Lyse Consolidated Financial statements

Transcription

1 Half-Year Report 2018 Lyse Consolidated Financial statements 1

2 Table of contents Financial key figures for Lyse Half year report from the Board of Directors 2018 Compliance declaration from the Board of Directors and Managing Director/ CEO Statement of profit and loss Statement of comprehensive income Balance sheet Statetement of cash flows Statement of changes in equity Notes to the interim consolidated financial statements

3 Financial key figures for Lyse FROM THE STATEMENT OF PROFIT OR LOSS (Amounts in NOK millions) Income EBITDA (1) EBITDA underlying operations (2) Operating result (EBIT) (3) Unrealised changes in value, financial instruments Non-recurring items, EBITDA Non-recurring items, reversal impairment Operating result (EBIT) underlying operations (4) Net financial items Profit or loss after tax FROM THE BALANCE SHEET (Amounts in NOK millions) Total assets Of which tangible fixed assets and investments in associated companies and joint ventures Cash and cash equivalents Equity Gross interest-bearing debt, incl. financial leases (5) Of which proportion of subordinated loans Capital employed (6) CASH FLOWS (Amounts in NOK millions) Net cash flow from operational activities Net interest costs Dividends paid to shareholders Net investment in intangible and tangible fixed assets Net investments in ownership interests (7) Cash and cash equivalents Unused drawing rights

4 FINANCE KEY FIGURES Funds from operations (FFO) (8) NOK mill EBITDA interest coverage (9) FFO interest coverage (10) Interest-bearing debt - equity ratio (11) % 61.7 % 61.9 % 60.9 % Equity ratio (12) % 30.2 % 29.3 % 30.1 % Equity ratio including subordinated loans (13) % 37.1 % 38.3 % 37.8 % KEY FIGURES, CONSOLIDATED FINANCIAL STATEMENTS EBITDA margin underlying operations (14) % 44.0 % 36.5 % 35.2 % EBIT margin underlying operations (15) % 31.9 % 26.3 % 24.3 % Return on equity (16) % 24.6 % 9.6 % 24.4 % Return on average capital employed (17) % 16.0 % 9.1 % 15.2 % SHAREHOLDERS Subordinated loans from majority shareholders (municipalities) NOK mill Interest and instalments, subordinated loans NOK mill Dividends/shareholder withdrawals NOK mill Earnings per share (18) NOK DEFINITIONS: (1) EBITDA (2) EBITDA, underlying operations (3) EBIT (4) EBIT, underlying operations (5) Interest-bearing liabilities (6) Capital employed (7) Net investments in ownership interests (8) Funds from operations (FFO) (9) EBITDA interest coverage (10) FFO interest coverage (11) Interest-bearing debt ratio (12) Equity ratio (13) Equity ratio taking into account subordinated loans (14) EBITDA margin, underlying operations (15) EBIT margin, underlying operations (16) Return on equity (17) Return on average capital employed (18) Earnings per share Operating profit/loss + depreciation and write-downs EBITDA adjusted for unrealised changes in value of financial instruments and material non-recurring items Operating profit/loss Operating profit/loss adjusted for unrealised changes in value of financial instruments, material one-off items and write-downs Long-term and short-term loans, incl. financial lease liabilities Equity + interest-bearing liabilities Sale and purchase of shares, and receipt and payments of subordinated loans to associated companies and joint ventures EBITDA, underlying operations less paid interest and tax payable in current year EBITDA/interest costs FFO/interest costs Gross Interest-bearing liabilities / (gross interest-bearing liabilities + book equity) Equity/total assets Total equity + subordinated shareholders loans/total capital EBITDA, underlying operations/operating income EBIT, underlying operations/operating income Profit/loss as % of average equity result for the last 12 months Operating profit/loss as % of average capital employed result for the last 12 months Profit/loss allocated to shareholders/no. of shares in the Company 4

