Notes

• Note 1 Accounting principles

  General

  Statnett SF (the parent company) is a Norwegian state-owned enterprise that was formed on 20 December 1991. The sole owner of Statnett SF is the Norwegian State, represented by the Ministry of Petroleum and Energy (MPE). Statnett has issued bond loans listed on the Oslo Stock Exchange. Statnett's registered head office from 11 march 2013 is at Nydalen allé 33, 0423 Oslo.

  Basis for preparation of the financial statements

  The consolidated financial statements for the Statnett Group and the financial statements for the parent company, Statnett SF, have been prepared in compliance with the current International Financial Reporting Standards (IFRS), as approved by the EU.

  
  All subsequent references to “IFRS” imply references to IFRS as approved by the EU.

  
  The financial statements have been prepared on the basis of the historical cost principle, with the following exceptions:

  • All derivatives, and all financial assets and liabilities classified as “fair value carried through profit or loss” or “available for sale”, are carried at fair value.
  • The book value of hedged assets and liabilities is adjusted in order to register changes in fair value as a result of the hedging.
  • Assets are measured at each reporting date with a view to impairment. If the recoverable amount of the asset is less than the book value, the asset is written down to the recoverable amount.

  New accounting standards

  Below follows a list of new, revised and additional standards and interpretations that had been announced as at 31 Dec. 2012, but that had not come into effect for the fiscal year 1 January - 31 December 2012. Only matters assumed to be relevant for Statnett have been included. 

  
  The Group management has established that all the compulsory and relevant interpretations and standards adopted by the EU will be implemented in the consolidated financial statements from the date they become effective, unless decided otherwise.

  
  Below is a review of the implications these standards are expected to have for the consolidated financial statements of the Statnett Group:

  Amendments to IAS 19 Employee Benefits - Pensions

  Following the amendments to IAS 19 Employee Benefits (June 2011) (“IAS 19R”) the use of the corridor method is no longer permitted for recognition of actuarial gains and losses. Actuarial gains and losses must now be recognised in their entirety in other revenues and costs (OCI) in the period they arise. This also entails that pension costs are split between ordinary result before tax and other revenues and costs (OCI). Projected yield on pension fund assets must be calculated using the discount rate calculated for gross pension liability. Accrued pension rights and net interest charges for the period are presented in ordinary result before tax, whereas remeasurements such as actuarial gains and losses are presented under other revenues and costs (OCI) in the statement of comprehensive income. Furthermore, the amendments to the information requirements relating to defined-benefit pension plans have been amended. The amendments will apply for fiscal years starting on 1 January 2013. The Group will implement the amended standard as of 1 January 2013.

  
  Following implementation of the amendment of IAS 19R, as of 1 January 2013, actuarial gains and losses as at December 2012 will be recognised directly in equity (72 per cent) and in deferred tax (28 per cent). Unrecognised actuarial gains and losses as at 31 December 2012 total NOK 145 million (NOK 771 million as at 31 December 2011), see Note 5.

  
  For amendments that are not considered to have any significant impact on the Group's application of accounting principles or notes to the accounts, cf. Note 20.

  Important accounting estimates and assumtions

  The preparation of the financial statements in compliance with IFRS requires that the management carries out assessments and prepares estimates and assumptions that affect the application of accounting principles. This affects recognised amounts for assets and liabilities on the balance sheet date, reporting of contingent assets and liabilities, as well as the reported revenues and costs for the period.

  
  Accounting estimates are used to determine some amounts that have an impact on Statnett's financial statements. This requires that Statnett prepares assumptions relating to values or uncertain conditions at the time of preparation. Key accounting estimates are estimates that are important to the Group’s financial performance and results, requiring the management’s subjective and complex assessment, often based on a need to prepare estimates on factors encumbered by uncertainty. Statnett assesses such estimates continuously on the basis of previous results and experiences, consultations with experts, trends, prognoses and other methods which Statnett deems appropriate in the individual case.

  
  Provisions for liabilities relating to disputes and legal claims are recognised in the income statement when the Group has an existing liability, legal or self-imposed, as a result of an event that has taken place. Furthermore, it must be possible to measure the amount reliably and it must be demonstrated as probable that the liability will be settled. The provisions are measured to the best of the management's ability on the balance sheet date.

