with Reykjavik Energy show an aggregate surplus during every 3 year period from to

9 The debt ratio of Reykjavik Group without Reykjavik Energy (liabilities and obligations as a % of revenues) is within the legally required 150% during the whole period. The debt ratio for Reykjavik Group with Reykjavik Energy is assumed to fall below 150% at the end of the five-year plan period, which is two years later than what was assumed in the the City Council's plan from However, the goal of 150% will still be reached before the end of 2022, which satisfies the requirements of Regulation no. 502/2012 on financial guidelines and monitoring of municipal finances. The lowering of the debt ratio is mainly driven by increasing revenues. From year-end 2015 to the end of the planning period, total debt and other obligations are expected to fall by 4.9% while revenues will increase by 40.6% in nominal terms. 7

10 REYKJAVIK MUNICIPAL 1 The operating results of Reykjavik Municipal have fluctuated considerably over the past few years, owing to new collective wage agreements in 2014 and 2015 and a ISK 14.6B increase in net accrued pension obligations in Over the period the expected surplus of Reykjavik Municipal is supported by revenues from the sale of building rights and of City-owned real estate to the amount of ISK B per year. As the surplus of Reykjavik Municipal grows during the five-year plan period, it will be less dependent on these revenues, which promotes sustainability in Reykjavik Municipal operations over the long term. Working capital provided by operating activities for Reykjavik Municipal was relatively stable from 2002 to 2013 or averaging at 10.1% of operating revenues. In 2014, the ratio decreased to 5.4% of revenues due to a downturn in Reykjavik Municipal's operating results. Working capital provided by operating activities has been historically low for the past few years but a stable increase is expected during the five-year plan period. A ratio above 9-10% of revenues is advisable while the output gap in the Icelandic economy remains positive. 1 Results for 2012 and 2013 have been adjusted to incorprate the effects of Reykjavik Parking Services, which was merged with Reykjavik Municipal in 2014, thereby making these figures comparable to the later years. 8

11 Gross investments for Reykjavik Municipal will be considerably higher than working capital provided by operating activities in 2017 and Revenues from road construction fees and the sale of building rights and City-owned properties, totalling about ISK 7.5B in each year, is expected to bridge the gap during these years. Looking farther ahead, gross investments are expected to be closer linked with working capital from operating activities, which is necessary to promote a self-sustaining funding of investments for Reykjavik Municipal. Net debt for Reykjavik Municipal is calculated by taking all of Reykjavik Municipal's long term debt and rental obligations, including next year's instalments, and deducting long term receivables and cash on hand. That way we can account for the monetary assets of Reykjavik Municipal in measuring its debt levels. Through 2018, net debt is expected to increase to ISK 26.4B or 23.4% of revenues but after that net debt decreases and is ISK 15.7B or 11.9% of revenues in

12 3. FIVE YEAR PLAN REYKJAVIK GROUP Revised Actual Budget Budget Budget Budget Budget Budget Income statement Operating revenues: Tax revenues... 68,861 75,373 81,750 87,401 93,018 98, ,265 Contributions from Municipal Equalisation Fund... 6,194 6,048 6,604 7,036 7,455 7,844 8,238 Other revenues... 68,872 73,719 73,487 78,731 83,609 86,803 89, , , , , , , ,417 Operating expenses: Wage cost and wage related expenses... 60,129 64,967 71,298 75,225 79,706 83,779 87,791 Change in pension obligations... 14,666 6,073 5,900 3,552 3,554 3,056 2,558 Other operating expenses... 48,282 49,616 48,221 51,586 54,321 56,798 58,785 Depreciation... 16,251 16,440 16,515 17,075 17,779 18,290 18, , , , , , , ,739 Operating result before financial items 4,600 18,044 19,907 25,730 28,721 31,258 34,678 Net financial items... (9,141 ) 5,467 (3,520 ) (8,440 ) (7,709 ) (7,527 ) (7,122 ) Operating results before contributions... (4,542 ) 23,511 16,388 17,290 21,012 23,731 27,555 Contributions from own funds Share in (loss) profit of minority interests... (765 ) Share in (loss) profit of associated companies... (256 ) Income tax (4,560 ) (1,799 ) (1,249 ) (1,884 ) (2,025 ) (2,369 ) Operating results... (4,980 ) 18,951 14,589 16,041 19,128 21,706 25,186 Amounts are in ISK M 10

