Lyse AS Financial statements

Transcription

1 Half-Year Report 2017 Lyse AS Financial statements

2 Contents Key figures for Lyse Half-year report from the Board of Directors 2017 Declaration Income statement Extended consolidated profit Balance sheet Statement of cash flows Consolidated statement of changes in equity Notes on the interim accounts

3 Financial key figures for Lyse From the income statement Income NOK millions EBITDA (1) NOK millions EBITDA, underlying operations (2) NOK millions Operating result (EBIT) (3) NOK millions Unrealised changes in value, financial instruments NOK millions One-off items, EBITDA NOK millions One-off items, write-downs NOK millions Operating result (EBIT), underlying operations (4) NOK millions Net financial items NOK millions Profit/loss after tax NOK millions From the balance sheet Total capital NOK millions Of which plant and machinery and investments in companies NOK millions Cash and bank deposits NOK millions Equity NOK millions Gross interest-bearing liabilities, incl. financial leasing (5) NOK millions Of which proportion of subordinated loans NOK millions Capital employed (6) NOK millions Cash flows Net cash flow from operations NOK millions Net interest costs NOK millions Dividends to shareholders NOK millions Net investments in tangible fixed assets and intangible assets NOK millions Net investments in ownership interests (7) NOK millions Liquid assets NOK millions Unused drawing rights NOK millions

4 Scale of financing Funds from operations (FFO) (8) NOK millions EBITDA interest coverage (9) 6,7 7,3 6,6 FFO interest coverage (10) 3,1 4,0 4,2 Interest-bearing debt-equity ratio (11) % 61,9 % 62,3 % 60,1 % Equity ratio (12) % 29,3 % 28,9 % 30,0 % Equity ratio taking into account subordinated loans (13) % 38,3 % 38,5 % 39,3 % Key figures, Financial statements EBITDA margin, underlying operations (14) % 41,8 % 45,9 % 42,1 % EBIT margin, underlying operations (15) % 30,1 % 34,0 % 29,7 % Return on equity (16) % 9,6 % 16,2 % 11,8 % Return on average capital employed (17) % 9,1 % 12,1 % 10,6 % Shareholders Subordinated loans from shareholders NOK millions Interest and instalments, subordinated loans NOK millions Dividends/shareholder withdrawals NOK millions Earnings per share (18) kr Definitions: (1) EBITDA (2) EBITDA, underlying operations (3) EBIT (4) EBIT, underlying operations (5) Interest-bearing liabilities (6) Capital employed (7) 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 one-off 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 leasing liabilities Equity + interest-bearing liabilities Purchase of equity or units 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 2017 Lyse is a Norwegian group operating within the fields of energy, telecommunications and infrastructure. Lyse is a national player within renewable energy and a national leader within fibre broadband. Regionally, Lyse has developed the country s most varied and complete infrastructure for fibre broadband, electricity, biogas and natural gas, and district heating. Good availability and security of supply are priorities. The company s shareholders are 16 municipalities in Southern Rogaland. 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 profitability. IMPORTANT EVENTS FIRST HALF-YEAR 2017 The development of the new power plant in Lysebotn is on schedule and on budget Lyse sold a further 19% of the shares in Skangas AS to the Finnish company Gasum it retains a stake of 30% Solar cell panels for retail customers were launched and well received by the market The Altibox partnership passed 500,000 sold fibre contracts in June The new Altibox TV was launched a market leading portal for linear and streamed TV Lyse now supplies fibre to all owner municipalities following Kvitsøy s expansion decision in the spring In May, Scope Ratings gave Lyse AS an official credit rating of BBB+ with a stable outlook Lyse AS issued its first green bond for NOK 500 million FINANCIAL RESULTS, FIRST HALF-YEAR The Lyse Group s first half-year profit before tax was NOK 935 million, compared with NOK 1,082 million for the same period last year. The first half-year profit after tax in 2017 was NOK 492 million, compared with NOK 630 million for the same period last year. The operating profit was NOK 1,095 million, a reduction of NOK 195 million compared with the same period last year. One-off items, primarily in the form of income recognition of the profit from the sale of Måkaknuten AS, amounted to NOK 22 million. One-off items in the first half of 2016 amounted to NOK 205 million and primarily consisted of the profit from the sale of Skangas AS s LNG plant in Risavika. The following presents the results from underlying operations, i.e. operating profit excluding one-off items and extraordinary circumstances. (Figures in NOK millions) Underlying operating income Underlying operating expenses Underlying Operating profit/loss Unrealised changes in value, financial instruments (income +) Material one-off items (income +) Operating profit/loss The Lyse Group s underlying operating income of NOK 3,283 million in the first half-year was distributed between the business areas as follows: Energy NOK 1,347 million, Telecommunications NOK 1,256 million, Infrastructure NOK 640 million, and other areas 5