  
  Insurance claims are considered a contingent asset and are not recognised as income until the income is all but certain. In connection with development projects where additional costs relating to the repair of damage constitute part of the facility’s cost price, and there is no basis for write-down, insurance claims are recognised as a reduction of the project’s acquisition costs. Such a reduction is contingent on the insurance company having acknowledged the damage and that the amount can be reliably estimated.

  
  Significant items relating to Statnett's use of estimates:

   

  Amounts in NOK million				Group
  Item		Note	Estimate/assumptions	Book value
  Property, plant and equipment		6	Recoverable amount and estimate of correct remaining useful life.	17 887
  Pension liabilities		5	Financial and demographic assumptions.	407

   

  Depreciation / Amortisation

  Tangible fixed assets
  Depreciation is based on the management’s assessment of the useful life of tangible fixed assets. The assessments may change owing, for example, to technological developments and historical experience. This may entail changes in the estimated useful life of the asset and thus the depreciation. It is difficult to predict technological developments, and Statnett’s view of how quickly changes will come may change over time. If expectations change significantly, the depreciation will be adjusted with effect for future periods. Please refer to the more detailed discussion under “Tangible fixed assets” below.

  
  Goodwill and other intangible assets
  Goodwill arising in a business combination is not amortised. Intangible assets with a fixed useful life are amortised over the asset's useful life which is assessed at least once a year. Intangible assets are amortised in a straight line as this best reflects the use of the asset.

  Write-downs

  Tangible fixed assets
  Statnett has made significant investments in tangible fixed assets. The value of these assets is assessed when there is an indication of impairment in value. Tangible fixed assets in the parent company are regarded as one cash-generating unit and are assessed collectively since Statnett SF has one collective revenue cap. In subsidiaries, each fixed asset is assessed individually.

  
  Statnett expects to make substantial investments in the future. These will largely take place in the form of projects under the company’s own direction which are recorded in the balance sheet as plants under construction until the fixed asset is ready to be put into operation. Projects under execution are valued individually on indications of impairment in value.

  
  Estimates of the recoverable amounts for assets must be based in part on the management’s assessments, including the calculation of the assets’ revenue-generating capacity and the probability of licences being granted for development projects. Changes in circumstances and the management’s assumptions may result in write-downs for the relevant periods.

  
  Goodwill
  Goodwill is evaluated for write-down annually or more frequently if there are any indications of impairment in value, based on the cash-generating unit to which goodwill is allocated. If the recoverable amount (the higher of net sales and utility value) for the cash-generating unit is lower than the carrying value, the write-downs will first reduce the carrying value of any goodwill and then the carrying value of the unit's other assets, proportionally based on the carrying value of the individual assets in the unit. The carrying value of individual assets is not reduced below the recoverable amount or zero. Write-downs of goodwill cannot be reversed in a subsequent period if the fair value of the cash-generating unit increases. Impairment of value is included in the income statement as a part of write-downs.

  
  Other intangible assets
  On each reporting date, the Group considers whether there are any indications of impairment in value for intangible assets. If there are any indications of impairment in value, the Group will estimate the recoverable amount for the assets and evaluate potential write-down.

  Pension costs, pension liabilities and pension assets

  The calculation of pension costs and net pension liabilities (the difference between pension liabilities and pension assets) is performed on the basis of a number of estimates and assumptions. Changes in and deviations from estimates and assumptions (estimate deviations) affect the fair value of the net pension liabilities, but are not recognised in the income statement until the cumulative estimated deviation exceeds 10 per cent of the higher of the pension liabilities or pension assets at the start of the fiscal year.

  Consolidation polices

  Consolidated companies
  The consolidated financial statements comprise Statnett SF and subsidiaries in which Statnett SF has a controlling influence. These will normally be companies where Statnett SF owns more than 50 per cent of the voting shares, either directly or indirectly through subsidiaries.

  
  The consolidated financial statements have been prepared using uniform accounting principles for equivalent transactions and other events under otherwise equal circumstances. The classification of items in the income statement and balance sheet has taken place in accordance with uniform definitions. The consolidated financial statements are prepared in accordance with the acquisition method of accounting and show the Group as if it was a single entity. Balances and internal transactions between companies within the Group are eliminated in the consolidated financial statements.

  
  The cost price of shares in subsidiaries is offset against equity at the time of acquisition. Any excess value beyond the underlying equity of the subsidiaries is allocated to the asset and liability items to which the excess value can be attributed. The portion of the cost price that cannot be attributed to specific assets represents goodwill.

  
  Statnett SF's Pension Fund is not part of the Statnett Group. Contributed equity in the pension fund is measured at fair value and classified as financial fixed assets.

