annual report 2010 - agder energi · 4 agder energi annual report 2010 from left: erik boysen, unni...

annual report 2010

2 AGDER ENERGI annual report 20102 Agder energi annual report 2010

Def. 2010 2009 2008 profit Operating revenues nOK millions 9 434 8 287 8 375eBiTdA 1 nOK millions 2 070 2 694 3 259Operating profit nOK millions 1 634 2 271 2 846Profit before tax nOK millions 1 371 2 789 1 149Profit for the year nOK millions 751 1 604 514

CaSH floWnet cash provided by operating activities 2 nOK millions 226 1 375 1 694Purchase of property, plant, equipment and intangible assets nOK millions 758 785 760depreciation and write-downs nOK millions 436 423 413dividends paid nOK millions 900 968 723

BalanCe SHeetTotal assets nOK millions 16 725 14 675 15 425equity nOK millions 3 488 3 740 3 024Capital employed nOK millions 11 109 9 684 8 416Unrestricted liquidity 4 nOK millions 1 340 906 1 059interest-bearing liabilities nOK millions 7 621 5 944 5 392net interest-bearing liabilities 5 nOK millions 7 578 5 918 5 222

KeY fiGureSeBiTdA margin 6 % 21.9 32.5 38.9Operating margin 7 % 17.3 27.4 34.0return on equity 8 % 20.8 47.4 15.8return on capital employed 9 % 16.0 33.6 16.6return on total assets 10 % 10.6 20.2 9.9equity ratio 11 % 20.9 25.5 19.6net interest-bearing liabilities/eBiTdA 12 3.1 2.2 1.9number of permanent and temporary staff at 31 dec. 1 692 1 714 1 538number of permanent and temporary full-time equivalents at 31 dec. 1 647 1 673 1 480

mAin figUres

profit

NOK millions

2 271

1 604

2 694

2009

1 634

751

2 070

2010

EBITDA Operating profit Profit for the year

2 846

514

3 259

2008

47,4

33,6

27,4

2009

20,8

1617,3

2010

Operating margin Return on equity

Return on capital employed

15,8 16,6

34

2008

Percent

47,4

33,6

27,4

2009

20,8

1617,3

2010

Operating margin Return on equity

Return on capital employed

15,8 16,6

34

2008

Percent

AGDER ENERGI annual report 2010 3Agder energi annual report 2010 3

Def. 2010 2009 2008 KeY fiGureS, HSe sickness absence % 4.4 4.4 4.0Lost time injury frequency (H1) 5.1 5.6 10.7Total injury frequency (H2) 16.1 12.8 17.6

KeY fiGureS, upStreaM aCtiVitieSHydropower generation, actual 13 TWh 6.6 7.8 9.5Hydropower generation, annual mean 13 TWh 7.8 7.8 7.8reservoir reserves at 13 dec. TWh 2.0 3.6 3.8Average spot price øre/kWh 40.7 29.5 32.4district heating production gWh 120 91 72

KeY fiGureS, DoWnStreaM aCtiVitieSnumber of retail customers 14 1 000 153 152 153number of transmission and distribution customers 1 000 176 173 169Power grid capital (nVe capital) 15 nOK millions 2 986 2 794 2 574

BalanCe SHeet 2010 2009 2008

Equity

Interest-bearing liabilities

Capital employed

Total assets

3 488

7 621

11 109

16 725

3 740

5 944

9 684

14 675

3 024

5 392

8 416

15 425

DefinitionS

1. Operating profit/loss before depreciation and write-

downs.

2. Net cash flow from operating activities.

3. Equity + interest-bearing liabilities.

4. Cash, cash equivalents and unused credit facilities.

Excludes restricted assets.

5. Interest-bearing liabilities - unrestricted liquidity.

6. EBITDA/Operating revenues.

7. Operating profit/Operating revenues.

8. Profit for the year/Average equity.

9. (Profit before tax + interest expense)/

Average capital employed.

10. (Profit before tax + interest expense)/

Average total assets.

11. Equity/total assets.

12. EBITDA is adjusted for unrealised gains and losses on

power and currency contracts.

13. All power generation figures are quoted prior to pump-

back and losses.

14. Retail customers.

15. Basis for calculating the income cap. Set by the

Norwegian Water Resources and Energy Directorate

(NVE).

4 AGDER ENERGI annual report 2010

From left: Erik Boysen, Unni Farestveit, Ole Th. Dønnestad, Realf Ottesen, Finn R. Johansen, Tom Nysted, Pernille K. Gulowsen and Hans Jakob Epland. The photo was taken at Agder Energi’s headquarters in Kristiansand.

CEOTom Nysted

NetworkErik Boysen

EnergyOle Th. Dønnestad

- AE Produksjon

Other central functions- Risk management/ internal controls- Internal audit service

Other direct subsidiaries- AE Venture- AE Innovasjon- Solvea

- AE Nett

BUSINESS AREAS

- LOS- LOS Bynett- Nettkonsult- Sopran- AE Varme

- Otera

ContractingHans Jakob Epland

MarketUnni Farestveit

FinancePernille K. Gulowsen

HRFinn R. Johansen

CommunicationsRealf Ottesen

grOUP sTrUCTUre

senior management team

AGDER ENERGI annual report 2010 5

For the second winter in a row, Norway experienced a very cold snap, which has, in combination with extended periods of unusually low precipitation, resulted in high electricity prices. Imports have helped to prevent prices from spiking even higher, but the situation has shown that Norwegian electricity supplies are vulnerable to large fluctuations in pre-cipitation and temperature. For Agder Energi, the situation resulted in power generation being significantly lower than in a normal year. In comparison with 2009, generation was down 16 percent. However, good results in our other busi-ness areas helped to offset lower reve-nue from power generation in 2010.

Two winters with high electricity prices, and an unparalleled media frenzy in re-lation to some important power lines in Hardanger, have raised the tempera-ture of the Norwegian public debate on energy. The need to increase intercon-nections with other countries has also moved high up the agenda, and the de-cision to introduce a common market in Norway and Sweden for green power certificates, which was adopted towards the end of 2010, has made this need even more urgent. The power certificates will result in a total of 26.4 TWh of new an-nual generation in Norway and Sweden by 2020. That is equivalent to three times the amount of electricity gener-ated by Agder Energi in a normal year. With so much new power generation, we risk there being surplus capacity in the Nordic electricity market. Increasing the number of interconnections with other

countries is vital in order to counteract this risk. It will also help to guarantee power supplies, allowing us to avoid big spikes in electricity prices.

By taking a leading role in the important task of establishing more international interconnections, Agder Energi has posi-tioned itself as one of the leading propo-nents of investment in renewable power and in the development of the energy sector in Norway. That is completely in line with Agder Energi’s new vision, which was adopted in April 2011 in conjunction with the new corporate strategy: Agder Energi shall be one of the leading compa-nies in the Norwegian renewable energy sector. Agder Energi also has a stake in a significant wind power portfolio through its ownership interest in Norway’s largest wind power developer, Statkraft Agder Energi Vind. With 700 GWh of annual hydropower generation under construc-tion or in planning, Agder Energi is in a good position to exploit the opportuni-

ties that will arise in conjunction with the introduction of green power certificates. Together, these things mean that Agder Energi is on track to achieve its ambi-tious vision during this important stage of development for the energy industry.

In its local community, Agder Energi also makes an important contribution to cre-ating added value and developing south-ern Norway. Agder Energi’s Board of Directors has proposed paying a dividend of NOK 900 million to Statkraft and the local shareholder municipalities in Agder. As the head of one of southern Norway’s biggest companies, I am also delighted with the results of this year’s employee satisfaction survey, which once again showed that as employees we enjoy working at the company. I am proud of our 1 700 members of staff, who each day provide important services to soci-ety while generating significant value for our shareholders.

The energy industry is changing fast. In April, the Group’s senior management team adopted a strategy that sets out how we shall meet the challenges and exploit the opportunities that arise as a result of a new regulatory environment and changing market conditions. By im-proving our performance, we shall con-tinue to develop the Group and add even more value over the coming years.

Tom NystedCEO

in THe driVing seAT TO deVeLOP THe energY indUsTrY

6 Agder energi årSrapport 2010

AGDER ENERGI annual report 2010 7Agder energi årSrapport 2010 7

COnTenTs

Corporate governance 8directors’ report 14declaration by the Board of directors 21

the agder energi Groupincome statement 24Balance sheet 25Cash flow statement 26statement of changes in equity 27Accounting principles 28notes 36

agder energi aSincome statement 78Balance sheet 79Cash flow statement 80Accounting principles 81notes 83Auditor’s report 96


COrPOrATe gOVernAnCe

For many years, Agder Energi has worked hard to establish and improve its internal controls. The company’s internal control system is documented in governance doc-uments that are available to all employees. The system is called “THIS is how we do things at Agder Energi”, generally abbre-viated to the first word of the Norwegian name – SLIK. SLIK has been established in accordance with the recommendations contained in the respected COSO frame-work and the Norwegian Code of Practice for Corporate Governance, drawn up by the Norwegian Corporate Governance Committee (NUES).

SLIK was implemented in May 2010. Sys-tems have been established to ensure that suggestions and proposed changes are recorded and discussed. This provides a basis for continuously developing and im-proving the Group’s established practices.

SLIK describes how the Group governs and manages its activities, and what internal frameworks and guidelines employees must adhere to in their day-to-day work. Through SLIK, all of the Group’s govern-ance documents – from the articles of as-sociation through manuals to descriptions of work processes – are easily accessible on the Group’s intranet “Energisk”. SLIK is an important foundation for the Group’s work on integrated risk management, inter-nal controls and continuous improvement.

SliK helps to:• Simplifyandstandardiseinternalframe-

works within the Agder Energi Group,

nOrWegiAn COde Of PrACTiCe fOr COrPO-rATe gOVernAnCesTATemenT Of COmPLiAnCe

The Norwegian Code of Practice for Corporate Governance is published by the Norwegian Corporate Governance Com-mittee (NUES), and was most recently revised on 21 October 2010.

The code of practice is based on Norwe-gian legislation relating to limited com-panies, accounting, stock exchanges and securities trading. It contains rules and guidelines that are partly a continuation of existing legislation, and partly cover areas not covered by the legislation. The code of practice looks at 15 main topics, with one chapter for each topic. Below we have set out to what extent, and how, Agder Energi has chosen to follow the recom-mendations. Each heading represents one topic covered by the recommendations.

Corporate Governance StatementAgder Energi is not a publicly traded company, so it is not obliged to follow the recommendations. Nevertheless, Agder Energi implements them in so far as they are considered appropriate to Agder Energi’s business and ownership structure.

ethical guidelinesAlong with our values, the ethical guide-lines provide the foundation and frame-

while also making them more easily accessible to employees.

•Improveresultsbypromotingefficientmanagement and continuous improve-ment throughout the Group.

• Ensure compliance with internal and external requirements.

By having its governance documents or-ganised like this, the Group is laying the foundations for a business culture that promotes high-quality and efficient day-to-day operations and reporting to the company’s executive management and Board.

the governance documents in SliK comprise:• Descriptionsofcorporategovernance principles approved by the Board• InstructionsfortheManagementGroup,

Company Secretary and CEO• Instructionsfortheinternalauditservice• TheGroup’svision,valuesandethical guidelines• InstructionsfortheBoardofDirectors and general managers at subsidiaries• StrategiesfortheGroup,HR/HSE,insurance and ICT• Strategiesandtoolsforintegratedrisk management• 15Grouppolicies,settingoutprinciples that apply to key areas of the Group’s business• Descriptions,proceduresandworkproc- esses to ensure compliance with Group policies

Corporate governance principles regulate the relationship between the shareholders, Board of Directors and executive management of a company, as well as describing the relevant roles and reporting structures.


work for the Group’s activities. The target groups are all employees, members of the boards of Agder Energi and its subsidiar-ies and other people who act on behalf of Agder Energi.

High ethical standards are a prerequi-site for the ability to add value, and the Group focuses hard on ensuring that this is reflected in the company’s reputation. Ethics are an integrated part of the com-pany’s business. Agder Energi requires all people who act on behalf of the Group to comply with high ethical standards, and it discusses ethical issues openly both within the company and with third parties.

The company’s partners are also expected to have high ethical standards consistent with those of the Group.

The Group has special whistle-blowing procedures that can be used by employ-ees or other people who wish to express their concern or ask for advice on ethical conduct.

Corporate social responsibilityAgder Energi considers its business to be of critical importance to society, and it recognises its responsibility to take so-cial and environmental considerations into account in its operations. The most important guidelines relating to this area can be found in the company’s Corporate Social Responsibility Policy, which focuses on human rights, employment conditions, the environment and measures to avoid discrimination. There are also rules relat-ing to the company’s social responsibilities in the ethical guidelines, as well as in the Group policies on HR, Purchasing, HSE, Environment and Risk.

exceptions from Group policiesThe operations of some the subsidiaries in the Group are very remote from, and have little in common with, the core activities of

Agder Energi, and there are few synergies to be realised by integrating them more closely with the Group’s other activities.

These companies operate in open, com-petitive markets, and they build their own reputations through independent brands. On account of their exposure to competi-tion, and the very distinct nature of their operations, these companies are exempt from some of the requirements set out in the Group policies, and are allowed to establish their own company policies covering these areas instead. Any such policies must be approved by the senior management team.

Business activitiesAgder Energi’s purpose is defined in the company’s articles of association: “The company’s purpose is to: exploit, produce and sell energy; contribute to the safe and efficient supply of energy; and exploit re-lated, profitable business opportunities within the energy, communications and infrastructure sectors.”

Agder Energi has goals and strategies for the whole Group, for each business area and for subsidiaries.

equity and dividendsAt 31 December 2010, the Group had NOK 3,488 million of equity, i.e. 21% of the Group’s total assets. The Board of Directors considers this to be satisfactory in view of the company’s need for sound finances and in relation to its goals, strat-egy and risk profile.

The Group’s dividend policy reflects the stated aim of giving shareholders a re-turn on their investment through divi-dends. Historically, the Group has paid high dividends. The plan is also to pay out NOK 900 million in dividends for the 2011 financial year. The Group’s future divi-dends policy will depend on parameters

such as expected cash flow, investment plans, financing needs and the need for adequate financial flexibility.

equity raisingEquity increases shall be proposed by the Board and discussed by the AGM. The Board is not currently authorised to carry out equity increases.

equal treatment of shareholders and transactions with related partiesAgder Energi has two classes of shares: A and B. Each share has one vote at the AGM, and has an equal entitlement to divi-dends. Class A shares can only be owned by hydropower licensors. The articles of association do not restrict voting rights in any way.

For significant transactions between the company and shareholders, Board mem-bers, key employees or any of their related parties, the Board shall obtain a valuation from an independent third party.

free negotiabilityThe shareholder agreement between the owners of Agder Energi means that the shares are not freely negotiable.

annual General MeetingUnder the agreement between the share-holders, the AGM is only attended by one representative of the shareholder mu-nicipalities and one representative of Statkraft Industrial Holding. The Chair of the Board, CEO and external auditor shall also attend. The election committee and other Board members than the Chair are also entitled to attend.

election committeeThe articles of association specify that the company shall have an election com-mittee. It consists of five members, who are appointed for a two-year term. Under the current shareholder agreement, the


municipal shareholders can appoint three members, while Statkraft can appoint two. The election committee nominates candi-dates for the corporate assembly and for the Board of Directors.

The shareholder agreement contains cer-tain rules on the work of the election com-mittee, designed to ensure compliance with the stipulations of the agreement.

Corporate assembly and Board of Directors: Composition and independ-enceThere are 15 members of Agder Energi’s corporate assembly. Five representatives are elected by and from the employees, five from the municipal shareholders and five from Statkraft. The corporate assem-bly is elected for a two-year term, and elects its own Chair and Deputy Chair. The members of the corporate assembly are elected by the AGM. The corporate assembly elects the Board of Directors, as well as the Chair and Deputy Chair of the Board, based on the parties’ nomina-tions, discusses dividend proposals and gives an opinion to the AGM on the ap-proval of the annual financial statements. The corporate assembly is invested with the authority and entrusted with the tasks specified in current legislation governing limited liability companies.

Under the shareholder agreement, twelve people sit on the Group’s Board of Direc-tors, all of whom have a personal deputy. Four members, including the Chair and Deputy Chair, are elected at the pro-posal of the municipal shareholders, four members are elected at the proposal of Statkraft and four at the proposal of the employees. The executive management is not represented on the Board.

Board members are elected for a two-year term.

entitlement of Board members to own sharesUnder the company’s articles of associa-

tion and the shareholder agreement, nei-ther Board members nor other individuals are entitled to own shares in Agder Energi.

the work of the BoardThe Board’s tasks are regulated by the Limited Liability Companies Act and other relevant legislation, the company’s articles of association and the Board guidelines. The Board guidelines are publicly avail-able. The Board appoints the CEO. The Board has drawn up instructions for, and delegated authority to, the CEO.

audit committeeChanges to the Stock Exchange Regula-tions that came into force on 30 June 2010 mean that Agder Energi is now obliged to have an audit committee. Work on implementing this started at the end of 2010, and the Board’s audit commit-tee will be in place by the deadline of 30 June 2011.

risk management and internal controlsAgder Energi’s internal control and risk management systems are described in a separate section below, and satisfy NUES’ recommendations. The Board guidelines require an annual review of internal con-trols and risk management to be carried out in collaboration with the external au-ditor.

non-executive Directors’ feesMembers of the Board are paid based on their roles. Their fees are not profit-related. No Board members are entitled to a pension, options or termination com-pensation from the company, apart from the entitlements of the employee repre-sentatives in their capacity as employees of the company.

Details of the fees paid to individual Board members are presented in Note 34 to the consolidated financial statements.

Management compensationManagement compensation reflects the

Group’s guidelines on compensation. Mem-bers of the senior management team are not entitled to any options, bonuses or performance-related pay.

Details of the compensation of each indi-vidual member of the senior management team are presented in Note 34 to the con-solidated financial statements.

information and communicationAgder Energi satisfies all statutory re-quirements relating to financial reporting and disclosure. The Group considers main-taining good lines of communication with external stakeholders to be a priority. The Director of Communications is responsible for this. The Group’s internal controls in-clude rules on contact with shareholders outside the framework of the AGM.

acquisitionsAgder Energi primarily acquires and dis-poses of companies through its wholly-owned subsidiaries Agder Energi Innovas-jon and Agder Energi Venture. Disposals and acquisitions can also be implemented through other subsidiaries as part of their company strategies.

auditorErnst & Young was the Group’s external auditor in 2010. The Group’s internal con-trols satisfy all of NUES’ recommendations relating to auditors.

risK mAnAgemenTIdentifying and managing risks is one of the keys to adding value, and it forms an integrated part of Agder Energi’s cor-porate governance model. The Group is exposed to risks in a variety of areas throughout the value chain. The most im-portant risks are related to the market, financial management, operations and the regulatory environment.

Agder Energi’s risk management activities form an integrated part of its business op-erations, and they are implemented at the


individual companies in the Group through procedures for identifying, assessing, managing, reporting and responding to risks. The Group’s overall exposure to risk is also monitored at the Group level, and is included in reports to the senior manage-ment team and Board of Directors.

risk management systemsIn the past, risk management at Agder Energi concentrated on market risk and on describing the potential impact on the Group’s anticipated profitability.

In recent years the Group’s risk manage-ment systems have been expanded to in-clude tools for managing risks at all of the Group’s companies and businesses, cov-ering every area that could prevent the Group and its companies from achieving all of their aims. Each year the compa-nies map their exposure to risk, which is reviewed quarterly, as well as being moni-tored in the day-to-day management of the business.

Agder Energi has set up a risk manage-ment committee to help ensure that in-vestment decisions and strategic ventures decided by the senior management team or at Board level are based on detailed, quality-assured background information. The risk management committee acts as a consultative body for the CEO.

Market riskAgder Energi is exposed to significant market risk through the generation and sale of electricity, as its revenues from power generation can vary due to fluc-tuations in volumes and prices. Hedging strategies are based on estimated vol-umes and aim to guarantee the minimum profit required to allow the company to service its debts. The amount of electricity sold through futures contracts is adjusted within that framework based on the com-pany’s price expectations and generation capacity. Downstream activities are ex-posed to fluctuations in the price at which

electricity is sold to domestic and business customers, as well as purchase prices in the wholesale market.

operational riskThere are operational risks associated with processes throughout the value chain. The most important ones are the risk of dam-age to power plants, distribution networks and other assets, injuries to the Group’s employees, and negative impacts on the environment and climate. Operational risk is managed through procedures governing activities at operating units, and through contingency plans.

The Group has established the “RUH” sys-tem for reporting and recording potential dangers, unwanted incidents and injuries. The reports are analysed with a view to limiting any consequences, as well as to uncover causes and implement corrective measures.

other risksThe most important other risks relate to the regulatory environment. Changes in the regulatory framework and political de-cisions affect the company’s room for ma-noeuvre and constitute a significant pro-portion of the Group’s risk exposure. The Group constantly evaluates changes in the political climate, and believes in maintain-ing an open dialogue with decision-makers in all relevant arenas. Agder Energi always aims to have good relationships with all stakeholders.

eArLY WArningIn order to pick up on changes in the world that are relevant to the company’s business, Agder Energi has introduced an Early Warning system. This system is used to carefully monitor developments in the regulatory environment and markets in which the Group operates, as well as technological developments. The informa-tion thus obtained is used in strategic and commercial decision-making procedures.

AUdiTingAgder Energi has an internal audit service, which assists the Board, senior manage-ment team and business areas by provid-ing an independent, unbiased assessment of the Group’s risk management proce-dures. The internal audit service’s mandate and guidelines are approved by the Board, which also reviews the internal audit serv-ice’s annual report and the audit plan for the following year.

The external auditor is chosen by the AGM, and is responsible for the financial audit of the parent company, Group and subsidiar-ies. Agder Energi has a Group-wide agree-ment with the external auditor, who must be used by all subsidiaries for the statu-tory audit. New subsidiaries shall choose to use the Group’s auditor no later than at the company’s next AGM. Companies in the Group’s seed and venture capital portfolios can have a different auditor.

WHisTLeBLOWingPrOCedUres

The head of the internal audit service is also the person who is notified under the Group’s system for reporting unethi-cal or illegal conduct. Such incidents are treated in strict confidentiality unless criminal conduct is involved. At Agder Energi, reporting unwanted incidents will never result in any sanctions against the whistle-blower.


direCTOrs’ rePOrT

Agder Energi’s vision is to be a leading Norwegian supplier of climate-friendly energy solutions. The Group’s activities comprise the generation, distribution and sale of energy, energy-related services, and the development and operation of a fibreoptic cable network. Most of Agder Energi’s business is done in southern Nor-way, and the company has its head office in Kristiansand.

The Group’s underlying performance at an operating level was satisfactory in 2010, given the low level of power generation. Most of the business areas achieved good results, performing in line with our strategy and expectations.

The Group’s profit for the year was NOK 751 million in 2010, compared with NOK 1 604 in 2009. The 2009 figure was greatly inflated by unrealised gains on energy, currency and interest rate contracts, which boosted profit after tax by NOK 896 million. In 2010, by contrast, these items reduced profit after tax by NOK 109 million. In 2010, the company generated 6 586 GWh of hydroelectric power, against 7 831 GWh in 2009. Pre-cipitation levels in 2010 were significantly lower than normal, and at the end of 2010, hydrological resources were also signifi-cantly below the normal level for the time of year.

KeY eVenTs Of 2010In December the Norwegian and Swedish governments agreed on the fundamental principles for a common market in the two countries for green power certificates, to be introduced on 1 January 2012. The aim of the proposed market is to increase an-nual generation by 26.4 TWh between 2012 and 2020, with each country pro-viding 13.2 TWh of additional generation. Agder Energi is well-positioned to benefit from the arrival of the market, with just

under 700 GWh of annual hydropower generation under construction or in plan-ning. This includes the 140 GWh expansion of Iveland power station, which was given a licence in March 2011. Agder Energi also has a large portfolio of wind power pro-jects through its joint ventures Statkraft Agder Energi Vind (SAE Vind) and Dalane Vind.

In August it was decided that Agder Energi Nett would build a new substation at Hippen in Grimstad. It will play an im-portant role in securing back-up supply and covering the increasing demand for electricity in the area. The project has a budget of NOK 90 million, and is due for completion in May 2012.

At the start of July, the Group’s retail elec-tricity and services company LOS bought Statoil’s electricity supply business. This made LOS Norway’s biggest supplier of electricity to businesses.

In June, the Norwegian Water Resources and Energy Directorate (NVE) licensed SAE Vind (38% owned by Agder Energi) to develop wind farms with a total ca-pacity of 320 MW at Kvenndalsfjellet and Storheia in Fosen, Sør-Trøndelag. The wind farms will generate enough power to cover the electricity needs of 45 000 households.

In June Statnett acquired 50% of the shares in the NorGer project, which is planning an undersea HVDC cable be-tween Norway and Germany. As a result, the other shareholders – Agder Energi, EGL and Lyse – now each own a 16.67% interest in the project.

On 13 July, one person drowned at the disused Kringsjå power station in the municipality of Vennesla, after people gained unauthorised access to the site. Additional security measures have been

implemented at this and other disused power stations.

finAnCiAL PerfOrmAnCeThe Group’s operating revenues amounted to NOK 9 434 million in 2010, compared with NOK 8 287 in 2009. The Group made an operating profit of NOK 1 634 (2 271) million, 28% less than in 2009. Wage costs in 2010 were affected by a one-off item relating to pension expens-es. In the past, pensioners with a defined benefit plan used to have their pension benefits adjusted in line with any increase in the National Insurance Scheme’s basic amount. In 2010 the way in which pensions are adjusted was modified, meaning that in the future pensioners with defined benefit plans will see their benefits adjusted by general wage inflation less 0.75 percent. This one-off item reduced the pension expense for the year by around NOK 150 million.

The Group made a profit before tax of NOK 1 371 (2 789) million, 51% lower than in 2009.

Spot prices for electricity in the NO2 re-gion were higher in 2010 than in 2009. The average spot price rose by 31% from 31.1 øre/kWh to 40.7 øre/kWh. Neverthe-less, the average price achieved by the Group was lower in 2010 than in 2009, as a result of the poor performance of the Group’s hedging instruments. The Group generated 6 856 GWh (7 831 GWh) of electricity in 2010, 12% less than in 2009.