6 NOK 40 million. In the Telecommunications business area, operating income increased by NOK 33 million compared with last year. The Group s underlying EBITDA (operating profit before depreciation and write-downs) was NOK 1,368 million, compared with NOK 1,534 million in the first half of last year. The underlying operating profit amounted to NOK 984 million, a reduction of 151 million compared with the same period last year. Even with higher market prices for energy, the reduction in energy generation compared with the same period last year resulted in a weaker operating profit from energy operations of NOK 53 million. Telecommunications underlying operating profit was down from NOK 294 million for the first half of 2016 to NOK 236 million for the first half of The reduction in the Telecommunications business area s underlying operating profit was primarily due to double IT costs in connection with the transition to a new TV platform, as well as costs linked to digitalisation and growth. Adjusted for these costs, the underlying operating profit for the Telecommunications business area was on a par with The primary reason behind the reduced operating profit for Infrastructure was that the income framework (permitted income) for 2017 was reduced compared with last year. Operational activities during the last 12 months produced a return of 9.6% measured by operating profit from underlying operations compared with the average capital employed. The table below shows the underlying operating profit/ loss for the Group s business areas. (Figures in NOK millions) Energy Telecommunications Infrastructure Others and eliminations *) Underlying operating profit per segment *) The Others and eliminations item includes Lyse AS, Smartly AS, Lyse Dialog AS, Lyse Link AS, Lyse Eiendom Mariero AS, and Lyse Eiendom Jørpeland AS. Lyse Alarm AS was also included in From and including the second quarter of 2016, the investment in LNG operations has been recognised using the equity method in the energy segment. The following section describes the underlying operating profits from the business areas in more detail. THE ENERGY BUSINESS AREA The Energy business area consists of the operation of the wholly owned companies Lyse Produksjon AS (which administers the ownership interests in Sira-Kvina Kraftselskap DA, Ulla Førre Verkene, and Jørpeland Kraft AS), Lyse Energisalg AS, and Lyse Neo AS. The operating profit from underlying operations was NOK 681 million, compared with NOK 773 million for the same period last year. Hydroelectricity generation delivered an operating result after resource rent tax of NOK 482 million, which represents a reduction of NOK 37 million compared with the same period last year. Energy generation in the first half-year amounted to 3.3 TWh, a reduction of 1.2 TWh compared with last year s record high generation volume. Meanwhile, spot prices during the period were higher than last year, primarily driven by a more normalised hydrological balance in the Nordic region and higher costs for thermal generation. The area price in Lyse s generation area was 26.6 øre/ kwh, compared with 21.3 øre/kwh for the same period last year. Gas and heating operations delivered an underlying operating result of NOK 32 million for the first halfyear, which is NOK 23 million higher than for the same period last year. A combined total of 370 GWh of gas and district heating was supplied, which represents an increase of 8 GWh compared with the first half of A significant proportion of the district heating volumes and parts of the gas volumes are indexed in relation to the market price for electricity. Higher market prices for electricity contributed to slightly better margins for the first half of The end-user market for electricity is characterised by strong competition and struggles for market shares. Lyse s end-user operations maintained their market shares in both the retail and corporate segments during the period. In April, the business launched solar product packages, which enable customers to implement decentralised electricity generation for their own use. The product has been well received. 6