  
  Investments in joint ventures
  Joint ventures are defined as entities in which there are contractual agreements that give joint control together with one or more parties. Result, assets and liabilities of joint ventures are recorded in the financial statements in accordance with the equity method. This means that the Group’s share of the result for the year after tax and amortisation of any excess value is reported on a separate line in the income statement between operating profit/loss and financial items. The accounts of joint ventures are restated in accordance with IFRS. Ownership interests in joint ventures are presented as fixed asset investments at original cost plus accumulated profit shares and less dividends in the consolidated balance sheet.

  
  Investment in associates
  Associates are entities where the Group has a significant, but not controlling influence over the financial and operational management. Normally these will be companies where the Group owns between 20 and 50 per cent of the voting shares. Earnings, assets and liabilities of associates are recorded in the financial statements in accordance with the equity method. This means that the Group’s share of the result for the year after tax and amortisation of any excess value is reported on a separate line in the income statement between operating profit/loss and financial items. The accounts of associates are restated in accordance with IFRS. Ownership interests in associates are carried as financial fixed assets at original cost plus accumulated profit shares and less dividends in the consolidated balance sheet.

  
  Purchase/sale of subsidiaries, joint ventures and associates
  In the case of acquisition or sale of subsidiaries, joint ventures and associates, they are included in the consolidated financial statements for the portion of the year they have been a part of or associated with the Group.

  
  Investments in other companies
  Investments in companies in which the Group owns less than 20 per cent of the voting capital are classified as “available for sale” and are carried at fair value in the balance sheet if they can be reliably measured. Value changes are recognised under other comprehensive income in the statement of comprehensive income.

  
  Investments in subsidiaries, joint ventures and associates in Statnett SF (parent company accounts)
  Investments in subsidiaries, joint ventures and associates are accounted for in accordance with the cost method in the parent company accounts. The group contribution paid (net after tax) is added to the cost price of investments in subsidiaries. Group contributions and dividends received are recorded in the income statement as financial income as long as the dividends and group contributions are within the earnings accrued during the period of ownership. Dividends in excess of earnings during the ownership period are accounted for as a reduction in the share investment.

  Business combinations

  Business combinations are recognised according to the acquisition method. Acquisition costs are the total of the fair value on the acquisition date of assets acquired, liabilities incurred or taken over as compensation for control of the acquired enterprise, plus costs which can be directly attributed to business combinations.

  
  The acquired enterprise's identifiable assets, liabilities and contingent liabilities which satisfy the conditions for accounting according to IFRS 3, are recognised at fair value on the acquisition date. Goodwill arising as a result of acquisitions is recognised as an asset measured as the excess of the total consideration transferred and the value of the minority interests in the acquired company beyond the net value of acquired identifiable assets and assumed liabilities. If the Group's share of the net fair value of the acquired enterprise's identifiable assets, liabilities and contingent liabilities exceeds the total consideration after re-assessment, the surplus amount is immediately recognised in the income statement.

  Segment reporting

  The company has identified its reporting segment based on the risk and rate of return that affect the operations. Based on IFRS' definition, there is, according to the company's assessment, only one segment. The business is followed up as a single geographical segment. Subsidiaries do not qualify as separate business segments subject to reporting based on IFRS criteria. The parent company and the Group are reported as a single business segment.

  Cash flow statement

  The cash flow statement has been prepared based on the indirect method. Cash includes cash in hand and bank deposits. Cash equivalents are short-term liquid investments that can be converted immediately to a known amount of cash, and with a maximum term of three months.

  Revenue Recognition principles

  Operating revenues are measured at fair value and recognised when they are accrued on a net basis after government taxes. Operating revenues are reported on a gross basis, except in cases where Statnett acts primarily as a settlement function in connection with common grids and power trading.

  
  Interest income is recognised over time as it is accrued. Dividends from investments are recorded as income when the dividends are adopted.

  Permitted revenue, tariffs and higher/lower revenue

  General
  Statnett is the operator of the main national grid and two common regional grids. As the operator, Statnett is responsible for setting the annual tariffs for each common grid. The main national grid is a common grid. In a fiscal year, the actual revenues will deviate from the regulated revenues.

  
  Permitted revenue - monopoly-regulated operations
  Statnett owns transmission grids and is the Norwegian Transmission System Operator. These are monopoly-regulated operations. This means that the Norwegian Water Resources and Energy Directorate (NVE) sets an annual limit – permitted revenue – for Statnett’s maximum revenues.