Agder Energi prepares its consolidated accounts under IFRS (International Finan-cial Reporting Standards), and unrealised gains and losses on most of the Group’s power, currency and interest contracts are recognised through profit or loss. This leads to large fluctuations in profit, but the gains and losses have no impact on cash


flows. To a large extent, the difference be-tween the Group’s profit in 2009 and 2010 was due to unrealised gains and losses. In 2009 they combined to increase profit before tax by NOK 1 245 million, whereas in 2010 they reduced profit by NOK 151 million. Currency contracts made the main contribution to this big difference.

Over the course of 2010, the Group disposed of the companies Elsmart Solutions, Phonzo and Agder Energi Eiendom I, making a total gain of NOK 42 million. The Group took a NOK 100 (80) million impairment charge on its invest-ment in Ventelo in 2010.

The Group’s tax expense in 2010 was NOK 620 (1 185) million. The effective tax rate in 2010 was 45%, compared with 42% in 2009. Profit after tax came to NOK 751 million in 2010, compared with NOK 1 604 million in 2009.

For 2010, the parent company Agder En-ergi AS has changed the principles it uses when accounting for interest rate swaps. Previously it measured them at fair value through profit or loss. As of 2010, the company has gone over to using hedge accounting for interest rate swaps. This means that the swaps are kept off the balance sheet, and are only recognised through profit or loss as and when they are realised. Comparative figures have been adjusted to reflect the change in accounting principles, which has resulted in a NOK 27 million increase in the com-pany’s equity.

financial results and capital structureAgder Energi’s assets had a book value of NOK 16.7 (14.7) billion at the close of 2010. The equity ratio fell by 4 percent-age points to 21%. The Group’s interest-bearing debt totalled NOK 7 621 (5 944) million at the close of the year. The aver-age interest rate on the debt portfolio was

4.3% (4.6%), calculated in NOK. At the end of the year, the Group had NOK 1 297 (880) million of undrawn credit facilities.

Net investment amounted to NOK 821 (1 081) million in 2010. NOK 758 (785) mil-lion of that consisted of investments in property, plant, equipment and intangible assets, of which around 70% related to the Network and Energy business areas.

In 2010, the Group’s cash flow from oper-ating activities was NOK 226 (1 375) mil-lion, 79 % lower than in 2009. The biggest single reason for the reduction was an in-crease in trade receivables in the Group’s retail business. This was a result of high volumes and high prices towards the end of the year.

proposed dividendsThe dividend for the year has been set based on the Group’s profit under NGAAP (Norwegian generally accepted account-ing principles). The controlling interest’s NOK 878 (800) million share of NGAAP profit reflects the underlying perform-ance of the Group better than the IFRS figure, as it is less affected by unrealised gains and losses. Moreover, the NGAAP profit more closely matches changes in the Group’s distributable reserves. The Board of Director proposes that NOK 900 million be paid out in dividends, which represents 103% of the Group’s NGAAP profit. The profit for the year of the parent com-pany Agder Energi AS under NGAAP was NOK 726 (815) million.

The Board proposes that Agder Energi AS’s profit for the year be appropriated as follows:

(Amounts in nOK millions) Allocated for dividends 726Transferred from other distributable reserves 174total allocated for dividends 900

The parent company had NOK 36 (112) million in distributable reserves after the appropria-tions as of 31 December 2010.

Going concern assumptionIn accordance with the Norwegian Account-ing Act, the Board of Directors confirms that the annual financial statements have been prepared on the assumption of the business being a going concern. There have been no significant events after the balance sheet date.

PerfOrmAnCe Of THe BUsiness AreAs in 2010The accounts for the business areas have been prepared under NGAAP.

the energy business areaThe Energy business area consists of the company Agder Energi Produksjon. In 2010 it made an operating profit of NOK 1 541 (2 090) million, and a pre-tax profit of NOK 1 415 (1 621) million. The Group’s dynamic hedging of electricity prices had a nega-tive impact on the company’s results. This, in combination with a large number of old industrial supply contracts and concession power agreements, means that the prices achieved by the company were lower than the spot prices. In 2010, the company gener-ated 6 586 GWh (7 831 GWh) of electricity in total. This was 16% less than in 2009, and the second lowest figure since the founda-tion of Agder Energi. The precipitation that reached the Group’s reservoirs was very low in 2010, which contributed to hydrological re-sources being significantly lower than normal at the end of the year.

The tax expense for the year amounted to NOK 625 (824) million. The decline was due to lower pre-tax profit, as well as a NOK 168 million reduction in the tax expense due to changes in deferred resource rent tax. The business area made a profit after tax of NOK 790 (797) million.


It invested NOK 185 (206) million in 2010, most of which related to reinvestments and investments required by the authori-ties.

Agder Energi is also involved in small hydro and wind power projects through its ownership interests in the companies Småkraft (20%), SAE Vind (38%) and Dalane Vind (50%).

the network business areaThe Network business area, which consists of the company Agder Energi Nett, made an operating profit of NOK 386 (220) million in 2010, on turnover of NOK 1 418 (1 018) million. The company’s income cap was raised due to compensation for past years’ energy not supplied (KILE) and pen-sion expenses, as well as due to a general increase in the income caps on power grid operators.

In 2010, KILE costs were NOK 28 (41) mil-lion, 32 % lower than in 2009.

The business area invested NOK 307 (433) million in 2010. The reduction was due to harsher winter weather at the start of 2010, as well as a slight fall in overall investment levels.

At the start of 2011, Agder Energi Nett’s transmission tariff has been kept un-changed from 2010.

the Market business areaThe Market business area comprises LOS, LOS Bynett, Agder Energi Varme, Nettkon-sult and Sopran. The business area made an operating profit of NOK 112 (72) million in 2010.

In the domestic market, LOS maintained its market share in Agder. The company is continuing to increase its volumes in the business market, and in 2010 it sup-plied a total of 8 677 GWh (7 307 GWh). In 2010 LOS acquired Statoil’s electricity business, which supplies almost 4 TWh an-nually. The acquired portfolio represents annual turnover of around NOK 1.2 billion, and this turnover has been included in the

company’s accounts as of the start of the fourth quarter.

In its annual customer satisfaction survey, LOS does very well in terms of its reputa-tion and customer satisfaction.

The Group’s fibreoptic business is oper-ated by LOS Bynett. The business made an operating profit of NOK 1 million (loss of NOK 8 million) in 2010.

Agder Energi Varme made an operating profit of NOK 12 (11) million. In 2010 it sup-plied 120 GWh (92 GWh) of heating and cooling energy. The growth in volume was due to growth in its customer base and lower temperatures in the first and fourth quarters of the year.

Profit from net energy sales did not grow as strongly, as much of the increase in volumes had to be covered with oil and electricity. Returkraft started supplying energy from its waste-to-energy plant at Langemyr in Kristiansand towards the end of the year, so the proportion of renewable energy and profitability are both expected to increase in 2011.

The business area invested NOK 114 (69) million in 2010. The connection to Re-turkraft’s waste-to-energy plant was the biggest single project. Nettkonsult sup-plies planning and design services in the areas electricity supply, telecommunica-tions and electrical safety.

Nettkonsult comprises three companies which made a combined operating profit of NOK 11 (1) million. Nettkonsult’s order book at the end of the year was satisfactory.

The debt collection company Sopran made an operating profit of NOK 6 (8) million in 2010. The company’s turnover rose com-pared with last year as a result of Vestfold Inkasso merging with Sopran.

the Contracting business areaThis business area, which consists of the Otera Group, made an operating profit of NOK 16 (50) million in 2010. In 2010 profit

was boosted by changes to pension plans, and on an underlying basis the Otera Group therefore made a loss. The dete-rioration was largely due to a challenging market as a result of the credit crisis, as well as difficult weather conditions in the first quarter of the year. The order book was satisfactory, and was higher than at the same time the previous year.

emPLOYeesStaff and organisational structureAt the close of the year, the Group had 1 692 (1 714) permanent and temporary employees, representing 1 647 (1 673) full-time equivalents, while the parent com-pany had 55 (55) permanent employees.

For a number of years, Agder Energi has carried out an employee satisfaction sur-vey known as “Energibarometeret”. In 2010 it once again revealed that employ-ees enjoy their work and like the working environment.

The construction of our new head office was completed in 2010. A business culture project was implemented in conjunction with the move, to help decide what kind of workplace we wanted as a result of bring-ing several hundred employees from differ-ent locations together under a single roof.

AE Akademiet has made a key contribution to professional development and training right across the Group. In 2010 it held 115 courses, which were attended by a total of 1 861 people. Although 2010 was a slightly unusual year, in that the main focus was on internal recruitment, there will be a lot of competition for staff in the coming years. We will therefore work hard to keep and de-velop our best employees. We will do so by offering competitive compensation pack-ages, implementing a life phase-conscious HR policy and providing good training, as well as by promoting a results-oriented cul-ture, diversity, HSE and good management.

The Board of Directors would like to thank staff for all their hard work over the course of the year.


Health and safetyIn 2010 the Group’s sickness absence rate was 4.4% of total working hours, un-changed from 2009. Of that, 1.7% (1.9%) was short-term absence and 2.8% (2.5%) was long-term absence (more than 16 days). The Group has for some time been working hard to improve the way in which it deals with absences, and it aims to bring its sickness absence rate below 3.5%. No occupational illnesses were recorded or reported in 2010.

In 2010 the Group ran various programmes to promote an active lifestyle as a way of achieving better health. In autumn 2010 it was decided that all of the companies in the Group would sign up to the Norwe-gian government’s inclusive working life scheme for the period 2010-2013.

During the year, 48 (31) occupational ac-cidents resulting in injury were recorded. Of these, 15 (17) resulted in a total of 83 (202) man days being lost. The total in-jury frequency, defined as the number of injuries (including both non-lost-time and lost-time injuries) per million working hours, was 16.1 (12.8). The number of man days lost to accidents per million working hours was 27.8 (68.7). In 2010 the Group achieved its goal of reducing its lost-time injury frequency, bringing it down to 5.1 (5.6). Fewer unwanted incidents were re-ported, which suggests that the Group’s goal of increasing the proportion of un-wanted incidents that get reported was not achieved. The Board continues to pri-oritise efforts to learn from near misses in order to minimise the number of accidents and injuries.

Diversity and equal opportunityAgder Energi’s ethical guidelines set out how the Group shall be governed and man-aged, and how Agder Energi’s employees are expected to conduct themselves. The guidelines also incorporate principles re-lating to equality and diversity. The Group aims to create a working environment that reflects the UN’s Universal Declaration of Human Rights and the ILO Convention. Agder Energi does not accept any form

of discrimination. This means that people shall not be treated differently, excluded or shown preference based on their race, gender, age, any disability, sexual orienta-tion, religion, political opinions or national or ethnic origin, and that no other form of discrimination shall be tolerated.

Agder Energi is signed up to the Female Future and Global Future programmes run by the Norwegian Confederation of Enter-prise (NHO). Female Future aims to pro-mote equal opportunity at the workplace and to improve female representation at senior management and Board level. Women make up 17% (16%) of the Group’s employees, and there are six men and two women in the senior management team. Women occupy 33% (33%) of the seats on the Board.

THe enVirOnmenTThe Group’s businesses in the hydropower, wind power, geothermal energy and grid operation sectors are run through wholly-owned and part-owned subsidiaries. The companies operate in accordance with government licences and rules based on current legislation and court decisions.

The Group has a system for managing hazardous waste. Dams and power sta-tions change the natural environment, but the Group’s activities do not have a bigger impact on nature or society than is usual for this kind of business.

The Water Resources Act, Watercourse Regulation Act, Energy Act, Industrial Licensing Act and Pollution Control Act are the most important pieces of legisla-tion governing our business. The compa-nies in the Group are required to report any non-conformances with the terms of their licences.

At Agder Energi Produksjon there were no non-conformances with the rules gov-erning the operation of the company’s dams that needed to be reported to NVE in 2010. Minor non-conformances with the rules are reported to NVE just after the

end of the year. In 2010 there were two such minor non-conformances.

Hydroelectric power stations can have a negative impact on fish populations. In view of this, Agder Energi’s power gen-eration business goes to great lengths to minimise the impact of its operations on the environment. In 2010, 42 000 juve-nile trout were released in order to secure the viability of the trout population in the Finså, Mandal and Uldal river systems. Moreover, Agder Energi Produksjon has participated in projects with the authori-ties to re-establish the salmon population in the Mandalselva and Nidelva rivers.

In the wind power sector, Agder Energi Produksjon owns and operates Fjeldskår wind farm in Lindesnes Municipality. Agder Energi is also involved in planning and de-veloping additional wind farms, through its part-owned subsidiaries SAE Vind and Dalane Vind. This involves inspecting the potential sites, and taking wind readings there. There is little or no danger that these activities will pollute the environ-ment. For all of the projects, agreements have been signed with the majority of the landowners. We work hard to establish good communication with host municipali-ties and other affected parties, in order to discover, in so far as possible, the potential impact of a wind farm on the environment before it is built. All future development and operation of wind farms will be carried out in accordance with the terms of our licence and relevant legislation.

In principle Agder Energi’s operation of the power grid is non-polluting. However, for operational reasons, components are used that may cause pollution in the event of an accident. In 2010 there were no incidents that resulted in environmental pollution.

Agder Energi Nett also carefully monitors the latest research and developments in relation to the potential impacts of elec-tromagnetic fields on human health. The company follows the guidelines of the Norwegian Radiation Protection Author-ity and NVE.


The Group reports on matters relating to the environment in a separate sustainabil-ity report, which forms part of the Group’s activities with respect to corporate social responsibility.

risK mAnAgemenT And inTernAL COnTrOLsAgder Energi uses a balanced scorecard to manage the implementation of its strat-egy and to measure the results achieved. This system involves specifying key goals, strategies and parameters on scorecards, which are specified for the Group as a whole, for business areas and for each individual subsidiary.

The Board has adopted a general risk management policy, which provides the framework and guidelines for integrated risk management. Based on that policy, individual risk management strategies have been drawn up for the areas power generation, retail market, electricity trad-ing and finance (interest and exchange rate risk). The Group’s risk management systems cover all areas that could affect the company’s ability to meet its goals, which includes setting and monitoring limits on the Group’s venture capital investments, as well as analysing potential impacts on financial results.

Agder Energi’s risk management activities form an integrated part of the business operations at individual Group companies, which are responsible for mapping and managing their own risks. Agder Energi’s overall exposure to risk is also monitored at the Group level, and is included in reports to the senior management team and Board of Directors. The Board fulfils its supervi-sory duty through monthly reports on the Group’s financial position, which include forecasts and scorecards for the Group. Each quarter the Board receives a more de-tailed report on the position of the Group.

Agder Energi’s corporate governance doc-ument SLIK is an internal control system, which describes how the Group governs and manages its activities. SLIK also sets

out which rules and guidelines employees need to follow in their day-to-day work, including the company’s values and its guidelines on ethics and corporate social responsibility.

risksThe Group is exposed to risks in a variety of areas throughout the value chain. The most important risks are related to the market, financial management, operations, the regulatory framework and the operat-ing environment.

Agder Energi is exposed to several types of market risk. Generating and selling electricity is associated with the risk of fluctuations in volumes and prices, which are directly affected by precipitation lev-els and temperatures, and indirectly influ-enced by the prices of gas, coal, oil and CO2 quotas. Electricity trading, which is done in Euros, also introduces a currency risk. Market risks are managed with the help of various physical and cash-settled instruments, which are used to secure sta-ble revenues from energy sales in NOK. The use of futures is designed to stabi-lise the Group’s revenues from one year to another. Limits on futures trading are based on the desired hedge ratio in rela-tion to the potential generation. Currency risk is hedged by gradually hedging cash flows from expected electricity sales over the next four years. Downstream activities are exposed to fluctuations in the price at which electricity is sold to domestic and business customers, as well as purchase prices in the wholesale market.

Agder Energi is exposed to interest rate risk through changes in the interest rates on the Group’s interest-bearing li-abilities, as well as through the impact of interest rates on the Network business area’s income cap. The Group’s finance department coordinates and manages financial risk. This is done using fixed-interest loans and with the help of finan-cial instruments.

Agder Energi is exposed to liquidity risk arising from the fact that its liabilities

do not mature at the same time as when cash flows are generated. Variations in margin requirements on futures are an-other source of liquidity risk. The capi-tal markets consider Agder Energi to be a low-risk borrower, and the company has been given an A- shadow rating by agencies in the bond market. The Group mainly finances operations through the Norwegian commercial paper and bond markets, but it also uses the banking mar-ket to some extent. The Group has credit facilities with banks to backstop its com-mercial paper programme. Exposure to liquidity risk is managed by the risk man-agement and internal control department.

Agder Energi takes on credit risk by trading and selling electricity, by investing excess liquidity and through trading financial in-struments. Agder Energi has good proce-dures for chasing up unpaid receivables, and the limits on exposure to individual par-ties are monitored and reported regularly.

The most important operational risks are the risk of injuries to the Group’s employ-ees, the risk of damage to power plants, distribution networks and other assets, and the risk of causing environmental pollution. Contingency plans and the pro-cedures of individual operating units are designed to manage these risks.

Changes to the operating environment and political decisions are also potential risks, and the Group constantly monitors the political situation.

reseArCH And deVeLOPmenTR&D and innovation shall provide a foun-dation for the long-term development of the Group. Agder Energi is involved in sev-eral R&D projects, and is actively involved in building up relevant research communi-ties at a national and regional level. The Group develops new business opportuni-ties through targeted investment in R&D, innovation and venture capital projects. The aim is to furnish the Group with long-term opportunities for growth.


Agder Energi is collaborating with the University of Agder and several other local businesses on the Norwegian Center for Offshore Wind Energy (NORCOWE). One of the things that NORCOWE will look at is the potential environmental impacts of future offshore wind farms.

Agder Energi is also involved with two other national research centres looking into green energy technology: CenBio (the Bioenergy Innovation Centre); and CEDREN (the Centre for Environmental Design of Renewable Energy). CEDREN’s main focus is on green energy solutions.

The Group is also helping the University of Agder to build up a renewable energy research community.

Agder Energi promotes innovation and growth through its proactive involvement in the companies Sørlandet Kunnskapspark and Gallion Sørlandets Etablererfond.

The Group’s venture capital investments are managed through the company Agder Energi Venture, which in 2010 invested ad-ditional money into existing projects and supported new ventures. The value of its investment portfolio rose over the course of the year.

OUTLOOKIn 2010 the Board decided that Agder En-ergi’s strategy needed to be reviewed. This

was based on the expectation that there would be big changes to the energy sec-tor’s operating environment and market opportunities. The Board of Directors is expecting to adopt its revised strategy during spring 2011.

A lack of precipitation combined with cold winter weather has meant that new inter-connections with other countries remain high on the agenda of the public debate on energy policy. Agder Energi is continu-ing to work with Statnett and others on developing NorGer, a cable that would run between Norway and continental Europe.

In addition, in February 2011, Agder Energi, E-CO, Lyse, Vattenfall and Scottish and Southern Energy signed a letter of intent on the construction of the first grid interconnection between Norway and the UK. The cable, which will have a capacity of 1 200-2 000 MW, may be operational by 2020. The aim of both projects is to pre-vent imbalances developing in the Nordic electricity market, as well as to increase the reliability of power supply.

At the end of 2010 the Norwegian and Swedish governments reached agreement on the fundamental principles for a com-mon market in Norway and Sweden for green power certificates. With 700 GWh of annual hydropower generation in its development pipeline, Agder Energi is in a good position to exploit the opportuni-ties provided by the market.

The goal of the market is to increase the amount of renewable energy generated in Norway and Sweden. A robust grid is es-sential if we are to bring new power plants online. In order to allow renewable energy to be connected, the Board of Directors considers it a priority for the regulatory environment to incentivise investment in the grid.

At the start of 2011, the Group’s hydrologi-cal resources (water and snow) were signifi-cantly below normal, and so far in 2011 there has been less precipitation than normal. Electricity prices fluctuate a great deal, and are affected by hydrological conditions and the prices of oil, gas, coal and CO2. Futures contracts for electricity in 2011 indicate that prices will be slightly higher than last year. In the event of normal precipitation levels for the rest of the year, we expect electric-ity generation to be low and revenue from power generation to fall in 2011.

Kristiansand, 18 March 2011Board of Directors of Agder Energi AS

Sigmund Kroslid Mette Gundersen Bente Zeline Rist Tønnes Seland Steinar Bysveen Chair Deputy Chair Kristin Steenfeldt-Foss Bjørn Blaker Elisabeth Morthen Johan Ekeland Øyvind Østensen Oddvar E. Berli Rolf Bjarne Eriksen Tom Nysted CEO


Front (left to right): Johan Ekeland, Elisabeth Morthen, Rolf Bjarne Eriksen, Kristin Steenfeldt-Foss, Øyvind Østensen and Oddvar Emil Berli. Back (left to right): Mette Gundersen, Bente Zeline Rist, Tønnes Seland, Steinar Bysveen, Bjørn Blaker and Sigmund Kroslid. The photo was taken at Agder Energi’s headquarters in Kristiansand.

The group’s Board of directors


Declaration pursuant to Section 3-5 of the Securities trading act

We confirm that, to the best of our know-ledge, the annual financial statements have been prepared in accordance with current accounting standards, and that the information contained therein pro-vides a true picture of the company’s assets, liabilities, financial position and overall results. We also confirm that the annual report gives a true picture of the performance, results and financial posi-tion of the company and the Group, as well as describing the most important areas of risk and uncertainty faced by the Group’s businesses.




THe Agder energi grOUP

FInanCIal StateMentS anD noteS


THe Agder energi grOUP

FInanCIal StateMentS anD noteSincome statement 24Balance sheet 25Cash flow statement 26statement of changes in equity 27Accounting principles 28

noteSnote 1 segment information 36note 2 Acquisitions, disposals and acquisition of non-controlling interest 39note 3 energy sales 40note 4 Transmission revenues 41note 5 Other operating revenue 42note 6 Long-term manufacturing contracts 42note 7 Unrealised gains and losses on energy contracts 42note 8 employee benefits 42note 9 Property taxes and licence fees 43note 10 Other operating expenses 43note 11 Auditor’s fee 43note 12 financial income and expenses 44note 13 Tax 45note 14 intangible assets 46note 15 Property, plant and equipment 48note 16 Associates and joint ventures 50note 17 non-current financial assets 53note 18 inventories 53note 19 receivables 54note 20 Cash and cash equivalents 54note 21 equity 55note 22 share capital and shareholder information 56note 23 Provisions 57note 24 Pensions 57note 25 interest-bearing liabilities 61note 26 Other non-interest-bearing current liabilities 61note 27 derivatives 62note 28 financial instruments 63note 29 fair value of financial instruments 64note 30 Qualitative information about risk exposures arising from financial instruments 66note 31 Quantitative information about risk exposures arising from financial instruments 70note 32 mortgaged assets, liabilities and guarantees issued 72note 33 Contingent liabilities 73note 34 management compensation, etc. 73note 35 related parties 75note 36 government grants 75

COnTenTs

24 AGDER ENERGI ANNUAL REPORT 2010

INCOME STATEMENT

(Amounts in NOK millions) Notes 2010 2009 Energy sales 3 7 000 5 846Transmission revenues 4 1 226 967Other operating revenues 5, 6 1 562 1 472Unrealised gains and losses on energy contracts 7 -354 2Total operating revenues 9 434 8 287

Energy purchases 3 4 721 3 061Transmission expenses 270 165Other raw materials and consumables used 648 770Employee benefits 8 783 775Depreciation and write-downs 14, 15 436 423Property taxes and licence fees 9 181 177Other operating expenses 10, 11 761 645Total operating expenses 7 800 6 016

Operating profit 1 634 2 271

Share of profit of associates and jointly controlled entities 12, 16 -27 -53Finance income 12 46 22Unrealised gains and losses on currency and interest rate contracts 12 203 1 243Finance costs 12 485 694Net finance income -263 518

Profit before tax 1 371 2 789

Income tax 13 386 811Resource rent tax 13 234 374Tax expense 620 1,185

Profit after tax 751 1 604

Of which attributable to non-controlling interests 21 3 7Of which attributable to controlling interest 21 748 1 597

Earnings per share (NOK) 277 591Earnings per share, diluted (NOK) 277 591

STATEMENT OF COMPREHENSIVE INCOME

Profit after tax 751 1 604Actuarial gains and losses on pensions 24 -167 133Cash flow hedges 30 44 0Tax on actuarial gains/losses and cash flow hedges 35 -37Comprehensive income 663 1 700

Of which attributable to non-controlling interests 3 7Of which attributable to controlling interest 660 1 693


BALAnCe sHeeT

(Amounts in NOK millions) Notes 2010 2009 deferred tax assets 13 543 572intangible assets 14 221 200Property, plant and equipment 15, 36 11 134 10 876investments in associates and jointly controlled entities 16 175 130Other non-current financial assets 17 575 597total non-current assets 12 648 12 375

Assets classified as available for sale 15 0 68inventories 18 28 22receivables 19 2 591 1 483derivatives 27, 29 1 209 659Cash and cash equivalents 20 249 68total current assets 4 077 2 300

total aSSetS 16 725 14 675

Paid-in capital 21, 22 1 972 2 072retained earnings 21 1 491 1 639non-controlling interests 21 25 29total equity 3 488 3 740

deferred tax 13 374 316Provisions 23, 24 1 645 1 759non-current interest-bearing liabilities 25 5 894 4 307total non-current liabilities 7 913 6 382

Current interest-bearing liabilities 25 1 727 1 637Tax payable 13 451 766derivatives 27, 29 1 803 1 001Other current non-interest-bearing liabilities 26 1 343 1 149total current liabilities 5 324 4 553

total eQuitY anD liaBilitieS 16 725 14 675




CAsH fLOW sTATemenT

(Amounts in NOK millions) 2010 2009 Cash flow from operating activitiesProfit before tax 1 371 2 789depreciation and write-downs 436 423Unrealised gains and losses on energy, currency and interest rate contracts 150 -1 245share of profit of associates and jointly controlled entities 27 53Tax paid -812 -836Changes in net working capital, etc. -947 191net cash provided by operating activities 226 1 375

investing activitiesPurchase of property, plant, equipment and intangible assets -758 -785Purchase of businesses/financial assets -142 -244net change in loans -53 -61sale of property, plant, equipment and intangible assets 38 3sale of businesses/financial assets 94 6net cash used in investing activities -821 -1 081

financing activitiesnew long-term borrowings 2 290 1 002repayment of long-term borrowings -645 -1 248net change in current liabilities 31 761dividends paid -900 -968net cash provided by financing activities 776 -453

net change in cash and cash equivalents 181 -159

Cash and cash equivalents at start of period 68 227Cash and cash equivalents at end of period 249 68


sTATemenT Of CHAnges in eQUiTY

(Amounts in NOK millions) Paid-in Retained Total for Non-controlling Total capital earnings cont. int. interests equity

equity at 1 Jan. 2009 2 072 937 3 009 15 3 024Profit/loss for the year 0 1 597 1 597 7 1 604Actuarial gains and losses on pensions 0 96 96 0 96Liabilities relating to acquisition of non-controlling interests 0 -26 -26 0 -26dividends paid 0 -967 -967 -2 -969Adjustments due to acquisitions, etc. 0 2 2 9 11equity at 31 Dec. 2009 2 072 1 639 3 711 29 3 740Profit/loss for the year 0 748 748 3 751Transfer from paid-in capital -100 100 0 0 0Actuarial gains and losses on pensions 0 -120 -120 0 -120Change in currency translation differences on investments 0 1 1 0 1Valuation gains on hedging instruments 0 32 32 0 32dividends paid 0 -900 -900 0 -900Changes due to acquisitions, disposals, etc. 0 -9 -9 -7 -16equity at 31 Dec. 2010 1 972 1 491 3 463 25 3 488


ACCOUnTing PrinCiPLes

General inforMationAgder Energi’s activities comprise the gen-eration, distribution and sale of energy, energy-related services, and the opera-tion and development of a fibreoptic cable network. Most of the Group’s operations are in southern Norway. The parent company Agder Energi AS is a Norwegian limited li-ability company, founded and domiciled in Norway. The address of the company’s head office is Kjøita 18, 4630 Kristiansand S.

