Q U A R T E R L Y R E P O R T 2018 FIRST QUARTER

Transcription

1 Q U A R T E R L Y R E P O R T 2018 FIRST QUARTER

2 Contents Highlights 3 Group summary 5 Business areas 6 Other matters 7 Outlook 7 Financial statements 8 Notes to the financial statements 13 Definitions 16 Financial calendar and investor information 17 2 QUARTERLY REPORT Q1 2018

3 Highlights Q EBITDA of NOK 409 million (NOK 395 million) in a quarter with demanding weather conditions. EBITDA Q MNOK 409 Stable profit after tax of NOK 154 million (NOK 149 million) NVE capital of NOK 10 billion, up NOK 1 billion on comparable prior-year quarter in part due to high AMS project activities. Around 550,000 of a total of 700,000 meters installed. Net debt/ EBITDA 3.3 Solid key financial ratios. Net interest-bearing debt down by NOK 1.1 billion due to seasonal reduction in working capital. Oslo City Government has proposed to combine the ownership of Hafslund and E-CO Energi under a single Board of Directors and management. The combined company would be a significant player in the Norwegian energy sector. 3 QUARTERLY REPORT Q1 2018

4 Key figures Q Q Income statement (NOK million) Year 2017 Year ,472 1,502 Sales revenues 5,169 4, EBITDA 1,634 1, Operating profit Profit before tax and discontinued operations Net result from discontinued operations, after tax 3, Profit after tax 4,315 1,402 Capital and equity 37% 32% Equity ratio 31% 36% Net debt / EBITDA % FFO / net debt 19% 13% 8,217 5,443 Net interest-bearing debt 6,554 9,480 21,928 11,477 Capital employed 12,404 22,730 Other key figures 6,421 7,230 Energy delivery Networks (GWh) 19,576 19, Number of network customers ( 000) KILE cost Costs not covered by income ceiling (Statnett, other overhead networks, ENOVA, etc.) 1,610 1, Investments 1,602 1,009 8,770 10,002 NVE capital 9,817 8, HSE: Total number of injuries per million working hours (H2) Figures in NOK unless otherwise stated. The figures for 2017 are stated in parentheses. Hafslund AS was established on 4 August 2017 after Hafslund ASA had been de-listed from the Oslo Stock Exchange, and Hafslund AS had been spun off from Hafslund ASA. Hafslund s Markets, Heat and Production business areas were sold to Fortum, E-CO and the City of Oslo effective 4 August Following the establishment, Hafslund AS s main business comprises Hafslund Networks. The divested businesses are reported net after tax in the 2016 figures and in the year-to-date figures to July The balance sheet figures for 2016 relate to the former Hafslund ASA Group. 1 The net debt / EBITDA and FFO / Net debt ratios are not shown for the first quarter of 2017, since the balance sheet figures relate to the former Hafslund ASA Group. 4 QUARTERLY REPORT Q1 2018