  The basis for Statnett's permitted revenue is the revenue cap. The revenue cap is based on expenditure, including capital expenditure, for a retrospective period of two years. Operating costs for the system are also included. Statnett’s revenue cap is regulated to ensure that Statnett has an incentive for efficient operations. In addition to the revenue cap, Statnett's permitted revenue consists of the following: Actual property tax, transit costs and a supplement for investments. The supplement for investments shall ensure that the year's investments are reflected in the permitted revenue for the year the investment is put into operation. Furthermore, Statnett's revenues are also adjusted for interruptions through quality-adjusted revenue cap energy not supplied.
   
  There can be uncertainty attached to measuring the individual amounts included in the permitted revenue. Increased revenue as a result of conditions that require an application for adjustment of the revenue caps or interpretation of the regulations on the part of NVE, is only included in the accounts if it is considered all but certain that the revenue will be realised.

  
  The revenue cap is recognised in the accounts at 1/12 per month.

  Revenue cap transmission losses

  Revenues
  Transmission losses in the regional and main grid are a part of Statnett's revenue cap. The reported revenue cap for transmission losses during the fiscal year consists of the actual measured loss in MWh for a retrospective period of two years valued at a regulated reference price based on the electricity spot market price in the fiscal year. The revenue cap has been included in the accounting line ”Operating revenues regulated operations”.

  
  Discrepancies between the revenue cap for transmission losses and actual costs of purchases of transmission losses in the fiscal year are, in accordance with the guidelines, apportioned among the grid owners in each common grid where Statnett is the operator.

  
  Transmission losses
  Transmission losses occur as a result of measured discrepancies between the input and outtake of power in the grid. The size of the loss will vary with the temperature, the load in the grid and the electricity price. Actual loss in the fiscal year is purchased externally at spot market price. Losses arising during transmission of power in the main national grid and the common regional grids are covered by the grid’s operator and are reported under "transmission losses".

  Tariff-setting and higher/lower revenue for the year

  Tariff revenues
  As the operator of the main national grid and two common regional grids, Statnett is responsible for invoicing the users for the services they receive. The invoicing takes place on the basis of a tariff model, in accordance with guidelines provided by the NVE. The price system consists of fixed elements and variable elements; energy elements. Fixed elements are invoiced evenly throughout the year, while the energy element is invoiced concurrently with the customers' measured input or outtake of power from the grid.

  
  Higher/lower revenue
  The tariff for the year is set with a view to ensuring that the higher/ lower revenue is offset over time. Tariffs are set in September preceding the fiscal year. Statnett has established a strategy for adjustment of the tariff basis including offsetting of the accumulated higher/lower revenue.  Some quantities and parameters, including the price of energy which is included in the calculation basis for the year's revenue cap, are based on estimates. Discrepancies will occur between tariff revenues and the permitted revenue.  This is indicated in Note 2.

  
  Higher/lower revenue interest calculations
  Interest is calculated on accumulated higher/lower revenue in accordance with the rules stipulated by the NVE, based on the site deposit rate set by the Central Bank of Norway. The amount of interest is included in the balance for higher/lower revenue and is expressed in the financial reporting through regulation of future tariffs. This is shown in Note 2.

  Power purchases and sales

  Statnett is the Transmission System Operator (TSO) and is responsible for the regulating power market system and balance settlement system. Responsibility for the balance settlement system means that Statnett subsequently compares the measured and agreed energy volumes, calculates any discrepancies, and carries out the financial settlement between the market participants. The settlement is based on the prices in the regulating power market. The purchase and sale of regulating power must be balanced. Statnett receives a fee covering Statnett's costs as responsible for the balance settlement. If the settlement is across national borders in the Nordic region, a marginal price difference will arise based on the average of the Norwegian and foreign regulating power price, which is passed on to or charged to Statnett as the TSO.

  
  Statnett has a separate licence as responsible for the balance settlement. This activity is recorded in the financial statement through fee revenues and costs relating to the execution of the balance settlement responsibility. Power purchases and sales are recognised as net and are therefore not expressed in the statement of comprehensive income. Power sales/purchases are recorded in the income statement when they are accrued/incurred, i.e. at the time of delivery.

  Customer projects

  Project revenue is recognised on a current basis based on the measurement of the estimated fair value. This means that revenue is recognised as the work is performed based on the degree of completion. The degree of completion is determined on the basis of the accrued costs of the executed work and estimated total project expenditure. Revenue is included in other operating revenues. Invoiced and accrued project revenues are included in trade accounts receivable.