5 HALF-YEAR REPORT 2018 Lyse is a Norwegian Group operating within the fields of energy, telecommunications and electricity grid. Lyse is a national player within renewable and regulated energy, and the Group is a national leader within fiber broadband. Regionally, Lyse has developed the country s most diversified and complete infrastructure for electricity, biogas and natural gas, district heating and fiber broadband. Stable and secure deliveries are priorities. The Company s shareholders are 16 municipalities in Southern Rogaland County. The shareholders intend to be long-term industrial owners and expect the Company to contribute to local development from a regionally strategic perspective and with satisfactory financial returns. IMPORTANT EVENTS FIRST HALF YEAR 2018 A cold winter and a dry first half-year has resulted in a low hydrological balance in the Nordics. The weather situation combined with increased prices for coal and CO2 has led to a significant increase in power prices. High reservoir levels at the beginning of the year made it possible to increase production to utilize the high power prices. The power production was 4.3 TWh in the first six months, an increase of 0.9 TWh compared to the same period last year. The new power plant in Lysebotn is expected to be completed in September. The project continues to proceed on time and on budget. In April 2018 Altibox exceeded active customers. Lyse AS entered the German Schuldshein market in 2018 by issuing EUR 90 million, giving further diversification of Lyses funding sources. FINANCIAL PERFORMANCE FIRST HALF YEAR 2018 The Groups profit before tax for the first half year amounted to NOK million, compared with 935 million the year before. The Groups profit for the first half year was NOK 520 million, compared with 492 million for the same period last year. Operating profits increased by NOK 266 million from last year and amounted to NOK million. Non-recurring items of a total of NOK 30 million are reversal of impairment losses of the power plants in Jørpeland vassdraget. Nonrecurring items in the first half of 2017 amounted to NOK 22 million and were primarily related to profits from the sale of shares in Måkaknuten AS. In the following the results from underlying operations are presented. Underlying operating profit consists of operating profit excluding nonrecurring items and unrealised gains and losses on financial instruments. (Amounts in NOK millions) Underlying operating income Underlying operating costs Underlying operating profit Unrealised gains and (losses) on financial instruments Non-recurring items (gains +) Operating profit

6 Lyses underlying operating profit amounts to NOK million, which represents an increase of million compared to the same period last year. The increase is primarily driven by high revenue from the hydropower production, as well as consolidating Viken Fiber as a subsidiary. In addition, a change in accounting principles regarding revenue recognition of energy sales from a net to a gross presentation is implemented from This effect is also included in the comparable 2017 figures in this report. The revenue from the first half year is distributed as follows among the segments; Energy NOK million, Telecommunications million, Electricity Grid 756 million and Others 30 million. Underlying EBITDA (operating profit before amortisations and depreciations) for the Group amounted to NOK million, against million last year. Underlying operating profit amounts to NOK 1 613, an increase of 616 million compared to the same period in High energy prices and the high level of power generation has resulted in an underlying operating profit from the Energy segment of NOK million, which is an improvement of 519 million compared to the same period in For the Telecommunications segment the underlying operating profit increase from NOK 205 million the first halfyear in 2017 to 243 million the same period in The increase is mainly explained by consolidating Viken Fiber as a subsidiary from December Adjusted by the effect of consolidating Viken Fiber, the underlying operating profit would be slightly lower than The reduction would primarily be explained by the fact that Altibox has high IT-investments from digitalization processes as well as the transition to a new TV-platform. Another effect is the amortisations of step-up values from the Viken Fiber transaction. The increased operating profit from the Electricity Grid segment from NOK 108 million the first half year last year to 175 million in the same period this year, is explained by a higher Revenue Cap (allowed revenue), higher customer contribution and a higher profit from other activities. Operating activities the last 12 months gives a return of 16 % measured by underlying operating profit by average capital employed. The table below shows the underlying operating profit for the Group segments. (Amounts in NOK millions) Energy Telecommunications Electricity Grid Other* Underlying operating profit per segment Underlying operating profit from Lyses business areas will be further described below. THE ENERGY SEGMENT *) The business segment Other consists of Lyse AS, Smartly AS, Lyse Dialog AS, Lyse Eiendom Mariero AS and Lyse Eiendom Jørpeland AS. The Energy segment consists of the 100% owned subsidiaries Lyse Produksjon AS (including ownership interests in Sira-Kvina Kraftselskap DA, Ulla-Førre verkene and Jørpeland Kraft AS), Lyse Neo AS and Lyse Energisalg AS. Underlying operating profit amounts to NOK million, compared to 726 million for the same period last year. Hydropower generation contributes to operating profits after resource rent tax by NOK 746 million, which represents an increase of 297 million compared with the first half year in The power generation volume in the first half year amounted to 4.3 TWh, 0.9 TWh higher than the corresponding period last year. The high level of power generation results from high reservoir filling levels at the start of the year, as well as relatively higher Nordic power 6