Basis of preparationAgder Energi’s consolidated accounts have been prepared in accordance with Inter-national Financial Reporting Standards (IFRS) as approved by the EU. The consoli-dated accounts apply the historical cost principle, except in the case of financial assets and liabilities (including financial derivatives) at fair value through profit or loss and financial assets available for sale.

new accounting standards and inter-pretationsRelevant accounting standards that were implemented during 2010:Amended version of IFRS 3 Business combinations: The standard may affect the allocation of costs associated with acquisitions. The amended version of the standard also allows non-controlling inter-ests to be accounted for at fair value on the date that control is obtained. For step acquisitions, the amended standard states that goodwill shall only be measured when control is obtained. In the event of fur-ther shares being acquired, the difference between the consideration and the book value of the non-controlling interest shall be recognised in equity. The standard will mainly affect the measurement of assets and liabilities related to acquisitions and the treatment of transaction costs.

Amended version of IAS 27 Consolidated and separate financial statements The main potential impact of the standard is

on the treatment of non-controlling inter-ests and on loss of control of a subsidiary included in the consolidated accounts.

The following relevant amendments to accounting standards and interpretations had been published at the time of the fi-nancial statements being filed, but had not yet been implemented by Agder Energi:Amendment to IFRS 7 Financial instru-ments – disclosures: The amendment re-lates to the information required in the notes for transfers of financial assets in which the company has a continuing in-volvement. The amendment aims to give users a better understanding of the expo-sure of the business transferring the finan-cial assets. IFRS 7 is supposed to come into force on 1 July 2011, but the standard has not yet been approved by the EU. The Group expects to implement the standard as of 1 January 2012.

IFRS 9 Financial instruments: IFRS 9 will replace the rules on classification and measurement in IAS 39 Financial instru-ments – recognition and measurement. Under IFRS 9, financial assets with basic loan features must be carried at amortised cost, unless you choose to measure them at fair value, while other financial assets should be measured at fair value. The rules on the recognition and measurement of financial liabilities remain the same as in IAS 39, except in the case of liabilities designated at fair value through profit or loss (the fair value option), for which changes in fair value associated with the company’s own credit risk should now be presented separately in other comprehen-sive income. IFRS 9 is due to come into force on 1 January 2013, but the standard has not yet been approved by the EU. The Group expects that it will implement the standard as of 1 January 2013.

IASB’s annual improvements project in 2010: A number of changes to standards

have been adopted in 2010 as part of the annual improvement project. These amendments came into force as of 1 July 2010, but they are yet to be approved by the EU. The Group expects to implement the amendments as of 1 January 2011.

IFRS 3 – Business combinations: Limita-tions are being introduced on the choices available when measuring components of non-controlling interests.

Changes have also been made to IFRS 3 in order to clarify the rules on the account-ing treatment of shared-based payment transactions of the acquiree that the ac-quirer replaces with its own share-based payment transactions. Options are ac-counted for at acquisition-date fair value and the equity element related to the new share option schemes is classified as a non-controlling interest.

IFRS 7 – Financial instruments – disclo-sures: Changes have been made to the standard to emphasise the interaction between quantitative and qualitative disclosures, and to clarify the nature and scope of risk exposures arising from financial instruments. Changes have also been made to the requirements relating to quantitative information in the notes and disclosures on credit risk.

IAS 27 – Consolidated and separate financial statements: Clarification that the changes to IAS 21, IAS 28 and IAS 31 that follow from the amendments to IAS 27 are to be applied prospectively for financial periods starting 1 July 2009 or later.

IAS 1 – Presentation of financial state-ments: Clarification that an analysis of each individual component of comprehen-sive income shall be presented for each component of equity, either in the equity statement or in the notes to the financial statements.


IAS 34 – Interim financial reporting: Guide-lines are given on the application of the disclosure requirements in IAS 34. Addi-tional disclosure requirements are also specified for: circumstances that affect the fair value and classification of finan-cial instruments; transfers between dif-ferent levels of the fair value hierarchy; the reclassification of financial assets; and changes in contingent liabilities and assets.

Comparative figuresComparative figures for the previous year are presented in the financial statements.

SuMMarY of tHe MoSt iMportant aCCountinG prinCipleS

Consolidation principlesThe consolidated financial statements present the overall financial performance and position of the parent company and its subsidiaries when considered as a sin-gle entity. Companies in which the Group holds a controlling interest are consolidat-ed. A controlling interest normally exists if Agder Energi holds more than 50% of voting rights, either through an ownership interest or through agreements. Subsidi-aries acquired or established during the year are consolidated from the date of acquisition or establishment. The non-controlling interests’ share of profit or loss after tax is specified on a separate line. Jointly-controlled assets are presented us-ing the gross equity method. Associates over which the Group wields significant influence (normally a 20-50% ownership interest) and jointly-controlled entities are accounted for using the equity method.

All of the financial statements of individual companies included in the consolidated accounts have been restated to ensure that equivalent balance sheet items and transactions are treated consistently

throughout the Group. All intra-Group transactions, receivables, liabilities and unrealised gains and losses have been eliminated in the consolidated accounts.

acquisitionsPurchase price allocation is performed on the date when control was obtained. This is when the risks and rewards of owner-ship have been transferred, and normally coincides with the acquisition date. The cost of shares in subsidiaries is eliminated against equity on the acquisition date. Any write-ups are based on fair values. The dif-ference between the purchase price and shareholders’ equity is attributed to any of the company’s assets and liabilities with fair values that differ from their carrying amounts. A provision is made for deferred tax on write-ups or write-downs. Any part of the difference that cannot be attrib-uted to identifiable assets and liabilities is treated as goodwill. No provision is made for deferred tax on goodwill.

Purchases from non-controlling interestsShares in subsidiaries purchased from non-controlling interests are recognised on the acquisition date. The difference between the consideration paid and the carrying amount of the non-controlling interests acquired is recognised in its en-tirety in equity.

Jointly-controlled assets and jointly-controlled entitiesOwnership interests in part-owned power stations and water management associa-tions are classified as jointly-owned as-sets and are accounted for by including the company’s share of assets, liabilities, revenues and expenses on the relevant lines in the consolidated accounts. This applies even if the power station is oper-ated as an independent enterprise. Inter-ests in jointly-controlled entities are ac-counted for using the equity method. The Group’s proportionate share of the profit

for the year of jointly-controlled entities is recognised under finance income. On the balance sheet, these investments are clas-sified as non-current financial assets, and are carried at cost adjusted for the Group’s share of retained earnings since acquisition, dividends received, impairment charges and equity transactions at the company. If an asset is sold to a jointly-controlled entity, a proportionate share of any gain is eliminated against Agder Energi’s interest in the jointly-controlled entity.

associatesAssociates are accounted for using the equity method. The Group’s proportionate share of the profit for the year of associates is recognised under finance income. On the balance sheet, these investments are clas-sified as non-current financial assets, and are carried at cost adjusted for the Group’s share of retained earnings since acquisition, dividends received, impairment charges and equity transactions at the company.

revenuesRecognition of revenues – generalProceeds from the sale of goods and services are recognised as revenues when the goods or service are delivered.

Revenues associated with long-term manu-facturing contracts are recognised in ac-cordance with the percentage of comple-tion method. Under this method, revenues and profit are recognised gradually as the work related to the contract is completed. The percentage of completion is normally es-timated by looking at incurred expenses as a percentage of total expected total project expenses.

Energy salesRevenues from the sale of electricity are rec-ognised when the electricity is supplied. Re-alised gains or losses on physical and cash-settled energy contracts are presented as energy sales under operating revenues. In the


case of physical and cash-settled deriva-tives, changes in fair value are presented as operating revenues under unrealised gains and losses on energy contracts. Re-alised gains or losses on trading portfolios are presented net as energy sales. When a contract is closed, the associated un-realised gain or loss is reversed, and the realised gain or loss is presented under energy sales.

Transmission revenuesGrid operation is subject to the regula-tions of the Norwegian Water Resources and Energy Directorate (NVE) on in-come caps. Each year, NVE specifies an income cap for each individual grid op-erator, which is adjusted in the event of changes in the quality of supply by KILE (compensation for energy not supplied). The revenues recognised in the income statement represent the volumes deliv-ered over the period multiplied by the ap-plicable tariff. The difference between the income cap and the actual tariff revenues creates a surplus or shortfall. This surplus or shortfall is recognised through profit or loss. Details of the surplus or shortfall are given in the notes.

Disposal of property, plant and equipmentWhen disposing of property, plant and equipment, any gain or loss is calculated by comparing the sales price with the re-maining carrying amount of the asset sold. Any gain or loss is presented under other operating revenues or operating expenses respectively.

Government grantsGovernment grants are recognised net in the income statement and balance sheet. Where a grant is linked to activities that are recognised in the income statement directly, the grant is treated as a reduction in the expenses that the grant is supposed to cover. Where the grant relates to a pro-ject that is included on the balance sheet,

the grant reduces the amount included on the balance sheet.

foreign currencyThe consolidated accounts are presented in Norwegian kroner (NOK), which is also the functional currency of the parent com-pany. The Group includes subsidiaries with a different functional value. These are translated into NOK using the current-rate method. That involves the balance sheet being translated at the exchange rate on 31 December and the income statement being translated at the average exchange rate. Translation differences are included under other comprehensive income and expenses in the statement of comprehen-sive income.

When preparing the accounts of the in-dividual companies, transactions in cur-rencies other than the functional currency of the company are translated into the functional currency using the exchange rate on the date of transaction. Foreign currency-denominated balance sheet items are measured using the exchange rate on the balance sheet date. Translation differences are recognised under finance income or costs.

financial instrumentsThe Group designates financial instru-ments in the following categories: a) Financial assets and liabilities at fair value through profit or loss; b) Loans and receivables; c) Available-for-sale financial assets; d) Financial liabilities at amortised cost. Designation is based on the purpose of the instrument, and instruments are designated when they are acquired.

a) Financial assets and liabilities at fair value through profit or lossFinancial assets and liabilities at fair value through profit or loss are financial instruments held for trading purposes. Financial instruments are designated in

this category if they have primarily been acquired in order to obtain a profit from short-term price fluctuations. Derivatives are designated as held for trading, unless they are part of an accounting hedge. For derivatives other than cash flow hedges, unrealised gains and losses are recog-nised through profit or loss. Derivatives can either be independent derivatives, or embedded derivatives that are separated from the host contract and measured at fair value on the balance sheet as if the derivative were an independent contract.

Physical contracts for the purchase and sale of energy and CO2 quotas that form part of the trading portfolio, are defined as financial instruments. Like their cash-settled equivalents, they are measured at fair value.

Physical contracts for the purchase and sale of energy and CO2 quotas that been entered into for the purpose of obtaining electricity needed by the Group, or as a means of selling the electricity it gener-ates, and which do not contain embedded derivatives such as flexibility in terms of volumes delivered, are normally recog-nised on delivery. Contracts entered into for different purposes are recorded in separate books.

Presentation of derivatives in the income statement and balance sheetDerivatives are presented on separate lines in the balance sheet under assets and liabilities respectively. Derivatives with a positive value are presented as assets and derivatives with a negative value are presented as liabilities. Derivatives that are assets and derivatives that are liabili-ties are presented gross on the balance sheet, unless there exists a legal right to offset contracts, and that right will actual-ly be used when the contracts are settled. In the latter case, the relevant contracts are presented net in the balance sheet. In


the income statement, gains and losses on the fair value of derivatives are shown on separate lines. Gains and losses on the value of energy derivatives are presented under operating revenues, while gains and losses on the value of interest rate and currency derivatives are presented under finance income.

b) Loans and receivablesOn initial recognition, loans and receiva-bles are measured at fair value plus di-rectly attributable transaction costs. Subsequently loans and receivables are carried at amortised cost using the effec-tive interest rate method.

Trade and other receivables with an in-significant interest component are rec-ognised at their nominal value less any provision for impairment. An impairment provision is made if there is objective evidence that the Group will not receive payment in accordance with the original conditions.

c) Available-for-sale financial assetsShares and ownership interests are clas-sified as available for sale. Financial in-vestments classified as available for sale are measured at fair value. Gains or loss-es on fair value are recognised as other comprehensive income and expenses in the statement of comprehensive income. Accumulated gains and losses on finan-cial investments previously included under other comprehensive income or expenses are recognised in the income statement if the investments are impaired or realised. For shares and ownership interests whose fair value is lower than cost, a provision is recognised in the income statement if the impairment is significant or other-than-temporary.

d) Financial liabilities at amortised costOn initial recognition, financial liabilities are measured at fair value plus directly

attributable transaction costs. Subse-quently financial liabilities are carried at amortised cost using the effective interest rate method.

HedgingIn order to manage its risk exposures aris-ing from fluctuations in electricity prices, exchange rates and interest rates, the Group uses Euro-denominated loans and derivatives, such as futures contracts for electricity, currency and CO2 quotas, as well as interest rate swaps. The purpose of these instruments is to secure cash flows from future electricity generation, as well as to avoid large variations in the interest expense payable on the Group’s debt portfolio.

Most of the Group’s hedging instruments do not meet the documentation require-ments that apply to hedge accounting. These contracts are therefore not ac-counted for as hedges, even if they have been entered into as hedges.

Euro-denominated loans and certain inter-est rate swaps, including combined cur-rency and interest rate swaps, do meet the conditions for hedge accounting under IAS 39, and they are consequently accounted for as hedging instruments. These hedging relationships are presented in the consoli-dated accounts as follows:

Cash flow hedgesIn so far as possible, Agder Energi uses cash flow hedges to eliminate its exposure to fluctuations in cash flows. This includes hedging the currency risk associated with highly probable future revenues from elec-tricity sales, and regular interest payments in NOK on USD-denominated loans.

The effective part of gains or losses on hedging instruments is recognised under other comprehensive income and ex-penses in the statement of comprehen-

sive income, whereas the ineffective part is recognised in the income statement. Any effective gain or loss on a hedging instrument is recycled to profit or loss if the hedged item is recognised in the in-come statement, for example when the revenues from hedged electricity sales are recognised.

fair value hedgesAgder Energi uses fair value hedges to hedge the currency risk associated with its interest-bearing liabilities and the interest-rate risk on fixed-rate loans.

The Group’s fair value hedges are deriva-tives, which are measured at fair value through profit or loss. The hedged items are loans whose carrying amounts fluctu-ate in parallel with the hedged risks. These changes in value are also recognised in the income statement.

CompensationThe Group pays compensation to landown-ers for the right to use waterfalls and land. Compensation is also paid for any damage to forests, land, etc. The compensation is a combination of one-off payments and perpetual charges or obligations to sup-ply electricity free of charge. The present value of annual charges and the cost of supplying free electricity are presented under Provisions. Annual compensation payments, as well as changes to provi-sions, are considered operating expenses, whereas one-off payments are charged to the provision.

Concession power and licence feesEach year, the Group supplies electricity to local municipalities at a price set by the Norwegian parliament. Revenues from this “concession power” are recognised as they are earned, based on the regulated price. Some agreements on concession power specify that Agder Energi will be invoiced for the difference between the


spot price and the regulated price. The present value of the future loss of revenue due to the difference between the regu-lated price and spot price is not included on the balance sheet, but it is presented in a note.

Each year, the Group pays licence fees to the central government and municipalities for the increase in generating capacity achieved by damming and piping water. Licence fees are expensed as they are incurred. The capitalised value of future fees is calculated and presented in a note.

taxCompanies in the Group involved in elec-tricity generation are subject to the spe-cial tax rules that apply to power compa-nies. The Group therefore pays income tax, natural resource tax and resource rent tax.

Income taxIncome tax is calculated in accordance with standard tax rules. The tax expense in the income statement consists of tax payable and changes in deferred tax/tax assets. Tax payable is calculated on the taxable profit for the year. Deferred tax/tax assets are calculated on the basis of the temporary differences that exist be-tween accounting and tax values, as well as the tax effect of any loss carryfor-wards. Deferred income tax and deferred income tax assets that are expected to be reversed in the same period are offset against each other. Deferred tax assets are only recognised on the balance sheet if it is likely that they will be used in the future.

Natural resource taxThe natural resource tax payable is not affected by profit, and is calculated on the basis of the individual power station’s average generation over the past seven years. The tax is charged at 1.3 øre/kWh. Natural resource tax paid can be deducted

from income tax. If the natural resource tax exceeds income tax, the excess por-tion can be carried forward with interest to subsequent years, in which case it is included on the balance sheet as a finan-cial asset, provided that it is likely that it will be possible to make use of the asset in future years.

Resource rent taxResource rent tax is profit-related, and is payable at a rate of 30% of the net resource rent estimated for each indi-vidual power station. The resource rent is estimated from the hourly output of the individual power station, multiplied by the spot price for the corresponding hour. In the case of concession power and power supplied under long-term contracts with a duration of more than seven years, the actual contract price is applied. Actual operating expenses, depreciation and a tax-free allowance are deducted from the estimated gross rent in order to reach the taxable net resource rent. The tax-free al-lowance is determined each year by mul-tiplying the tax value of the power sta-tion’s property, plant and equipment by a standard interest rate set by the Ministry of Finance. In 2010 the standard interest rate was 2.3%. Resource rent tax is cov-ered by the so-called “verksamordning”, which under certain conditions allows you to offset positive and negative resource rent at different power stations owned by the same taxpayer or different power stations owned by a group of companies consolidated for tax purposes. Any nega-tive resource rent can be carried forward with interest to be offset against future positive resource rent. The interest rate applied to carryforwards was 2.0% for 2010.

Deferred resource rent tax assets and de-ferred resource rent taxDeferred tax assets arising from carryfor-wards and deferred tax arising from other

temporary differences are calculated for power stations where it is probable that the tax assets will be used within a 10-year time frame. Provisions for deferred resource rent tax are based on the nomi-nal tax rate of 30%. Tax-free allowances are treated as permanent differences in the year to which they apply, and do there-fore not affect the calculation of deferred resource rent tax.

Deferred resource rent tax assets and deferred resource rent tax are presented gross. Deferred income tax positions can under certain conditions be offset against deferred resource rent tax positions. De-ferred resource rent tax positions can un-der certain conditions be presented net for several power stations.

Classification of current and non-current assets and liabilitiesAn asset is classified as a current asset if it fulfils one of the following criteria:a) It is expected to be realised in, or is

held for sale or consumption in, the ordinary business cycle;

b) It is primarily held for trading;c) It is expected to be realised within

twelve months of the balance sheet date; or

d) It is a form of cash or cash equivalent, unless it is subject to restrictions which mean that it cannot be realised or used to settle a liability within twelve months of the balance sheet date.

A liability is classified as a current liability if it fulfils one of the following criteria:a) It is expected to be settled as part of

the ordinary business cycle.b) It is primarily held for trading;c) It is due for payment within twelve

months of the balance sheet date; ord) The company has no unconditional right

to delay settlement of the liability be-yond twelve months after the balance sheet date.


All other assets are classified as non-current assets and all other liabilities are classified as non-current liabilities.

Financial instruments are presented as either current or non-current items in accordance with the general guidelines for classification. For non-current liabili-ties, any principal repayments due over the first year are presented as current liabilities.

intangible assetsIntangible assets, including goodwill, are carried at cost less accumulated deprecia-tion and write-downs, provided that they meet the criteria for capitalisation. Good-will is not amortised, but is instead tested annually for impairment.

Research costs are expensed as they are incurred. Development costs are capital-ised on the balance sheet if it is probable that future economic benefits attributable to the development of an identifiable in-tangible asset will flow to the entity.

property, plant and equipmentInvestments in production facilities and other property, plant and equipment are carried at cost, less accumulated depre-ciation and write-downs. Hydropower li-cences are classified as property, plant and equipment. Depreciation starts when the assets are available for use. The acquisition cost of property, plant and equipment includes the cost of acquiring and preparing the asset for use. Interest on major investments is calculated and capitalised. Costs accrued after the item entered service, such as regular mainte-nance, are expensed.

Costs accrued in relation to internal in-vestments within the Group are capital-ised. The acquisition cost only includes directly attributable costs. Indirect costs are not capitalised.

Depreciation is calculated using the straight-line method over the expected useful life. The residual value is taken into account when calculating annual depre-ciation. Sites are not depreciated. Hydro-power licences are not depreciated either, as they do not revert to public ownership, but they are instead tested annually for impairment. Periodic maintenance is capi-talised and depreciated over the mainte-nance interval. The estimated useful life, depreciation method and residual value are reassessed each year.

When assets are sold or disposed of, their carrying amount is deducted, and any loss or gain is recognised in the income state-ment under other operating expenses and revenues. Repairs and regular main-tenance are expensed as incurred. If new parts are capitalised on the balance sheet, the carrying amount of the parts that were replaced is deducted, and any gain or loss is recognised in profit or loss.

lease contractsLease contracts are classified as finance leases if the majority of the risks and ben-efits associated with ownership are trans-ferred to Agder Energi. Assets acquired through finance leases are carried at the lower of fair value and the present value of the minimum lease payments calculated at the start of the lease term, less ac-cumulated depreciation and write-downs. The associated liability to the lessor is capitalised on the balance sheet as a fi-nancial liability. Depreciation is calculated using the straight-line method over the ex-pected useful life. Lease payments are ap-portioned between the finance charge and the reduction of the outstanding liability so as to produce a fixed rate of interest on the remaining balance of the liability.

Lease contracts where most of the risks and benefits of ownership remain with the lessor are classified as operating leases.

Lease payments are expensed in a straight line over the lease term.

impairmentProperty, plant, equipment and intangible assets that are depreciated are also tested for impairment if there is any indication to suggest that future cash flows cannot jus-tify the carrying amount. Intangible assets with an uncertain useful life are not de-preciated, and are instead tested annually for impairment. The difference between the carrying amount and the recoverable amount, if lower, is expensed in the income statement. The recoverable amount is the higher of fair value less costs to sell and the utility value.

When testing for impairment, non-current assets are grouped at the lowest possible level at which it is possible to find inde-pendent cash flows (cash flow generating units). In conjunction with each financial report, the Group assesses whether any past write-downs of non-financial assets, except goodwill, should be reversed.

inventoriesInventories are carried at the lower of cost and fair value less costs to sell. The ac-quisition cost is calculated using the FIFO principle.

reservoir reservesThe Group’s most valuable raw mate-rial is the water stored in its reservoirs. In accordance with standard practice in the power sector, the value of reservoir reserves is not included on the balance sheet.

Cash pooling arrangementAgder Energi AS has a cash pooling ar-rangement with its subsidiaries, and the Group has a joint bank account for short-term deposits and short-term loans. External interest income and interest expenses arising from the cash pooling


arrangement are presented as interest income and interest expenses on the consolidated income statement. On the consolidated balance sheet, net deposits or overdrafts are presented as cash and cash equivalents and current liabilities respectively.

liquid assetsCash and cash equivalents includes cash, bank deposits and other short-term, liq-uid investments that can be converted into known cash values immediately and at insignificant risk, and that mature less than three months after their dates of acquisition.

DividendsProposed dividends are classified as eq-uity. Dividends are reclassified as current liabilities when they are adopted.

provisions, contingent assets and con-tingent liabilitiesA provision is recognised if the Group has a present obligation arising from a past event, and if it is probable that it will have to settle the obligation. Provisions are measured using the management’s best estimate of the cost of settling the obliga-tions on the balance sheet date, and are discounted to their present value if this makes a significant difference.

pensionsDefined benefit plansA defined benefit plan is a pension plan which defines the pension benefit an em-ployee will receive on retirement. The pen-sion benefit is normally a percentage of the employee’s salary. In order to receive a full pension, it is necessary to have be-tween 30 and 40 years of service. The pension benefits of employees who have fewer years of service are proportionately lower. The pension liability recognised for defined benefit plans is the present value of the pension benefits earned as of the

balance sheet date, less the fair value of the pension plan assets. The present value of pension benefits earned as of the balance sheet date is calculated by discounting estimated future payments using a risk-free interest rate. The pen-sion obligation is calculated annually by an independent actuary using the projected credit unit method.

Actuarial gains and losses are recognised in the statement of comprehensive income under other comprehensive income or ex-penses.

Changes to defined benefit pension ob-ligations arising from plan amendments that are applied retrospectively, i.e. where the change in entitlement also applies to past years of service, are recognised di-rectly in the income statement. Changes that are not applied retrospectively are recognised through profit or loss over the remaining years of service.

In the case of pension plans with a sur-plus, net pension plan assets are meas-ured at fair value and classified as non-current assets. The net pension liabilities associated with underfunded pension plans, and unfunded pension plans that are treated as operating expenses, are classified as provisions for non-current liabilities.