  
  Where projects are expected to make a loss, the entire expected loss is recognised as an expense.

  Taxes

  Tax costs in the income statement encompass both the tax payable for the period and changes in the deferred tax liabilities/assets. Taxes payable are calculated on the basis of the taxable income for the year. Net deferred tax assets/liabilities are calculated on the basis of temporary differences between the accounting and tax values, and the tax loss carried forward.

  
  Tax-increasing or tax-reducing temporary differences that are reversed or may be reversed are offset. Deferred tax assets are recorded when it is probable that the company will have a sufficient taxable profit to benefit from the tax asset. Deferred tax liabilities/assets that can be recorded in the balance sheet are carried at their nominal value on a net basis.

  
  Property taxes are recorded in the income statement and paid during the fiscal year. They are classified as other operating expenses.

  Classification of items in the balance sheet

  An asset is classified as short-term (current asset) when it is related to the flow of goods, receivables paid within one year, and “assets that are not intended for permanent ownership or use in the operations”. Other assets are fixed assets. The distinction between short-term and long-term loans is drawn one year before maturity. The first year’s instalments on long-term loans are reclassified as current liabilities.

  Plants under construction

  Plants under construction are recognised in the balance sheet at acquisition cost less any accumulated losses from impairments. Plants under construction are not depreciated.

  
  Development projects start off with a feasibility and alternative study. The project is recognised in the balance sheet when the conclusion from the study is available, and the main development concept has been selected. At this point, a licence has not been granted and no final investment decision has been made. Statnett’s experience is that once a main concept has been selected for the development, it is highly likely that the project will be implemented.

  
  Ongoing assessments are made of whether licensing conditions or other causes necessitate a full or partial write-down of the project expenses incurred. Write-downs are reversed when there is no longer any basis for the write-down.

  Interest during the construction period

  Construction loan costs related to the company’s own plants under construction are capitalised in the balance sheet. The interest is calculated based on the average borrowing interest rate and scope of the investment, as the funding is not identified specifically for individual projects. Interest is recorded in the income statement through depreciation based on the associated asset's anticipated economic life.

  Tangible fixed assets

  Tangible fixed assets are carried at cost price less accumulated depreciation and write-downs. The depreciation reduces the carrying value of tangible fixed assets, excluding building lots, to the estimated residual value at the end of the expected useful life. Ordinary straight-line depreciation is implemented from the point in time when the asset was ready for operation, and is calculated based on the expected useful life of the asset. This applies correspondingly to fixed assets acquired from other grid owners. The cost price is decomposed when the fixed asset consists of components with differing useful lives.

  
  The estimated useful life, depreciation method and residual value are assessed once a year. The value is assessed when there is an indication of impairment in value. Tangible fixed assets in the parent company are regarded as one cash-generating unit and are assessed collectively since Statnett SF has a collective revenue cap. In subsidiaries, each fixed asset is assessed individually. For most assets, the residual value is estimated at zero at the end of the useful life.

  
  Gains or losses on the divestment or scrapping of tangible fixed assets are calculated as the difference between the sales proceeds and the fixed assets’ carrying value.  Gains/losses on divestment are recorded in the income statement as other operating revenues/expenses. Losses on scrapping are recognised in the income statement as depreciation/write-downs.

  Compensation

  Lump sum payments in connection with the acquisition of land, etc. are included in the cost price of the fixed asset. Ongoing payments are minor amounts and are recognised in the income statement in the year in which the payment is disbursed.

  Maintenance/Upgrades

  Maintenance expenses are recognised in the income statement when they are incurred. No provisions are made for the periodic maintenance of the grid (transformer stations or power lines/cables). Even though maintenance is periodic for the individual transformer station or power lines/cabels, it is not considered to be periodic for the entire grid as the grid as a whole is regarded as a single cash-generating unit. If the fixed asset is replaced, any residual financial value will be recorded in the income statement as a loss on scrapping.

  
  Expenses that significantly extend the life of the fixed asset and/or increase its capacity are capitalised.

  Intangible asset

  Intangible assets bought separately are measured at acquisition cost on initial recognition. For intangible assets included in a business combination, acquisition cost is measured at fair value on the transaction date. In later periods, intangible assets are recognised at acquisition cost less accumulated amortisations and write-downs. Intangible assets with a fixed useful life are amortised over the asset's useful life which is assessed at least once a year. Intangible assets are amortised in a straight line as this best reflects the use of the asset.