7 prices. A cold winter and a dry first half year has resulted in a weakening of the hydrological resource situation in the Nordic region. This, combined with increased costs of thermal generation, has contributed to higher spot prices during the first half year. The area price in Lyses production area was 36.5 øre/kwh, compared with 26.6 øre/kwh during the same period in At the end of June, the reservoir filling levels are lower than normal. Lyse continues the work towards realizing North Connect, the power interconnector between Norway and the UK. The Norwegian Government and the opposition reached a cooperation agreement regarding the endorsement of the 3rd Energy Package, and by such significantly changing the terms and conditions for interconnector projects. After the proposed changes in the Energy Act, it is expected that in the future only the System Operator (Statnett) will be allowed to be the owner of the Norwegian part of the interconnector NorthConnect. Underlying operating profit from gas and heating amounted to NOK 33 million, which is an improvement of 23 million compared with the first half year A total of 404 GWh of gas and district heating was distributed during the first six months of the year, this represents an increase of 28 GWh compared to last year. A significant part of the district heating volumes, and parts of the gas volumes, are indexed against power prices. Higher costs of purchasing natural gas contributes to reduced margins, while the effect of increased electricity prices increases margins and the margins as a total are higher in the first half year of 2018 compared to the same period last year. District heating, supplied through the district heating grid, connected to the Forus combustion plant, is climate neutral from The retail market for electricity is characterized by strong and increasing price competition, where large national players put in strong efforts to increase their market share in the region. Lyse has managed to maintain the market share in the region. Lyse opened a high speed charge station for electric cars in Sola in May 2018, primarily for taxis. The further development of high speed chargers in central locations will continue and by the end of the year the access to high speed chargers will be improved significantly, facilitating an increased participation of electric cars for commercial use. THE TELECOMMUNICATIONS SEGMENT The Telecommunications segment consists of the whollyowned digital TV and internet provider Altibox AS, the 100% owned fiber company Lyse Fiber AS and the 100% owned investment company Lyse Fiberinvest AS, which is the owner of Lyses shares in other fiber companies. Lyse Fiberinvest owns shares in, among others, Viken Fiber AS (71%), Bergen Fiber AS (37%), Signal Bredbånd AS (100%), Innlandet Fiber AS (100%) and Istad Fiber AS (50%). Bergen Fiber AS and Istad Fiber AS are joint ventures. From the 1st of December 2017 Viken Fiber was recognized as a subsidiary in the Lyse Group accounts. The Altibox Partnership as a total has customers as of the 30th of June 2018, compared to at the end of the half year last year. A total of of these customers are through Lyse-owned companies, against at the end of the half year last year. Operating profits before depreciations and amortizations (EBITDA) amounts to NOK 601 million the first half year for 2018, compared with 351 million in the same period last year. Underlying operating profit improved from NOK 205 million the first 6 months of 2017 to 243 million in the same period in The increase is explained by the consolidation of Viken Fiber as a subsidiary from December Adjusted for Viken Fiber AS, the operating profit would be slightly reduced. The reduction in underlying operating profits are primarily driven by high IT-investments caused by digitalization projects, transitioning to a new TV-platform and amortization of the step-up value from the Viken Fiber transaction. The sales of communications- and entertainment services in the Norwegian retail market is characterized by increasing competition as well as an increasing number of companies building fiber infrastructure. The increased competition 7

