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- Note 1 Summary of significant accounting policies
Hafslund ASA’s financial statements have been prepared in accordance with the Norwegian Accounting Act and generally accepted accounting practice in Norway (NGAAP).
Operating revenues
Revenue on the sale of goods and services is valued at the fair value of the consideration received. Sales of goods and services are recognised in revenue at the time of delivery to the customer, provided that the customer has assumed the risks and rights pertaining to the property.
Classification
Assets intended for permanent ownership or long-term use are classified as non-current assets. Assets relating to goods circulation, receivables due to be repaid within one year, and assets that are not intended for permanent ownership or long-term use in the business are deemed to be current assets. Liabilities falling due more than one year after the end of the accounting year are recognised as long-term liabilities. Other liabilities are classified as current liabilities.
Valuation principles
Assets and liabilities denominated in foreign currency
Balance sheet items denominated in foreign currency that are not hedged against changes in exchange rates are valued at the rate in force at the reporting date. Balance sheet items that are hedged against fluctuations in exchange rates using financial instruments are valued at the hedging rate. Balance sheet items denominated in foreign currency that hedge each other are valued at the rate in force at the reporting date. Gains and losses as a result of fluctuations in exchange rates on other balance sheet items are classified as financial items.
Trade and other receivables
Trade and other receivables are recognised at nominal value less bad debt provisions. Bad debt provisions are based on an individual assessment of each receivable. A non-specific provision is also recognised to cover expected bad debts on other trade receivables.
Treasury shares
Hafslund offers discounted treasury shares to employees in order to encourage employee ownership in the company. Any treasury shares sold to employees below market price are recognised as the difference between market price and sales price in the income statement under salaries and other personnel expenses. Treasury shares are recognised in the balance sheet as a reduction in equity.
Investments in subsidiaries, associates and joint ventures
Investments in subsidiaries, associates and joint ventures are valued in accordance with the cost method. Dividends and other distributions received from subsidiaries are recognised as financial income. The Group values single-entity companies in accordance with IAS 36.
Investments in long-term shareholdings
Long-term investments in companies in which Hafslund controls more than 20 percent of equity rights, but does not exercise significant influence or long-term ownership, are recognised at cost less any permanent diminutions in value. Individual investments are valued on a case-by-case basis. Dividends and other distributions received from subsidiaries are recognised as financial income. Realised gains and losses and any impairments attributable to permanent diminutions in value are recognised in the income statement under financial items.
Property, plant and equipment
Property, plant and equipment is recognised in the balance sheet at historic cost plus upwards revaluations less cumulative depreciation and impairments. Own investment activities are recognised in the balance sheet at full production cost. Property, plant and equipment is depreciated on a straight-line basis over its expected useful life from the time it is taken into operation. Profits and losses on the sale of property, plant and equipment are recognised as operating income and operating expenses respectively.
Retirement benefit obligations
See Note 2.18 to the consolidated financial statements. Hafslund ASA has opted to switch to NRS 6A which refers to IAS 19, regarding the accounting treatment of pension expenses.
Income tax expense, deferred income tax liabilities and deferred income tax assets
The income tax expense is based on the result on ordinary operations before tax. The income tax expense comprises taxes payable and changes in deferred income tax liabilities/deferred income tax assets. Tax payable is calculated based on the taxable result for the year. Deferred income tax recognised in the balance sheet is calculated in accordance with the offset method, with full provision for net tax-increasing temporary differences based on tax rates and nominal amounts at the balance sheet date. Recognition of deferred income tax assets relating to net tax-reducing temporary differences and tax loss carryforwards is based on an assessment of the probability of there being sufficient future earnings or ability to utilise tax positions that can be offset through Group contributions.
Financial derivatives
The accounting treatment adopted for financial derivatives depends on the purpose of the underlying agreement. Financial gains and losses on derivatives are recognised on maturity in the income statement if the financial criteria for accounting hedging are not satisfied.
Borrowings
Borrowings are recognised at nominal value. Borrowing costs on the assumption of loans are recognised directly in the income statement.
Contingencies
Contingencies are recognised if, on the balance of probabilities, it is more likely that these will be settled than not settled. Best estimates are used to calculate settlement values.