  Goodwill

  Goodwill is not amortised. Goodwill does not generate cash flows independently of other assets or groups of assets, and is allocated to the cash-generating units expected to benefit from the synergy effects of the business combination that generated the goodwill. Cash-generating units allocated to goodwill are evaluated for write-down annually or more often if there are any indications of impairment in value. If the recoverable amount (the higher of the net sales and utility value) for the cash-generating unit is lower than the carrying value, the write-downs will first reduce the carrying value of any goodwill and then the carrying value of the unit's other assets, proportionally based on the carrying value of the individual assets in the unit. The carrying value of individual assets is not reduced below the recoverable amount or zero. Write-downs of goodwill cannot be reversed in a subsequent period if the fair value of the cash-generating unit increases. Impairment of value is included in the income statement as a part of write-downs.

  Write-down of tangible fixed assets and intangible assets other than goodwill

  On each reporting date, the Group considers whether there are any indications of impairment in value for tangible fixed assets and intangible assets. If there are any indications of impairment in value, the Group will estimate the recoverable amount for the assets and evaluate potential write-down.

  
  The recoverable amount is the higher of the net sales and utility value. To assess the utility value, estimated future cash flows are discounted to present value using a pre-tax discount rate that reflects the current market assessments of the time value of money and risks specific to the asset.

  
  If the recoverable amount for a fixed asset (or cash-generating unit) is estimated to be lower than the carrying value, the carrying value of the fixed asset (or cash-generating unit) will be reduced to the recoverable amount. If an impairment in value is subsequently reversed, the carrying value of the fixed asset (cash-generating unit) will be increased to the revised estimate of the recoverable amount, but limited to the value that would be the carrying value if the fixed asset (or cash-generating unit) had not been written down in a prior year.

  Financial leasing

  The Group as lessor

  Financial lease agreements
  Financial lease agreements are lease agreements where the lessee takes over the major part of the risk and return associated with the ownership of the asset. The Group presents leased assets as receivables equal to the net investment in the lease agreements. The Group’s financial income is determined so that a constant rate of return is achieved on the outstanding receivables over the agreement period. Direct expenses incurred in connection with the establishment of the lease agreement are included in the receivable.

  
  Operating leases
  The Group presents leased assets as fixed assets in the balance sheet. The lease revenue is recognised in a straight line over the lease period. Direct expenses incurred to establish the operating lease agreement are added to the leased asset’s carrying value and recognised as expenses during the term of the lease on the same basis as the lease revenue.

  
  The Group as lessee

  Financial lease agreements
  Financial lease agreements are lease agreements where the Group takes over the major part of the risk and return associated with the ownership of the asset. At the beginning of the lease term, financial lease agreements are capitalised at an amount corresponding to the lower of fair value and the present value of the minimum rent, less accumulated depreciation and write-downs. When calculating the lease agreement’s present value, the implicit interest charge in the lease agreement is used if this can be estimated. Otherwise the company’s marginal borrowing rate is used. Direct expenses related to establishing the lease agreement are included in the asset’s cost price.

  
  The same depreciation period is used as for the company’s other depreciable assets. If it is not reasonably certain that the company will acquire ownership at the end of the lease period, the asset will be depreciated over the shorter of the lease agreement’s duration and the asset’s useful life.

  
  Operating leases
  Operating leases where the major part of the risk and return associated with ownership of the asset is not transferred to the Group, are classified as operating leases. The rent payments are classified as operating expenses and are recorded in a straight line in the income statement over the duration of the agreement.

  Research & development

  Research expenses are recognised on a current basis. Research is an internal process that does not give rise to independent intangible assets that generate future economic benefits.

  
  Expenses related to development activities are capitalised in the balance sheet if the product or process is technically and commercially feasible and the Group has adequate resources to complete the development. Expenses capitalised in the balance sheet include material expenses, direct wage costs and a percentage of directly attributable overhead expenses. Capitalised development expenses are recorded at acquisition cost, less any accumulated depreciation and write-downs.

  
  Capitalised development expenses are depreciated in a straight line over the estimated useful life of the asset.

  Trade receivables

  Trade accounts are recorded in the accounts at nominal value less any losses from impairment in value.

  Contigent assets and liabilities

  Contingent liabilities are not recorded in the annual financial statements. Significant contingent liabilities are disclosed unless the probability of the liability is low.