8 leads to higher sales costs, and satisfied customers and a positive presence in the local market is essential to succeed. Lyse has a high focus on product development, efficient operations and optimization of the value chain. There is a high demand for the segments products and services despite higher competition, and sales numbers this far in 2018 have been positive. THE ELECTRICITY GRID SEGMENT The Electricity Grid segment consists of the 100% owned subsidiary Lyse Elnett AS. The company s main purpose is to secure a stable power supply for its customers while maintaining efficient operations. The Electricity Grid segment is a monopoly-based service, and as such subject to government regulations through The Norwegian Water Resources and Energy Directorate (NVE). At the end of the first half year, Lyse Elnett has customers, and supplied 3.3 TWh energy, compared to 3.1 TWh in the same period last year. The underlying operating profit from the segment was NOK 175 million in the first half of 2018, compared with 108 million in the same period as last year. The primary reason for the increased operating profit is a higher Revenue Cap (allowed revenue) for 2018 compared to the previous year, as well as increased contributions from customers. In addition to the higher Revenue Cap, the activity in other operations has increased. Power outages in the first half year result in a slightly higher Cost of Energy Not Supplied (CENS) compared to the first half of Total CENS for first half of 2018 accumulates to NOK 10 million, an increase of 3.2 million from the corresponding period in Total investments so far this year amounts to NOK 354 million. The AMS project (Advanced Metering System) is to be finalized in During the first 6 months of 2018 total investments in AMS are NOK 130 million, while investments in the local distribution grid are 157 million and 67 million in the regional distribution grid. Electricity grid operations achieved a total return (operating profit by average regulatory asset base) of 4.2% in the first half of 2018, against 3.5% in the same period last year. The Norwegian Water Resources and Energy Directorate (NVE) has measured Lyses Electricity grid operations to be among the most efficient compared to an average of comparable Electricity Grid operators. OTHER SEGMENTS Other segments include group support functions in the companies Lyse AS, Lyse Dialog AS, Lyse Eiendom Mariero AS and Lyse Eiendom Jørpeland AS. FINANCIAL ITEMS AND TAX Net financial cost amounts to NOK 151 million in the first half year, a reduction of 22 million compared to the first six months of Both long-term and short-term interest rates were low during the first half year, from a historical perspective. Of the Group s net interest-bearing debt (exclusive of financial lease liabilities) amounting to NOK million, million is hedged through fixed-rate loans and interest swap agreements with a remaining maturity of up to 15 years. This, along with the inherent interest rate hedges in the Electricity Grid Segment as well as the resource rent tax, means that the annual profits for the next few years are moderately sensitive to changes in the interest rates in the short and medium term. Of the Group s total interest-bearing liabilities (inclusive of financial lease liabilities) of NOK million, bond loans and bank loans amount to NOK and million. The loans have a term to maturity ranging from 1 to 15 years, and annual refinancing requirements are actively managed. Lyse experienced good access to funding sources through the first half year 2018, as well as reduced credit margins. In May 2018 Lyse issued a new loan amounting to EUR 90 million in the German Schuldshein market, Namensschuldverschreibung ( NVS ). The loan consists of two equally sized tranches with a maturity of 12 and 15 years. The issuance opened a new source of funding and contributes to increasing the diversification of Lyses funding 8

9 sources. Lyse also issued NOK 225 million in new bonds during the first half year, with an average maturity of 3 years. During the first 6 months of 2018 Lyse bought back NOK 179 million of bonds with a shorter maturity. In May Lyses official rating of BBB+ with a stable outlook from Scope Ratings was reconfirmed. Lyse received its first official rating in 2017 by Scope Ratings. Tax cost for the first half year amounts to NOK 703 million. The corresponding number for 2017 was 443 million. In accordance with the provisions of the Norwegian Accounting Act, the Board of Directors confirms that the interim financial statements have been prepared on the going concern assumption, and that it is appropriate to make that assumption. CASH FLOWS The Group s operations produced cash flows of NOK million the first half year of 2018, against 823 million during the same period last year. During the first 6 months of 2018, Lyse invested a total amount of NOK million, an increase of 388 million from the same period in The distribution between the segments is presented in the following table: (Amounts in NOK millions) Energy Telecommunications Electricity Grid Other* Gross investments in property plant and equipment and shares *) Other consists of Lyse AS, Smartly AS, Lyse Link AS, Lyse Dialog AS, Lyse Eiendom Mariero AS and Lyse Eiendom Jørpeland AS The increase in investments in the Telecommunications segment is primarily because Viken Fiber was not consolidated as a subsidiary at the corresponding time last year. In addition, there has been made short term financial investments of NOK 126 million. Received payments from associated companies and joint ventures of NOK 162 million are due to a down-payment of a loan to Skangas AS. Interest-bearing debt (inclusive of financial lease liabilities) amounts to NOK million at the end of the first half year. At the beginning of the year the Group s interestbearing debt amounted to NOK million. The Groups cash and cash equivalents has increased from NOK million at the beginning of the year to million at the end of the first half year. Net interest-bearing debt amounts to NOK million, decreasing from million at the start of the year. The Groups available cash and cash equivalents, consisting of Bank deposits and unused drawing rights, amounted to NOK million by the end of the first half year. At the end of the first half year the Group s equity amounted to NOK million which equals an equity ratio of 30%. Including of subordinated loans the equity ratio is 37%. HEALTH, SAFETY AND THE ENVIRONMENT The Group s sick leave in the first half year was 4.1%, compared to 4.0% in the first half of employee injuries were reported in the Group in the first half of The injuries resulted in 21 days of sick leave. FUTURE OUTLOOK The Board continue the strategy of diversification and growth. This strategy has materialized in even more stable results and dividends to the shareholders. The first half-year results for the Energy segment is solid due to high energy prices combined with high production. The Board expect a solid financial performance for the full year, however a slightly weaker resource situation and high uncertainty about further development in the electricity 9