5 Summary Q HSE Seven injuries were reported in the first quarter of 2018 (including the AMS project and suppliers), five of which were lost-time injuries. At the reporting date, the H2 indicator (rolling 12-month number of injuries per million working hours) was 16, compared with 21 as of 31 March The company is actively endeavouring to reduce the number of injuries across the business. First-quarter performance Hafslund posted EBITDA of NOK 409 million (NOK 395 million) and an operating profit of NOK 232 million (NOK 237 million) in the first quarter of 2018, which was on a par with the corresponding prior-year period. At NOK 32 million (NOK 39 million), financial expenses for the first quarter include a reduction of NOK 21 million (NOK 19 million) due to changes in the market value of the share of the loan portfolio that is recognised at fair value caused by higher interest rates. The tax expense for the first quarter closed on NOK 45 million (NOK 48 million). The profit after tax came in at NOK 154 million (NOK 473 million). Continuing operations contributed NOK 149 million and discontinued operations net after tax NOK 324 million in the comparable prior-year quarter. Cash flow in the first quarter The cash flow from operating activities came in at NOK 1,441 million in the first quarter of 2018, compared with NOK 1,356 million for continued operations (NOK 1,629 million including discontinued operations) in the first quarter of The high cash flow from operating activities is in part attributable to a NOK 1,089 million (NOK 1,119 million) reduction in working capital. At the end of the quarter, net working capital totalled NOK 1,689 million. Liquidity is normally strong in the first quarter of the year due to working capital requirements generally gradually decline over the course of the quarter in line with reduced demand for energy. At NOK 409 million, first-quarter EBITDA were NOK 57 million higher than the related cash flow from operations before changes in working capital. This was attributable to payment of interest totalling NOK 120 million, and result items adjusted for liquidity effects of NOK 63 million. At the reporting date, net investments totalled NOK 331 million. Financing and capital At the balance sheet date, Hafslund had net interest-bearing debt of NOK 5.4 billion and an average coupon rate for the loan portfolio of 2.7 per cent. The average term to maturity is 3.2 years. Annual maturity profile of loans as of March 2018 (NOK million) Bonds Obligasjonslån Bank loans Banklån Maturity profile for the next 12 months as of March 2018 (NOK million) 369 Apr Mai May Jun Jul Aug Sep Oct Okt Nov Dec Des Bonds Obligasjonslån Hafslund has solid key financial ratios and at the end of the first quarter had a net debt / EBITDA ratio of 3.3, which was down from 4.0 at the end of Hafslund s capital structure has been aligned with operations following the establishment of Hafslund AS on 4 August 2017, whose main business comprises Networks. The aim is to maintain a similar credit profile to that of the former Hafslund ASA. Hafslund s capital requirements will increase slightly towards the end of 2018, in part due to the completion of the roll-out of automatic meters (the AMS project ). One of Hafslund s goals is to maintain a net interestbearing debt / EBITDA ratio of below 5. At the end of the first quarter, Hafslund had cash and cash equivalents of NOK 1,447 million and a credit facility of NOK 500 million maturing in October In the fourth quarter of 2017, an agreement was also entered into with a syndicate of six banks for two credit facilities totalling NOK 2,502 million. One facility is for NOK 504 million with a term of three years (plus an option for up to two years) while the second is for NOK 1,998 million with a term of five years (plus an option for up to two years). Hafslund has a robust financing structure with sufficient liquidity to cover at least the next 12 months loan maturities. 51 Banklån loans 500 Jan Feb Mar 5 QUARTERLY REPORT Q1 2018