The net pension expense for the period is included under employee benefits, and consists of the sum of the current serv-ice cost, the interest cost, the estimated return on pension plan assets and employ-ers’ NICs.

Defined contribution pension plansIn the case of a defined contribution plan, the Group makes regular contributions into a separate legal entity, but has no further liabilities once the contributions have been made.

The contributions are expensed as employee benefits when they are made.

AFP liabilitiesAFP liabilities are calculated for all em-ployees. The liability is classified as an un-funded pension plan/non-current liability.

Cash flow statementThe cash flow statement has been pre-pared using the indirect method.

CritiCal aCCountinG JuDGeMentS

Below we have set out the areas where the judgements made by management in applying the Group’s accounting principles potentially have a material impact on the consolidated financial statements.

non-financial energy contractsNon-financial energy contracts, which in accordance with IAS 39 are considered to be contracts that can be “settled net in cash”, are treated as though they were financial instruments. This applies unless the contracts have been entered into and continue to be held for the purpose of the receipt or delivery of the energy in accordance with the Group’s expected purchase, sale or usage requirements (the “own use” exemption). However, IAS 39 sets out clearly defined limits on when such contracts shall be considered to have been settled in cash.

The senior management team has, based on the criteria in IAS 39, used its best judgement to assess which contracts should be defined as financial instruments and which contracts should not, mainly due to the “own use” exemption. Con-tracts classified as financial instruments are carried at fair value, with gains and losses recognised in profit or loss, while other contracts are generally recognised on delivery.


Concession power and licence feesThe concession power provided and the licence fees paid to the central govern-ment and municipalities are supposed to compensate for the damage or incon-venience caused by hydropower projects. Liabilities arising from the fact that future concession power may be supplied at a discount to the market price, as well as the cost of future licence fees, are regula-tory requirements and are therefore non-contractual liabilities. Consequently they are not included in the accounts, but their present value has been calculated, and is presented in Note 3 and Note 9.

unCertaintieS – CritiCal aCCountinG eStiMateS

In conjunction with the preparation of the financial statements, the management have to make estimates and assumptions that affect the reported assets and li-abilities, including contingent assets and liabilities on the balance sheet date, and the reported revenues and expenses for the period. Actual results may deviate from these estimates.

The most important assumptions concern-ing the future and other key sources of estimation uncertainty as of the balance sheet date giving rise to a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities in future periods are set out below.

fair value of financial instrumentsThe fair value of energy contracts is partly calculated on the basis of assumptions that are not entirely observable in the market. This is particularly true of long-term electricity contracts. Where that is the case, the management has based its estimates on the information available in the market in combination with its best judgement. There is a more detailed de-

scription of the assumptions used to value those contracts in the notes. The fair value of interest rate and currency derivatives is based on market practice and confirmed by external market players.

property, plant and equipmentProperty, plant and equipment is depreci-ated over its expected useful life, giving rise to depreciation in the income state-ment. The expected useful life is esti-mated on the basis of experience, past performance and best judgement, and is adjusted if there are any changes to those estimates. The residual value, which is taken into account when calculating de-preciation, is also estimated.

impairmentThe Group has significant investments in intangible assets, property, plant and equipment, joint ventures, associates and shares. These non-current assets are test-ed for impairment if there is an indication that they have fallen in value. This might be indicated by changes in market prices or contract structures, negative events or other operating conditions. When calculat-ing the recoverable amount, a number of estimates must be made regarding future cash flows, with required rates of return, prices, operating margins and sales vol-umes being the most important factors.

Deferred tax assetsThe Group has capitalised deferred tax assets arising from negative resource rent that has been carried forward. De-ferred tax assets are capitalised when it is expected that it will be possible to make use of the negative resource rent within a ten-year time frame. The timing of when it may be possible to make use of negative resource rent is particularly dependent on assumptions regarding fu-ture electricity prices. The management has used its best judgement when mak-ing assumptions about future electricity

prices and other assumptions that affect future resource rent.

pensionsCalculating pension liabilities involves us-ing best judgement and estimates for a number of parameters. See the relevant note for a more detailed description of the assumptions that have been applied.


nOTes

Segment information is reported using the same segments as used in financial reports to the senior management team. Seg-ment reporting is used by Agder Energi’s management to assess the performance of the various business areas, and to allocate resources to them. Operating segments are presented in accordance with the organisational structure of the business, with each segment corresponding to an internal business area (BA). The segments used are Energy BA, Network BA, Market BA, Contracting BA and Parent/Other. The business areas’ accounts are reported in accordance with Norwegian generally accepted accounting principles (NGAAP), as this is used for internal corporate governance purposes.

note 1 SeGMent inforMation

(Amounts in nOK millions) energy BA network BA market BA Contracting BA Parent/Other group adjustments Total (ngAAP) ifrs adjustments Total (ifrs)

eliminations

2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009

profit Operating revenues 2 867 3 322 1 418 1 018 4 663 3 336 1 252 1 373 397 299 -729 -1 074 9 868 8 273 -433 14 9 434 8 287 - of which external operating revenues 2 672 2 858 1 338 953 4 577 3 252 985 1 078 270 170 26 -38 9 868 8 273 -433 14 9 434 8 287 - of which internal operating revenues 195 464 80 65 86 84 267 295 127 129 -755 -1 036 0 0 0 0 0 0energy and transmission expenses 599 481 462 240 4 250 2 919 0 0 0 0 -320 -414 4 991 3 226 0 0 4 991 3 226Other raw materials and consumables used 0 0 0 0 24 41 501 672 126 65 -4 -9 648 770 0 0 648 770employee benefits 142 159 54 85 143 162 458 476 217 208 -231 -314 783 775 0 0 783 775Other operating expenses 397 400 339 311 93 103 257 154 152 147 -278 -293 961 822 -19 0 942 822operating profit/loss before depreciation and write-downs 1 728 2 283 563 382 152 111 35 70 -98 -122 105 -44 2 485 2 680 -415 14 2 071 2 694depreciation and write-downs 187 192 177 162 40 39 19 20 28 22 9 8 460 444 -24 -21 436 423operating profit 1 541 2 090 386 220 112 72 16 50 -126 -144 96 -52 2 025 2 236 -390 34 1 634 2 271share of profit/loss of associates and jointly controlled entities 0 0 0 0 0 0 0 0 -4 -12 -23 -41 -27 -53 0 0 -27 -53finance income 27 16 2 2 7 10 3 5 1 313 1 341 -1 299 -1 174 51 200 198 1 065 249 1 265finance costs 154 486 83 79 38 32 7 5 411 367 -208 -274 485 694 0 0 485 694net finance income/costs -126 -469 -81 -76 -32 -21 -5 0 898 961 -1 115 -941 -461 -547 198 1 065 -263 518profit before tax 1 415 1 621 305 143 80 51 12 50 772 817 -1 019 -993 1 564 1 689 -192 1 099 1 371 2 789Tax expense 625 824 86 41 23 15 6 17 15 4 -73 -18 682 883 -62 302 620 1 185profit after tax 790 797 219 103 57 36 5 33 757 813 -947 -975 882 807 -130 797 751 1 604

BalanCe SHeet Total assets 7 669 7 733 3 597 3 272 2 681 1 458 561 547 10 709 9 964 -10 727 -9 966 14 492 13 008 2 233 1 667 16 725 14 675equity 2 630 2 563 763 783 444 397 178 127 2 894 2 369 -3 273 -2 505 3 636 3 734 -148 6 3 488 3 740Total segment liabilities 5 039 5 170 2 835 2 489 2 237 1 061 383 419 7 815 7 595 -7 454 -7 461 10 856 9 274 2 381 1 661 13 236 10 934Capital employed * 5 273 5 262 2 721 2 730 2 260 1 016 281 227 10 353 8 972 -9 296 -8 209 11 591 9 999 -482 -314 11 109 9 684interest-bearing liabilities 2 643 2 699 1 958 1 947 1 816 618 103 100 7 459 6 603 -6 023 -5 703 7 955 6 264 -334 -320 7 621 5 944investments in associates and jointly controlled entities 0 0 0 0 4 0 0 0 281 216 -110 -87 175 130 0 0 175 130investments in intangible assets ** 0 0 1 2 19 3 4 28 21 4 1 39 45 76 0 0 45 76investments in property, plant and equipment ** 185 206 307 433 140 117 6 12 98 70 -24 -11 713 827 0 0 713 827Permanent and temporary full-time equivalents 244 248 146 135 226 233 774 798 257 259 1 647 1 673 1 647 1 673

* Equity + interest-bearing liabilities** Includes intangible assets and property, plant and equipment acquired through business combinations.


Companies in the various business areas:

the energy business area consists of the company Agder Energi Produksjon AS. The main activity of the Energy business area is the generation and sale of hydroelectric and wind power.

the network business area consists of the company Agder Energi Nett AS. The main activity of the Network business area is power distribution in Agder.

note 1 SeGMent inforMation

(Amounts in nOK millions) energy BA network BA market BA Contracting BA Parent/Other group adjustments Total (ngAAP) ifrs adjustments Total (ifrs)

eliminations

2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009

profit Operating revenues 2 867 3 322 1 418 1 018 4 663 3 336 1 252 1 373 397 299 -729 -1 074 9 868 8 273 -433 14 9 434 8 287 - of which external operating revenues 2 672 2 858 1 338 953 4 577 3 252 985 1 078 270 170 26 -38 9 868 8 273 -433 14 9 434 8 287 - of which internal operating revenues 195 464 80 65 86 84 267 295 127 129 -755 -1 036 0 0 0 0 0 0energy and transmission expenses 599 481 462 240 4 250 2 919 0 0 0 0 -320 -414 4 991 3 226 0 0 4 991 3 226Other raw materials and consumables used 0 0 0 0 24 41 501 672 126 65 -4 -9 648 770 0 0 648 770employee benefits 142 159 54 85 143 162 458 476 217 208 -231 -314 783 775 0 0 783 775Other operating expenses 397 400 339 311 93 103 257 154 152 147 -278 -293 961 822 -19 0 942 822operating profit/loss before depreciation and write-downs 1 728 2 283 563 382 152 111 35 70 -98 -122 105 -44 2 485 2 680 -415 14 2 071 2 694depreciation and write-downs 187 192 177 162 40 39 19 20 28 22 9 8 460 444 -24 -21 436 423operating profit 1 541 2 090 386 220 112 72 16 50 -126 -144 96 -52 2 025 2 236 -390 34 1 634 2 271share of profit/loss of associates and jointly controlled entities 0 0 0 0 0 0 0 0 -4 -12 -23 -41 -27 -53 0 0 -27 -53finance income 27 16 2 2 7 10 3 5 1 313 1 341 -1 299 -1 174 51 200 198 1 065 249 1 265finance costs 154 486 83 79 38 32 7 5 411 367 -208 -274 485 694 0 0 485 694net finance income/costs -126 -469 -81 -76 -32 -21 -5 0 898 961 -1 115 -941 -461 -547 198 1 065 -263 518profit before tax 1 415 1 621 305 143 80 51 12 50 772 817 -1 019 -993 1 564 1 689 -192 1 099 1 371 2 789Tax expense 625 824 86 41 23 15 6 17 15 4 -73 -18 682 883 -62 302 620 1 185profit after tax 790 797 219 103 57 36 5 33 757 813 -947 -975 882 807 -130 797 751 1 604

BalanCe SHeet Total assets 7 669 7 733 3 597 3 272 2 681 1 458 561 547 10 709 9 964 -10 727 -9 966 14 492 13 008 2 233 1 667 16 725 14 675equity 2 630 2 563 763 783 444 397 178 127 2 894 2 369 -3 273 -2 505 3 636 3 734 -148 6 3 488 3 740Total segment liabilities 5 039 5 170 2 835 2 489 2 237 1 061 383 419 7 815 7 595 -7 454 -7 461 10 856 9 274 2 381 1 661 13 236 10 934Capital employed * 5 273 5 262 2 721 2 730 2 260 1 016 281 227 10 353 8 972 -9 296 -8 209 11 591 9 999 -482 -314 11 109 9 684interest-bearing liabilities 2 643 2 699 1 958 1 947 1 816 618 103 100 7 459 6 603 -6 023 -5 703 7 955 6 264 -334 -320 7 621 5 944investments in associates and jointly controlled entities 0 0 0 0 4 0 0 0 281 216 -110 -87 175 130 0 0 175 130investments in intangible assets ** 0 0 1 2 19 3 4 28 21 4 1 39 45 76 0 0 45 76investments in property, plant and equipment ** 185 206 307 433 140 117 6 12 98 70 -24 -11 713 827 0 0 713 827Permanent and temporary full-time equivalents 244 248 146 135 226 233 774 798 257 259 1 647 1 673 1 647 1 673

* Equity + interest-bearing liabilities** Includes intangible assets and property, plant and equipment acquired through business combinations.


In 2009 the Market business area comprised the companies LOS AS, LOS Bynett AS and LOS Bynett Vestfold AS (90.1% owners-hip interest). Since autumn 2010 it has also comprised Agder Energi Varme AS and Sopran AS, as well as the subsidiary group Nettkonsult AS, which previously formed part of the Contracting business area. Nettkonsult AS is the parent company of Nettkonsult Services AS and Nettkonsult Elsikkerhet AS. The main areas of activity of the Market business area are retail energy sales, the production and sale of geothermal energy, electrical consultancy services and debt collection services. The Group’s fibreoptic operations also form part of this business area. Comparative figures have been restated due to the restructuring.

the Contracting business area consists of the subsidiary group Otera AS. Otera AS is the parent company of Otera Telecom AS, Otera Samferdsel AS, Otera Elkraft AS, Otera Ergon AS, Otera Delta AS, Otera Avotech AS (80%), Otera XP AS (75%) and the subsidiary group Otera AB (70%). Otera Telecom AS, Otera Samferdsel AS and Otera Elkraft AS were demerged from the com-pany Otera Montasje AS as of 1 January 2010. After the demerger, Otera Montasje AS was closed down. The main activity of the business area is providing electrical contracting services. In 2009 the business area also comprised the companies Agder Energi Varme AS, Norsk Varme- og Energiproduksjon AS, Solvea AS, Sopran AS and Nettkonsult AS. Norsk Varme- og Energiproduksjon AS was merged with Agder Energi Varme AS as of 1 January 2010. In 2010 the above companies were transferred to the Market business area, with the exception of Solvea, which was transferred to Parent/Other.

the parent/other segment comprises the parent company Agder Energi AS, Ella Kommunikasjon AS, Solvea AS and the pro-perty companies Agder Energi Næringsbygg AS and Lundevågveien 11 AS. Agder Energi Eiendom I AS was sold in 2010, and was deconsolidated as of 1 July 2010. Njord Solar Power Ltd and Nanna Solar Power Ltd were deconsolidated as of 1 December 2010.

This segment also includes the subsidiary groups Agder Energi Venture AS and Agder Energi Innovasjon AS. Agder Energi Venture AS is the parent company of NorgesFilm AS (93.8%) and the subsidiary groups Netsecurity AS (100%), NetNordic Holding AS (54.6%) and Norsk Energigjenvinning AS (67.1%). Phonzo AS and Elsmart Solutions AS were sold in 2010 and were deconsolidated as of 1 October and 1 December 2010 respectively. Agder Energi Innovasjon AS is the parent company of Innosa AS and Norsk Varme- og Energiproduksjon AS (established in December 2010).

the eliminations segment relates to the elimination of intra-group transactions and balances. Transactions between segments are on an arm’s-length basis.

the ifrS adjustments segment covers items arising from the fact that the accounts of business areas are presented in accor-dance with NGAAP, while the consolidated financial statements are presented in accordance with IFRS.

Most of Agder Energi’s turnover comes from customers in Norway or from Nord Pool. The turnover of the subsidiary group Otera AB (70%) comes from the Swedish market.


note 2 aCQuiSitionS, DiSpoSalS anD aCQuiSition of non-ControllinG intereSt

The Group made the following acquisitions and disposals in 2010 and 2009. All acquisitions are accounted for using the acquisi-tion method. The list below does not include capital increases or other financing from Agder Energi.

acquisitions in 2010 Company Country Change in owner- Business Cost in ship interest in % NOK millionsPurchase of retail electricity supply business 1) Norway 100.0 Retail market 34.7Norsk Energigjenvinning AS 2) Norway 33.4 Biofuels 12.2Scandpower Information Technology AS 3) Norway 100.0 ICT 3.2Netsecurity Oslo AS Norway 67.0 ICT 1.1

1) This relates to the asset purchase of Statoil’s retail electricity supply business.2) Agder Energi Venture AS owned 67.1% of the shares at the close of 2010.3) The company is owned by the part-owned subsidiary NetNordic Holding AS.

The purchase of Statoil’s electricity supply business is expected to increase turnover by NOK 1.2 billion. The turnover of the busi-ness has been included in the income statement as of October 2010.

Other acquisitions in 2010 are considered to be individually immaterial to the Group.

Calculation of net assets and goodwill at the acquisition date for acquisitions in 2010 (Amounts in NOK millions) Carrying amonts (IFRS) Write-up Acquisition at acquisition date balance sheetDeferred tax assets 1 1Intangible assets 8 8Property, plant and equipment 0 0Derivatives 15 15Current receivables 3 3Cash and cash equivalents 2 2Trade payables and other current liabilities -1 -1net assets 19 8 27Non-controlling interests 0net assets acquired 26Goodwill 13total net assets acquired plus goodwill 40 Total cash consideration for shares 39Total equity consideration for shares 0total consideration 39

The above table covers acquisitions of new businesses in 2010. Transactions relating to the acquisition of non-controlling inter-ests are not included in the table.

In 2010 Agder Energi recognised a gain of just under NOK 1 million as a result of the fair value of assets and liabilities trans-ferred exceeding the consideration paid for them.


Disposals in 2010In 2010 Agder Energi sold the companies Elsmart Solutions AS, Phonzo AS and Agder Energi Eiendom I AS. There were no other significant disposals in 2010. In conjunction with the disposals, the Group recognised a gain of NOK 42 million.

acquisitions in 2009 Company Country Change in owner- Business Cost in ship interest in % NOK millionsOtera AS 1) Norway 7.5 Contracting 29.9Ejno Capital AB 2) Sweden 70.0 Contracting 27.9Vestfold Inkasso AS 3) Norway 100.0 Debt collection 4.8NetNordic Holding AS 4) Norway 0.8 ICT 0.3Norsk Energigjenvinning AS Norway 33.4 Biofuels 12.2NorgesFilm AS 5) Norway 40.5 Film and media 2.0Phonzo AS Norway 100.0 Telecoms 8.2

1) Agder Energi AS owned 100 % of the shares at the close of 2009.2) Hereafter called Otera AB. The shares were acquired through Otera AS. The vendors of the shares have an option to sell the

remaining 30% of the shares in 2010. The option agreement sets out the valuation principles that will apply in the event of the option being exercised.

3) The company was merged with Sopran AS in 2009.4) Agder Energi Venture AS owned 53.4% of the shares at the close of the year.5) Agder Energi Venture AS owned 93.8% of the shares at the close of 2009.

Acquired entities contributed NOK 86 million in turnover and NOK 9 million in profit after tax in 2009. Capitalised acquisition costs amounted to NOK 1 million.

All of the acquisitions in 2009 are considered to be individually immaterial to the Group.

Disposals in 2009In 2009, Agder Energi transferred its wind power business to Statkraft Agder Energi Vind DA as a non-cash contribution, in return for a 38% ownership interest in the company. The value of the business transferred was NOK 80 million. A NOK 50 million gain was recognised in the income statement in conjunction with the transaction. There were no other significant disposals in 2009.

note 3 enerGY SaleSAgder Energi optimises its generation of hydroelectric power based on an assessment of the value of available water in relation to current and expected future spot prices. This assessment does not take into account any contractual obligations that the company may have. If Agder Energi’s contractual obligations to supply electricity to customers deviate from actual generation, the differ-ence is bought or sold in the spot market. Physical and cash-settled sales and purchase contracts are used to secure cash flows from underlying power generation.

energy sales (Amounts in NOK millions) 2010 2009Spot and balancing markets 2 168 1 992Concession power at regulated prices 50 49Long-term commercial contracts 201 206Financial hedges -290 322Trading of cash-settled contracts 23 -3Trading-related physical energy sales 327 101Network 38 25Retail market 4 340 3 011District heating 84 74Other/eliminations 61 69total 7 000 5 846


energy purchases (Amounts in NOK millions) 2010 2009Power generation 527 363Retail market 4 206 2 887Network 188 133District heating 45 33Other/eliminations -245 -353total 4 721 3 061 Agder Energi has a perpetual obligation to supply local municipalities, who are entitled to buy electricity at a price set by the government, which is lower than the market price. Over the ten-year period 2011-2020, the annual volume of concession power is 0.55 TWh. Revenues from concession power are recognised in the income statement when the electricity is supplied. The present value of the discount to market prices, for which there is no provision in the financial statements, has been estimated at NOK 4.4 billion, based on a nominal interest rate before tax of 5.0% and a price difference of 20 øre/kWh.

2010 2009Volume of concession power (GWh) 550 550Regulated price (øre/kWh) 10.3 10.1Long-term physical delivery contracts (øre/kWh) 20.0 20.3

Agder Energi also has long-term physical delivery contracts with industrial customers. Several of these contracts were signed in the 1960s, at prices that are significantly below current market prices. The combined volume of these contracts is around 4.2 TWh over the period 2011-2020. Most of these old agreements with industrial customers will expire in 2014-2015, and by the end of 2016 the annual volume associated with them will be under 0.1 TWh.

Agder Energi has no significant long-term physical purchase contracts.

The right to produce hydroelectric power derives from various types of licences. The Group controls – either directly through Agder Energi Produksjon, or indirectly through user water management associations and joint ventures – licences to regulate watercourses and to acquire ownership rights to waterfalls. These licences do not revert to public ownership, with the exception of a few minor regulations of the Arendal river system, which constitute less than 1% of the total river regulation capacity.

note 4 tranSMiSSion reVenueS

The Norwegian Water Resources and Energy Directorate regulates the revenues of power grid operators by setting an annual in-come cap. Based on the income caps they have been allocated and the volumes of electricity they expect to distribute, power grid operators set the transmission tariffs payable by customers. In the event of any difference between actual and expected volumes, revenues from transmission tariffs will show a surplus or shortfall relative to permitted revenues (income cap). In the accounts of Agder Energi Nett AS, this difference is treated as either a liability or an asset. However, in the consolidated accounts, which are presented in accordance with IFRS, this surplus or shortfall cannot be included on the balance sheet, and only the actual transmis-sion tariff revenues are recognised in the income statement.

(amounts in noK millions) 2010 2009Revenues under next year’s income cap recognised in the consolidated income statement -55 34Accumulated surplus transmission revenues not included on the balance sheet 15 70


note 5 otHer operatinG reVenueS (Amounts in NOK millions) 2010 2009Contracting 979 1 079services 63 56Communication 195 206Other revenues 325 131total 1 562 1 472

Electrical contracting services are provided through Otera, and cover areas such as electrical power systems, telecommuni-cations, traffic solutions, building services, ships and offshore and industry and control panels. Otera also services electrical systems and runs a shop.

note 6 lonG-terM ManufaCturinG ContraCtS

The Group’s work in progress is accounted for using the percentage of completion method. Profit is recognised in proportion to the percentage of completion of the project. The percentage of completion is estimated to be the ratio between project costs incurred to date and total estimated project costs. Estimated losses on projects are also recognised in the income statement.

(Amounts in NOK millions) 2010 2009revenues, work in progress 218 121Costs incurred to date, work in progress 195 105Accrued revenues included under other receivables 33 18deferred revenues included under other liabilities 13 8

note 7 unrealiSeD GainS anD loSSeS on enerGY ContraCtS

Breakdown of profit and loss effects of financial instruments by class of instrument: (Amounts in NOK millions) 2010 2009Portfolio of production hedges, excluding power for industrial users -524 -603Cash-settled contracts, compensation power 25 227Cash-settled contracts, power for industrial users 32 196retail customer portfolio 113 182total -354 2 The figures cover financial instruments that must be measured at fair value through profit or loss.

note 8 eMploYee BenefitS (Amounts in NOK millions) 2010 2009 Wages and salaries 935 865employers’ national insurance Contributions 126 130Pension expense including employers’ niCs -77 94Other benefits and reimbursements 47 40Own investments -249 -354total 783 775

number of permanent and temporary full-time equivalents at 31 dec. 1 647 1 673

For details of management compensation, etc., please see Note 34.


note 9 propertY taXeS anD liCenCe feeS (Amounts in NOK millions) 2010 2009Licence fees 45 49Property taxes 136 128total 181 177

Licence fees are perpetual payments designed to compensate for the damage or inconvenience caused by hydropower projects. The fees are paid annually, and are adjusted in line with the consumer price index, initially five years after the licence was granted and subsequently every five years. No provision is made for future licence fees in the accounts. The present value of the liability arising from these fees is estimated to be NOK 1,851 million. That estimate is based on a nominal interest rate before tax of 5.0%.

note 10 otHer operatinG eXpenSeS (Amounts in NOK millions) 2010 2009 Property-related expenses, lease of machinery and office equipment 96 63Purchase of plant and equipment 60 59repairs and maintenance to equipment 8 11Contractors 175 74Operation/maintenance of iT systems 40 35Technical consultants 27 31Administrative consultants 49 67Other external services 32 31Office supplies, telecommunications, postage, etc. 35 37Cost of vehicles 64 56Travel expenses, subsistence allowances, mileage expenses, etc. 45 44sales, advertising, representation, membership fees and gifts 37 43insurance premiums 17 13share of other operating expenses at joint ventures 66 57Other operating expenses 9 24total 761 645

note 11 auDitor’S fee

The Group’s auditor is Ernst & Young, who audits the parent company and all subsidiaries with the exception of the part-owned subsidiaries Otera AB, Norsk Energigjenvinning AS and NorgesFilm AS.