10 price gives expectations about a more normalized financial performance in the second half of The Telecommunications segment is expected to deliver stable growth in customer numbers, but with a flatter development in margins due to increased competition resulting in higher sales cost, increased content cost, investments in double IT and TV platforms. However, these initiatives are expected to give increased revenue and reduced cost over time. This will, combined with initiated cost programs, result in significantly reduced cost per customer. The financial performance from the grid operation is expected to have a stable development going forward, however initiated cost programs will over time reduce the cost per customer. Stavanger, 23 August 2018 The Board of Directors of Lyse AS Harald Espedal Chairman of the board Kristine Enger Deputy Chair Pål Morten Borgli Board member Svein Ingvar Gjedrem Board member Stine Rolstad Brenna Board member Sissel Knutsen Hegdal Board member Arne M. Sele Board member Marie Folstad Board member Eimund Nygaard Managing Director/ CEO 10

11 Compliance declaration from the Board of Directors and Managing Director/ CEO We confirm that the unaudited financial statements for the period 1 January to 30 June 2018 have, to the best of our knowledge, been prepared in accordance with IAS 34 Interim Reporting and that the accounts provide a true and fair view of the assets, liabilities, financial position and results as a whole and that the information in the interim report provides a true and fair view of key events during the accounting period and their impact on the interim accounts as well as a specification of the most important risk and uncertainty factors that the company will face during the next accounting period. Stavanger, 23 August 2018 The Board of Directors of Lyse AS Harald Espedal Chairman of the board Kristine Enger Deputy Chair Pål Morten Borgli Board member Svein Ingvar Gjedrem Board member Stine Rolstad Brenna Board member Sissel Knutsen Hegdal Board member Arne M. Sele Board member Marie Folstad Board member Eimund Nygaard Managing Director/ CEO 11

12 Statement of profit and loss (Amounts in NOK 1,000) Note Sales revenue Net gain from the sale of business Gross profit Cost of sales Payroll costs Depreciation and impairment Net other operating income and costs 2, Licence fees and property tax Other operating costs Operating profit Share of the profit from associated companies and joint ventures 2, Financial income Financial costs Profit before tax Excess profits tax Resource rent tax Tax cost Profit for the period Allocated to: Shareholders Non-controlling interests

13 Statement of comprehensive income (Amounts in NOK 1,000) Note Profit for the period Items that will not recycle over profit and loss in future periods Other pension effects Items that will recycle over profit and loss in future periods Cash flow hedging, currency forward contracts Cash flow hedging, interest swap contracts Cash flow hedging Euro loans Share of other comprehensive income in associated companies and joint ventures Currency translation differences, associated companies Currency translation differences, subsidiaries Total of items that will recycle over profit and loss in future periods Statement of comprehensive income for the period Total comprehensive income for the period Allocated to: Shareholders Non-controlling interests Total comprehensive income for the period Earnings per share of comprehensive income allocated to the Company s shareholders

14 Balance sheet ASSETS (Amounts in NOK 1,000) Note Non-current assets Waterfall rights Other intangible assets Deferred tax asset Tangible fixed assets Investments in associated companies and joint ventures Other non-current financial assets Derivatives Other receivables Total non-current assets Current assets Stock Trade receivables and other receivables Derivatives Current financial assets Cash and cash equivalents 5, Total current assets TOTAL ASSETS

15 EQUITY AND LIABILITIES (Amounts in NOK 1,000) Note Equity Share capital and premium reserve Other equity Equity allocated to the Company's shareholders Non-controlling interest Total equity Liabilities Non-current interest-bearing liabilities 5, Deferred tax liability Deferred tax liability (resource rent) Pension liabilities Derivatives Provisions Other non-current liabilities Total non-current liabilities Current interest-bearing liabilities 5, Accounts payable and other current liabilities Tax payable Derivatives Provisions Total current liabilities Total liabilities TOTAL EQUITY AND LIABILITIES

16 Statement of cash flows (Amounts in NOK 1,000) Cash flow from operating activities Profit before tax Net gain from the sale of business Depreciation and write-downs Gain on sales of tangible fixed assets Net other operating income and cost classified as operations Change in pension liabilities Net financial costs Profit/loss from associated companies and joint ventures Change in trade receivables and other current receivables Change in accounts payable and other current liabilities Change in stock Other changes Net cash flows from operating activities Interest paid Tax paid Net cash flow from operating activities Cash flow from investment activities Payments on purchase of tangible fixed assets and intangible assets Receipts from sale of tangible fixed assets Net receipts and payments, loans to associated companies and joint ventures Net receipts and payments, shares in subsidiaries Net receipts and payments, shares of associated companies and joint ventures Net receipts and payments, investments available for sale Net receipts and payments, other financial investments Net receipts and payments, current financial assets Cash effect disposal of subsidiaries Net cash flows from investment activities