  
  Contingent assets will not be recorded in the annual financial statements, but will be disclosed if there is a certain degree of probability that it will benefit the Group.

  
  Higher/lower revenues are contingent liabilities/assets in accordance with IFRS and are not recorded in the balance sheet.

  Dividend (from the parent company)

  Dividends paid are recorded in the Group’s financial statements during the period in which they are approved by the General Meeting. If the approval and payment occur in different periods, the amount will be allocated to current liabilities until payment is made.

  Pensions and pension liabilities

  The Group's liability relating to pension schemes, defined as defined-benefit pension schemes, is recognised at the present value of the future retirement benefits accrued at the end of the reporting period. Pension assets are evaluated at fair value. The accumulated effect of estimate changes and changes in financial and actuarial assumptions, actuarial gains and losses, less than 10 per cent of the higher of the defined pension liabilities and pension assets at the start of the year, is not included. When the accumulated effect exceeds 10 per cent, the excess is included in the income statement over the estimated average remaining service period for the employees covered by the scheme. Net pension costs for the period are presented as salaries and personell cost.

  
  The contributions to contribution-based pension plans are recognised as costs as they occur.

  Loans

  Interest-bearing loans are recorded in the income statement as the proceeds that are received, net of any transaction costs. Loans are subsequently accounted for at amortised cost using the effective interest rate method, where the difference between net proceeds and redemption value is recognised in the income statement over the term of the loan.

  Financial Instruments

  In accordance with IAS 39 (Financial Instruments: Recognition and Measurement), financial instruments are classified in the following categories: fair value through profit or loss, available for sale, amortised cost and loans and receivables. The initial measurement of financial instruments is at fair value on the settlement date, normally at the transaction price.

  • Financial assets and liabilities held for the purpose of profiting from short-term price fluctuations (held for trading purposes) or accounted for according to the fair value option are classified at fair value through profit or loss.
  • All other financial assets with the exception of loans and receivables issued by the company are classified as available for sale.
  • All other financial liabilities are classified as other liabilities and accounted for at amortised cost.

  
  Gains or losses attributed to changes in fair value of financial instruments classified as available for sale are recognised as other comprehensive income until the disposal of the investment. The cumulative gain or loss on the financial instrument previously recognised in other comprehensive income will be reversed, and the gain or loss will be recognised in the income statement.

  
  Changes in the fair value of financial instruments classified at fair value through profit or loss (held for trading purposes or fair value option) are recognised in the income statement and presented as financial income/expenses.

  
  Financial instruments are included in the balance sheet when the Group becomes a party to the instrument’s contractual terms. Financial instruments are eliminated from the balance sheet when the contractual rights or obligations have been fulfilled, cancelled, transferred or expired. Financial instruments are classified as long-term when they are expected to be realised more than 12 months after the balance sheet date. Other financial instruments are classified as short-term.

  Derivatives and hedging

  The Group utilises derivatives such as future interest rate swaps and currency swaps to hedge its interest rate and currency risks. Such derivatives are initially recognised at fair value on the date when the contract is entered into and then measured at fair value on a current basis. Derivatives are accounted for as assets when the fair value is positive and as liabilities when the fair value is negative, provided that Statnett has no right or intention to settle the contracts net. Gains and losses resulting from changes in the fair value of derivatives that do not meet the conditions for hedge accounting are recorded in the income statement.

  
  Derivatives that are embedded in other financial instruments or non-financial contracts are treated as free-standing derivatives when their risk and properties are not closely related to the contracts, and the contracts are not recorded at fair value with the change in value carried through profit or loss.

  
  When entering into a hedging contract, the Group will formally identify and document the hedging contract that the Group will use hedge accounting for, as well as the risk that is hedged and the strategy for the hedge. Documentation includes identification of the hedging instrument, the item or transaction that is hedged, the type of risk that is hedged, and how the Group will assess the effectiveness of the hedging instrument to counteract the exposure to changes in the hedged item’s fair value or cash flows that can be attributed to the hedged risk. Such hedges are expected to be highly effective in counteracting changes in fair value or cash flows, and are assessed on a current basis to determine whether they actually have been highly effective throughout the entire accounting period they are intended to cover.