7 LNG On 22 June 2017, Lyse sold a further 19% of its shares in Skangas AS and following this selldown it now retains a stake of 30% in the company. The selldown is in line with Lyse s long-term strategic goal of reducing its exposure within LNG. The majority shareholder in Skangas AS is Gasum OY, which is positioning itself for growth in the Nordic LNG market. Gasum OY is wholly owned by the Finnish state. As part of the selldown, an agreement has been signed that gives Lyse the right to sell its remaining shares in Skangas AS, while Gasum has a corresponding right to buy Lyse s remaining stake of 30%. The business is exposed to a market situation in which the competition consists of various petroleum products. Low market prices for the customers alternative energy products are resulting in strong competition and putting delivery volumes and margins under pressure. Skangas s contribution to the result was negative in the amount of NOK 42.9 million in the first half-year. THE TELECOMMUNICATIONS BUSINESS AREA The Telecommunications business area consists of the wholly owned digital TV and internet provider Altibox AS, the wholly owned fibre optic company Lyse Fiber AS and the investment company Lyse Fiberinvest AS, which is the owner company of the other fibre companies in which Lyse has ownership interests. Lyse Fiberinvest owns, among other things, Viken Fiber AS (71%), Bergen Fiber AS (37%), Signal Bredbånd AS (100%) and Istad Fiber AS (50%). Viken Fiber, Bergen Fiber, and Istad Fiber are all joint ventures. As of 30 June 2017, Altibox had a total of 465,061 customers, compared with 422,325 as of 30 June The operating profit before depreciation (EBITDA) was NOK 382 million, compared with NOK 430 million for the same period last year. The operating profit from underlying operations was NOK 236 million, compared with NOK 294 million for the first half of The reduction in the Telecommunications business area s underlying operating profit was primarily due to double IT costs in connection with the transition to a new TV platform, as well as costs linked to digitalisation and growth. Adjusted for these costs, the underlying operating profit for the Telecommunications business area was on a par with Inclusive of Lyse s stakes in the joint ventures Viken Fiber (71%), Bergen Fiber (37%), and Istad Fiber (50%), the EBITDA was NOK 523 million, compared with NOK 549 million for the same period last year. The business s products are in strong demand despite increased competition, and the sales results for the year to date have been good. There is a high focus on product development, efficient operations and optimisation of the value chain. THE INFRASTRUCTURE BUSINESS AREA Lyse s Infrastructure business area consists of the wholly owned grid operator company Lyse Elnett AS. The company s main tasks are to ensure stable energy supplies for its customers and efficient operations. The Infrastructure business area is a monopoly-based service and subject to special government control via the Norwegian Water Resources and Energy Directorate (NVE). At the end of the first half-year, Lyse Elnett AS had 142,200 grid customers and had supplied energy equivalent to 3,104 GWh, compared with 3,290 GWh in the same period last year. The underlying operating profit from the company was NOK 108 million in the first half of 2017, compared with NOK 158 million for the same period last year. The primary reason behind the reduced operating profit was that the income framework (permitted income) for 2017 was reduced compared with last year. Few interruptions resulted in low interruption costs (KILE costs) of NOK 6.8 million being recognised for the first half-year, a reduction from NOK 8.6 million for the same period in A total of NOK 154 million was invested in the business area during the period, with the investment of NOK 88 million in the distribution grid, which included connecting new customers, accounting for the largest share. NOK 42 million has been invested in the regional grid in the year to date. Grid operations achieved a total return (based on the half-year result before tax and average net capital) of 3.5% in the first half-year, compared with 5.1% for the same period last year. The Norwegian Water Resources and Energy Directorate (NVE) has measured the Group s grid operations and determined that they are among the most efficient in 7