17 Statement of cash flows cont. (Amounts in NOK 1,000) Cash flow from financing activities Payment of equity from non-controlling ownership shares Borrowings Repayment of interest-bearing liabilities Payment of financial lease liabilities Dividends paid to minority shareholders of subsidiaries Dividends paid to company shareholders Net cash flow from financing activities Change in cash and cash equivalents Cash and cash equivalents as at beginning of period Cash through the acquisition of subsidiaries Cash and cash equivalents at end of period

18 Statement of changes in equity CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FIRST HALF YEAR 2018 (Amounts in NOK 1,000) Share capital and share premium Other equity Retained earnings Equity allocated to Company s shareholders Non-controlling interest Total equity Balance at 1 January Profit for the period Other comprehensive income for the period Total comprehensive income for the year after tax Dividend Other changes recorded directly against equity Balance at 30 June SPECIFICATION OF OTHER EQUITY (Amounts in NOK 1,000) Translation differences Hedging Pensions Total other equity Balance at 1 January Other pension effects Cash flow hedging Share of other comprehensive income, associated companies Currency translation differences subsidiaries Balance at 30 June

19 Statement of changes in equity cont. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FIRST HALF YEAR 2017 (Amounts in NOK 1,000) Share capital and share premium Other equity Retained earnings Equity allocated to Company s shareholders Non-controlling interest Total equity Balance at 1 January Profit for the period Other comprehensive income for the period Total comprehensive income for the year after tax Dividends Capital increases Other changes recorded directly against equity Balance at 30 June SPECIFICATION OF OTHER EQUITY (Amounts in NOK 1,000) Translation differences Hedging Investments booked using equity method Pensions Total other equity Balance at 1 January Other pension effects Cash flow hedging Transferred to other equity Share of other comprehensive income, associated companies Currency translation differences subsidiaries Balance at 30 June

20 Notes to the interim consolidated financial statements 1 Summary of material accounting principles The consolidated financial statements for the first half of 2018, ending 30 June 2018, have been prepared in accordance with IFRS (International Financial Reporting Standards as adopted by the EU) and consist of Lyse AS and its subsidiaries, associated companies and joint ventures. The interim consolidated financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting. As the information provided in the interim financial statements is less comprehensive than the information provided in the annual financial statements, these statements should be read in conjunction with the consolidated annual financial statements for The interim consolidated financial statements have not been audited. The accounting principles and calculation methods applied in the interim consolidated financial statements are the same as those described in Note 2 of the consolidated financial statements for Amendments to the accounting principles and information a) New and amended standards adopted by the Group With effect from 1 January 2018, the Group has implemented IFRS 9 Financial instruments and IFRS 15 Revenue from Contracts with Customers. IFRS 9 Financial instruments The implementation of IFRS 9 Financial instruments had no significant impact. IFRS 15 Revenue from Contracts with Customers The implementation of the standard did not have a significant impact, however there is an ongoing discussion within the industry related to the accounting treatment of customer facility contributions. Whitin the Electricity grid area the customers pay a contribution towards the cost of upgrades or new connections to the power grid. This also applies for the Telecommunications area however to a lesser extent. The facility investment contributions are currently recognized as income in their entirety when it is justified. Currently there are discussions within the industry on the accounting treatment of such customer contributions and if these are to be considered a seperate delivery obligations under IFRS 15. If going forward the industry practice will vary from Lyse, the company may change the conclusion and correspondingly the accounting treatment. b) Standards, amendments and interpretations of existing standards that have not come into effect and which the Group has chosen not to adopt early 20