6 Networks Key financial figures NOK million Q Q Year 2017 Year 2016 Sales revenues 1,485 1,334 5,066 4,757 Gross contribution ,803 2,834 EBITDA ,675 1,654 Operating profit ,014 1,056 Energy delivery (GWh) Number of customers ( 000) Costs not covered by income ceiling 7,230 6,421 19,576 19, ,610 1,315 Investments ,602 1,009 NVE capital 10,002 8,770 9,817 8,817 Capital employed 9,654 10,877 12,608 11,870 Networks posted sales revenues of NOK 1,485 million in the quarter, which were up NOK 151 million on the corresponding prior-year period. The increase was primarily attributable to a higher delivered volume due to an increase in network customers and colder weather. At 7,230 GWh, the energy delivery for the first quarter was up 13 per cent on the comparable prior-year period. Combined costs for the overhead network (Statnett) and energy purchases to cover network losses and delivery obligations amounted to NOK 735 million (NOK 582 million) in the quarter. The increase in costs of the overhead network and network losses amounted to NOK 87 million and NOK 65 million respectively. The increase in network losses is attributable to higher power prices and higher volume losses. Gross contributions in the quarter totalled NOK 656 million (NOK 677 million). First-quarter operating expenses of NOK 252 million were down NOK 31 million on the comparable prior-year period, primarily due to lower invoicing and collection, and maintenance, costs. At NOK 403 million, first-quarter EBITDA were up NOK 9 million on the previous year. Assuming normal energy demand, budgeted network tariffs and forward power prices, as well as planned maintenance and cost changes, Networks operating profit for 2018 is expected to come in around 10 per cent lower than in At the end of 2017, Networks had accumulated surplus income of NOK 387 million. According the available forecasts, accumulated surplus income is expected to decrease by around NOK 100 million by the end of The decrease in accumulated surplus income is partly due to Hafslund Nett s desire to maintain the network rental charge as stable as possible. Operations Hafslund Nett s security of supply is among the best of any network operator in Norway. The table below shows the change in operating downtime per customer in minutes (right axis) and the KILE cost (left axis). KILE is the quality-adjustment of the income ceiling for non-delivered energy. KILE cost and operating downtime per customer Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Quarterly penalties (NOK mill) Operating downtime per customer, rolling 12 months (minutes) There were 299 (158) operational stoppages in the first quarter of the year. Almost 50 per cent of the operational stoppages were due to weather conditions. Total KILE costs in the first quarter closed on NOK 25 million (NOK 15 million). The high KILE costs were largely attributable to three particular periods of heavy snow and sleet in the quarter which caused longer-term operational stoppages. Investments First-quarter investments closed on NOK 334 million (NOK 312 million). The increase primarily relates to higher investments in the AMS project (NOK 17 million), while investments in the supply network were on a par with the previous year. Around 550,000 out of a total of 700,000 meters had been installed by the end of the first Quarter. This corresponds to 86,907 meters in the quarter. The project is progressing well and an accumulated amount of NOK 1,332 million has been incurred on the AMS project. At the end of the quarter, Hafslund Nett had capital employed of NOK 9.7 billion (NOK 10.9 billion). The reduction is primarily attributable to lower working capital and higher cash balances due to reduced working capital requirements as a result of lower seasonal demand for energy, and payment of a dividend to Hafslund AS. At the reporting date, the NVE capital amounted to NOK 10.0 billion (NOK 8.8 billion). Other business NOK million Operating profit/loss Other business Q Q Year 2017 Year (2) (52) (92) Other business posted a total operating profit of NOK 4 million in the first quarter. Other business comprises staff functions, Bio-El 6 QUARTERLY REPORT Q1 2018

7 Fredrikstad, associates and changes in the value of interest-rate derivatives. Staff functions consisted of the former parent company Hafslund ASA until 4 August 2017, and subsequently the new company Hafslund AS. Staff functions have been scaled down in the new company Hafslund AS. Outlook Hafslund owns and operates the bulk of the regional and distribution network in Oslo, Akershus and Østfold, and is the largest network operator in Norway, with around 715,000 customers. Hafslund also owns Bio-El Fredrikstad AS and a number of associated companies, including a 49 per cent stake in Fredrikstad Energi AS which has 94,000 network customers and a 50 per cent stake in Energy Future Invest AS. Ownership of the regulated networks business provides a solid basis for stable and predictable returns. Networks long-term earnings are influenced by the business area s relative cost efficiency compared with the rest of the Norwegian networks industry, interest rate fluctuations and changes in public regulations. Digitalisation of the value chain and the customer interface are absolutely critical to achieving efficient operations and retaining satisfied customers. Hafslund has focused on being a company geared for growth in infrastructure solutions for renewable energy, while also focusing on digitalisation, automation and customer interfaces in the Networks business. This work is paying off Hafslund Nett has boosted its efficiency and strengthened its position as one of Norway s most efficient network operators. Hafslund will continue its growth and improvement initiatives and will facilitate and contribute to a further electrification of society. Hafslund will ramp up its investments to NOK 1.8 billion in 2018, compared with an average of NOK 0.7 billion between 2013 and 2015 and NOK 1.3 billion in 2016 and In addition to ongoing investments in operations and expansion, the Group s current investments are characterised by investments of NOK 2.1 billion in automatic meters at all customers and associated new ICT systems. The installation of automatic meters is planned to be completed in 2018, with investments levels expected to be scaled back to investments in ongoing operations and expansion from Hafslund AS aims to maintain a similar credit profile to that of the former Hafslund ASA. The company is achieving solid underlying organic growth due to population growth and investments in the network. At the same time, new growth opportunities are sought both organically and structurally. Hafslund aims to play a key role in the expected future consolidation of the sector. City of Oslo combines ownership of Hafslund and E-CO Energi On 20 March, Oslo City Government promoted a proposal to Oslo City Council to combine the ownership of Hafslund AS and E-CO Energi Holding AS under a new parent company that will be wholly owned by the City of Oslo. The combined business will be a significant player in the Norwegian energy industry as Norway s second-largest power producer with 13 TWh of renewable hydropower production, and Norway s largest network operator with around 715,000 customers. The combination is done to secure competence along the entire production and power distribution value chain, and optimally position the company for expected changes in the energy sector moving forward. There will be no changes in the activities of Hafslund AS and E- CO Energi Holding AS and their subsidiaries, and all financing and debt will be maintained in the respective companies. The combined ownership, which is contingent on the approval of Oslo City Council and the regulatory authorities, will not impact Hafslund AS s and E-CO Energi Holding AS s key financial ratios. The City Council is expected to make its final decision by the summer. The City of Oslo will appoint the new company s Board of Directors, with Hafslund s Finn Bjørn Ruyter intended to take up the position as CEO. Hafslund s Board of Directors has actively participated in formulating the City Government s decision-making basis for combining Hafslund and the City of Oslo s wholly owned power company E-CO Energi under one board and management team, and welcome the proposed combination. Oslo, 7 May 2018 Hafslund AS Board of Directors 7 QUARTERLY REPORT Q1 2018