8 the industry compared with the average for comparable companies. OTHER AREAS Other areas include support functions and the Smartly business. Smartly AS is the Lyse Group s company that provides services at the intersection between energy and technology. Its services are based on sensor technology and are generally covered by the collective noun the Internet of Things (IoT) where all things are connected to the internet. Its business includes smart home solutions and automatic meter data collection. Smartly has stabilised it product range and commenced sales after a period of interruption. The company is generating interest in new energy services. Smartly started 2017 with a far lower costs base than before thanks to a major restructuring process conducted in Smartly s operating result for the first half-year was a loss of NOK 19 million. The operating result for the same period last year was a loss of NOK 98 million, NOK 37 million of which were one-off costs. FINANCIAL ITEMS AND TAX Net financial costs amounted to NOK 160 million in the first half-year, a reduction of NOK 48 million compared with the same period last year. Both short-term and long-term market interest rates were low in the first half-year when viewed from a historical perspective. Of the Group s net interest-bearing liabilities (exclusive of financial leasing liabilities) of NOK 8,246 million, NOK 5,908 million is interest hedged through fixed-rate loans and interest swap agreements with a remaining maturity of up to 10 years. This, together with the inherent interest rate hedges in the grid business area and resource rent tax, means that the annual results for the next few years are moderately sensitive to changes in the market rates in the short and medium term. Of the Group s total interest-bearing liabilities (inclusive of financial leasing liabilities) of NOK 11,333 million, bond loans and bank loans amount to NOK 5,798 million and NOK 2,914 million respectively. Loans have a term to maturity ranging from 1 to 15 years and the annual refinancing requirements are actively managed. The loan market was good during the first half-year, with good supply and contracting credit margins. In the first half of 2017, Lyse issued new bonds worth a total of NOK 980 million, with an average term to maturity of 6 years Lyse bought back NOK 177 million in bond loans with shorter terms to maturity. In April, Lyse issued its first green bond, which was for NOK 500 million with a term to maturity of 6 years. To ensure a robust and flexible financing structure, the loan sources are diversified. In May, Scope Ratings gave Lyse AS an official rating of BBB+ with a stable outlook. The tax costs amounted to NOK 443 million in the first half-year. The corresponding figure for last year was NOK 452 million. The consolidated financial statements have been prepared on the basis of a going concern assumption. CASH FLOWS The Group s operations produced a cash flow of NOK 823 million, compared with NOK 1,007 million for the same period last year. The Lyse Group invested NOK 735 million in the first half of 2017, a reduction of NOK 271 million compared with the same period last year. The investments were distributed between the business areas as follows: (Figures in NOK millions) Energy Telecommunications Infrastructure Others and eliminations *) Gross investments (shares and current assets) *) The Others and eliminations item includes Lyse AS, Smartly AS, Lyse Link AS, Lyse Dialog AS, Lyse Eiendom Mariero AS, and Lyse Eiendom Jørpeland AS. Lyse Alarm AS was also included in

9 Interest-bearing liabilities (including financial leasing) amounted to NOK 11,333 million at the end of the first half-year. At the start of 2017, the Group s interestbearing liabilities were NOK 10,643 million. In the same period, the Group s cash and cash equivalents increased from NOK 2,062 million to NOK 2,816 million. Net interest-bearing liabilities were reduced from NOK 8,303 at the start of the year to NOK 8,246 at the end of the first half-year, primarily due to the selldown of 19% of the shares in Skangas AS. Cash reserves in the form of unrestricted bank deposits and committed drawing rights that can be activated within a few days amounted to NOK 4,616 at the end of the first half-year. At the end of the first half-year, the Lyse Group s book equity was NOK 6,968 million, which is equivalent to an equity ratio of 29%. Including subordinated loans, the equity ratio is 38%. HEALTH, SAFETY AND THE ENVIRONMENT The Group s sick leave in the first half-year was 4.0% compared with 4.4% in the first half of One employee injury was reported in the Group in the first half-year. The injury resulted in 10 days of sick leave. FUTURE OUTLOOK The Board believes that the Group s strategy of diversification and growth has been a success. The weaker results from the Energy business area due to lower energy prices are being counteracted by better results from the Telecommunications business area. The first half-year results for the Energy business area are somewhat weaker than in previous years, primarily due to lower generation. The Board of Directors anticipates stable prices for the remainder of the year and the current reservoir situation indicates normal production for the next six months. The Telecommunications business area is expected to deliver stable growth in customer numbers, but with a flatter development in margins compared with previous years due to a period of extraordinary costs linked to double IT platforms, digitalisation, and growth. Telecommunications has commenced a programme of cost cutting, which is expected to result in significantly reduced costs per customer in the long term. The results from grid operations are expected to develop stably. Stavanger, 22 August 2017 The Board of Directors of Lyse AS Harald Espedal Chair Reinert Kverneland Deputy Chair Iselin Nybø Board member Pål Morten Borgli Board member Kristine Enger Board member Irene Heng Lauvsnes Board member Øyvind S. Ediassen Employee representative Karen Ommundsen Employee representative Eimund Nygaard Managing Director/CEO. 9