21 IFRS 16 Leases IFRS 16 specifies principles for recognising, measuring, presenting, and notes disclosures for leases. The standard replaces IAS 17 and corresponding interpretations and will come into effect in It is expected that more lease agreements will be treated as financial lease compared to current treatment. This is because the standard stipulates that all leases should be capitalised in line with a model equivalent to that used for financial leases under IAS 17. There are two exceptions to the standard s capitalisation principle: low-valued leases and short-term leases (lease periods up to 12 months). When leases are capitalised there will be recognised a lease liability and an asset that represents the right to use the asset. Interest costs will be calculated for the liability and the asset will be depreciated. The interest costs and the depreciation will be calculated independently. The Group is currently mapping all leases that will change from operational to financial lease when this standard will come into effect. There is an implementation choice between a full retrospective or a modified retrospective implementation. The Group is in a process of analysing the scope and has yet to choose preferred implementation method. The planned date for implementation is 1 January No other identified IFRS or IFRIC interpretations that have not come into effect are expected to have a material impact on the financial statements. c) Changes in accounting principles Revenue recognition for sale of energy The Group has with effect from 1 January 2018 changed the recognition of repurchase of hydropower for resale to the Group s end customers. In prior years, the value of repurchased hydropower was eliminated against the total revenue of the Energy segment and the Group s total revenue. The Company has evaluated current practice and adopted a change. As a result the revenue is presented gross, which is also in line with the majority of similar companies. This change only affects the presentation and has no effect on the operating income. The comparable numbers in the profit and loss statement and the segment note are restated and a bridge is included in note 2 Segment information. Recognition of share of profit or loss from associated companies and joint ventures The Group has chosen to change the presentation of profit or loss from associated companies and joint ventures. The share of profit or loss is now presented wihtin net financial items. This share of profit or loss was previously included in operating profit. Amounts in the statement of profit and loss and the segment note have been adjusted to reflect this change. 21

22 2 Segment information ENERGY Key figures, Energy Average production GWh Water reservoir capacity GWh Hydroelectricity production GWh Area price NO2 øre/kwh Actual price (excl. hedging) øre/kwh Book value of hydroelectricity per KWh NOK/kWh Electricity supply, end-user GWh Delivered volume, natural gas GWh Delivered volume, district heating GWh TELECOMMUNICATIONS Key figures, Telecommunications Capital employed NOK mill EBITDA NOK mill EBITDA margin % 35.6 % 27.9 % 47.4 % Carrying value tangible fixed assets and investments in associated companies and joint ventures NOK mill No. of kilometres of fiber optic network Km No. of active fiber optic customers in the Altibox partnership No. of active fiber customers owned by Lyse *) No. of fiber contracts sold *) Including subsidiaries and joint ventures owned by Lyse GRID ACTIVITY Key figures, Electricity grid No. of electricity grid customers Delivered energy GWh Net capital (NVE capital) used as a basis in revenue cap NOK mill KILE costs NOK mill

23 STATEMENT OF PROFIT AND LOSS (Amounts in NOK millions) Energy Electricity grid Other segments Telecommunications Eliminations Group Gross sales revenue Inter-segment sales Operating revenue EBITDA*) Cost of sales Depreciation and impairment Net other operating income and costs Operating profit Share of profit/loss from associated companies and joint ventures **) Financial income Financial costs Profit/loss before tax Resource rent tax Interim profit/loss before ordinary tax Of which - revenue/costs (-): Unrealised changes in value, financial instruments (before tax) Non-recurring items (before tax) Lower revenue in the period, recognised (before tax) *) EBITDA is defined as operating profit + depreciation and impairment. The amounts are restated according to changes in principles for classification of share of profit from associated companies and joint ventures. **) Income from a share of the result in associated companies and joint ventures (+), losses on a share of the result in associated companies and joint ventures (-) 23

24 STATEMENT OF PROFIT AND LOSS (Amounts in NOK millions) Energy Electricity grid Other segments Telecommunications Eliminations Group Gross sales revenue***) Inter-segment sales Net gain from sale of business Operating revenue EBITDA*) Cost of sales***) Depreciation and impairment Net other operating income and costs Operating profit Share of profit/loss from associated companies and joint ventures **) Financial income Financial costs Profit before tax Resource rent tax Interim profit before ordinary tax Of which - revenue/costs (-): Unrealised changes in value, financial instruments (before tax) Non-recurring items (before tax) Lower revenue in the period, recognised (before tax) *) EBITDA is defined as operating profit + depreciation and impairment. The amounts are restated according to changes in principles for classification of share of profit from associated companies and joint ventures. **) Income from a share of the result in associated companies and joint ventures (+), losses on a share of the result in associated companies and joint ventures (-) ***) Amounts in Energy are changed as a consequence of a changed principle for recognition of energy revenue per 1. January. The change has no effect on net income. 24

25 STATEMENT OF PROFIT AND LOSS (Amounts in NOK millions) Energy Electricity grid Other segments Telecommunications Eliminations Group Gross sales revenue***) Inter-segment sales Net gain from sale of business Operating revenue EBITDA*) Cost of sales***) Depreciation and impairment Net other operating income and costs Operating profit Share of profit/loss from associated companies and joint ventures **) Financial income Financial cost Profit before tax Resource rent tax Interim profit before ordinary tax Of which - revenue/costs (-): Unrealised changes in value, financial instruments (before tax) Non-recurring items (before tax) Lower revenue in the period, recognised (before tax) *) EBITDA is defined as operating profit + depreciation and impairment. The amounts are restated according to changes in principles for classification of share of profit from associated companies and joint ventures. **) Income from a share of the result in associated companies and joint ventures (+), losses on a share of the result in associated companies and joint ventures (-) ***) Amounts in Energy are changed as a consequence of a changed principle for recognition of energy revenue per 1. January. The change has no effect on net income. 25