(Amounts in NOK 000s excl. VAT) 2010 2009statutory audit 2 423 2 291Other auditing services 9 0Tax advice 121 130Other services not related to auditing 753 587total 3 306 3 008


note 12 finanCe inCoMe/CoStS (Amounts in NOK millions) 2010 2009

Share of profit/loss of associates and jointly controlled entities 1) -27 -53 interest income on loans 2) 8 8Other interest income 2) 30 11realised gains on shares and dividend payments received 0 1Other finance income 8 2finance income 46 22 Unrealised gains and losses on currency contracts 194 1 055Unrealised gains and losses on foreign currency loans 3) 11 155Unrealised gains and losses on interest rate contracts -2 33unrealised gains and losses on currency and interest rate contracts 203 1 243 interest expense on loans 4) 264 232interest expense on interest rate swaps 35 25interest on capitalised construction loans -10 -7net realised exchange rate losses 58 340Write-downs of non-current financial assets 5) 100 80Other finance costs 38 24finance costs 485 694 net finance income/costs -263 518

1) For 2010, this includes a NOK 19 million gain on the partial disposal of the Group’s interest in NorGer. The figure also includes a NOK 2 (12) million impairment charge.

2) Relates to interest income on financial assets carried at amortised cost.3) Relates to gains and losses on a Euro-denominated loan up until November 2010. Since then, the loan has been designated a

cash flow hedge. Since its reclassification, gains and losses due to exchange rate fluctuations have been recognised as other comprehensive income and expenses in the statement of comprehensive income.

4) Relates to interest expenses on loans carried at amortised cost.5) Impairment of available-for-sale financial assets.


note 13 taX (Amounts in NOK millions) 2010 2009

the tax expense consists of income tax payable 145 454Change in deferred income tax 250 366Corrections to previous years’ tax assessments -9 -9resource rent payable 340 312Change in deferred resource rent tax -106 62tax expense recognised in the income statement 620 1 185 tax payable on the balance sheet Profit before tax 1 371 2 789Permanent differences 43 140Change in temporary differences -910 -1 271Change in loss carryforwards 13 -41profit for income tax purposes 517 1 617 income tax payable 145 454Prepaid tax in sweden -3 0natural resource tax payable 96 96natural resource tax payable offset against income tax payable -96 -96natural resource tax carried forward -32 0resource rent payable 340 312tax payable on the balance sheet 451 766 reconciliation of nominal tax rate with effective tax rate Profit before tax 1 371 2 789expected tax based on nominal rate 384 781tax effect of: non-deductible expenses/non-taxable income 11 39resource rent payable 340 312Changes in deferred resource rent tax/tax assets -106 62Corrections to previous years’ tax assessments -9 -9tax expense recognised in the income statement 620 1 185effective tax rate 45 % 42 % Breakdown of deferred tax assets non-current assets 1 992 1 869Current assets/liabilities -694 619Pension liabilities -607 -637Other non-current provisions -989 -2 051gains and losses 60 5Loss carryforwards -37 -9Other 553 -186total taxable (+)/deductible (-) temporary difference 278 -390 net deferred income tax liabilities (+)/assets (-) 78 -117net deferred income tax liabilities (+)/assets (-) that cannot be offset -81 -6deferred resource rent tax assets -540 -449total capitalised deferred tax assets (-) -543 -572


(Amounts in NOK millions) 2010 2009 Breakdown of deferred tax net deferred income tax liabilities (+)/assets (-) that cannot be offset 80 6deferred resource rent tax 293 309total capitalised deferred tax 374 316 To calculate deferred resource rent tax assets, it is necessary to assess whether it is likely that the Group will be able to make use of future loss carryforwards. The assessment has been based on a conservative estimate of future electricity prices and on the assumption that future yields on short-term government debt will be between 3.8% and 5.0%. Deferred resource rent tax assets arising from NOK 1 800 (1 497) million of negative resource rent carryforwards were included on the balance sheet. Deferred resource rent tax arising from NOK 977 (1 029) million of temporary differences was included on the balance sheet. Off-balance sheet deferred resource rent tax assets arising from NOK 917 (1 678) million of negative resource rent carryforwards amounted to NOK 275 (503) million.

(Amounts in NOK millions) 2010 2009

Changes in net deferred income tax over the year net deferred tax liabilities (+)/assets (-) at 1 Jan. -117 -513new deferred tax liabilities (+)/assets (-) 0 -5Change in net deferred tax liabilities (+)/assets (-) on items recognised in equity -55 37Change in deferred tax liabilities (+)/assets (-) recognised through profit or loss 250 364net deferred income tax liabilities (+)/assets (-) at 31 Dec. 78 -117 Changes in net deferred resource rent tax over the year net deferred resource rent tax at 1 Jan. -140 -202Change in deferred resource rent tax recognised through profit or loss -106 62net deferred resource rent tax liabilities (+)/assets (-) at 31 Dec. -246 -140 Changes in deferred tax on items in the statement of comprehensive income Actuarial gains and losses on pensions -47 37Cash flow hedges 12 0net change in deferred tax on items in the statement of comprehensive income -35 37

The following tax rates have been applied:28 % - income tax rate30 % - resource rent tax rate

note 14 intanGiBle aSSetS (Amounts in NOK millions) Goodwill Software Other Total intangible intangible assets assets Acquisition cost 158 74 58 291Accumulated depreciation and write-downs 1 48 42 91Carrying amount at 31 Dec. 2009 157 27 16 200 Carrying amount at 1 Jan. 2010 157 27 16 200Acquisitions 13 21 11 45disposals at book value 0 6 0 6depreciation 0 12 6 18Carrying amount at 31 Dec. 2010 171 30 20 221


(Amounts in NOK millions) Goodwill Software Other Total intangible intangible assets assets Acquisition cost 172 84 34 290Accumulated depreciation and write-downs 1 54 14 69Carrying amount at 31 december 2010 171 30 20 221 Useful life/depreciation period Tested annually 3-5 years 3-8 years for impairment

Goodwill impairmentThe Group tests goodwill annually for impairment, or more frequently if there is evidence to suggest a fall in value. Testing for impairment is done in the fourth quarter. Agder Energi has not identified any other intangible assets with indefinite useful lives. Goodwill that has arisen in conjunction with acquisitions is allocated to the following individual cash flow-generating units:

Breakdown of goodwill on the balance sheet (Amounts in NOK millions) 2010 2009Otera As 66 66Otera Avotech As 22 22Otera XP As 15 15Otera delta As 18 18Otera AB 21 21sopran As 2 2norsk energigjenvinning As 9 9norgesfilm As 1 1LOs As 12 0netsecurity Oslo As 1 0netnordic Holding As 3 3Carrying amount of goodwill 171 157

Agder Energi tests goodwill on the balance sheet for impairment by discounting expected future cash flows attributable to the cash flow-generating unit to which the goodwill is allocated.

Future cash flows are estimated using forecasts for the next two or three years, based on the company’s business plans as ap-proved by the senior management team. The key assumptions that have been used to calculate utility value are annual growth rates over the forecast period (-2% to 30%), EBIT margins (2% to 9%), EBITDA margins (15%) and discount rates. Most of the Group’s goodwill relates to Otera. For Otera, annual growth rates in the range -2% to 10% have been used for the forecast period. From year three or four, a residual value has been calculated. The residual value has been adjusted by an annual growth rate of 2.5%, equivalent to expected inflation.

The calculations are based on expected cash flows before tax and a nominal discount rate before tax. The discount rate is based on the companies’ average required rate of return, which is in turn based on the risk-free interest rate, plus a risk premium for the specific asset. The average discount rate used for impairment testing is 13% before tax.

The impairment tests found that the recoverable amounts were higher than the carrying amounts, and so no goodwill impairments were recognised in 2010.

Sensitivity analyses have been carried out for the discount rate and EBIT/EBITDA. A 2% increase in the discount rate would lead to an impairment of around NOK 5 million. A 20% reduction in EBIT/EBITDA would lead to an impairment of around NOK 45 million.


note 15 propertY, plant anD eQuipMent

(Amounts in NOK millions) Hydropower Properties Dams Own power Alternative Regional Local Fibreoptics/ Vehicles, Work in Total own Property, Total licences stations energy power distribution telematics fixtures, progress property, plant and property, plants grid network fittings and plant and equipment plant and machinery equipment at JCEs equipment Acquisition cost 1 098 204 447 4 650 28 1 368 3 046 435 241 148 11 664 3 968 15 632Accumulated depreciation and write-downs 15 48 155 1 564 16 495 1 198 170 166 1 3 829 1 260 5 088Carrying amount at 31 Dec. 2008 1 083 156 291 3 086 12 873 1 847 265 75 147 7 836 2 708 10 544 Carrying amount at 1 Jan. 2009 1 083 156 291 3 086 12 873 1 847 265 75 147 7 836 2 708 10 544Acquisitions 1 17 11 109 5 146 275 49 30 44 686 97 783disposals 0 5 0 0 0 13 0 0 4 0 23 0 23Available-for-sale assets 0 68 0 0 0 0 0 0 0 0 68 0 68Acquisitions through business combinations 0 0 0 0 0 0 0 0 43 0 43 0 43impairment 0 0 0 0 10 0 0 0 0 0 10 0 10depreciation 0 5 14 105 3 42 105 25 30 0 330 69 399Carrying amount at 31 Dec. 2009 1 084 94 289 3 090 3 963 2 018 289 113 190 8 134 2 737 10 871 Acquisition cost 1 099 130 458 4 759 33 1 501 3 321 484 309 192 12 286 4 065 16 351Accumulated dep. and write-downs 15 36 169 1 668 30 538 1 303 195 196 1 4 152 1 328 5 480Carrying amount at 31 Dec. 2009 1 084 94 289 3 090 3 963 2 018 289 113 190 8 134 2 737 10 871 Carrying amount at 1 Jan. 2010 1 084 94 289 3 090 3 963 2 018 289 113 190 8 134 2 737 10 871Acquisitions 0 4 39 94 6 86 205 24 65 147 670 42 713disposals 0 -5 0 10 0 0 0 0 23 3 31 0 31depreciation 0 4 14 109 1 47 112 25 36 0 348 70 418Carrying amount at 31 Dec. 2010 1 084 99 314 3 066 8 1 002 2 111 288 119 334 8 425 2 709 11 134 Acquisition cost 1 099 139 497 4 812 39 1 587 3 526 508 348 334 12 888 4 107 16 996Accumulated dep. and write-downs 15 39 183 1 746 31 585 1 415 220 229 0 4 463 1 398 5 861Carrying amount at 31 Dec. 2010 1 084 99 314 3 066 8 1 002 2 111 288 119 334 8 425 2 709 11 134 Useful life/depreciation period (years) indefinite 25-99/ 50-99 25-99 15-67 15-40 15-35 5-20 3-8 indefinite

For work in progress, the net change is shown. Periodic maintenance is included within the relevant category.Capitalised loan arrangement fees amounted to NOK 10 (7) million in 2010.


the useful lives of the most important assets on the balance sheet are set out below:

depreciation period (years) depreciation period (years)Waterfall rights: power distribution network: Waterfall rights Perpetual Regional power transmission grid: dams: - Power and ground cables 40- embankment dams, concrete dams 99 - Transmission substations 35- Other dams 67 - High-voltage power lines 25Tunnel systems 99 - grid control systems 15Mechanical installations: Local power distribution network: - Pipelines 67 - High-voltage lines and cables 40- Penstock operating equipment 40 - Low-voltage lines and cables 30- Turbines 50 - distribution substations 25- Other machinery 15 other assets: Caverns 99 Office buildings 50Road, bridges and quays 99 Sites PerpetualElectrical installations: Office and IT equipment 3- Transformers/generators 50 Fixtures and fittings 5- High-voltage switchgear 45 Vehicles 8- grid control systems 25 - Control centres 15 - Communications 10

note 16 aSSoCiateS anD Joint VentureS

associates: (Amounts in NOK millions) 2010 2009Carrying amount at 1 Jan. 90 90Acquisitions 62 45Transferred to/from other investments -10 0disposals -7 -4Consolidated shares of profit/loss* -22 -41Carrying amount at 31 Dec. 112 90

* For most of the companies, the profit/loss before tax has been consolidated, as the companies are at an early, high-risk stage of their development. For well-established companies, the profit/loss after tax is used.

Breakdown of investments in associates: (Amounts in NOK millions) Ownership Carrying Acquisitions Disposals Consolidated Carrying interest amount at share of amount at 31 Dec. 2009 profit/loss 31 Dec. 2010småkraft As * 20,0 % 57,1 19,0 -0,7 75,4Baltic Hydroenergy As 42,6 % 4,2 4,3 1,4 9,9norger Ks/norger As ** 16,7 % 1,7 25,9 -6,7 -16,4 4,6mobyson AB *** 15,0 % 6,2 4,0 -10,2 0,0skagerak Venture Capital i Ks/gP Ks ** 19,6 % 15,6 5,9 -6,1 15,4Teknova invest As 38,9 % 3,0 -0,2 2,8gallion sørlandets etablererfond As 22,2 % 1,7 0,2 -0,1 1,8Others 0,2 2,4 -0,1 2,5total for associates 89,8 61,7 -17,0 -22,1 112,4


* The Group has also lent NOK 150 million to Småkraft AS. In 2010, Småkraft AS had NOK 54 million in operating revenues and made a NOK 2 million loss after tax. The company had NOK 1 182 million of assets on its balance sheet, made up of NOK 797 million of debt and NOK 385 million in equity.

** The Group has an obligation to contribute NOK 50 million of capital associated with its ownership interests in Skagerak Venture Capital I KS/GP KS, NOK 17.5 million of which had not yet been called up at the close of the year. In 2010, NorGer KS made a NOK 74 million operating loss leaving it with NOK 28 million in equity. In February 2011, Agder Energi’s senior management team decided to contribute its share of around NOK 17 million towards NorGer’s planned NOK 99 million capital increase. In 2010 Agder Energi reduced its ownership interest in NorGer from 33.3% to 16.7%. The Group recognised a gain of NOK 19 million from the sale.

*** In 2010, Mobyson AB was reclassified under Other non-current financial assets; cf. Note 17.

Joint venturesJoint ventures are investments in jointly controlled entities and joint assets (power stations), where the Group and its partners have a controlling interest. The Group naturally has less access to liquid assets, for example, at these kinds of operations than at subsidiaries.

Jointly controlled entities (Amounts in NOK millions) 2010 2009Carrying amount at 1 Jan. 40 3Acquisitions 45 50Consolidated share of profit/loss -23 -12Carrying amount at 31 Dec. 62 40 Breakdown of investments in jointly controlled entities (Amounts in NOK millions) Ownership Carrying Acquisitions Consolidated Carrying interest amount at share of amount at 31 Dec. 2009 profit/loss 31 Dec. 2010dalane Vind As 50,0 % 1,1 4,0 -1,2 3,9statkraft Agder energi Vind dA * 38,0 % 38,9 37,2 -21,8 54,4Viking Varme As 50,0 % 0,1 3,5 0,5 4,0total for jointly controlled entities 40,1 44,7 -22,5 62,3 * For SAE Vind DA, the preliminary loss for the year of NOK 57 million has been used when consolidating Agder Energi’s share

of profit/loss for 2010. The company had NOK 250 of total assets, made up of NOK 218 million of equity and NOK 32 million of debt.

Jointly controlled assetsIn the case of jointly controlled assets, the collaboration is based on an agreement that regulates key areas of cooperation. The Group uses the gross equity method to account for jointly controlled assets, and the Group’s share of revenues, expenses, assets and liabilities are consolidated on a pro-rata basis. Through Agder Energi Produksjon, the Group participates in the fol-lowing jointly controlled power stations and water management associations:

otra Kraft Da owns the Holen and Brokke power stations on the River Otra. Otra Kraft is owned by Agder Energi Produksjon, which has a 68.6% interest, and Skagerak Kraft, which has a 31.4% interest, and is managed through the general meeting. The company has its head office at Rysstad in Valle.

otraverkene is a co-ownership/community of interest that safeguards the owners rights/ownership interest in the Ulla Førre hydropower complex. The owners of Otraverkene control approximately 7% of Ulla Førre’s power generation. Otraverkene are not represented on any of Ulla Førre’s executive bodies. The general meeting of Otra Kraft is Otraverkene’s executive body. Agder Energi Produksjon has an 83.05% ownership interest.


finndøla kraftverk Da is 50:50 owned by Agder Energi Produksjon and Skagerak Kraft. Voting rights are proportionate to the ownership interests.

the power station Hekni kraftverk is a statutory co-ownership between Agder Energi Produksjon, with a 66.67% interest, and Skagerak Kraft, with 33.33%. The co-ownership is managed through a steering committee, and voting rights are proportion-ate to the ownership interests. Agder Energi Produksjon represents the co-ownership in dealings with third parties.

the water management association otteraaens Brugseierforening comprises Agder Energi Produksjon, Skagerak Kraft, Otra Kraft and Vigelands Brug. The association is managed through a Board, and voting rights are proportionate to the owner-ship interests. Agder Energi Produksjon’s ownership interest, including its indirect interest through Otra Kraft, is approximately 73.8%. Otteraaens Brugseierforening has its business address in Valle.

the water management association arendals Vasdrags Brugseierforening comprises Agder Energi Produksjon, Skafså Kraftverk, Skagerak Kraft, Finndøla kraftverk and Arendals Fossekompani. The association is managed through a Board, and has its business address in Arendal. Agder Energi Produksjon’s ownership interest, including its indirect interest through Finndøla Kraftverk, is approximately 52.2%. No single member can have more than 50% of the votes.

Sira-Kvina Da is owned by Agder Energi Produksjon (12.2%), Lyse Produksjon (41.1%) Statkraft Energi (32.1%) and Skagerak Kraft (14.6%). Voting rights at the power company are proportionate to ownership interests. The company has its business address at Tonstad.

Below there follows a summary of the Group’s share of assets, liabilities, revenues and expenses at jointly controlled assets. The energy sales in the table do not represent actual revenues, and have instead been calculated by multiplying Agder Energi Produksjon’s actual power generation by the average electricity price, and adding its share of revenues from concession power.

(Amounts in NOK millions) 2010 2009energy sales 1 087 930Other operating revenues 4 18total operating revenues 1 091 948

Transmission expenses 1 48Property taxes and licence fees 25 25depreciation 70 69Other operating expenses 66 63total operating expenses 162 205

operating profit/loss 929 743

non-current assets 2 710 2 737Current assets 145 79total assets 2 855 2 816

non-current liabilities 1 41Other provisions 7 9Current liabilities 53 53net assets 2 794 2 712


note 17 non-Current finanCial aSSetS (Amounts in NOK millions) 2010 2009 investments in shares and ownership interests 297 374Loans to associates and joint ventures* 151 121Other non-current financial assets at joint ventures 1 0Other receivables** 126 103total 575 597

* Detailed information about loans to associates and joint ventures can be found in notes 16 and 28.** Detailed information about other receivables can be found in Note 28. They include a NOK 40 million subordinated loan to

Agder Energi Pensjonskasse.

The fair value of non-current financial assets is described in greater detail in notes 28 and 29.

Breakdown of investments in shares and ownership interests: (Amounts in NOK millions) Ownership interest Carrying amountVentelo As* 16.7 % 238.4Bio Varme As 14.9 % 16.9glo AB 2.9 % 9.424seven Office As 12.2 % 9.3mobyson AB 15.0 % 7.9såkorninvest sør As 15.9 % 6.3Teknova As 17.0 % 5.0Barahonda investors As 2.2 % 1.3skagerak seed Capital ii Ks/gP Ks 10.5 % 1.3Ownership interests in other companies, etc. 1.3total 297.2 * In 2010 a NOK 100 million impairment provision was recognised for the shareholding in Ventelo AS.

note 18 inVentorieS (Amounts in NOK millions) 2010 2009 finished goods 28 22total 28 22

Inventories are carried at the lower of cost and fair value less costs to sell.


note 19 reCeiVaBleS (Amounts in NOK millions) 2010 2009Trade receivables 1 996 1 052Bad debt provision 21 22total trade receivables 1 975 1 030Accrued revenues 155 202Prepaid expenses 22 33receivables from joint ventures 14 2Other receivables 279 137share of current assets at joint ventures 145 79total receivables 2 591 1 483

ageing analysis of trade receivables: (Amounts in NOK millions) Not 0-30 days 31-60 days 61-90 days Over 90 days Total overdue overdue overdue overdue overdue2010 1 653 246 34 8 55 1 9962009 887 62 52 5 46 1 052

note 20 CaSH anD CaSH eQuiValentS (Amounts in NOK millions) 2010 2009 Cash and cash equivalents 44 26restricted assets (e.g. term deposits, tax withholding account and client assets) 205 42total 249 68

A NOK 58 million bank guarantee covering the parent company and subsidiaries has been used to secure tax deductions at source. The parent company has also set up a cash pooling arrangement with an associated NOK 500 million overdraft facility. All subsidiar-ies in the Group in which the parent company holds an ownership interest of at least 90% (with the exception of NorgesFilm AS), take part in the cash pooling arrangement and are jointly and severally liable to the bank for the overdraft facility.


note 21 eQuitY (Amounts in NOK millions) Share Share Total Retained Non- Total capital premium paid-in earnings controlling equity account capital interests

equity at 1 Jan. 2009 2 025 47 - 937 15 3 024Profit/loss for the year - - - 1 597 7 1 604Actuarial gains and losses on pensions - - - 96 - 96Liabilities relating to acquisition of non-controlling interests - - - -26 - -26dividends paid - - - -967 -2 -969Adjustments due to acquisitions, etc. - - - 2 9 11equity at 31 Dec. 2009 2 025 47 - 1 639 29 3 740 equity at 1 Jan. 2010 2 025 47 - 1 639 29 3 740Profit/loss for the year - - - 748 3 751reduction in share capital -216 - 216 - - -Actuarial gains and losses on pensions - - - -120 - -120Change in currency translation differences on investments - - - 1 - 1Valuation gains on hedging instruments - - - 32 - 32dividends paid - - -100 -800 - -900Changes due to acquisitions, disposals, etc. - - - -9 -7 -16equity at 31 Dec. 2010 1 809 47 116 1 491 25 3 488

Proposed dividends for 2010 come to NOK 900 million in total, equivalent to NOK 333 per share.


note 22 SHare Capital anD SHareHolDer inforMation The share capital is made up of: Number Nominal value Share capital of shares (in NOK 000s)share capital 2 700 000 670 1 809 000 total 2 700 000 1 809 000 list of shareholders in agder energi aS Number % of Number % of Total % of Share of class A class A of class B class B shares total capital shares shares shares shares sharesstatkraft industrial Holding As 743 197 41.289 % 485 990 53.999 % 1 229 187 45.525 % 823 555Arendal municipality 115 017 6.390 % 57 507 6.390 % 172 524 6.390 % 115 591Kristiansand municipality 95 400 5.300 % 47 700 5.300 % 143 100 5.300 % 95 877grimstad municipality 53 327 2.963 % 26 663 2.963 % 79 990 2.963 % 53 593flekkefjord municipality 53 269 2.959 % 14 650 1.628 % 67 919 2.516 % 45 506Lyngdal municipality 49 745 2.764 % 13 680 1.520 % 63 425 2.349 % 42 495Kvinesdal municipality 49 254 2.736 % 13 545 1.505 % 62 799 2.326 % 42 075Lillesand municipality 40 901 2.272 % 20 450 2.272 % 61 351 2.272 % 41 105marnardal municipality 44 500 2.472 % 12 238 1.360 % 56 738 2.101 % 38 014sirdal municipality 43 845 2.436 % 12 057 1.340 % 55 902 2.070 % 37 454mandal municipality 42 343 2.352 % 11 644 1.294 % 53 987 2.000 % 36 171Vennesla municipality 42 343 2.352 % 11 644 1.294 % 53 987 2.000 % 36 171froland municipality 31 847 1.769 % 15 924 1.769 % 47 771 1.769 % 32 007søgne municipality 33 601 1.867 % 9 240 1.027 % 42 841 1.587 % 28 703evje og Hornnes municipality 27 511 1.528 % 13 756 1.528 % 41 267 1.528 % 27 649songdalen municipality 31 689 1.761 % 8 714 0.968 % 40 403 1.496 % 27 070Lindesnes municipality 31 470 1.748 % 8 654 0.962 % 40 124 1.486 % 26 883Hægebostad municipality 28 776 1.599 % 7 913 0.879 % 36 689 1.359 % 24 582farsund municipality 27 502 1.528 % 7 563 0.840 % 35 065 1.299 % 23 494Birkenes municipality 22 679 1.260 % 11 340 1.260 % 34 019 1.260 % 22 793Åmli municipality 21 921 1.218 % 10 960 1.218 % 32 881 1.218 % 22 030risør municipality 21 052 1.170 % 10 525 1.169 % 31 577 1.170 % 21 157Valle municipality 20 327 1.129 % 10 164 1.129 % 30 491 1.129 % 20 429Bygland municipality 19 995 1.111 % 9 998 1.111 % 29 993 1.111 % 20 095iveland municipality 19 155 1.064 % 9 578 1.064 % 28 733 1.064 % 19 251Tvedestrand municipality 19 066 1.059 % 9 533 1.059 % 28 599 1.059 % 19 161Åseral municipality 21 776 1.210 % 5 988 0.665 % 27 764 1.028 % 18 602Vegårshei municipality 14 553 0.809 % 7 277 0.809 % 21 830 0.809 % 14 626Bykle municipality 13 232 0.735 % 6 616 0.735 % 19 848 0.735 % 13 298gjerstad municipality 12 423 0.690 % 6 211 0.690 % 18 634 0.690 % 12 485Audnedal municipality 8 284 0.460 % 2 278 0.253 % 10 562 0.391 % 7 077total 1 800 000 100 % 900 000 100 % 2 700 000 100 % 1 809 000

The NOK 1 809 million of share capital is made up of class A and class B shares.

Class A shares can only be owned by shareholders who meet the conditions for being allocated indefinite waterfall licences under the relevant current legislation. Class B shares are freely negotiable. In all other respects, class A and class B shares have equal rights.

The company has entered into an industrial collaboration agreement with its biggest shareholder, Statkraft Industrial Holding AS. There is also a shareholder agreement between the shareholders in the company.

The company has a corporate assembly with 15 members, who are elected for a two-year term.


note 23 proViSionS (Amounts in NOK millions) 2010 2009 Pension liabilities, cf. note 24 607 637Other non-current provisions 1 038 1 122total 1 645 1 759

Breakdown of other non-current provisions: (Amounts in NOK millions) Supply of free Supply of free Cash-settled Other Total electricity and electricity and contracts 3) provisions compensations 1) compensation 2)

Balance sheet at 1 Jan. 2009 838 147 502 30 1 517Unrealised gains and losses -227 0 -196 0 -423new provisions 0 0 0 29 29Provisions used 0 0 0 1 1Balance sheet at 31 Dec. 2009 611 147 306 58 1 122Balance sheet at 1 Jan. 2010 611 147 306 58 1 122Unrealised gains and losses -25 -19 -32 0 -76new provisions 0 0 0 1 1Provisions used 0 0 0 9 9Balance sheet at 31 Dec. 2010 586 128 274 50 1 038

1) Perpetual obligation to supply free electricity and pay compensation accounted for in accordance with IAS 39. Also see notes 7, 28, 29 and 30.