Provisions are recognised in the event that decisions are taken to implement measures (such as restructuring measures) that materially change the scope of the business or way in which it is operated, and when such measures result in termination benefits. Provisions are calculated based on best estimates of the expenses that are expected to accrue.Basis of preparation of statement of cash flow
The cash flow statement has been prepared in accordance with the indirect method. This means that the starting point of the statement is the entity's result for the year in order to be able to present cash flows from respectively ordinary operating activities, investing activities and financing activities.
- Note 2 Employee benefit expenses
NOK million 2011 2010 Salaries 117 105 Employer's national insurance contributions 14 19 Pension expenses 35 (37) Other benefits 9 7 Total employee benefit expenses 175 94 Number of employees as of 31 December 2011. 125 140 Information on remuneration paid to the Board of Directors and senior executives can be found in the section on Corporate Governance.
- Note 3 Pension expenses, assets and liabilities
Pension expenses NOK million 2011 2010 Defined benefit plans: Present value of accrued pension entitlements for the year 9 10 Interest expense on pension liabilities 29 30 Yield on pension assets (31) (30) Net amortisation 22 (45) Employer's national insurance contributions 2 (5) Pension expense defined benefit plans 31 (40) Defined contribution plans: Employer contributions 4 3 Total pension expenses 35 (37) Pension assets and liabilities NOK million 2011-31-12 2010-31-12 Gross pension liabilities 849 750 Pension assets (566) (491) Actual net pension liabilities 283 259 Non-amortised deviations from plan/assumption (314) (264) Employer's national insurance contributions 43 37 Net pension liabilities (pension assets) 12 32 Net pension liabilities in balance sheet (67) (55) Net pension assets in balance sheet 55 23 2011-31-12 2010-31-12 Net pension liabilities as of 1 January 32 109 Pension expense for the year 31 (40) Pension payments and payment of pension premiums (51) (37) Net pension liabilities as of 31 December 12 32 Assumptions 2011-31-12 2010-31-12 Expected yield 2,60% 5,40% Discount rate 4,10% 4,00% Salary adjustment 3,25% 3,75% Pension adjustment 3,25% 3,75% As of 31 December 2011, the pension plans covered 122 employees.
- Note 4 Other operating expenses
NOK million 2011 2010 Purchase of services 39 34 Rent, power etc. 9 9 Sales and marketing costs 27 36 Impairment of shares in subsidiaries 1 184 159 Other operating expenses 94 107 Total other operating expenses 1 353 345 Fees paid to auditors recognised in the income statement in 2011 for Hafslund ASA amounted to NOK 1.6 million. The fees relate to the following:
Statutory auditing NOK 1 million
Tax consultancy NOK 0.3 million
Other consultancy NOK 0.3 million - Note 5 Result of share investments and net financial items
NOK million 2011 2010 Dividends 28 55 Gains on sale of shares 0 2 Profit/loss on share investments 28 57 Interest income 1) 437 462 Interest expenses (693) (652) Group contributions 1 192 355 Other finance income/(finance costs) (3) (1) Net financial items 933 164 1) Hafslund ASA interest income includes intragroup interest of NOK 432 million for 2011 and NOK 457 million for 2010.
- Note 6 Income tax expense
NOK million 2011 2010 Profit/loss before income tax (364) (9) Permanent differences 1 158 107 Change in temporary differences (40) (95) Tax basis before application of tax loss carryforward and Group contribution 754 3 Utilisation of tax loss carryforward (3) Group contributions, net of tax (660) Tax basis, tax payable 94 The total tax expense comprises: Estimated tax payable 26 Adjusted tax settlement 1 Change in deferred income tax liabiilties 12 27 Income tax expense 39 27 Reconciliation of tax rate Profit/loss before income tax (364) (9) Expected tax expense at a nominal rate of 28% (102) (3) Tax effect of non-taxable income and non-deductible expenses 140 30 Income tax expense 39 27 Effective tax rate (11%) (305%) Dec-31-2011 Dec-31-2010 Basis deferred income tax liabilities/assets Temporary differences (12) (11) Operating assets (69) (97) Accrued pension liabilties 28 13 Basis deferred income tax liabilities/assets (53) (95) Deferred income tax asset in balance sheet (15) (27) - Note 7 Property, plant and equipment