8 Consolidated income statement Q Q NOK million Year 2017 Year ,472 1,502 Sales revenues 5,169 4,824 (661) (834) Purchases of goods and energy (2,279) (1,950) Gross contribution 2,890 2, Net financial items (80) (65) Personnel expenses (346) (349) (289) (198) Other operating expenses (926) (903) EBITDA 1,634 1,636 (158) (177) Depreciation and amortisation (672) (642) - - Impairment losses - (30) Operating profit (58) (53) Interest expenses, etc. (281) (235) Change in value of loan portfolio (39) (32) Finance costs (206) (148) Profit before tax and discontinued operations (48) (45) Tax expense (143) (155) Net result from discontinued operations, after tax 3, Profit after tax 4,315 1,402 8 QUARTERLY REPORT Q1 2018

9 Consolidated statement of other comprehensive income Profit after tax 4,315 1, Changes in value of hedging contracts, cash flow hedging (124) (5) Credit risk, loans valued at fair value (4) 7 (8) Translation differences (8) (63) (10) 1 Tax (7) Total items to be reclassified to profit or loss (11) (156) - 87 Change in pension estimates 66 (137) - (11) Tax (16) Total items not to be reclassified to profit or loss 50 (103) Other comprehensive income for the period, allocated to: 4,354 1, Profit attributable to shareholders of Hafslund AS 4,354 1, Profit attributable to non-controlling interests Other comprehensive income after tax 4,354 1,143 9 QUARTERLY REPORT Q1 2018

10 Consolidated balance sheet NOK million 31 Mar Mar Dec Dec 2016 Intangible assets 624 2, ,880 Property, plant and equipment 12,095 19,762 11,937 19,610 Financial assets Receivables and inventories 664 2,584 1,335 3,135 Cash and cash equivalents 1,447 1,281 1, Assets 15,149 27,003 15,323 26,740 Equity (owners of the Company) 4,916 10,061 4,762 9,567 Equity (non-controlling interests) Provisions 1,076 3,675 1,224 3,553 Non-current interest-bearing debt 5,951 7,353 6, Current interest-bearing debt 939 2,157 1,197 2,193 Current non-interest-bearing debt 2,267 3,753 1,678 3,553 Debt and equity 15,149 27,003 15,323 26,740 Equity reconciliation NOK million Ytd 2018 Year 2017 Equity at start of period 4,762 9,571 Other comprehensive income for the period 152 4,354 Spin-off - (1,510) Dividends - (7,668) Change in non-controlling interests - (4) Other equity effects 3 19 Equity at end of period 4,917 4, QUARTERLY REPORT Q1 2018