2) Perpetual obligation to supply free electricity and pay compensation accounted for in accordance with IAS 37.3) Non-current cash-settled contracts measured in accordance with IAS 39. Also see notes 7, 28, 29 and 30.

note 24 penSionS

Defined benefit pension planAs the collective wage agreement that covers the Group’s employees requires the Group to have an occupational pension plan, the Group is not covered by the stipulations of the Act on Mandatory Occupational Pensions in relation to the required characteristics of pension plans. Nevertheless, the Group’s pension plan does fulfil the requirements specified in the Act.

actuarial assumptions for funded pension plansThe company has a funded public pension plan for its employees, which entitles them to defined future pension benefits, based on number of years of service and salary on reaching retirement age. The company’s pension liabilities are funded through a pen-sion plan run by Agder Energi Pensjonskasse. At 31 December 2010, 1 910 people were covered by the plan, including 771 current employees. The figures also include people with accrued rights. The defined benefit pension plan was closed to new members on 1 April 2007; cf. information on the defined contribution pension plan below.

The amount of funding required for the plan is calculated on the basis of a linear accumulation model. The calculation method and assump-tions used comply with the relevant current accounting standard. All actuarial gains and losses that occur over the course of the financial year are presented under other comprehensive income and expenses in the statement of comprehensive income. Changes in defined benefit pension plan liabilities arising from changes to plan arrangements (past service cost), are recognised directly in the income statement.

Pension liabilities were calculated by an independent actuary in November, and represent an estimate of the situation at 31 December 2010. The senior management team considers that any changes in the assumptions and underlying data between the date of calculation and the balance sheet date would not have a significant impact on the figures.

Actuarial gains and losses in 2010 were mainly due to the impact of a lower discount rate and the transition from a private to a public early-retirement scheme (AFP).


In conjunction with changes to the National Insurance Scheme, it was decided that future pensions benefits shall be indexed by 0.75% less than the National Insurance Scheme’s basic amount. This change reduced the Group’s pension liabilities. For account-ing purposes it has been treated as a past service cost, and the reduction in liabilities was recognised through profit in 2010. The change in the annual indexing of pensions reduced pension liabilities by approximately NOK 150 million, including employers’ NICs.

actuarial assumptions for unfunded pension plansEmployees who are members of Agder Energi Pensjonskasse are offered the option of early retirement from the age of 62 onwards. If they have the full number of years of service, they will receive a pension equivalent to approximately 62% of their qualifying salary. Previously the scheme was combined with a private early-retirement scheme. Due to the pension reform coming into force in 2011, and the changes to private early-retirement schemes, the rights of the affected employees on the balance sheet date have not been finally determined. However, in calculating the pension expense for 2010, it has been assumed that employees will receive an annual benefit equivalent to the benefit from the public early-retirement scheme. Under this assumption, employees are entitled to roughly equivalent benefits to those they have received in previous years, but as all of the early-retirement pension must now be paid by the employer, the company faces a significant increase in unfunded pension liabilities. The increase in the liability has been treated as an actuarial loss, and has been recognised under Other comprehensive expenses in the statement of comprehensive income. When calculating the pension liability, it has been assumed that there will be a 100% take-up of the early-retirement scheme by the age of 64. For accounting pur-poses, employees start accruing early-retirement pension rights on reaching the age of 50 or on joining the company, whichever is later.

Employees who are members of the defined contribution pension plan, and who are therefore not members of Agder Energi Pensjonskasse, have an ordinary private early-retirement scheme. The old early-retirement scheme was discontinued in 2010, and the associated liabilities previously included on the balance sheet have been removed. The amounts involved are insignificant. There is a provision for the estimated premiums under the old early-retirement scheme for the years 2011-2015, which is included under unfunded pension liabilities.

The new private early-retirement scheme from 2011 will be funded by contributions from the employer and the state. For accounting purposes, the scheme shall be treated as a defined benefit plan. As the administrator of the scheme has not calculated the surplus or underfunding of the scheme, it is currently being treated as a defined contribution scheme. The first contributions/premiums will be calculated in 2011, and there are therefore no expenses or liabilities associated with this scheme in 2010.

1 300 people were included in the calculation of the unfunded pension liabilities at the close of the year. The calculation is based on 100% take-up by the age of 64.

Defined contribution pension planThe defined benefit pension plan was closed to new members on 1 April 2007. At 31 December 2010, 785 people at the Group were covered by the defined contribution pension plan.

The actuarial tables used for mortality and disability rates are based on standard Norwegian tables adjusted to take into account historical data from Pensjonskassen’s members. The historical data has led to both life expectancy and the probability of disability being adjusted up.

The mortality table, GAP 07, is based on best estimates for the Norwegian population. The disability table closely matches actual disability rates observed at Agder Energi over the past 3-4 years.

Extracts from the actuarial tables are reproduced below. This table shows life expectancy and the probability that an employee in a given age bracket will suffer disability or die within a year.

Age Disability risk in % Mortality risk in % Life expectancy Man Woman Man Woman Man Woman20 0,07 0,07 0,01 0,01 85 89 40 0,22 0,22 0,06 0,05 84 88 60 2,16 2,59 0,52 0,37 84 87 80 - - 6,04 3,35 87 90



the pension expense for the year has been calculated as follows Current service cost 66 70interest cost 78 79expected return on pension plan assets -78 -70Past service cost (excl. employers’ niCs) -141 0employers’ national insurance Contributions -8 9employee contributions -8 -8pension expense for the year -90 81defined contribution pension plans (incl. employers’ niCs) 13 13total pension expense recognised in the income statement -77 94 pension liabilities and pension plan assets Change in gross pension liabilities gross pension liabilities at 1 Jan. 1 881 1 750Current service cost 64 71interest cost 78 79Past service cost -131 0Benefits paid/paid-up policies -59 -48Actuarial gains and losses 162 29Gross pension liabilities at 31 Dec. 1 995 1 881 Breakdown of defined benefit pension liabilities funded pension liabilities 1 782 1 730Unfunded pension liabilities 213 151Gross pension liabilities at 31 Dec. 1 995 1 881 Change in gross pension plan assets fair value of pension plan assets at 1 Jan. 1 322 1 033Acquisitions/disposals of businesses/actuarial gains and losses 0 -1expected return on pension plan assets 77 70Actuarial gains and losses 10 139Pension contributions 85 130Benefits paid/paid-up policies -41 -49fair value of pension plan assets at 31 Dec. 1 453 1 322 net pension liabilities 542 559employers’ niCs accrued 65 79net pension liabilities at 31 Dec. 607 637 estimates Actual return on pension plan assets 122 152expected pension contributions next year 85 117 Change in defined benefit pension liabilities net defined benefit pension liabilities at 1 Jan. 637 816Pension expense recognised in the profit and loss statement -90 82Company contributions incl. employers’ niCs -97 -127Pension benefits included under operating expenses -10 -11Actuarial gains and losses 167 -122net pension liabilities at 31 Dec. 607 637


When calculating the pension cost and net pension liabilities, a number of assumptions have been made: The discount rate is based on the observed interest rate on Norwegian government bonds, adjusted for the duration. The average duration of the pension liabilities has been estimated at approximately 25 years. The discount rate is based on the yield on Norwegian 10-year government bonds on the balance sheet date (cf. IAS 19.78) adjusted for the weighted average duration of the pension liabilities. Wages increases, indexing of retirement pensions and indexing of the National Insurance Scheme basic amount are based on the Norwegian Accounting Standards Board’s guidelines on actuarial assumptions of September 2010. The wage growth assumption also reflects past observed wage growth at the Group.

2010 2009assumptions used to determine pension liabilities at 31 Dec. discount rate 3.70 % 4.40 %Annual wage growth 3.75 % 4.00 %increase in the national insurance scheme’s basic amount (“g”) 3.75 % 4.00 %Annual indexing of pensions 3.00 % 4.00 %expected return on pension plan assets 5.70 % 5.90 %expected average remaining years of service 15 years 15 years

assumptions used to calculate the pension expense for the year:discount rate 4.40 % 4.60 %return on pension plan assets 5.90 % 6.50 %Annual wage growth 4.00 % 4.25 %increase in the national insurance scheme’s basic amount (“g”) 4.00 % 4.25 %Annual indexing of pensions 4.00 % 4.25 %

Distribution of the pension scheme assets by investment category at 31 Dec.Property funds 6 % 4 %interest-bearing financial instruments 68 % 76 %shares 23 % 18 %Other 3 % 3 %fair value of pension plan assets 100 % 100 %


note 25 intereSt-BearinG liaBilitieS (Amounts in NOK millions) 2010 2009

interest-bearing non-current liabilities Bonds 3 574 2 534Liabilities to financial institutions 2 316 1 769Other interest-bearing non-current liabilities 4 4total 5 894 4 307 interest-bearing current liabilities Commercial paper 700 850Overdraft with cash pooling arrangement 201 221Current portion of non-current liabilities (principal repayments due within one year) 625 566Other interest-bearing current liabilities 201 0total 1 727 1 637

The fair value of the Group’s interest-bearing liabilities is described in Note 28. All of the above balance sheet items are carried at amortised cost in accordance with IAS 39. Note 31 sets out further details of interest rates, durations, liquidity risk, credit facilities, etc. Some loans form part of hedging relationships in accordance with IAS 39. See Note 30 for a more detailed descrip-tion.

note 26 otHer non-intereSt-BearinG Current liaBilitieS (Amounts in NOK millions) 2010 2009Trade payables 383 281Unpaid government taxes and duties, tax deducted at source, etc. 371 323share of non-current liabilities at joint ventures 53 53Other current liabilities 536 492total 1 343 1 149


note 27 DeriVatiVeS

In the table below, derivatives with positive and negative fair values are shown separately by portfolio. The portfolios are described in greater detail in Note 30. The figures for energy derivatives are the accounting values of contracts which, under the criteria set out in IAS 39, fall within the definition of financial instruments. There can be significant discrepancies between accounting values and underlying financial values, as the portfolios contain both contracts that are covered by IAS 39 and ones that are not.

In the vast majority of cases, the Group’s derivatives are supposed to reduce the risk that fluctuations in electricity prices and exchange rates will negatively impact cash flows from the Group’s energy sales. Interest rate swaps are used to balance the desire to minimise interest expenses with the need to reduce uncertainty surrounding future interest payments. For a small number of hedging relation-ships involving interest rate swaps, including combined currency and interest rate swaps, Agder Energi applies hedge accounting. The Group also applies hedge accounting to a Euro-denominated loan used to hedge future cash flows in Euros. The Group’s remaining hedging instruments do not meet the documentation requirements that apply to hedge accounting as set out in IAS 39, and gains and losses in fair value are therefore recognised through profit or loss. Derivatives can either be independent derivatives, or embedded derivatives that are separated from the host contract and measured at fair value as if the derivative were an independent contract. Certain perpetual obligations to supply free electricity and pay compensation are classified as non-current liabilities in accordance with IAS 39. The same applies to certain non-current cash-settled contracts.

Agder Energi offers several managed electricity trading products to the retail market. With these products, the company supplies physical electricity to a portfolio of customers, on whose behalf it actively trades electricity through Nord Pool. These Nord Pool posi-tions are measured symmetrically. In other words, Agder Energi recognises equivalent contracts with respect to the retail customers covered by the electricity trading products, but with the opposite exposure of the Nord Pool positions. This symmetrical treatment means that these financial positions do not have any impact on Agder Energi’s income statement, but it does result in an increase in total assets, as the gross value of derivatives on the balance sheet rises.

In 2010 the Group had derivatives worth NOK 996 million that were assets in relation to Nord Pool and liabilities in relation to custom-ers. Similarly, it had derivatives worth NOK 85 million that were assets in relation to customers and liabilities in relation to Nord Pool. In total the value of these positions is higher than the NOK 988 million in energy derivatives shown as assets in the table below. That is because Agder Energi has other positions at Nord Pool that are offset against the abovementioned positions. These positions are therefore presented net on the balance sheet.


Derivative assets: Portfolio of financial electricity contracts 988 534Currency derivatives, electricity sales 204 109total energy and currency derivatives 1 192 643interest rate swaps 17 16total cash-settled derivatives 17 16 total derivatives 1 209 659 Derivative liabilities: Portfolio of financial electricity contracts 1 647 782Currency derivatives, electricity sales 67 165total energy and currency derivatives 1 714 947interest rate swaps 90 54total cash-settled derivatives 90 54 total derivatives 1 803 1 001


note 28 finanCial inStruMentS

Financial instruments constitute a significant proportion of Agder Energi’s total assets, and they have a big impact on the Group’s financial position and results. The majority of the financial instruments are used in energy trading or as financial hedges.

Within energy trading, financial instruments are used as a hedges, to secure future revenues from a proportion of expected power generation. As revenues from electricity sales are denominated in Euros, energy trading exposes the Group to considerable cur-rency risk. Currency swaps, currency futures, foreign currency loans and options are used to manage this risk. A number of financial instruments are also used in trading activities. Except in the case of one foreign currency loan, hedge accounting is not used for financial instruments related to energy trading, in spite of the fact that both energy and currency derivatives are described as hedges. The reason for this is the strict documentation requirements relating to hedge accounting set out in IAS 39. Energy and currency derivatives are measured at fair value through profit or loss. Due to the significant volumes of these contracts, gains and losses on the contracts can potentially cause great volatility in the Group’s balance sheet and profit or loss, without this reflecting the overall financial results. In order to highlight the unrealised impact of these contracts, their values and changes in value are presented on separate lines in the income statement and balance sheet.

Financial hedges mainly consist of loans and interest rate swaps. The Group uses hedge accounting for some currency and interest rate swaps. However, for the majority of the financial instruments used as financial hedges, the Group does not meet the detailed, formal documentation requirements relating to hedge accounting set out in IAS 39. Most of the hedged items are financial instru-ments at amortised cost, whereas the hedging instruments are measured at fair value through profit or loss. This can cause great volatility in the Group’s reported balance sheet and profit or loss, without it reflecting the overall financial results. In order to highlight the unrealised impact of these contracts, they are also presented on separate lines in the income statement and balance sheet. Summary of carrying amount and fair value of financial instruments (Amounts in NOK millions) Carrying Fair Carrying Fair amount value amount value 2010 2010 2009 2009 financial assets at fair value through profit or lossderivatives 1 209 1 209 659 659 see note 27

investments held to maturityexchange-traded bond 0 0 1 1 see note 17

available-for-sale assetsshares 297 297 374 374 see note 17

loans and receivables at amortised costLoans to associates and joint ventures 151 151 121 121 see note 17Other non-current receivables 126 126 103 103 see note 17Cash and cash equivalents 249 249 68 68 see note 20

financial liabilities at fair value through profit or lossnon-current liabilities, obligation to provide free electricity and pay compensation 586 586 611 611 see note 23non-current liabilities, cash-settled contracts 274 274 306 306 see note 23derivatives 1 803 1 803 1 001 1 001 see note 27

financial liabilities at amortised costBonds 4 198 4 236 3 058 3 071 see note 25Loans from financial institutions 2 316 2 333 1 769 1 824 see note 25share of bonds issued by joint ventures 0 0 41 41 see note 25Commercial paper 700 700 850 851 see note 25Overdraft and other interest-bearing current liabilities 402 402 221 221 see note 25


note 29 fair Value of finanCial inStruMentS

The below table sets out to what extent observable market data are used to value financial instruments measured at fair value. The financial instruments have been broken down into the various categories used by the Group for classification purposes. (Amounts in NOK millions) TOTAL Level 1* Level 2** Level 3***

2010 derivatives 1 209 1 209 shares and ownership interests 1) 297 17 280total assets 1 506 17 1 209 280

supply of free electricity and compensation 2) 586 586Cash-settled contracts 2) 274 274derivatives 1 803 1 803 total liabilities 2 663 0 1 803 860 2009 derivatives 659 659 shares and ownership interests 1) 374 374total assets 1 033 0 659 374

supply of free electricity and compensation 2) 611 611Cash-settled contracts 2) 306 306derivatives 1 001 1 001 total liabilities 1 918 0 1 001 917

1) Included under Non-current financial assets, see Note 17.2) Included under Provisions, see Note 23.

* Level 1 assets are financial instruments the fair values of which can be determined from market prices in an active market.** Level 2 assets are financial instruments the fair values of which are estimated using a valuation model that only uses market data as its inputs.*** Level 3 assets are financial instruments the fair values of which are estimated using a valuation model that does not only use market data as its inputs. In 2010 the Group recognised a net loss of NOK 43 million on level 3 financial instruments.

level 3 assets and liabilities at fair value* (Amounts in NOK millions) Shares and Supply of free electricity Cash-settled ownership interests and compensation contractsOpening balance at 1 Jan. 2010 374 -611 -306gains and losses recognised in profit or loss -100 25 32Acquisitions 9 - -disposals -2 - -Closing balance at 31 Dec. 2010 280 -586 -274 * Liabilities are shown with a minus sign.


fair Value of enerGY DeriVatiVeSIn measuring the fair value of energy derivatives, the following parameters and assumptions have been applied:

electricity pricesNord Pool and other bilateral contracts are measured using a smooth forward curve based on the final price on the balance sheet date. For contracts with a term to maturity of more than five years, the price is inflation-adjusted after five years. The prices used are discounted.

Agder Energi has a number of perpetual supply contracts (compensation power), which are accounted for in accordance with IAS 39. The market value of these contracts has been calculated based on a 200 year term. Nord Pool’s market prices have been used for the first five years. For the period where market prices are not available, the Group’s long-term price expectations have been used.

foreign currencyFor currency derivatives and contracts quoted in foreign currency, the calculation is based on the exchange rate on the balance sheet date and the associated forward exchange rates.

CommoditiesFor certain electricity contracts, the contract price is linked to the prices of various commodities. Valuations are based on the forward prices on the relevant commodity exchanges. If there are not quoted prices for the relevant time period, the commodity prices are inflation-adjusted from the last quoted market price.

Co2CO2 contracts are valued using the forward price of emission quotas (EUAs) on Nord Pool.

interest ratesEnergy derivatives are discounted by the market interest rate curve (swap curve). Where credit risk is significant, a risk premium is added to the interest rate curve. When discounting perpetual contracts to supply free compensation power, a risk-adjusted nominal interest rate is used, based on Norges Bank’s long-term forecasts for inflation and real interest rates.

fair Value of CurrenCY anD intereSt rate DeriVatiVeS

interest rate swaps, currency swaps and currency futuresInterest rate and currency swaps, as well as currency futures, are valued by discounting future cash flows to their present value. Expected cash flows are calculated and discounted by looking at the observed market interest rates on various currencies (swap curves) and the observed exchange rates, which are used to derive forward exchange rates. The estimated present values are checked against the equivalent calculations carried out by the counterparties to the contracts.

fair Value of finanCial inVeStMentS

SharesSome of the Group’s equity investments classified as available for sale are listed on a stock exchange, while for others there are not quoted prices. The former are valued at the most recent available share price (bid price). The latter are valued using valuation techniques, including discounting expected future cash flows.


note 30 QualitatiVe inforMation aBout riSK eXpoSureS ariSinG froM finanCial inStruMentS

General inforMation aBout riSK eXpoSureS ariSinG froM finanCial inStruMentSAgder Energi’s financial instruments are exposed to market risk, credit risk and liquidity risk. There follows a more detailed descrip-tion of these risks, and of how they are managed.

MarKet riSKMarket risk is the risk that a financial instrument’s fair value or future cash flows will fluctuate due to changes in market prices. Market risk primarily consists of electricity price risk, currency risk and interest rate risk. Risk management at Agder Energi focuses on entire portfolios of contracts, and not specifically on contracts under IAS 39.

eleCtriCitY priCe riSK – DeSCription of portfolioS

power generation portfolioThe power generation portfolio aims to manage the market risks associated with power generation. All cash-settled contracts, and some physical contracts, are classified as financial instruments, and are measured at fair value. The physical contracts measured at fair value include an option to be settled in cash.

The net exposure of the portfolio at any given time consists of the latest power generation forecasts, purchase and sale commit-ments under long-term physical contracts, as well as contracts through Nord Pool and bilateral cash-settled contracts. The aim is to hedge the value of future revenues, and the portfolio normally maintains a net short position in cash-settled contracts.

The physical contracts comprise commercial sales contracts, contracts to supply concession power and various contracts to sup-ply free power and compensation power. The durations of the commercial contracts vary, with most of them expiring by the end of 2020, but the Group has perpetual agreements to supply compensation power. The agreements on concession power are also perpetual under the current regulatory framework.

Cash-settled contracts include contracts traded through Nord Pool and bilateral contracts. The vast majority of them run for less than five years, but a few bilateral cash-settled contracts run for longer.

In 2000, Statkraft and Elsam agreed to convert a physical power exchange agreement signed in 1994 into a cash settlement contract, where the parties settle the difference between the contract price (indexed to coal price, etc.) and a market reference price (spot price for area). The contract runs until 30 June 2020, and has an annual volume of 1 463 GWh. The Elsam contract is based on a collaboration agreement between a number of Norwegian energy companies. Agder Energi’s share of the volume is 11.96%.

retail customer portfolioThe retail market covers sales to private customers, state-owned entities, private companies and industrial customers, It includes both physical and cash-settled contracts. Physical contracts are mainly based on spot prices, variable rates, fixed prices or capped variable rates. Electricity for immediate use is purchased at the spot price. A number of the physical contracts are flexible in terms of the volumes delivered. Some of the cash-settled contracts with retail customers are based on back-to-back contracts through Nord Pool. Various managed electricity supply products are also offered to customers, which involve cash-settled trades through Nord Pool based on expected physical deliveries to the relevant portfolio of customers.

The net exposure of the retail portfolio at any given time consists of sale contracts with prices that are fixed for varying lengths of time, as well as contracts through Nord Pool and bilateral cash-settled contracts. The vast majority of the contracts expire in less than three years. The portfolio shall hedge the value of future revenues from this area. The retail portfolio normally maintains a net long position in cash-settled contracts.

trading portfoliosAgder Energi has various trading portfolios which are managed independently of the company’s expected power generation. The portfolio managers trade in the market with the aim of profiting from short-term and long-term changes in the market values of


energy products. All trading contracts are measured at fair value. The portfolios consist of short-term cash-settled futures and options contracts for electricity, coal, oil and CO2, which are traded through Nord Pool, through other exchanges and bilaterally.

ManaGinG MarKet riSK ariSinG froM fluCtuationS in eleCtriCitY priCeSThere are internal guidelines on exposure to market risk, for both the hedging and trading portfolios. Agder Energi’s Risk Management and Internal Control department has been given responsibility for continuously monitoring compliance with limits on risk exposure. The limits on trading both cash-settled and physical contracts are systematically monitored and the current status is regularly reported.

power generation portfolioAgder Energi trades various physical and cash-settled instruments in order to secure its revenues from electricity sales. These trading activities help to stabilise the company’s revenues from one year to another, which is considered desirable on account of the great uncertainty surrounding electricity prices. Hedging activities, which take into account the company’s current and future power generation capacity, are designed to optimise contracts in relation to the Group’s risk profile. Agder Energi is exposed to risks arising from fluctuations in prices and volumes, as both future prices and precipitation levels are unknown.

Limits on futures trading are based on the desired hedge ratio in relation to the potential generation. In addition, trading strate-gies have been established at an operating level designed to manage risk using a profit at risk method with a range of potential outcomes. For risk management purposes, cash-settled and physical contracts are considered together.

retail customer portfolioThis business area exposes itself to variations in electricity prices by agreeing fixed prices with retail customers or by agreeing to give retail customers notice of changes in variable rates. Where this kind of price risk exists, prices are hedged through cash-settled contracts on Nord Pool. Limits have been set on the maximum volume of exposure. Daily Value at Risk (VaR) calculations are also used to monitor exposure. VaR gives a prediction with a certain level of confidence of potential portfolio losses. Management is kept informed of the exposure level relative to the specified limits. The retail customer portfolios are also exposed to volume risks, as many of the physical contracts are flexible in terms of the volumes delivered. Based on experience, knowledge of normal seasonal variation and knowledge of other specific issues that affect end users’ electricity consumption, the company calculates the volumes likely to be needed, which consequently need to be hedged.

trading portfoliosVaR is the most important tool used to manage the risk exposures arising from these portfolios. Trading volumes are significant, but the financial exposure at any given time is limited by hedging activities. Electricity trading authorisations are expressed in terms of limits on potential losses. At an operating level, risk management focuses on minimising any losses.

MarKet riSK – CurrenCYAgder Energi’s currency risk exposure mainly relates to revenues from electricity sales in foreign currencies. Electricity sold through Nord Pool is settled in Euros, and all contracts that are entered into through Nord Pool are Euro-denominated. Agder Energi hedges its exposure to the Euro exchange rate arising from the potential impact on cash flows from both physical contracts and cash-settled contracts through Nord Pool.

ManaGinG MarKet riSK ariSinG froM fluCtuationS in eXCHanGe rateSExpected future cash flows from electricity sales over the next four years are gradually hedged. The hedge ratio is highest for the cash flows that are closest in time. Cash-settled derivatives are used to hedge the risk. In some cases where it is natural from a financial point of view to consider that a hedging relationship exists, the relationship is not adequately documented, and so the instruments do not qualify for hedge accounting in accordance with IAS 39. Agder Energi’s Group Finance department is responsible for trading foreign currency instruments. The Risk Management and Internal Control department is responsible for monitoring that trading adheres to the adopted strategies and limits on risk exposure.

MarKet riSK – intereSt rateSThe vast majority of the Group’s exposure to interest rate risk arises from its debt portfolio. Interest rate swaps are used to achieve the desired exposure to interest rates within the Group’s debt portfolio. This is done using fixed-interest loans and with the help of financial instruments.