10 Statement on compliance We confirm that the unaudited financial statements for the period 1 January to 30 June 2017 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, 22 August 2017 The Board of Directors of Lyse AS Harald Espedal Chair Reinert Kverneland Deputy Chair Iselin Nybø Board member Pål Morten Borgli Board member Kristine Enger Board member Irene Heng Lauvsnes Board member Øyvind S. Ediassen Employee representative Karen Ommundsen Employee representative Eimund Nygaard Managing Director/CEO. 10

11 Income statement (Figures in NOK thousands) Note Sales revenue Net gain from the sale of business Total income Commodity costs Payroll costs Depreciation and write-downs Net other operating income and costs Share of the profit from associated companies and joint ventures Licence fees and property tax Other operating costs Operating profit/loss Financial income Financial costs Profit before tax Excess profits tax Resource rent tax Tax cost Profit for the period Allocated to: Shareholders Non-controlling ownership interests

12 Consolidated statement of comprehensive income (Figures in NOK thousands) Note Profit for the period Items that will not be reclassified to the income statement: Other pension effects Items that may be reclassified to the income statement: Cash flow hedging, currency forward contracts Cash flow hedging, interest swap contracts Cash flow hedging EUR 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 may be reclassified to the income statement Statement of comprehensive income for the period Total comprehensive income for the period Allocated to: Shareholders Non-controlling ownership interests Total comprehensive income for the period Earnings per share of comprehensive income allocated to the company s shareholders

13 Balance sheet Assets (Figures in NOK thousands) Note Fixed assets Waterfall rights Other intangible assets Deferred tax benefit Tangible fixed assets Investments in associated companies and joint ventures Financial assets available for sale Derivatives Other receivables Total fixed assets Current assets Stock Trade receivables and other receivables Derivatives Bank deposits, cash and cash equivalents 5, Total current assets TOTAL ASSETS

14 Equity and liabilities (Figures in NOK thousands) Note Equity Share capital and premium reserve Other equity Equity allocated to the company's shareholders Non-controlling ownership interests Total equity Liabilities Non-current interest-bearing liabilities 5, Deferred tax Deferred tax, 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

15 Statement of cash flows (Figures in NOK thousands) Profit before tax Net gain from the sale of business Depreciation and write-downs Gain on sales, plant and machinery Net other operating income and costs 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 Change in other dated items Net cash flows from operational activities Interest paid Tax paid Net cash flow from operations 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 Cash effect disposal of subsidiaries Net cash flows used in investment activities Cash flow from financing activities Payment of equity from non-controlling ownership shares Borrowings Repayment of interest-bearing liabilities Payment of financial leasing liabilities Dividends paid to company shareholders Net cash flow used for financing activities Change in cash and cash equivalents Cash and cash equivalents as at 1 January Cash on acquisition of subsidiaries Cash and cash equivalents at end of period

16 Consolidated statement of changes in equity Consolidated statement of changes in equity (Figures in NOK thousands) Share capital and share premium Other equity not recognised Retained equity Equity allocated to company s shareholders Noncontrolling ownership interests Equity 31 Dec Profit for the period Other comprehensive income for the period Total equity Total comprehensive income for the year after tax Dividends Capital increases Other changes recorded directly against equity Equity 30 June Specification of other reserves (Figures in NOK thousands) Translation differences Investments available for sale Hedging Investments booked using equity method Pensions TOTAL Balance 1 January Other pension effects Cash flow hedging Transferred to other equity Share of other comprehensive income, associated companies Currency translation differences subsidiaries Balance 30 June