11 Consolidated statement of cash flows NOK million Q Q EBITDA ,634 1,636 Interest paid (120) (130) (300) (350) Tax payable - (92) (96) (55) Changes in market value and other liquidity adjustments (436) Change in trade receivables, etc Change in working capital credits, etc Cash flow from operations discontinued operations Cash flow from operating activities 1,441 1,629 2,437 2,045 Investments in operations and expansion (331) (307) (1,574) (1,051) Net purchase/sale of shares, etc Cash flow from investing activities, discontinued operations - (57) 2,794 (173) Cash flow from investing activities (331) (363) 1,245 (1,116) Change in interest-bearing debt and receivables (769) (557) (2,426) (496) Dividends and equity transactions - - (722) (586) Cash flow from financing activities (769) (557) (3,148) (1,082) Change in cash and cash equivalents during the period (153) Cash and cash equivalents at start of period 1, Cash and cash equivalents at end of period 1,447 1,281 1, QUARTERLY REPORT Q1 2018

12 Segment reporting Q Q NOK million ,334 1,485 Networks 5,066 4, Other business/eliminations ,472 1,502 Total sales revenues 5,169 4, Networks 1,014 1,056 (2) 4 Other business/eliminations (52) (92) Total operating profit QUARTERLY REPORT Q1 2018

13 Notes to the financial statements 1) Framework conditions and key accounting policies The consolidated financial statements for the first quarter of 2018, for the period ending 31 March 2018, have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU and include Hafslund AS, its subsidiaries and associates. This interim report has not been audited. The interim financial statements do not provide the same scope of information as the annual financial statements and should therefore be viewed in the context of Hafslund AS s consolidated financial statements for The accounting policies and calculation methods applied in interim reporting are the same as those described in Note 2 to the consolidated annual financial statements of Hafslund AS for 2017, with the exception of IFRS 15 Revenue from Contracts with Customers. Effective 1 January 2018, Hafslund has applied the new revenue recognition standard IFRS 15 as detailed in Note 2 to the Hafslund Group s consolidated annual financial statements for IFRS 15 has not resulted in any material changes to the company s accounting policies. Recognition of income in accordance with the new standard requires the use of estimates. The accounting treatment of investment contributions is the area that requires the most extensive use of estimates. The actual costs of constructing and reinforcing the network for individual customers will be covered by investment contributions from the customers in question. Hafslund deems the delivery covered by the investment contribution to be a separate delivery obligation, which is recognised in income when the network connection has been established. The costs included in investment contributions are not deemed to qualify as an asset since they are not included in network capital, and consequently do not generate returns in subsequent periods. In previous years, costs of investment contributions were classified as other operating expenses. Effective the first quarter of 2018, investment contributions are classified under cost of goods sold, and the comparative figures for 2017 have been restated accordingly. The standard did not result in any change in equity as of 1 January The Group is also working to implement IFRS 16 Leases. See Note 2 to Hafslund AS s consolidated annual financial statements for The Group has not yet fully quantified the effects of the new rules on the consolidated financial statements or the implementation effect on Other equity as of 1 January The Group will carry out a more detailed review of the above during ) Business disposals On 3 July 2017, the City of Oslo made a voluntary offering for all the shares in Hafslund ASA through its wholly owned subsidiary Oslo Energi Holding AS. After the compulsory acquisition of the shares of minority shareholders, the shares were de-listed from the Oslo Stock Exchange. On 4 August 2017, Hafslund ASA implemented a spin-off pursuant to company law with continuity of shareholders shares and rights, in which all assets, rights and debt, apart from those assets, rights and liabilities associated with Hafslund Production, were spun off to the new company Hafslund AS. From a company-law perspective Hafslund AS is the acquiring company in the spin-off described above. However, for consolidated accounting purposes the financial entity represented by the former Hafslund ASA Group is continued as the reporting entity. Since Hafslund AS acquired three of four business areas in the spin-off, the consolidated financial statements of Hafslund AS are deemed to represent a continuation of the former Hafslund ASA Group. Consequently, the values have not been re-measured in the Hafslund AS Group. The disposal of the power production segment is recognised in the consolidated financial statements as a reduction in equity as a result of the spin-off in the statement of changes in equity. The results of the power production business for the period 1 January 2016 to the spin-off date are recognised under the result from discontinued operations. Immediately after the spin-off, Hafslund AS sold 100 percent of the shares in the subsidiary Hafslund Marked AS and 50 per cent of the shares in the subsidiary Hafslund Varme AS to Fortum. The gain on the sale of the shares in Hafslund Marked AS is recognised in the consolidated financial statements as the difference between the carrying amount in the Group and the consideration received. The results from the Markets segment for the period 1 January 2016 to the disposal date are recognised in the result from discontinued operations together with the gain. The sale of 50 per cent of the shares in Hafslund Varme AS is recognised in the consolidated financial statements as a sell-off with loss of control. The residual shareholding is measured at fair value, with the resulting upwards revaluation recognised in income. The results from the Heat segment for the period 1 January 2016 to the disposal date are recognised in the result from discontinued operations together with the associated gains. The residual 50 per cent shareholding in Hafslund Varme AS, and receivables due from Fortum following the disposal of the shares in Hafslund Varme AS and Hafslund Marked AS, were distributed as a non-cash asset to Oslo Energi Holding AS as of 30 September This distribution is recognised at fair value in the consolidated financial statements. The consideration for all the above transactions was measured at fair value and subject to normal purchase sum calculations. The result from discontinued operations is based on the final estimated purchase sum calculations available at the balance sheet date. Final settlement was completed in the fourth quarter of QUARTERLY REPORT Q1 2018