13 Revised Actual Budget Budget Budget Budget Budget Budget Balance Sheet Assets Fixed assets: Fixed tangible assets: Real estate , , , , , , ,473 Utilities , , , , , , ,043 Other assets... 61,360 62,545 64,286 65,689 66,381 66,901 67,117 Lease properties... 7,653 7,028 6,403 5,778 5,153 4,528 3, , , , , , , ,536 Investments and long term receivables: Shares in companies... 5,333 6,140 7,145 8,151 8,951 9,751 10,551 Long term receivables... 1,809 1,309 1, Long term receivables from own companies... 0 (0 ) (0 ) (0 ) (0) 0 (0 ) Other long term receivables... 7,988 10,924 16,211 16,032 18,901 21,051 23,349 15,131 18,373 24,377 24,651 27,852 30,801 33,900 Total fixed assets 481, , , , , , ,436 Current assets: Inventories Short term receivables: Unclaimed revenues and receivables... 13,539 13,088 13,139 12,823 13,157 13,546 14,043 Short term receivables from own companies Other short term receivables... 4,249 5,320 5,380 3,295 3,235 2,830 2,499 Next year's paym. of long term receivables Next year's paym. of other long term receivables Securities... 9,512 3,171 3, Cash... 16,171 30,422 26,183 29,926 31,604 35,683 44,098 Total current assets 44,435 53,161 49,161 47,324 49,326 53,582 61,613 Total assets 525, , , , , , ,049 Amounts are in ISK M 11

14 Revised Actual Budget Budget Budget Budget Budget Budget desember Equity and liabilities Equity: Equity account , , , , , , ,958 Minority interest... 12,700 12,700 12,700 12,700 12,700 12,700 12,700 Obligations: Pension obligations... 26,394 30,406 34,045 35,156 36,099 36,394 36,031 Other obligations... 8,012 8,941 9,903 10,127 10,066 10,065 10,394 34,406 39,348 43,948 45,283 46,165 46,459 46,424 Long term liabilities: Long term debts , , , , , , ,000 Long term debts to own companies... 0 (0 ) 0 (0 ) (0) (0) 0 Lease liabilities... 12,119 11,701 11,233 10,850 10,357 9,808 9, , , , , , , ,214 Current liabilities: Debts to credit institutions... 1,114 4,104 1,114 1,514 1,314 1,115 1,115 Accounts payable... 6,878 7,229 7,238 7,532 7,751 7,955 8,123 Accounts payable to own companies Next year's payment of long term debts... 25,633 15,697 15,245 15,716 15,890 15,664 14,247 Other payables... 13,806 18,023 20,017 19,401 20,621 20,912 21,268 47,431 45,053 43,614 44,164 45,577 45,646 44,752 Total liabilities and obligations 301, , , , , , ,391 Total equity and liabilities 525, , , , , , ,049 Amounts are in ISK M 12

15 Revised Actual Budget Budget Budget Budget Budget Budget Statement of Cash Flows Cash flow from operating activities: Operating result according to Income Statement... (4,980 ) 18,951 14,589 16,041 19,128 21,706 25,186 Adjustments not affecting cash flow: Depreciation... 16,251 16,440 16,515 17,075 17,779 18,290 18,605 Indexation, discounts and exch.rate differences... 9,673 (18,286 ) (4,890 ) 5,556 3,817 3,161 3,197 Effect of minority interests Effect of own companies Loss (Gain) on sold assets... (1,050 ) (3,607 ) (4,201 ) (3,697 ) (4,388 ) (3,821 ) (3,692 ) Contributions from own funds Changes in mkt. val. of investm. assets and deriv ,627 3,807 (1,773 ) (1,126 ) (765 ) (1,127 ) Other changes... (4,663 ) Changes in obligations... 14,643 10,628 7,694 4,796 5,435 5,076 4,922 Working capital provided by operating activities 31,138 32,754 33,515 37,998 40,644 43,647 47,090 Changes in operating assets and liabilities: Inventories decrease (increase)... (202 ) 189 (30 ) (10 ) (5) 0 (5 ) Unclaimed revenues decrease (increase)... (911 ) 451 (51 ) (284 ) (234 ) (189 ) (197 ) Other current receivables decrease (increase)... (1,147 ) 2,356 (3,001 ) 1,753 (1,669 ) (1,027 ) (1,127 ) Contributions to obligations... (1,805 ) (2,050 ) (2,540 ) (2,764 ) (3,823 ) (4,651 ) (4,912 ) Current liabilities increase (decrease) Change in operating assets and liabilities (3,388 ) 1,351 (4,967 ) (992 ) (5,389 ) (5,631 ) (6,065 ) Net cash provided by operating activities 27,750 34,105 28,548 37,006 35,255 38,016 41,025 Investment activities: Investments in fixed tangible assets*... (23,530 ) (24,192 ) (32,321 ) (37,079 ) (32,965 ) (29,301 ) (22,169 ) Proceeds from sale of fixed tangible assets... 1,725 4,295 4,691 3,817 4,514 4,823 3,823 Change in share holdings... 5 (807 ) (1,005 ) (1,005 ) (800 ) (800 ) (800 ) Long term receivables, change (195 ) 707 Other long term receivables, change (24 ) (25 ) (32) (37) (37) Long term receivables from own companies, change (0 ) 0 (0 ) Other investment activities... 4, Net cash provided by investment activities (16,830 ) (20,627 ) (28,453 ) (33,804 ) (28,814 ) (25,510 ) (18,477 ) Financing activities: Contributions from own companies (39 ) (857 ) Paid in capital / other changes in equity ,136 1,291 2,131 1, Accounts (receivables) payable to own comp., change New long term borrowings... 3,002 13,737 14,973 17,925 9,635 7,644 3,100 Repayment of long term debt and lease liabilities... (17,896 ) (17,060 ) (18,291 ) (19,396 ) (16,595 ) (17,065 ) (16,809 ) Long term liabilities to own companies, change (0 ) Short term borrowings, change ,990 (2,990 ) 400 (200 ) (200 ) 0 Net cash provided by financing activities (14,626 ) 773 (4,333 ) 541 (4,764 ) (8,428 ) (14,133 ) Increase (decrease) in cash and cash equivalents... (3,707 ) 14,251 (4,238 ) 3,743 1,678 4,079 8,415 Cash and cash equivalents at beginning of year... 19,877 16,171 30,422 26,183 29,926 31,604 35,683 Cash and cash equivalents at year end... 16,171 30,422 26,183 29,926 31,604 35,683 44,098 Amounts are in ISK M *Gross investments less road construction fees 13