17 Consolidated statement of changes in equity (Figures in NOK thousands) Share capital and share premium Other equity not recognised Retained equity Equity allocated to company s shareholders Noncontrolling ownership interests Equity 31 December Profit for the period Other comprehensive income for the period Total equity Total comprehensive income for the year after tax Dividends Capital increases Other changes recorded directly against equity Equity 30 June Specification of other reserves (Figures in NOK thousands) Translation differences Investments available for sale Hedging Investments booked using equity method Pensions TOTAL Balance 1 January Other pension effects Cash flow hedging Transferred to other equity Share of other comprehensive income, associated companies Currency translation differences subsidiaries Balance 30 June

18 Notes on the interim financial statements 1 Summary of the most important accounting policies The consolidated financial statements for the first half of 2017, ending 30 June 2017, have been prepared in accordance with the accounting policies in IFRS (International Financial Reporting Standards) as adopted by the EU and cover Lyse AS and its subsidiaries, associated companies and joint ventures. The interim accounts are submitted in accordance with IAS 34 Interim Reporting. These interim financial statements do not provide the same scope of information as annual financial statements and must therefore be viewed together with the Group s annual financial statements for The Interim financial statements have not been audited. The accounting policies and calculation methods applied in the interim financial statements are the same as those described in Note 2 in the consolidated financial statements for Amendments to the accounting policies and information a) New and amended standards adopted by the Group No new standards have been adopted to date in 2017 that materially affect the financial statements. b) Standards, amendments and interpretations of existing standards that have not come into effect and which the Group has chosen not to adopt early A number of new standards, amendments to standards and interpretations are compulsory for future annual financial statements. The most important of these that the Group has chosen not to apply early are described below. IFRS 9 Financial Instruments IFRS 9 deals with the classification, measurement and recognition of financial assets and liabilities, as well as hedge accounting. It was issued in July 2014 and replaced IAS 39. According to IFRS 9, financial assets must be classified into three categories: fair value through other comprehensive income, fair value through profit or loss and amortised cost. The measurement category is determined by the initial recognition of the asset. The classification depends on the unit s business model for managing its financial instruments and the characterisation of the cash flows of the individual instrument. Equity instruments must as a starting point e measured at fair value through profit or loss. A company can choose to present changes in value through other comprehensive income, but the choice is binding and in the event of a subsequent sale the gain/ loss cannot be reclassified through profit or loss. An impairment due to credit risk must now be recognised on the basis of the expected losses unlike in the current model where losses must have been incurred. The standard largely continues the requirements of IAS 39 as far as financial liabilities are concerned. The biggest change is that in cases where the fair value option has been used for a financial liability, changes in fair value that are due to changes in own credit risk must be recognised in other comprehensive income. IFRS 9 simplifies the requirements for hedge accounting in that the effect of the hedging is more closely linked to the executive management team s risk management and provides greater room for discretion. Meanwhile, hedging 18

19 documentation is still required. The standard comes into force in the 2018 financial year, but early application is permitted. The Group does not expect the implementation of this standard to have any material effects on the figures. The planned date for implementation is 1 January IFRS 15 Revenue from Contracts with Customers IFRS 15 deals with income recognition. The standard requires customer contracts to be classified by individual performance obligations. A performance obligation can be a good or a service. Income is recognised when a customer achieves control of a good or a service and thus is able to determine the use of, and receive the benefits of, the good or service. The standard replaces IAS 18 Revenue and IAS 11 Construction Contracts, as well as associated interpretations. The standard comes into force in the 2018 financial year, but early application is permitted. A number of different implementation methods are permitted for this standard. Both full retrospective and modified retrospective implementation are permitted. The Group is currently working on an impact analysis. This has not been completed yet and the implementation method has therefore not been chosen. Some changes in the accrual of income, as well as further disclosures in notes are expected. The planned date for implementation is 1 January IFRS 16 Leases IFRS 16 specifies policies for recognising, measuring, presenting, and notes disclosures for leases. The standard replaces IAS 17 and associated interpretations and will come into effect in 2019, but has not yet been by the EU. More leases are expected to be treated as financial leases than is currently the case in the Group. 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 rule: leases for low-value assets and short-term leases for lease periods of up to 12 months. When leases are capitalised they will be recognised as a liability to pay rent and an asset that represents the right to use the asset. Interest costs will be calculated for the liability and depreciation will be calculated for the asset. The interest costs and depreciation will be calculated independently of each other. The Group is currently analysing all of the leases that will switch category from operational to financial lease upon the implementation of this standard. Here too one can choose between full retrospective or modified retrospective implementation. The Group is in the process of analysing the scope and has not chosen the implementation method it wants to use. The planned date for implementation is 1 January No other IFRS and IFRIC interpretations not yet in force are expected to have a material impact on the financial statements. 19