14 Result from discontinued operations NOK million Operating revenues 5,428 9,126 Operating expenses (4,660) (7,898) Net financial items (47) (69) Profit before tax 721 1,159 Tax expense (244) (418) Net profit for the period Profit after tax 3,225 Result from discontinued operations 3, Permitted income will normally deviate from actual income for the year due to the effect of the weather and temperatures on the transmitted energy volume in the network. If actual income is higher than permitted income, this results in an income surplus; and if it is lower, in an income shortfall. Under IFRSs, income surpluses and income shortfalls are defined as regulated liabilities or assets that do not qualify for balance-sheet recognition. This is justified on the grounds that a contract has not been entered into with a particular customer and therefore the resulting receivable/liability is theoretically contingent on a future delivery. At the end of 2017, Networks had accumulated surplus income of NOK 387 million. According to the available forecasts, accumulated surplus income is expected to decrease to around NOK 287 million by the end of The decrease in surplus income is partly due to Hafslund Nett s desire to maintain the network rental charge as stable as possible. 3) Networks income ceiling and income surpluses/shortfalls Permitted income for the year Electrical power is distributed via networks, which represent a natural monopoly within the individual network business s geographic area. The Norwegian Water Resources and Energy Directorate (NVE) therefore establishes an income ceiling that represents the maximum income level networks businesses are allowed to charge in network rental, and which is intended to provide a reasonable return on invested capital, and to cover normal operating and maintenance expenses. The regulated income ceiling, plus re-invoicing of expenses from the overhead transmission grid (Statnett) are referred to as permitted income and established for the year as a whole. Actual income for the year Actual income (tariff income) for a network operator comprises the tariffs, power output and actually transmitted energy volumes at any one time in the network operator s supply area. In accordance with IFRS rules, income is recognised in the Networks business based on actual income for the year, and not permitted income as described above. However, the tariffs, or network rental charges, are determined on the premise that, over time, the Networks segment s actual income will correspond to its permitted income. Annual income surpluses and shortfalls 4) Interest-bearing loans and interest rate derivatives At the end of the first quarter of 2018, the value of the loan portfolio recognised in the balance sheet amounted to NOK 6,931 million, of which NOK 5,992 million related to non-current liabilities and NOK 939 million to current liabilities. The change in the fair value of loans boosted profits by NOK 19 million in the first quarter of 2018, while the change in the fair value of interest rate derivatives reduced profits by NOK 5 million. In the first quarter of 2018, Hafslund s credit spreads had an entry of around 20 basis points for maturities of less than one year. Other maturities had an entry of around five basis points. NIBOR and swap rates increased by around basis points for all maturities. The net effect of the above was that the market interest rate (including Hafslund s credit spreads) increased by basis points for maturities of less than one year and by basis points for longer maturities. The change in the fair value of loans is recognised as financial expenses in the income statement, while any change in the value of interest rate derivatives is recognised as a net financial item in the operating result. In the fourth quarter of 2017, Hafslund entered into an agreement for two drawdown facilities totalling NOK 2,502 million. Facility A is for NOK 504 million with a three-year term, while Facility B is for NOK 1,998 million with a five-year term. Both the facilities have an option for a one plus one-year prolongation. The lender is a syndicate of Norwegian and international banks: Danske Bank, DNB, Handelsbanken, National Westminster Bank, Nordea and SEB. Hafslund also has a drawdown facility of NOK 500 million maturing in October All three drawdown facilities were unutilised at the reporting date. 14 QUARTERLY REPORT Q1 2018