16 REYKJAVIK MUNICIPAL Revised Actual Budget Budget Budget Budget Budget Budget Income statement Operating revenues: Tax revenues... 69,285 75,941 82,300 88,012 93,672 99, ,002 Contributions from Municipal Equalisation Fund... 6,194 6,048 6,604 7,036 7,455 7,844 8,238 Other revenues... 15,556 18,293 17,455 17,762 18,905 18,774 19,097 91, , , , , , ,338 Operating expenses: Wage cost and wage related expenses... 49,151 52,292 57,614 60,777 64,370 67,688 71,019 Change in pension obligations... 14,623 6,011 5,861 3,511 3,511 3,011 2,511 Other operating expenses... 35,971 36,656 35,829 37,955 39,866 41,548 42,898 Depreciation... 4,151 4,327 4,582 4,801 4,953 5,097 5, ,896 99, , , , , ,630 Operating result before financial items (12,861 ) 995 2,473 5,766 7,332 8,504 10,708 Net financial items... (775 ) (497 ) (654 ) (1,475 ) (1,401 ) (1,370 ) (1,363 ) Operating results before contributions... (13,636 ) 498 1,819 4,291 5,931 7,134 9,345 Contributions from own funds Share in (loss) profit of minority interests Share in (loss) profit of associated companies Income tax Operating results... (13,636 ) 498 1,819 4,291 5,931 7,134 9,345 Amounts are in ISK M 14

17 Revised Actual Budget Budget Budget Budget Budget Budget Balance Sheet Assets Fixed assets: Fixed tangible assets: Real estate... 90,746 93,574 98, , , , ,657 Utilities... 12,811 12,251 14,058 17,271 19,885 21,825 24,479 Other assets... 4,070 4,583 5,283 5,774 6,074 6,272 6,234 Lease properties... 7,653 7,028 6,403 5,778 5,153 4,528 3, , , , , , , ,273 Investments and long term receivables: Shares in companies... 7,343 8,143 9,148 10,153 10,953 11,753 12,553 Long term receivables... 2,038 2,357 2,145 1,935 1,724 1,196 1,196 Long term receivables from own companies... 12,177 11,703 10,826 9,904 8,869 7,722 6,447 Other long term receivables ,558 22,203 22,118 21,992 21,546 20,671 20,196 Total fixed assets 136, , , , , , ,469 Current assets: Inventories Short term receivables: Unclaimed revenues and receivables... 8,342 8,342 8,342 8,342 8,342 8,342 8,342 Short term receivables from own companies Other short term receivables... 2,138 3,138 3,113 3,013 3,013 2,688 2,498 Next year's paym. of long term receivables... 1, ,370 1,510 1,523 1,905 1,469 Next year's paym. of other long term receivables Securities Cash... 5,597 7,856 7,714 7,773 9,070 12,805 19,638 Total current assets 17,641 20,531 20,784 20,883 22,193 25,984 32,191 Total assets 154, , , , , , ,660 Amounts are in ISK M 15