NOK million Machinery,
technical equipment,
furniture etc.Land and
other
propertyWork under
constructionTotal Book value as of 31 December 2009 38 72 1 113 Investments 13 5 20 38 Depreciation for the year (8) (2) (10) Book value as of 31 December 2010 44 75 21 140 Cost 183 100 21 304 Cumulative depreciation and impairments (139) (25) (164) Book value as of 31 December 2010 44 75 21 140 Investments 49 13 62 Disposals (1) (4) (5) Depreciation for the year (17) (2) (19) Book value as of 31 December 2011 75 69 34 178 Cost 231 96 34 361 Cumulative depreciation and impairments (156) (27) (183) Book value as of 31 December 2011 75 69 34 178 Depreciation percentage 3-33 0-5 - Note 8 Shares in subsidiaries and other companies
NOK million Year of acquisition Registered office Ownership/voting rights % Recognised shareholding in company as of 31 Dec 2011 Book value as of 31 Dec 2011 Hafslund Handel AS 1986 Oslo 100 856 1 085 Sarp Kraftstasjoner AS 1987 Sarpsborg 100 90 61 Hafslund Nett AS 2009 Oslo 100 5 478 4 422 Hafslund Eiendom AS 2009 Oslo 100 651 662 Hafslund Strøm AS 2009 Oslo 100 1 636 1 348 Hafslund Fakturaservice AS 2009 Oslo 100 143 30 Hafslund Kundesenter AS 2009 Oslo 100 20 15 Hafslund Varme AS 2009 Oslo 100 1 257 3 073 Hafslund Pellets Holding AS 2009 Oslo 100 165 Hafslund Miljøenergi AS 2009 Sarpsborg 100 530 335 Hafslund Produksjon AS 2009 Askim 100 878 3 076 Hafslund Driftssentral AS 2009 Oslo 100 187 722 Inforum AS 2009 Fredrikstad 100 15 10 Gøta Energi AB 2010 Kungälv 100 37 83 Total shares in subsidiaries 11 943 14 922 Energibolaget i Sverige AB 2010 Haninge 49 83 131 Infratek ASA 2002 Oslo 43,3 309 129 Total shares in subsidiaries, associates and joint ventures 12 335 15 182 The shares in Hafslund Handel AS have been written down by NOK 1,184 million as a result of losses of equity.
- Note 9 Other long-term receivables
NOK million 2011-12-31 2010-12-31 Net pension assets in balance sheet (See Note 3) 55 23 Interest-bearing loans and receivables 249 34 Contributions to pension funds 116 116 Loans to Group companies 2 700 3 200 Total other long-term receivables 3 120 3 373 - Note 10 Trade and other receivables
NOK million 2011-12-31 2010-12-31 Trade receivables 15 1 Receivable due from Group companies 1 192 3 715 Other receivables 32 15 Total trade and other receivables 1 239 3 731 - Note 11 Current interest-bearing liabilities
NOK million Interest % as of 31 Dec 2011 Interest % as of 31 Dec 2010 Liabilities as of 31 Dec 2011 Liabilities as of 31 Dec 2010 Miscellaneous commercial papers and current loans 3,9 2,6-3,9 750 2 693 Overdraft facility 26 Current interest-bearing liabilities 750 2 719 - Note 12 Other current liabilities
NOK million 2011-12-31 2010-12-31 Public taxes due 3 5 Accrued interest 184 193 Other non-interest-bearing liabilities 24 19 Liabilities due to other Group companies 1 484 13 Total other current liabilities 1 695 230 - Note 13 Long-term interest-bearing liabilities
NOK million Interest % as of 31 Dec 2011 Interest % as of 31 Dec 2010 Liabilities as of 31 Dec 2011 Liabilities as of 31 Dec 2010 Fixed-interest bonds 5,0-6,3 5,0-6,3 4 009 4 009 Floating rate notes 3,2-4,9 2,7-4,3 1 458 1 390 Other loans 3,2-5,7 2,8-5,2 4 465 5 437 Total long-term interest-bearing liabilities 9 932 10 836 Maturity profile
Year 2012 2013 2014 2015 2016 Later Total NOK million 1 125 1 767 1 284 1 819 1 000 2 937 9 932 Hafslund has entered into a syndicated NOK 3,600 million revolving credit facility maturing on 17 June 2016. Hafslund has a contingent option for up to two years' prolongation. The lender is a banking syndicate comprising six Nordic banks. The drawdown facility is used as a back-stop for commercial papers and as a general liquidity reserve. At the end of the year the entire facility remained unused. Further, the Group has a bilateral NOK 400 million credit facility that was unused at the end of the reporting period. The Group also has a NOK 400 million credit facility with Nordea that was unused at the end of the reporting period.