15 Until 31 December 2009, Hafslund s entire loan portfolio was valued at fair value through profit or loss. Since 2010, new loans have been measured at amortised cost. At the end of the first quarter, these amounted to NOK 6,085 million. 2. Valuation based on observable factors other than listed prices (level 1) either directly (prices) or indirectly (derived from prices) for the asset or liability (level 2). 3. Where it is not practicable to use only a listed price or transaction value, discounted future cash flows and the Group s own estimates are used. 5) Financial instruments by category, including hedging instruments The following principles have been applied in the subsequent measurement of financial instruments recognised in the balance sheet: NOK million Derivatives used for hedging purposes Assets at fair value through profit or loss Receivables at amortised cost Non-current receivables Derivatives Trade and other receivables Cash and cash equivalents 1,447 1,447 Total financial assets as of 31 March ,045 2,057 Total NOK million Level 1 Level 2 Level 3 Total Financial assets at fair value through profit or loss: Interest rate derivatives Total assets Financial debt at fair value through profit or loss: Loans Total debt ) Operating assets Investments in operating assets for the first quarter came in at NOK 331 million. Investments relate in their entirety to investments in operations and expansion. NOK million Derivatives used for hedging purposes Debt at fair value through profit or loss Other financial debt at amortised cost Loans 846 6,085 6,931 Trade and other current payables 1,283 1,283 Total financial debt as of 31 March ,606 7,368 8,214 Total 7) Related party transactions Hafslund enters into purchase and sales transactions with related parties as part of normal business operations. In 2018, Hafslund bought and sold goods and services from/to the City of Oslo. The City of Oslo owns 100 percent of the shares in Hafslund AS through Oslo Energi Holding AS. Examples of sales to the City of Oslo include network rental. All transactions between the parties are conducted in accordance with the arm s length principle. Derivatives are financial instruments that are recognised either at fair value through profit and loss or for hedging purposes. Hafslund s interest rate derivatives are recognised at fair value through profit or loss. The table below shows financial instruments at fair value through profit or loss based on valuation method. The levels are: 1. Listed price in an active market for an identical asset or liability (level 1). The table below shows transactions with related parties: NOK million Sales of goods and services Purchases of goods and services Purchases recognised as investments Trade receivables Ytd City of Oslo Trade payables 15 QUARTERLY REPORT Q1 2018

16 Definitions Capital employed NVE capital Equity ratio Net interest-bearing debt Debt / EBITDA FFO / Debt Costs not covered by income ceiling Equity + Net interest-bearing debt + Net tax positions Finished non-current assets including a fixed percentage add-on for working capital Equity / Total capital Interest-bearing debt Interest-bearing receivables and cash equivalents Net interest-bearing debt / EBITDA for the last 12 months (EBITDA interest paid tax paid) / Net interest-bearing debt Costs for Statnett, other networks, ENOVA, etc. 16 QUARTERLY REPORT Q1 2018

17 Financial calendar 1. Fourth Quarter Report 2017 and preliminary annual result 15 February First Quarter Report May Second Quarter Report July Third Quarter Report October 2018 Investor information 1. Information is displayed on Hafslund s website: o o You can subscribe to stock market notifications via My page at 2. CFO, Heidi Ulmo, o Heidi.Ulmo@hafslund.no o Tel.: Head of Finance and Investor Relations, Martin S. Lundby o martin.lundby@hafslund.no o Tel.: QUARTERLY REPORT Q1 2018