ManaGinG MarKet riSK ariSinG froM fluCtuationS in intereSt rateSSensitivity to interest rates is measured by modified duration within a defined period of 1 to 3 years. The chosen strategy aims to minimise net finance costs over the long term, while reducing risk to an acceptable level. It is based around making use of the Group’s natural interest rate hedges, such as the income cap on its power distribution business and the deductible interest rate used to calculate the resource rent tax payable by the power generation business. The Group Finance department is responsible for taking positions. Exposure to interest rate risk is measured. Each month, current exposure to interest rate risk in relation to the limit specified in the finance strategy is reported to the CFO. Interest rate exposure is also reported to the Group’s Board of Directors in the risk report.

CreDit riSKCredit risk is the risk that a party to a financial or physical trade will cause his counterparty to incur a loss by failing to fulfil his obligations. Agder Energi takes on counterparty risk by selling and distributing electricity, and by selling other goods and services. The investment of surplus liquid assets and trading of financial instruments also give rise to counterparty risk. The majority of cash-settled electricity contracts are cleared through Nord Pool. For these contracts, there is assumed to be no counterparty risk. For all other electricity contracts, the maximum exposure to any individual counterparty is determined based on an internal credit rating. The credit rating is based on information such as key financial figures. Counterparties are then grouped in various risk classes, each of which is allocated a maximum exposure level. Bilateral contracts are subject to limits on exposure to individual counterparties, both in terms of value and duration.

In order to limit credit risk, bank guarantees are sometimes demanded when a contract is signed. The guarantee must have been issued by an acceptable bank. Parent company guarantees are also used. In those cases, the parent company is assessed and classified in the normal way. Agder Energi has good procedures for ensuring that outstanding receivables are paid on time. An aged analysis of customers is continuously monitored. If a counterparty encounters financial difficulties, special procedures are followed. Historically Agder Energi’s losses on its receivables have been low.

The maximum credit risk arising from energy derivatives is virtually identical to the carrying amount on the balance sheet. Limits on exposure to individual counterparties are regularly monitored and reported. Total counterparty risk is calculated and reported for all relevant business units, as well as being consolidated at Group level and being covered by the Group’s overall risk manage-ment procedures.

liQuiDitY riSKAgder Energi is exposed to liquidity risk arising from the fact that its liabilities do not mature at the same time as when cash flows are generated, as well as from variations in margin requirements on futures traded through Nord Pool. The capital markets consider Agder Energi to be a low-risk borrower, and the company has been given a so-called shadow rating of A- by agencies in the bond market. Agder Energi mainly funds its operations through the Norwegian commercial paper and bond markets, but it also uses the banking market to some extent. The Group also has credit facilities with banks to backstop its commercial paper programme. The credit facilities would provide sufficient time to make alternative financing arrangements in the event of the commercial paper market no longer being an attractive source of financing. A bank guarantee has been set up to cover significant fluctuations in Nord Pool’s margin requirements on futures.

Exposure to liquidity risk is monitored by the Risk Management and Internal Control department. The Group Finance department is responsible for ensuring that the Group has sufficient liquidity in relation to its finance strategy. Key figures relating to liquidity risk are included in the Group’s risk report to the Board of Directors.

HeDGe aCCountinGAgder Energi has two types of financial instruments that qualify for accounting as fair value hedges. The first of these is a fixed-to-variable interest rate swap, which is subject to the same main terms as the underlying loan being hedged.

The Group also has combined interest rate and currency swaps. Agder Energi has issued a USD-denominated fixed-interest bond, in relation to which it has entered into swap agreements which see it receive fixed USD interest payments, and make a combina-tion of fixed and variable NOK interest payments. From an accounting point of view, these swaps are considered to be fair value hedges, which swap a fixed interest rate with payments in USD to a floating interest rate with payments in NOK. For one of these


swaps, the Group receives fixed interest payments in USD and pays fixed interest payments in NOK. For accounting purposes, this swap is considered to be a swap from a fixed interest rate with payments in USD to a variable rate with payments in NOK, with this part of the swap being designated a fair value hedge. In addition, it is considered to be a swap from a variable rate with payments in NOK to a fixed rate with payments in NOK, and this part of the swap is designated as a cash flow hedge.

In addition to the above, Agder Energi has designated a Euro 100 million loan as a cash flow hedge of probable future revenues from electricity sales.

For its other hedging relationships, the Group does not satisfy the documentation requirements specified in the IFRS rules on hedge accounting. Amounts in NOK millions 2010 2009

fair value of derivatives designated as hedging instruments derivatives designated as fair value hedges -39 0derivatives designated as cash flow hedges 5 0total fair value of derivatives designated as hedging instruments -34 0 fair value hedges Losses on derivatives used as fair value hedges -39 0gains on hedged items in fair value hedges, hedged risk 39 0Hedge ineffectiveness recognised in profit or loss 0 0 Cash flow hedges gains and losses on derivatives recognised in statement of comprehensive income 5 0gains and losses on foreign currency loans recognised in statement of comprehensive income 39 0total gains and losses on hedging instruments recognised in statement of comprehensive income 44 0 Cash flow hedge ineffectiveness recognised in profit or loss 0 0


note 31 QuantitatiVe inforMation aBout riSK eXpoSureS ariSinG froM finanCial inStruMentS

Market riskMarket risk arises as a result of open currency, interest rate and electricity positions. Market risk is the risk that a financial instru-ment’s fair value will fluctuate due to changes in market prices. In the event of the changes set out below taking place, the results will be directly recognised in the income statement.

electricity derivatives: (Amounts in NOK millions) Change in electricity prices Change in exchange rate -10 % 10 % -5 % 5 %electricity derivatives 13 -13 33 -33 The table shows a partial risk analysis of how the fair values of electricity derivatives would change in the event of a parallel 10% decrease/increase in electricity futures prices and of a parallel 5% decrease/increase in foreign currency exchange rates. Minus is taken to mean NOK strengthening in relation to EUR. Currency contracts: (Amounts in NOK millions) Change in exchange rate -5 % 5 % Currency contracts 64 -64 The table shows how the fair values of the foreign currency contracts would change in the event of a parallel 5% decrease/in-crease in foreign currency exchange rates. A decrease is taken to mean NOK strengthening in relation to EUR.

interest rate swaps: (Amounts in NOK millions) Change in interest rate -1 % 1 %interest rate swaps -63 63 The table shows how the fair values of interest rate swaps would change in the event of a parallel 1% decrease/increase in the yield curve.

Breakdown of loans by currency: (Amounts in NOK millions) 2010 2009 nOK-denominated loans 6 840 5 112euro-denominated loans 781 832total 7 621 5 944 Breakdown of interest by currency: Nominal average interest rate, NOK 4.2 % 4.4 %Nominal average interest rate, Euros 5.2 % 5.2 % fixed-interest periods within loan portfolio: (Amounts in NOK millions) 1-3 years 3-5 years Over 5 years TotalnOK-denominated loans 1 392 1 307 2 290 4 989euro-denominated loans 312 0 469 781total 1 704 1 307 2 759 5 770


The Group has issued a bond with a face value of USD 100 million. In the table, the bond is presented under NOK-denominated loans, as the Group has used currency swaps to ensure that it has no exposure to USD exchange rates arising from the loan.

Agder Energi uses a duration target of between 1 and 3 years to help it manage the risk exposures arising from its loan portfolio. Average duration at the close of the year was 2.2 years.

euro-denominated loans (Amounts in NOK millions) Change in exchange rate -5 % 5 % euro-denominated loans 39 -39 The table shows how the fair values of the foreign currency contracts would change in the event of a parallel 5% decrease/in-crease in foreign currency exchange rates. A decrease is taken to mean NOK strengthening in relation to EUR. The loan has been designated as a cash flow hedge, and gains and losses are recognised in the statement of comprehensive income.

Credit risk arising from derivatives: (Amounts in NOK millions) 2010 2009gross exposure to credit risk, energy derivatives 989 534gross exposure to credit risk, currency and interest rate derivatives 204 109total 1 193 642

For energy derivatives, the credit risk associated with all contracts traded through Nord Pool is limited by the fact that counter-parties provide cash collateral or bank guarantees. For bilateral contracts there is not normally any such security.

liquidity risk, maturity structure of liabilities (Amounts in NOK millions) Carrying Maturing Maturing Maturing Maturing Maturing Maturing Un- amount in in in in in after speci- 2010 2011 2012 2013 2014 2015 2015 fiedBonds and liabilities to financial institutions 6 514 625 1 338 1 675 425 1 113 1 338 -Commercial paper and overdraft facility 1 102 1 102 - - - - - -total interest-bearing liabilities 7 616 1 727 1 338 1 675 425 1 113 1 338 -

financial liabilities at fair value through profit or loss 2 668 1 098 460 267 25 22 116 680Tax payable and deferred tax 825 451 - - - - - 374Other non-interest-bearing current liabilities 1 343 1 343 - - - - - -Other non-interest-bearing non-current liabilities 786 - - - - - - 842total non-interest-bearing liabilities 5 621 2 892 460 267 25 22 116 1 896 total 13 237 4 619 1 798 1 942 450 1 135 1 454 1 896

Credit facilities with banksThe parent company has a long-term NOK 800 million committed facility with a bank to back-stop its short-term borrowing programme in the event of problems in financial markets. The parent company has also set up a cash pooling arrangement with an associated NOK 500 million overdraft facility. At the close of the year, the Group had NOK 1 297 million in total in unused credit facilities.


note 32 MortGaGeD aSSetS, liaBilitieS anD GuaranteeS iSSueD

Mortgages Agder Energi has mortgaged some assets as collateral for loans. NOK 109 million of the parent company’s interest-bearing liabili-ties were mortgage loans, and the book value of the mortgaged assets (owned by Agder Energi Produksjon) was NOK 338 million. Subsidiaries held NOK 35 million in mortgage debt, and the book value of the mortgaged assets was NOK 95 million.

liabilities and guarantees issuedAgder Energi’s agreements with banks contain covenants relating to key financial figures. Firstly, net interest-bearing liabilities must not exceed five times EBITDA. Secondly, the Group must have a market-adjusted equity ratio of at least 40% at a consolidated level, based on the bank’s calculation method. The key figures are adjusted for unrealised gains and losses. At the close of the year the key figures were 3.1 and 48% respectively, which satisfied the covenants.

Of the parent company’s interest-bearing liabilities, NOK 1 000 million is guaranteed by banks and NOK 179 million is guaranteed by the shareholder municipalities. Agder Energi’s loan agreements contain negative pledge clauses, which also cover its subsidiar-ies. This means that any new security interests require the consent of the lenders.

Agder Energi has NOK 1 110 million in off-balance sheet bank guarantees. NOK 464 million of this relates to a cash-settled power exchange agreement, NOK 392 million to electricity trading, NOK 64 to tax deducted at source and NOK 190 million to other guarantees. At the close of the year, the parent company had issued guarantees worth NOK 72 million in relation to subsidiaries’ external liabilities.

Contractual obligationsAt any given time the Group has several ongoing investment projects that involve obligations to fulfil contracts with subcontractors. The Group also has obligations arising from its ownership interests in joint ventures and water management associations; cf. Note 16.

Through its subsidiary Agder Energi Varme, Agder Energi has entered into a long-term contract to buy heating energy from the municipally-owned enterprise Returkraft. The contract, which runs for 20 years with an optional extension, commits Agder Energi Varme to buying an agreed volume from the new waste-to-energy plant in Kristiansand from 2010 onwards.

The companies in the Otera Group and Nettkonsult mainly occupy leased premises. The Otera Group also leases its fleet of vehicles.

In 2010, Agder Energi moved its head office to new premises at Kjøita in Kristiansand. It has signed a 15+5-year lease contract with Kristiansand Næringspark. The contract contains a purchase option.


note 33 ContinGent liaBilitieSAgder Energi’s operations are extensive, and the company therefore gets involved in major and minor disputes from time to time. At the time of the financial statements being presented, there were no ongoing disputes with the potential to significantly impact Agder Energi’s profitability or liquidity.

expected annual electricity generation at Sira-KvinaThe dispute is over expected electricity generation from pump-back at Duge. Historical figures show that pump-back volumes have been lower than anticipated by NVE when it calculated the preliminary figure for expected annual generation. Sira-Kvina has appealed the new figure proposed by NVE for expected annual generation. If Sira-Kvina’s appeal is successful, expected annual electricity generation will be set at a lower level than proposed by NVE. No allowance has been made for NVE winning the case.

note 34 ManaGeMent CoMpenSation, etC.The senior management team consists of Tom Nysted, Pernille K. Gulowsen, Unni Farestveit, Finn R. Johansen, Jan Pedersen, Ole Th. Dønnestad, Erik Boysen and Realf Ottesen. As of 1 January 2011, Hans Jakob Epland took over responsibility for the Contract-ing business area. In 2010, the combined taxable compensation of the eight members of the senior management team amounted to NOK 12 897 000. In addition to this, there was a NOK 5 622 000 pension expense. The compensation of the Board of Directors and Corporate Assembly for 2010 was NOK 835 000 and NOK 14 000 respectively. All of the stated figures exclude employers’ NICs. The Board members are not entitled to any special termination benefits such as bonuses, profit-sharing or options. Senior management team (Amounts in whole NOK 000s) Basic Other Total Pension salary benefits taxable expense (1) income incurred by companyTom nysted – CeO 2 379 142 2 548 1 889Pernille K. gulowsen – CfO 1 355 11 1 386 407Unni farestveit – Business Area director, market 1 398 11 1 431 596finn r. Johansen – Hr director 1 341 87 1 454 800Jan Pedersen – Business Area director, Contracting 1 439 172 1 736 521Ole Th. dønnestad – group director, energy 1 439 8 1 512 344erik Boysen – Business Area director, network 1 439 9 1 460 387realf Ottesen – director of Communications 1 328 11 1 370 677

(1) Other benefits includes company cars, company phones, broadband and other minor benefits. A flat in Kristiansand has been made available to the CEO.

non-executive Directors’ fees (amounts in noK)Sigmund Kroslid (Chair) 150 000, Åshild Martinussen (Deputy Chair until May) 50 000, Mette Gundersen (Deputy Chair from May) 92 500, Tønnes Seland 80 000, Jon G. Brandsar (no fees)*, Oluf Ulseth (no fees)*, Steinar Bysveen (no fees)*, Elisabeth Morthen 80 000, Kristin Steenfeldt-Foss (no fees)*, Bente Zeline Rist 50 000, Johan Ekeland 80 000, Rolf Bjarne Eriksen 80 000 and Oddvar E. Berli 80 000.

Fees paid to Board members’ deputies: Ingunn Foss 6 000, Arnt Haugland 3 000, Irene H. Aune 3 000.

* Employees of Statkraft are not paid Directors’ fees.

No Board members have received any compensation other than their Directors’ fees from any companies in the Group, with the exception of the employee representatives, who received their salaries for their normal duties. The Group has no committees ap-pointed by the Board, and so no fees were paid in relation to such committees in 2010.


Departing Board membersJon G. Brandsar, Åshild Martinussen and Oluf Ulseth.

new Board membersBente Zeline Rist, Steinar Bysveen and Bjørn Blaker.

loans/guaranteesNo members of the senior management team or the Board of Directors have been granted loans or had guarantees issued on their behalf by the company.

Share option schemesThe company does not have any share option schemes for management or other employees.

Bonuses and pension plansThe senior management team has no bonus arrangement for 2010.

The CEO has a pension plan that allows him to retire at the age of 67 with a pension equivalent to 66% of his qualifying salary. On reaching the age of 62, the CEO has a right and duty to vacate his position. An agreement has been reached whereby the CEO will then move to a new position, which will involve working up to 75% of full-time for 75% of the full salary. If the CEO is asked to leave the company, he remains entitled, during the notice period and for up to a further 12 months, to receive his salary and other benefits, less the value of any benefits that he may receive from other sources during that period. The notice period is six months.

For other members of the senior management team, the notice period is also six months. There are no special agreements on ter-mination compensation and all members of the management team are entitled to a pension equivalent to 66% of their qualifying salaries on retirement at the age of 67. The pension agreements of the executive directors Pernille K. Gulowsen, Unni Farestveit, Finn R. Johansen, Ole Th. Dønnestad, Erik Boysen and Realf Ottesen all state that their pensions shall be based on their regular salaries. The pension agreement of the executive director Jan Pedersen includes an additional clause, stating that if he retires between the ages of 60 and 67, his retirement pension will be equivalent to 80% of his salary.

The company’s pension expense for 2010 includes retirement pension benefits in excess of 12G, which are not covered by the National Insurance Scheme and the state occupational pension plan.


note 35 relateD partieS

The subsidiaries and joint ventures specified in Note 16 are classified as related parties of Agder Energi. The people specified in Note 34, who are members of the Group’s senior management team or Board of Directors, are also related parties of Agder Energi.

Agder Energi’s largest shareholder is Statkraft Industrial Holding, which owns a 45.525% interest. Sales to the Statkraft Group amounted to NOK 46 million in 2010 and NOK 24 million in 2009. Purchases from companies in the group amounted to NOK 101 million in 2010 and NOK 18 million in 2009. Statkraft Industrial Holding is also a joint owner of several of the joint ventures in which Agder Energi holds an ownership interest.

Agreements have also been signed with several cultural institutions in shareholder municipalities in Agder. Note 32 lists loans guaranteed by municipalities.

All transactions with related parties are carried out on an arm’s length basis.

note 36 GoVernMent GrantS

(Amounts in NOK millions) 2010 2009grants recognised on the balance sheet 13 7

Enova has awarded a grant to the company Agder Energi Varme for the development of district heating plants in Kristiansand, Grimstad and Arendal. There are no unfulfilled conditions relating to grants received.


Agder energi As



Agder energi As


COnTenTs

income statement 78Balance sheet 79Cash flow statement 80Accounting principles 81

noteSnote 1 intra-group transactions and balances 83note 2 employee benefits, management compensation, etc. 83note 3 Pensions 84note 4 Auditor’s fee 87note 5 Other operating expenses 87note 6 finance income and costs 87note 7 Tax 88note 8 intangible assets 89note 9 Property, plant and equipment 89note 10 Other non-current financial assets 89note 11 shares in subsidiaries and associates 90note 12 investments in shares and ownership interests 91note 13 Other non-current receivables 91note 14 Cash and cash equivalents 91note 15 equity 92note 16 interest-bearing liabilities 92note 17 Other non-interest-bearing current liabilities 92note 18 market and financial risk 93note 19 Contingent liabilities 93note 20 mortgaged assets, liabilities and guarantees issued 94


inCOme sTATemenT

(Amounts in NOK millions) Note 2010 2009 energy sales 1 -2 1Other operating revenues 1 69 62total operating revenues 67 63

Other raw materials and consumables used 1 0employee benefits 1, 2,3 87 87depreciation and write-downs 8, 9 11 7Other operating expenses 1, 4, 5 118 128total operating expenses 217 222

operating profit/loss -150 -159

finance income 1, 6 1 371 1 324finance costs 1, 6 485 354net finance income/costs 886 970

profit before tax 736 811

Tax expense 7 10 -4

profit after tax 726 815 allocation of profit: Proposed dividends 15 900 800Transferred to/from other equity 15 -174 15total appropriations 726 815 other information: group contributions received (after tax) 918 893

earnings per share (nOK) 269 302earnings per share, diluted (nOK) 269 302


BALAnCe sHeeT

(Amounts in NOK millions) Note 2010 2009 deferred tax assets 7 16 16intangible assets 8 19 7Property, plant and equipment 9 41 24investments in subsidiaries 11 3 010 3 026investments in associates and jointly controlled entities 11 258 190Other non-current financial assets 10, 12, 13 5 411 5 388total non-current assets 8 755 8 650

receivables 1 1 070 1 021derivatives 0 0Cash and cash equivalents 14 616 0total current assets 1 686 1 021 total aSSetS 10 441 9 672 Paid-in capital 15 1 907 2 072retained earnings 15 0 128total equity 1 907 2 200

Provisions 3 42 31interest-bearing non-current liabilities 16,18 6 518 4 790total non-current liabilities 6 560 4 821

interest-bearing current liabilities 16,18 900 1 665Tax payable 7 11 10derivatives 0 0Other non-interest-bearing current liabilities 1, 17 1 063 976total current liabilities 1 974 2 651 total eQuitY anD liaBilitieS 10 441 9 672




CAsH fLOW sTATemenT

(Amounts in NOK millions) 2010 2009 Cash flow from operating activitiesn Profit before tax 736 811depreciation and write-downs 11 7Unrealised gains and losses on foreign currency loans and interest rate contracts -11 -156Tax paid -601 0dividends and group contributions received from subsidiaries 1 492 1 458Changes in net working capital, etc. -911 -714net cash provided by operating activities 716 1 406 investing activities Purchase of property, plant, equipment and intangible assets -42 -15Acquisitions/financial investments and equity investments in subsidiaries -93 -184net change in loans -120 -504sale of property, plant, equipment and intangible assets 2 0sale of businesses/financial assets 10 5net cash used in investing activities -243 -698 financing activities new long-term borrowings 2 313 0repayment of long-term borrowings -585 -223net change in current liabilities -685 482dividends paid -900 -967net cash used in financing activities 143 -708

net change in cash and cash equivalents 616 0

Cash and cash equivalents at start of year 0 0Cash and cash equivalents at end of year 616 0


ACCOUnTing PrinCiPLes

The financial statements have been pre-sented in compliance with the Norwegian Accounting Act and generally accepted ac-counting principles. accrual, classification and measure-ment principlesIn accordance with generally accepted ac-counting principles, the financial statements are based on the historical cost, revenue recognition, matching, conservatism, hedg-ing and congruence principles. In the event of uncertainty, best judgement is applied. Financial statements are prepared using uniform principles that are applied consist-ently over time. The financial statements have been prepared on the assumption of the business being a going concern. Recognition of revenues and expensesRevenues and expenses are recognised in the income statement when they are earned/incurred. Revenues from the sale of goods and services are recognised on delivery. Revenues from services are rec-ognised in the income statement as they are supplied. General principles for measurement and classificationCurrent assets and short-term liabilities cov-er items that are due for payment within one year of the balance sheet date, as well as items relating to the business cycle. Other items are classified as non-current assets or non-current liabilities. Current assets are carried at the lower of cost and fair value. Current liabilities are capitalised at their nominal value on the initial date. Non-current assets are carried at cost, but are written down to the recoverable amount if there is evidence of impairment, in compli-ance with the Norwegian accounting stand-ard on the impairment of non-current assets.

intangible assetsIntangible assets are included on the bal-ance sheet if they meet the criteria for capi-talisation, with the exception of research

and development costs, which are expensed as they are incurred. This means that ex-penses associated with intangible assets are included on the balance sheet if it is considered probable that future economic benefits attributable to the assets will flow to the company and it has been possible to reliably measure the acquisition cost of the asset. property, plant and equipmentProperty, plant and equipment is depreci-ated in a straight line over its anticipated useful life. Maintenance on property, plant and equipment is considered an operating expense, while upgrades and replacements are added to the acquisition cost of the as-set and are depreciated together with the asset. The distinction between maintenance and upgrades/improvements is judged on the basis of the condition of the asset when it was acquired. non-current financial investmentsThe historical cost method is used for shares, bonds and other financial instru-ments. This means that shares/ownership interest are carried at cost, and any cash received is treated as dividends (other fi-nance income). Group contributions received are recognised in the year that they are allocated by subsidiaries. Dividends from subsidiaries are also recognised in the year that they are appropriated by the subsidiary. Investments are written down to fair value if there is evidence of other-than-temporary impairment. interest rate swapsInterest rate swaps are used to match the duration and interest rate sensitivity of the company’s debt portfolio to the Group’s policy and strategy. Interest rate swaps are managed within the context of the Group’s overall debt portfolio. Instruments in the hedging portfolio thus meet the criteria for hedge accounting, which means that all profit and loss effects are recognised over the contract period and the value of the portfolio is kept off the balance sheet.