26 ASSETS AND LIABILITIES PER SEGMENT (Amounts in NOK millions) Energy Electricity grid Other segments Telecommunications Eliminations Group Assets Associated companies and joint ventures Total assets Total liabilities Investments in tangible fixed assets Investments in shares and other investments ASSETS AND LIABILITIES PER SEGMENT (Amounts in NOK millions) Energy Electricity grid Other segments Telecommunications Eliminations Group Assets Associated companies and joint ventures Total assets Total liabilities Investments in tangible fixed assets Investments in shares and other investments ASSETS AND LIABILITIES PER SEGMENT (Amounts in NOK millions) Energy Electricity grid Other segments Telecommunications Eliminations Group Assets Associated companies and joint ventures Total assets Total liabilities Investments in tangible fixed assets Investments in shares and other investments

27 Changes in accounting principles The table below shows changes in comparative figures as a consequence of a changed principle for recognition of energy revenue per 1 January The change has no effect on net income. ENERGY Originally Restated Gross sales revenue Cost of sales ENERGY Originally Restated Gross sales revenue Cost of sales Sale of ownership interests Sale of Sensio AS On 2 May 2018 Lyse sold its shares in Sensio AS. The 100 % owned subsidiary LSS Holding AS owned 16 % of the shares in Sensio AS. Compensation for the shares amounted to NOK 25.8 millions and the booked gain for Lyse amounted to NOK 20.7 millions. The gain is included in the Other segment and is recognised in the income statement under net financial items. 27

28 4 Net other operating income and costs Other operating income and cost consist of unrealised changes in the fair value of financial instruments. The note covers other operating income and costs that are recognised through profit and loss, and items recognised in other comprehensive income. The note presents income and costs as they affect the profit/loss for the year and other comprehensive income. In other words, income is presented as positive amounts and costs as negative amounts. NET OTHER OPERATING INCOME AND COSTS RECOGNISED IN PROFIT/LOSS Financial instruments: Financial instruments at fair value through profit/loss Financial hydropower contracts - held for hedging purposes Currency derivatives in long-term physical industry contracts in EUR Currency derivatives held for hedging purposes Other unrealised changes in value Long-term financial hydropower contracts Other (losses)/gains net for financial instruments OTHER (LOSSES)/GAINS NET INCLUDED IN OTHER COMPREHENSIVE INCOME Financial instruments at fair value recognised in other comprehensive income Cash flow hedging, currency forward contracts Cash flow hedging, interest swap contracts Cash flow hedging, liabilities in EUR Other (losses)/gains net included in other comprehensive income

29 5 Financial instruments Financial instruments recorded at fair value on the reporting date are categorised into levels considering measurement of fair value: Level 1: Quoted price in an active market for an identical asset or liability. Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. Level 3: Valuation based on factors that are not taken from observable markets (non-observable assumptions). Lyse has allocated hydropower contracts to level 3 when measuring at fair value. The contracts consists of an in advanced paid power sales agreement, commitments to free electricity and long-term industry contracts with power delivery settled in EUR where there is an embedded derivative. Examples of factors used as input for valuation at fair value when using dicounted cash flows are interest rate curves, consumer price indexes and forward prices for power and exchange rates. Observable market data is used in the calculations when possible. The fair value of the contracts are sensitive for changes in market prices related to the factors used as input. Changes in EUR forward prices can have a signficant impact on the fair value. For more information refer to note 6, 7 and 22 of Lyse s 2017 consolidated financial statements. For further information on the recognition and measurement of financial assets refer to Lyse s consolidated financial statements for 2017, available at lysekonsern.no. CARRYING VALUE PER MEASUREMENT CATEGORY: FINANCIAL ASSETS AS AT (Amounts in NOK 1,000) Financial assets at fair value through profit or loss Financial assets at fair value recognised in other comprehensive income Financial assets measured at amortised cost Total Fair value Non-current receivables Other non-current financial assets Derivatives Derivatives - hedge accounting Current assets - Bonds Trade receivables and other current receivables Cash and cash equivalents Total assets