20 2 Segment information Energy Key figures, Energy Mean generation GWh Reservoir capacity GWh Hydroelectricity generation GWh Area price NO 2 øre/kwh 26,55 21,27 23,32 Actual price attained (excl. hedging) øre/kwh 28,98 22,85 25,06 Book value of hydroelectricity per KWh kr/kwh 1,16 1,17 1,18 Electricity supply, end-user GWh Supplied volume, natural gas GWh Supplied volume, district heating GWh Telecommunications Key figures, Telecommunications Capital employed NOK millions EBITDA NOK millions EBITDA margin % 33,5 % 38,6 % 38,3 % Book value plant and machinery, associated companies, and joint ventures NOK millions No. of kilometres of fibre optic network Km No. of active fibre optic customers in the Altibox partnership No. of active fibre customers owned by Lyse *) No. of fibre contracts sold *) Including subsidiaries and joint ventures owned by Lyse Infrastructure Key figures, Infrastructure No. of mains customers Supplied energy GWh Net capital (NVE capital) used as basis in income framework NOK millions KILE costs NOK millions 6,84 8,58 16,32 20

21 Income statement, (Figures in NOK millions) Energy Other segment Telecommunications Infrastructure Eliminations Gross sales revenue Inter-segment sales Net gain from the sale of business Income Group EBITDA *) Commodity costs Depreciation and write-downs Net other operating income and costs Share of the profit from associated companies and joint ventures **) Operating profit/loss Financial income Financial costs Profit/loss before tax Resource rent tax Interim profit before ordinary tax Of which - income/costs (-): Unrealised changes in value, financial instruments (before tax) One-off items (before tax) Lower income in the period, recognised (before tax) *) EBITDA is defined as: operating profit/loss + depreciation and write-downs **) Income from the share of the result in associated companies and joint ventures (-), losses on the result in associated companies and joint ventures (+) 21

22 Income statement, (Figures in NOK millions) Energy Other segment Telecommunications Infrastructure Eliminations Gross sales revenue Inter-segment sales Net gain from the sale of business Income Group EBITDA *) Commodity costs Depreciation and write-downs Net other operating income and costs Share of the profit from associated companies and joint ventures **) Operating profit/loss Financial income Financial costs Profit/loss before tax Resource rent tax Interim profit before ordinary tax Of which - income/costs (-): Unrealised changes in value, financial instruments (before tax) One-off items (before tax) Lower income in the period, recognised (before tax) *) EBITDA is defined as: operating profit/loss + depreciation and write-downs **) Income from the share of the result in associated companies and joint ventures (-), losses on the result in associated companies and joint ventures (+) 22

23 Income statement, (Figures in NOK millions) Energy Other segment Telecommunications Infrastructure Eliminations Gross sales revenue Inter-segment sales Net gain from the sale of business Income Group EBITDA *) Commodity costs Depreciation and write-downs Net other operating income and costs Share of the profit from associated companies and joint ventures **) Operating profit/loss Financial income Financial costs Profit/loss before tax Resource rent tax Interim profit before ordinary tax Of which - income/costs (-): Unrealised changes in value, financial instruments (before tax) One-off items (before tax) Lower income in the period, recognised (before tax) *) EBITDA is defined as: operating profit/loss + depreciation and write-downs **) Income from the share of the result in associated companies and joint ventures (-), losses on the result in associated companies and joint ventures (+) 23