For 2010, the parent company Agder Energi AS has changed the principles it uses when accounting for interest rate swaps. Previ-ously it measured them at fair value through profit or loss. As of 2010, the company has gone over to using hedge accounting for interest rate swaps. This means that the swaps are kept off the balance sheet, and are only recognised through profit or loss as and when they are realised. Comparative figures have been adjusted to reflect the change in accounting principles, which has resulted in a NOK 27 million increase in the company’s equity. foreign currency and currency instru-mentsThe Finance department manages the Group’s overall exposure to currency risk. To some extent Agder Energi AS acts as a counterparty within the Group when it does not make sense to hedge subsidiaries’ expo-sure to currency risk directly in the market. Where the parent company has acted as a counterparty in conjunction with the need of subsidiaries to hedge their currency risk exposure arising from electricity sales, the contracts are accounted for as part of the Group’s currency hedging activities. Gains and losses on these contracts are recog-nised in the accounts under hedges in the period when the hedged electricity sales take place. receivablesTrade debtors and other receivables are presented on the balance sheet at their nominal value less anticipated bad debts. Provisions for bad debts are made on the basis of individual assessments of the indi-vidual receivables. In addition, a non-specific provision is made to cover anticipated bad debts related to other trade debtors. Cash pooling arrangementAgder Energi AS is part of a cash pooling ar-rangement with its subsidiaries. This means that the Group has a joint bank account for short-term deposits and short-term loans. Interest income and interest expenses aris-


ing from the cash pooling arrangement are classified as interest income and interest ex-penses in the company’s income statement. pensionsAgder Energi AS has pension agreements that entitle employees to specific pension benefits on reaching retirement age (de-fined benefit pension plans). Pension costs and pension liabilities are calculated using a linear accumulation model based on as-sumptions relating to discount rates, pro-jected salaries, the level of benefits from the National Insurance Scheme and future returns on pension scheme assets, as well as actuarial calculations of mortality, vol-untary early retirement, etc. These assump-tions are the same as the ones specified in the NASB’s guidelines, except that the long-term wage growth assumption has been set 0.25% lower than the recommendation, due to lower expected seniority increases. In ad-dition, the expected return on pension plan assets has been set 1.1% higher than the NASB’s recommendation. Pension plan assets are measured at their estimated fair value and have been de-ducted in the net pension liabilities on the balance sheet. Any pension plan surplus is capitalised on the balance sheet in so far it is likely that the surplus will be used. The company applies Norwegian Accounting Standard 6A when recognising pension li-abilities in the balance sheet and pension expenses in the income statement. Any ac-tuarial gains and losses that arise during the financial year are included in the bal-ance sheet, so that the pension liability at all times represents the full liability. Agder Energi AS also has various defined contribution pension plans, which are ex-pensed as incurred. The company has unfunded and funded pension liabilities. Each pension plan is as-sessed individually, and any surplus is in-cluded in the balance sheet as a non-current receivable. Unfunded pension liabilities are

included under provisions. If a pension plan is terminated, any net pension assets are not the property of the company. taxesIncome tax is calculated in accordance with standard tax rules. The tax expense in the income statement consists of tax payable and changes in deferred tax/tax assets. Tax payable is calculated on the taxable profit for the year. Deferred tax/tax assets are calculated on the basis of the temporary differences that exist between accounting and tax values, as well as the tax effect of any loss carryforwards. Deferred tax assets are only recognised on the balance sheet if it is likely that they will be realised in the future. Tax on equity transactions is recog-nised directly in equity. liabilitiesAgder Energi AS uses the amortised cost principle, and consequently the effective interest rate method, for interest and li-abilities. Under the effective interest rate method, the carrying amount of a loan is the sum of future cash flows attributable to the loan discounted by the original effective interest rate calculated for the cash flows. This means that loan arrangement fees are deducted on initial recognition, and that over the duration of the loan, the difference between the nominal interest rate (the rate charged) and the effective interest rate (the rate expensed) is recognised in the balance sheet under amortisation. In practice loans are therefore initially recognised at their face value less arrangement fees, which means that the debt is not carried on the balance sheet at its nominal value. A provision is made for Agder Energi AS’s proposed dividends at 31 December. Contingent liabilities and contingent assetsIf there is a greater than 50% probability that an uncertain liability will need to be settled, a provision is made based on best judgement. If there is a smaller than 50%

probability that an uncertain liability will need to be settled, information is provided in the notes. Contingent assets are not recognised, but if there is a greater than 50% probability that the company will re-ceive payment, information is provided in the notes. The amount is not estimated if it would be inappropriate to do so under generally accepted accounting principles. Furthermore, under generally accepted ac-counting principles entities shall only recog-nise liabilities/provide information based on best judgement to the extent that this will not prejudice the outcome of any court case. Cash flow statementThe cash flow statement has been prepared using the indirect method. Cash and cash equivalents includes cash, bank deposits and other short-term, liquid investments that can be converted into known cash val-ues immediately and at insignificant risk, and that mature less than three months after their acquisition dates. Correction to Group contributions for 2009In the financial statements they presented for 2009, several companies in the Agder Energi Group specified that they had paid/received non-taxable group contributions. After consultation with the central tax au-thorities for large companies, many of these group contributions have been changed to taxable group contributions in the 2009 tax return. The change was carried out symmet-rically at both parties to the transactions, in order to avoid double taxation. At compa-nies that had paid group contributions, the correction reduced tax payable and hence increased distributable reserves, whereas the reverse was true for recipients of group contributions. The AGMs of the companies that made contributions have emphasised that the overall equity position of both par-ties remains unchanged, and that the in-crease in the gross group contribution paid is therefore a clarification of the appropria-tion of the profit for the year.


nOTes

note 1 intra-Group tranSaCtionS anD BalanCeS


intra-group balances Loans 4 913 4 853Trade receivables 17 6Other current receivables 989 938total receivables 5 919 5 796 Trade payables 8 6Other current liabilities 0 80total liabilities 8 86 revenues and expenses relating to transactions with other companies in the Group Energy sales 0 1Other operating revenues 59 57total operating revenues 59 58

Employee benefits 11 1Other operating expenses 44 52total operating expenses 56 53

Income from investments in subsidiaries 995 894Other interest and finance income 352 250Other interest and finance costs 24 23net finance income/costs 1 323 1 121

note 2 eMploYee BenefitS, ManaGeMent CoMpenSation, etC.


employee benefits, wages and salaries 1) 72 56employers’ national insurance Contributions 9 9Pension expense including employers’ niCs -6 13Other benefits and reimbursements 2) 13 9total 87 87

number of permanent full-time equivalents at 31 Dec. 54 55

For details of management compensation and non-executive Directors’ fees at Agder Energi AS, please see Note 34 to the con-solidated financial statements.

1) In conjunction with the tenth anniversary of the Agder Energi Group in 2010, a bonus was paid to all of the employees at the Group. The bonus paid to all employees is included under Agder Energi AS’s expense for wages and salaries in 2010.2) Other benefits and reimbursements includes an anniversary party held for all employees at the Group.


note 3 penSionS

Defined benefit pension planAs the collective wage agreement that covers the company’s employees requires the company to have an occupational pension plan, the company is not covered by the stipulations of the Act on Mandatory Occupational Pensions in relation to the required characteristics of pension plans. Nevertheless, the company’s pension plan does fulfil the requirements specified in the Act. actuarial assumptions for funded pension plansThe company has a funded public pension plan for its employees, which entitles them to defined future pension benefits, based on number of years of service and salary on reaching retirement age. The company’s pension liabilities are funded through a pension plan run by Agder Energi Pensjonskasse. At 31 December 2010, 116 people were covered by the plan, including 37 current employees. The figures also include people with accrued rights. The defined benefit pension plan was closed to new members on 1 April 2007; cf. information on the defined contribution pension plan below. The amount of funding required for the plan is calculated on the basis of a linear accumulation model. The calculation method and assumptions used comply with the relevant current accounting standard. All actuarial gains and losses that arise over the course of the financial year are recognised under the balance sheet entry for equity/deferred tax assets at 31 December of the financial year. Changes in defined benefit pension plan liabilities arising from changes to plan arrangements (past service cost), are recognised directly in the ioncome statement. The pension liability was calculated by an independent actuary in November, and represents an estimate of the situation at 31 December 2010. The senior management team considers that any changes in the assumptions and underlying data between the date of calculation and the balance sheet date do not have a significant impact on the figures. Actuarial gains and losses in 2010 were mainly due to the impact of a lower discount rate and the transition from a private to a public early-retirement scheme (AFP). In conjunction with changes to the National Insurance Scheme, it has been decided that future pensions benefits shall be increased by 0.75% less than the National Insurance Scheme’s basic amount. This change in the law reduced the Group’s pension liabilities. For accounting purposes it has been treated as a past service cost, and the reduction in liabilities was recognised in the income statement in 2010. Calculations are based on the National Insurance Scheme’s rules for 2010. actuarial assumptions for unfunded pension plansEmployees who are members of Agder Energi Pensjonskasse are offered the option of early retirement from the age of 62 onwards. If they have the full number of years of service, they will receive a pension equivalent to approximately 62% of their qualifying salary. Previously the scheme was combined with a private early-retirement scheme. Due to the pension reform coming into force in 2011, with changes to private early-retirement schemes, the rights of the affected employees on the balance sheet date have not been finally determined. However, in calculating the pension expense for 2010, it has been assumed that employees will receive an annual benefit equivalent to the benefit from the public early-retirement scheme. Under this assumption, employees are entitled to roughly equivalent benefits to those they have received in previous years, but as all of the early-retirement pension must now be paid by the employer, the company faces a significant increase in unfunded pension liabilities. The increase in liabilities has been treated as an actuarial loss and has been charged directly to equity. When calculating the pension liability, it has been assumed that there will be a 100% take-up of the early-retirement scheme by the age of 64. For accounting purposes, employees start accruing early-retirement pension rights on reaching the age of 50 or on joining the company, whichever is later. Employees who are members of the defined contribution pension plan, and who are therefore not members of Agder Energi Pensjons-kasse, have an ordinary private early-retirement scheme. The old early-retirement scheme was discontinued in 2010, and the associated liabilities previously included on the balance sheet have been removed. The amounts involved are insignificant. There is a provision for the estimated premiums under the old early-retirement scheme for the years 2011-2015, which is included under unfunded pension liabilities. The new private early-retirement scheme from 2011 will be funded by contributions from the employer and the state. For accounting


purposes, the scheme shall be treated as a defined benefit plan. As the administrator of the scheme has not calculated the surplus or underfunding of the scheme, it is currently being treated as a defined contribution scheme. The first contributions/premiums will be calculated in 2011, and there are therefore no expenses or liabilities associated with this scheme in 2010. 54 people were included in the calculation of the unfunded pension liabilities at the close of the year. The calculation is based on 100% take-up by the age of 64. Defined contribution pension planIn 2006 the Group decided to close the existing defined benefit pension plan as of 1 April 2007. At 31 December 2010, 17 people at the company were covered by the defined contribution pension plan. The pension contribution is 5% for incomes up to 6G and 8% for income above this up to 12G. Within the pension plan, all members are assumed to have the same risk of death and disability, and so the actuarial tables used for mortality and disability rates are based on standard Norwegian tables adjusted to take into account historical data relating to plan members. The historical data has led to both life expectancy and the probability of disability being adjusted up. In the tables used, the life expectancy for all age groups is 80 for men and 84 for women. In 2007, updated versions of the actuarial tables were implemented. These continue to be used in the current accounts. The mortality table, GAP 07, is based on best estimates for the Norwegian population. The disability table closely matches actual disability rates observed at the Agder Energi Group over the past 3-4 years. Extracts from the actuarial tables are reproduced below. This table shows the probability that an employee in a given age bracket will suffer disability or die within a year, as well as life expectancy.

Disability risk in % Mortality risk in % Life expectancyr Age Man Woman Man Woman Man Woman20 0.07 0.07 0.01 0.01 85 8940 0.22 0.22 0.06 0.05 84 8860 2.16 2.59 0.52 0.37 84 8780 - - 6.04 3.35 87 90

(Amounts in NOK 000s) 2010 2009the pension expense for the year has been calculated as follows Current service cost 9 370 10 481interest cost 7 882 5 254expected return on pension plan assets -10 332 -4 227Past service cost (excl. employers’ niCs) -14 322 0employers’ national insurance Contributions 1 377 977employee contributions -578 -573pension expense for the year -6 603 11 912defined contribution pension plans (incl. employers’ niCs) 707 746total pension expense recognised in the income statement -5 896 12 658 pension liabilities and pension plan assets Change in gross pension liabilities gross pension liabilities at 1 Jan. 194 090 115 977Current service cost 9 370 10 481interest cost 7 882 5 254Actuarial loss/gains/past service cost -14 322 0Benefits paid/paid-up policies -1 236 -3 501Actuarial gains and losses included on the balance sheet -283 68 653Gross pension liabilities at 31 Dec. 195 501 196 864


(Amounts in NOK 000s) 2010 2009

Breakdown of defined benefit pension liabilities funded pension liabilities 148 655 159 618Unfunded pension liabilities 46 846 37 246Gross pension liabilities at 31 Dec. 195 501 196 864 Change in gross pension plan assets fair value of pension plan assets at 1 Jan. 169 412 60 322reclassification of Ae Pensjonskasse’s contributed capital to pension plan assets 1 957 0Acquisitions/disposals of businesses/actuarial gains and losses 0 -859expected return on pension plan assets 10 332 4 227Actuarial gains and losses -28 940 96 299Pension contributions 8 769 12 924Benefits paid/paid-up policies -1 273 -3 501fair value of pension plan assets at 31 Dec. 160 257 169 412

net pension liabilities 35 244 27 452employers’ niCs accrued 6 605 3 508net pension liabilities at 31 Dec. 41 849 30 960 estimates Actual return on pension plan assets 16 094 7 573expected pension contributions next year 7 177 11 441 Change in defined benefit pension liabilities net defined benefit pension liabilities at 1 Jan. 31 494 63 502Pension expense recognised in the profit and loss statement -6 603 11 912Company contributions incl. employers’ niCs -7 893 -11 693Pension benefits included under operating expenses -1 410 -1 540Actuarial gains and losses 26 261 -31 221net pension liabilities at 31 Dec. 41 849 30 960

When calculating the pension cost and net pension liabilities, a number of assumptions have been made: The discount rate is based on the observed interest rate on Norwegian government bonds, adjusted for the duration. The average duration of the pension liabilities has been estimated at 25 years. The discount rate is based on the yield on Norwegian 10-year government bonds on the balance sheet date (cf. IAS 19.78) adjusted for the weighted average duration of the pension liabilities. Wages increases, indexing of retirement pensions and indexing of the National Insurance Scheme basic amount are based on the Norwegian Accounting Standards Board’s guidelines on actuarial assumptions of September 2010. The wage growth assumption also reflects past ob-served wage growth at the company.

assumptions used to determine pension liabilities at 31 Dec. 2010 2009discount rate 3.70 % 4.40 %Annual wage growth 3.75 % 4.00 %increase in the national insurance scheme’s basic amount (“g”) 3.75 % 4.00 %Annual indexing of pensions 3.00 % 4.00 %expected return on pension plan assets 5.70 % 5.90 %expected average remaining years of service 13.5 years 13.5 years


Distribution of the pension scheme assets byinvestment category at 31 Dec. 2010 2009Property funds 6 % 4 %interest-bearing financial instruments 68 % 76 %shares 23 % 18 %Other 3 % 3 %fair value of pension plan assets 100 % 100 %

note 4 auDitor’S fee

(Amounts in NOK 000s excl. VAT) 2010 2009statutory audit 420 428Tax advice 0 75Other services not related to auditing 206 329total 627 831

note 5 otHer operatinG eXpenSeS (Amounts in NOK millions) 2010 2009Property-related expenses, lease of machinery and office equipment 11 6Purchase of plant and equipment 1 2external services 96 106Office supplies, telecommunications, postage, etc. 3 2Travel expenses, subsistence allowances, mileage expenses, etc. 4 4sales, advertising, representation, membership fees and gifts 6 7Other operating expenses -1 2total 118 12

note 6 finanCe inCoMe/CoStS (Amounts in NOK millions) 2010 2009 income from investments in subsidiaries* 995 894Profit/ loss on investments in associates 4 0Unrealised gains and losses on foreign currency loans/receivables** 11 155exchange rate gain 74 19Other interest and finance income 288 255total finance income 1 371 1 324

impairment charge against non-current financial assets 100 70exchange rate losses 57 0Other interest and finance costs 328 284total finance costs 485 354

net finance income/costs 886 970

* Profit/loss from investments in subsidiaries comprises allocated dividends and group contributions from subsidiaries. These amounts are recognised in the income statement as they are considered to reflect the return on the investment.** See Note 19 for a more detailed description.


note 7 taX (Amounts in NOK millions) 2010 2009

the tax expense consists of income tax payable 11 10Change in deferred income tax 7 -14Corrections to previous years’ tax assessments -9 -1tax expense recognised in the income statement 10 -4 tax payable on the balance sheet Profit before tax 736 811Permanent differences -16 69Change in temporary differences -37 48non-taxable group contributions -643 -893profit for income tax purposes 40 35tax payable on the balance sheet 11 10 reconciliation of nominal tax rate with effective tax rate profit before tax 736 811expected tax based on nominal rate 206 227tax effect of: non-deductible expenses 35 23non-taxable income -223 -253Corrections to previous years’ tax assessments -9 -1tax expense recognised in the income statement 10 -4effective tax rate 1 % 0 % Breakdown of deferred tax assets non-current assets 2 0Current assets/liabilities 4 -26Pension liabilities -42 -31gains and losses 1 1Other -21 0total taxable (+)/deductible (-) temporary difference -56 -56net deferred income tax liabilities (+)/assets (-) -16 -16total capitalised deferred tax assets (-) -16 -16 Changes in net deferred income tax over the year net deferred tax liabilities (+)/assets (-) at 1 Jan. -16 -11new deferred tax liabilities (+)/assets (-) -3 -14Change in net deferred tax liabilities (+)/assets (-) on items recognised in equity 3 9net deferred income tax liabilities (+)/assets (-) at 31 Dec. -16 -16 Changes in deferred tax on items recognised in equity Change to accounting principles 10 0Actuarial gains and losses on pensions -7 9total change 3 9


note 8 intanGiBle aSSetS (Amounts in NOK millions) Software Total intangible assetsCost at 1 Jan. 2010 31 31Acquisitions 19 19disposals 2 2Cost at 31 Dec. 2010 49 49Accumulated depreciation at 31 dec. 2010 29 29Carrying amount at 31 Dec. 2010 19 19

depreciation for the year 6 6Useful life/depreciation period 3-8 years

note 9 propertY, plant anD eQuipMent (Amounts in NOK millions) Properties Vehicles, Work Total fixtures, in property, fitting. progress plan and machinery, etc equipmentCost as of 1 Jan. 2010 9 13 7 30Acquisitions 0 23 0 23disposals 0 1 0 1Cost as of 31 Dec. 2010 9 35 7 51Accumulated depreciation as of 31 dec. 2010 0 9 0 9Carrying amount at 31 Dec. 2010 8 25 7 41

depreciation for the year 0 5 0 5Useful life/depreciation period 25-99 years/ 3-8 years indefinite

note 10 otHer non-Current finanCial aSSetS

(Amounts in NOK millions) 2010 2009 Loans to group companies 4 913 4 853Loans to associates 150 117investments in shares and ownership interests 1) 257 355Other non-current receivables 2) 90 64total non-current financial assets 5 411 5 388 1) Investments in shares and ownership interests are described in Note 12.2) Other non-current receivables are described in Note 13.


note 11 SHareS in SuBSiDiarieS anD aSSoCiateS (Amounts in NOK millions) Business Ownership interest Book office and voting rights value*Subsidiaries Agder energi Produksjon As Kristiansand 100.0% 1 936.9Agder energi nett As Arendal 100.0 % 601.7LO s As Kristiansand 100.0% 88.9Otera As Kristiansand 100.0% 121.8Agder energi Varme As Kristiansand 100.0% 70.7solvea As Kristiansand 100.0% 50.7LOs Bynett As Kristiansand 100.0 % 35.1Agder energi Venture As Kristiansand 100.0 % 42.3Agder energi innovasjon As Kristiansand 100.0 % 11.9nettkonsult As Kristiansand 100.0% 30.4Agder energi næringsbygg As Kristiansand 100.0 % 8.2Lundevågveien 11 As Kristiansand 100.0 % 1.4LOs Bynett Vestfold As Tønsberg 90.1 % 7.3sopran As Kristiansand 100.0 % 3.0ella Kommunikasjon As Kristiansand 100.0 % 0.1total shares in subsidiaries 3 010.4 (Amounts in NOK millions) Business Company’s Company’s Ownership interest Book office equity profit/loss and voting rights value*associates småkraft As 1) Bergen 385.1 -1.9 20.0 % 90.0Baltic Hydroenergy As Kristiansand 26.5 1.5 42.6 % 11.1norbio energi As Kristiansand 0.1 0.0 14.6 % 0.0norger Ks 2) Kristiansand 27.6 -74.3 16.7 % 25.1norger As Kristiansand 2.8 -7.4 16.7 % 2.8total for associates 442.1 -82.1 129.0 Jointly controlled entities dalane Vind As egersund 7.7 -2.5 50.0 % 12.0sAe Vind dA Kristiansand 221.9 -57.3 38.0 % 117.2total for jointly controlled entities 229.6 -59.8 129.3

total for associates and jointly-controlled entities 671.7 -141.9 258.3 * Carried at the lower of cost and fair value.

1) Agder Energi AS has also lent NOK 150 million to Småkraft AS. In 2010 the Board of Directors decided to make a NOK 102 million capital injection into Småkraftt AS. This would be made up of a NOK 41 million equity investment and a NOK 61 million loan. In 2010 NOK 52 million of the capital injection was disbursed, consisting of NOK 19 million in equity and NOK 33 million in loans.

2) In February 2010, the Board of Directors decided to provide a third of the capital for the planned 12 million Euro capital increase for the NorGer project, i.e. Agder Energi AS would provide 4 million Euros. 3.2 million Euros of the capital increase was disbursed to NorGer in 2010.


note 12 inVeStMentS in SHareS anD oWnerSHip intereStS (Amounts in NOK millions) Ownership Carrying interest amountVentelo As 16.7% 238Bio Varme As 14.6% 17Barahonda investors As 2.2% 1total 257

In 2010 a NOK 100 million impairment provision was recognised for the shareholding in Ventelo AS.

note 13 otHer non-Current reCeiVaBleS (Amounts in NOK millions) 2010 2009 receivables which fall due after more than one year* 90 64total 90 64

* Includes a NOK 40 million subordinated loan to Agder Energi Pensjonskasse.

note 14 CaSH anD CaSH eQuiValentS (Amounts in NOK millions) 2010 2009 Cash and cash equivalents 6 0deposits in cash pooling arrangement 610 0total 616 0

The company has established a bank guarantee with Nordea Bank to cover tax deducted at source.

The company has also set up a cash pooling arrangement with an associated NOK 500 million overdraft facility at 31 December 2010. At the close of the year, the Group had NOK 1 116 million in total in unused credit facilities. All subsidiaries in which the com-pany holds an ownership interest of at least 90% (with the exception of NorgesFilm AS), take part in the cash pooling arrangement and are jointly and severally liable to the bank for the overdraft facility.


note 15 eQuitY (Amounts in NOK millions) Share Share Total Other Total capital premium paid-in reserves equity account capitalequity at 31 dec. 2009 2 025 47 0 101 2 173Change to accounting principles 1) - - - 27 27equity at 1 Jan. 2010 2 025 47 0 128 2 200Actuarial gains and losses on pensions - - - -19 -19reduction in share capital -216 - 216 - 0distributed to shareholders - - -100 - -100Profit/loss for the year - - - 726 726Allocated for dividends - - -65 -835 -900equity at 31 Dec. 2010 1 809 47 51 0 1 907

1) The change in accounting principles involves a change in the way interest rate derivatives are accounted for. As of 2010 hedge accounting has been used for interest rate derivatives.

note 16 intereSt-BearinG liaBilitieS

(Amounts in NOK millions) 2010 2009 non-current liabilities with a term to maturity of more than 5 years Liabilities to financial institutions 469 499Bonds 1 017 704total 1 485 1 203 non-current liabilities with a term to maturity of less than 5 years Liabilities to financial institutions 1 813 900Bonds 3 220 2 687total 5 032 3 587

total interest-bearing non-current liabilities 6 518 4 790 interest-bearing current liabilities Commercial paper 900 850Overdraft with cash pooling arrangement 0 35interest-bearing current liabilities to group companies 0 80total interest-bearing current liabilities 900 1 665 Guarantees and obligations relating to interest-bearing non-current liabilities are described in greater detail in Note 20.

note 17 otHer non-intereSt-BearinG Current liaBilitieS (Amounts in NOK millions) 2010 2009 Trade payables 19 24intra-group trade payables 8 6Unpaid government taxes and duties, tax deducted at source, etc. 5 6Allocated dividends 900 800Other current liabilities 130 140total other non-interest-bearing current liabilities 1 063 976


note 18 MarKet anD finanCial riSK

risk policy and risk strategyThe Group’s Board of Directors has formulated an overall risk policy containing frameworks and guidelines to ensure a uniform approach to risk management throughout the Group. In order to manage Agder Energi’s exposure to market and financial risk, and based on the risk policy, separate risk strategies have been drawn up for the following areas:•Powergeneration•Electricitytrading•Retailmarket•Finance(interestratesandforeigncurrency)

One of the main purposes of the risk policy and risk strategies is to hedge against fluctuations in future cash flows.

loan portfolioAgder Energi’s loan portfolio exposes the Group to considerable interest rate risk. Agder Energi’s interest rate risk is associated with its debt portfolio. The Group has a central Finance department within Agder Energi, which has overall responsibility for bank services, financing, currency operations, corporate finance and other financial services. Subsidiaries shall go through Agder Energi when they need financial products and services.

The aim in relation to interest rate risk is to limit fluctuations in interest costs. Interest rates risk is measured by modified duration, which is kept within a target period of 1 to 3 years. Rules on durations and other rules relating to interest rate portfolios, liquidity risk, etc. are given in the risk policy and finance strategy. The chosen strategy aims to minimise net finance costs over the long term, while reducing risk to an acceptable level. Exposure to interest rate risk is measured and monitored by the Risk Management and Internal Control department. The Group Finance department is responsible for taking positions.

The parent company’s debt portfolio includes foreign currency loans. A 100 million Euro loan is used as a hedge against fluctua-tions in the Group’s revenues in that currency. Since late 2010, Agder Energi has lent a similar amount in Euros to Agder Energi Produksjon. In 2010, a net exchange rate loss of NOK 11 million was recognised on these positions.

Put/call conditions in the debt portfolio entail a certain liquidity risk. The clauses are related to loans guaranteed by municipalities. Also see Note 31 to the consolidated financial statements for a description of credit risk and liquidity risk.

note 19 ContinGent liaBilitieS

Agder Energi AS had no contingent liabilities at 31 December 2010.


note 20 MortGaGeD aSSetS, liaBilitieS anD GuaranteeS iSSueD

MortgagesAgder Energi has mortgaged some assets as collateral for loans. NOK 109 million of the company’s interest-bearing liabilities were mortgage loans, and the book value of the mortgaged assets (owned by Agder Energi Produksjon) was NOK 338 million. Agder Energi does not have any other mortgaged assets, except restricted cash provided as collateral for cash-settled electricity trading.

liabilities and guarantees issuedAgder Energi’s agreements with banks contain covenants relating to key financial figures. Firstly, net interest-bearing liabilities must not exceed five times EBITDA. Secondly, the Group must have a market-adjusted equity ratio of at least 40% at a consolidated level, based on the bank’s calculation method. The key figures are adjusted for unrealised gains and losses. At the close of the year the key figures were 3.1 and 48% respectively, which satisfied the covenants.

Of the company’s interest-bearing liabilities, NOK 1 000 million is guaranteed by banks and NOK 179 million is guaranteed by the shareholder municipalities. Agder Energi’s loan agreements contain negative pledge clauses, which also cover its subsidiaries. This means that any new security interests require the consent of the lenders.

Agder Energi has NOK 1 110 million in off-balance sheet bank guarantees. NOK 464 million of this relates to a cash-settled power exchange agreement, NOK 392 million to electricity trading, NOK 64 to tax deducted at source and NOK 190 million to other guarantees. At the close of the year, the company had issued guarantees worth NOK 72 million in relation to subsidiaries’ external liabilities.

Contractual obligationsIn 2010, Agder Energi moved its head office to new premises at Kjøita in Kristiansand. It has signed a 15+5-year lease contract with Kristiansand Næringspark. The contract contains a purchase option. In February 2011, the lease contract between Kristiansand Næringspark and Agder Energi was transferred to Agder Energi Næringsbygg.

agder energiP.O.Box 603 Lundsiden, 4606 Kristiansand, Norway

Visiting address (head office): Kjøita 18, 4630 KristiansandTel. no: +47 38 60 70 00

Organisation number: NO 981 952 324

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