Hafslund has a negative pledge clause in its loan agreement. Some loan agreements also stipulate that significant assets cannot be disposed of without bank approval and have an ownership clause requiring more than 50 percent of shares issued by Hafslund ASA to be held by current shareholders, or by shareholders with a credit rating of at least A-from Standard & Poor's or A3 from Moody's, or by shareholders approved by the lending banks.
- Note 14 Related parties
Hafslund has two bond loans of NOK 500 million and NOK 740 million with Oslo Pensjonsforsikring AS established in 2007 and 2008 respectively. The loans have ten-year terms. Both loans were taken out on market terms and conditions and are publicly listed. Norsk Tillitsmann is a counterparty to the agreement. Oslo Pensjonsforsikring AS is a life insurance company that is wholly owned by the City of Oslo. The loans are included in Non-current loans, fixed-interest-rate bonds, see Note 17.
- Note 15 Risk management and financial derivatives
The table below shows outstanding interest rate swaps as of 31 December 2011:
NOK million Currency Amount Hafslund pays Hafslund receives Start Maturity NOK 200 Fixed/quarterly 4,25% Floating 3M Nib 22.04.2009 23.04.2012 NOK 200 Fixed/quarterly 4,11% Floating 3M Nib 11.11.2008 12.11.2012 NOK 200 Fixed/semi-annually 3,19% Floating 6 M Nib 21.01.2009 21.01.2013 NOK 350 Floating/semi-annually 6 m Nib+185 Fixed/annually 5% 04.02.2009 04.02.2013 NOK 200 Fixed/annually 5,07% Floating 3M Nib 29.04.2005 11.07.2013 NOK 200 Fixed/semi-annual 5,37% Floating 6 M Nib 25.02.2009 26.08.2013 NOK 200 Floating 3M Nib+120 Fixed/annually 6,2% 09.01.2004 09.01.2014 NOK 200 Fixed/annually 4,92% Floating 3M Nib 09.01.2004 09.01.2014 NOK 200 Fixed/quarterly 3,845% Floating 3M Nib 09.03.2011 10.03.2014 NOK 200 Fixed/quarterly 3,7025% Floating 3M Nib 29.04.2011 29.04.2014 NOK 200 Fixed/quarterly 4,0375% Floating 3M Nib 09.03.2011 09.03.2015 NOK 200 Fixed/quarterly 4,02% Floating 3M Nib 29.04.2011 29.04.2016 NOK 200 Fixed/semi-annually 3,76% Floating 6M Nib 26.08.2013 25.08.2016 NOK 200 Fixed/quarterly 4,149% Floating 3M Nib 21.05.2013 21.05.2017 NOK 200 Fixed/quarterly 3,955% Floating 3M Nib 21.05.2012 22.05.2017 NOK 500 Floating 6M Nib+200 Fixed/annually 6,3% 21.01.2009 21.01.2019 As of 31 December 2011, the fair value of interest rate swaps amounted to NOK -34 million.
Forward foreign exchange contracts
The company has entered into forward foreign exchange contracts. As of 31 December 2011, the fair value of the contracts amounted to NOK 1 million.
- Note 16 Cash and cash equivalents
The Group purchases bank guarantees to secure some liabilities. As of 31 December 2011 these guarantees amounted to NOK 557 million for trading in the power market, NOK 51 million in tax deduction guarantees, NOK 37 million in rental guarantees and NOK 18 million in contract and payment guarantees.
- Note 17 Equity
NOK million Share capital Premium Other paid-in equity Retained earnings Total paid-in capital and retained earnings Equity as of 31 December 2009 195 4 080 74 5 465 9 815 Loss for the year (36) (36) Proposed dividend (NOK 7.50 per share) (1 461) (1 461) Equity as of 31 December 2010 195 4 080 74 3 968 8 318 Loss for the year (403) (403) Proposed dividend (NOK 2.50 per share) (487) (487) Change in treasury shares (2) 4 2 Equity as of 31 December 2011 195 4 080 72 3 082 7 430 As of 31 December 2011 Hafslund held 397,361 treasury B shares. The average purchase price was NOK 105.27 per share, making the total cost price NOK 41,830,541.
- Note 18 Share capital and shareholder information
We refer to Note 15 to the consolidated financial statements.