24 Business area s assets and liabilities, (Figures in NOK millions) Energy Other segment Assets Associated companies and joint ventures Total assets Total liabilities Investments in tangible fixed assets Investments in shares and units Group Business area s assets and liabilities, (Figures in NOK millions) Energy Other segment Assets Associated companies and joint ventures Total assets Total liabilities Investments in tangible fixed assets Investments in shares and units Group Business area s assets and liabilities, (Figures in NOK millions) Energy Other segment Telecommunications Infrastructure Eliminations Telecommunications Infrastructure Eliminations Telecommunications Infrastructure Eliminations Assets Associated companies and joint ventures Total assets Total liabilities Investments in tangible fixed assets Investments in shares and units Group 24

25 3 Sale of ownership interests Selldown in associated company, Skangas AS On 2 May 2014, Lyse sold 51% of its shares in its subsidiary Skangas AS to the Finnish company Gasum OY (Gasum). From this date, Lyse derecognised the subsidiary s assets and liabilities at their book value and recognised the fair value of the remaining asset as an associated company. Because the investment was recognised at fair value, the asset was recognised with significant excess value on the date of the transaction. According to the sales agreement signed for the 2014 transaction, Lyse had the right to sell (put option) a further 15.6% of the shares in Skangas AS, and Gasum had a corresponding right to buy (call option) the same stake. The remuneration agreed in Lyse s put option was based on the price in the 2014 transaction plus the 10-year Finnish government bond yield. On 22 June 2017, Lyse sold a further 19% of its shares in Skangas AS to Gasum for EUR 50 million. Following the transaction, Lyse owns a 30% stake and Gasum 70%. The options in the 2014 transaction were not exercised since the selldown took place prior to the period for exercising them, but the transaction price nonetheless reflects the remuneration agreed in 2014 for the 15.6% stake covered by the options. The net value of the options was NOK 6.2 million on the date of the transaction and they were derecognised as a consequence of the selldown. The derecognition is included in the fair value of the remuneration in the transaction. Following the selldown, Lyse retains considerable influence and the investment in Skangas AS is still classified as an associated company. A shareholder agreement has been entered into between the parties. The investment in Skangas AS is included in the Energy segment. The parties have, as part of the transaction, entered into an agreement in which Lyse has the right to sell (put option) and Gasum has the right to buy (call option) the remaining 30% stake in Skangas AS. The options are recognised at fair value as a part of the remuneration. The fair value on the date of the transaction was estimated at NOK 0 million. In 2016, Lyse sold 100% of the shares in its subsidiary Risavika LNG Production AS to Skangas AS. 49% of the calculated gain, NOK 225 million, was considered not realised and was used to reduce the book value of the investment in Skangas AS. A proportion corresponding to a 19% stake in Skangas is now regarded as realised and included in the calculation of the gain. The unrealised gain from the RLP transaction is included in the line Book value of sold share of Skangas AS in the statement below. Lyse derecognised the book value of the sold share and recognised the fair value of the remuneration. The difference between the remuneration and sold share of the book value constitutes the calculated gain. Based on the expected future cash flow from the investment, an impairment assessment was conducted of the remaining stake of 30%. The book value was written down by NOK 165 million and the book value after the write-down is NOK 298 million. There is deemed to be a close correlation between the realised gain in the transaction and the write-down of the remaining stake and therefore the gain and write-down are presented net in the income statement. The net gain from the sale of shares therefore amounts to NOK 0 million. 25

26 Provisional calculation of gain from selldown in associated company Fair value of remuneration in the transaction Book value of sold share of Skangas AS Transaction costs Calculated gain Write-down of remaining ownership interest Net recognised gain 0 Book value of investment in Skangas AS Book value of investment in Skangas AS before transaction Book value of sold stake Write-down of remaining ownership interest Book value of investment in Skangas AS, Sale of Måkaknuten AS Lyse Produksjon AS spun off the business linked to Måkaknuten Wind Farm into a separate company, Måkaknuten AS, on 6 February Måkaknuten AS was a subsidiary of the Lyse Group. On 22 March 2017, a transaction was completed in which Lyse sold 100% of the shares in Måkaknuten AS to Norsk Vind Bjerkreim Nord AS. The remuneration in the transaction was NOK 24.4 million and the booked gain NOK 22.2 million. The gain is included in the Energy segment and is recognised in the income statement under operating income. 26