18 Revised Actual Budget Budget Budget Budget Budget Budget desember Equity and liabilities Equity: Equity account... 73,778 74,276 76,095 80,385 86,317 93, ,795 Minority interest Obligations: Pension obligations... 25,852 29,802 33,402 34,472 35,372 35,622 35,212 Other obligations ,852 29,813 33,424 34,505 35,416 35,677 35,278 Long term liabilities: Long term debts... 27,736 29,292 31,397 34,284 34,041 33,698 33,174 Long term debts to own companies Lease liabilities... 12,119 11,701 11,233 10,850 10,357 9,808 9,214 40,115 41,260 42,902 45,416 44,687 43,804 42,693 Current liabilities: Debts to credit institutions Accounts payable... 3,128 3,128 3,128 3,128 3,128 3,128 3,128 Accounts payable to own companies Next year's payment of long term debts... 1,991 2,127 2,373 2,319 1,991 2,038 2,203 Other payables... 9,019 9,019 9,019 9,019 9,019 9,019 9,019 14,736 14,821 15,062 15,009 14,681 14,729 14,894 Total liabilities and obligations 80,702 85,893 91,388 94,930 94,784 94,209 92,864 Total equity and liabilities 154, , , , , , ,660 Amounts are in ISK M 16

19 Revised Actual Budget Budget Budget Budget Budget Budget Statement of Cash Flows Cash flow from operating activities: Operating result according to Income Statement... (13,636 ) 498 1,819 4,291 5,931 7,134 9,345 Adjustments not affecting cash flow: Depreciation... 4,151 4,327 4,582 4,801 4,953 5,097 5,203 Indexation, discounts and exch.rate differences ,203 1, Effect of minority interests Effect of own companies Loss (Gain) on sold assets... (958 ) (3,607 ) (4,201 ) (3,697 ) (4,388 ) (3,821 ) (3,692 ) Contributions from own funds Changes in mkt. val. of investm. assets and deriv Other changes Changes in obligations... 14,623 6,011 5,861 3,511 3,511 3,011 2,511 Working capital provided by operating activities 5,212 7,964 8,816 10,110 11,020 12,366 14,286 Changes in operating assets and liabilities: Inventories decrease (increase) Unclaimed revenues decrease (increase)... (972 ) Other current receivables decrease (increase)... (603 ) (1,000 ) Contributions to obligations... (1,784 ) (2,050 ) (2,250 ) (2,430 ) (2,600 ) (2,750 ) (2,910 ) Current liabilities increase (decrease) Change in operating assets and liabilities (2,510 ) (3,050 ) (2,225 ) (2,330 ) (2,600 ) (2,425 ) (2,720 ) Net cash provided by operating activities 2,702 4,914 6,591 7,780 8,420 9,941 11,566 Investment activities: Investments in fixed tangible assets*... (9,455 ) (6,485 ) (11,728 ) (12,662 ) (9,874 ) (8,740 ) (7,472 ) Proceeds from sale of fixed tangible assets ,610 4,201 3,697 4,388 3,821 3,692 Change in share holdings... (50 ) (800 ) (1,005 ) (1,005 ) (800 ) (800 ) (800 ) Long term receivables, change Other long term receivables, change Long term receivables from own companies, change ,179 1,318 1,330 1,394 Other investment activities... 3, Net cash provided by investment activities (6,170 ) (2,870 ) (7,571 ) (8,579 ) (4,757 ) (4,178 ) (2,658 ) Financing activities: Contributions from own companies Paid in capital / other changes in equity Accounts (receivables) payable to own comp., change... 0 (23 ) (6 ) (0 ) New long term borrowings... 3,063 2,221 3,012 3, Repayment of long term debt and lease liabilities... (1,911 ) (1,983 ) (2,169 ) (2,437 ) (2,366 ) (2,028 ) (2,075 ) Long term liabilities to own companies, change... (91 ) (0 ) 0 (0 ) Short term borrowings, change Net cash provided by financing activities 1, (2,366 ) (2,028 ) (2,075 ) Increase (decrease) in cash and cash equivalents... (2,408 ) 2,259 (142 ) 59 1,298 3,734 6,833 Cash and cash equivalents at beginning of year... 8,005 5,597 7,856 7,714 7,773 9,070 12,805 Cash and cash equivalents at year end... 5,597 7,856 7,714 7,773 9,070 12,805 19,638 Amounts are in ISK M *Gross investments less road construction fees 17