  
  Hedges that fulfil the strict conditions for hedge accounting are accounted for as follows:

  
  Fair value hedging
  Fair value hedging is hedging of the Group’s exposure to changes in the fair value of a recorded asset or liability or an unrecognised liability, or an identified portion of such, that can be attributed to a specific risk and can affect the financial result. For fair value hedging, the carrying value of the hedged item is adjusted for gains or losses from the risk that is hedged. Derivatives are re-measured at fair value, and gains or losses from both are recorded in the income statement.

  
  For fair value hedging of items that are accounted for at amortised cost, the change in value is amortised in the income statement over the remaining period until maturity.

  
  The Group discontinues fair value hedging if the hedging instrument expires or is sold, or is terminated or exercised, and the hedging no longer fulfils the conditions for hedge accounting or the Group cancels the hedging.

  
  The Group uses fair value hedging primarily to hedge the interest rate risk for fixed interest rate loans and the currency risk for interest-bearing liabilities. Fair value hedging is also performed for specific acquisitions in foreign currencies for investment projects. Unrealised hedging gains/losses (currency futures) reduce/increase the cost price of the investments upon realisation.

  
  Cash flow hedging
  Cash flow hedging is hedging of the exposure to the variations in cash flow that are attributable to a particular risk associated with a recognised asset or liability, or a highly probable future transaction that could affect profit or loss. The effective portion of the gain or loss on the hedging instrument is recognised as other comprehensive income, while the ineffective portion is recognised as financial income or cost.

  
  Amounts that are initially recognised as other comprehensive income are reclassified and recognised in the income statement as financial income or cost when the hedged transaction affects the profit or loss.

  
  If the expected future transaction is no longer expected to take place, amounts recognised earlier as other comprehensive income will be recognised in the income statement as financial income or cost. If the hedging instrument expires, or is sold, terminated or used, without being replaced or continued, or when the hedging is cancelled, the amount recognised previously as other comprehensive income is retained until the future transaction is executed. If it is not expected that the related transaction will be executed, the amount will be recognised in the income statement as financial income or cost.

  
  The Group uses cash flow hedging primarily to hedge the interest rate risk for loans with floating interest rates.

  Financial risk management

  Financial risk management is performed by the central finance department in accordance with guidelines approved by the Board of Directors. The Board of Directors lays down guidelines for general financial risk management in addition to guidelines that cover specific financial risks.

  Currency

  The consolidated financial statements are presented in Norwegian Kroner (NOK), which is also Statnett SF’s functional currency. All Group companies use NOK as their functional currency.

  
  As all the companies in the Group have the same functional currency, no translation differences arise upon consolidation of the group companies.

  
  Transactions in foreign currency are translated at the rate in effect on the transaction date. Monetary items in foreign currencies are translated into NOK at the exchange rate in effect on the balance sheet date. Non-monetary items that are measured at historical cost expressed in foreign currency are translated into NOK using the exchange rate in effect on the transaction date. Non-monetary items that are measured at fair value expressed in foreign currency are translated at the exchange rate in effect on the balance sheet date. Changes in exchange rates are recorded on a current basis in the income statement during the reporting period.

  
  Long-term interest-bearing debt in foreign currency is related to interest rate and currency swaps and treated as borrowings in NOK.

  Provisions

  Provisions for liabilities are recognised in the income statement when the group has an existing liability (legal or assumed) as a result of an event that has taken place and it can be demonstrated as probable (more likely than not) that a financial settlement will be made as a result of the liability, and the amount can be reliably measured. Provisions are reviewed on each balance sheet date and the level reflects the best estimate of the liability. If there is a substantial time effect, the liability will be accounted for at the present value of future liabilities.

  Government grants

  Government grants are not recorded in the accounts until it is reasonably certain that the group will meet the conditions stipulated for receipt of the grants and that the grants will be received. Grants are recorded as a deduction in the expenses that they are meant to cover. Grants that are received for investment projects are recorded in the balance sheet as a reduction of the cost price.

  Events since the balance sheet date

  New information about the group’s positions on the balance sheet date is incorporated into the annual financial statements. Events after the balance sheet date that do not affect the position on the balance sheet date, but will affect the group’s position in the future, are disclosed if they are material.

• Note 2 Operating revenues

  Operating revenues regulated operations
  Statnett's revenues are mainly derive from activities regulated by the NVE. Statnett's actual operating revenues from regulated operations come from fixed and variable tariff revenues in the main grid and regional grid, as well as congestion revenues.
  
  Each year the NVE set an upper limit, or cap, for Statnett's permitted revenue. This item corresponds to Statnett's revenue cap including amendment in the revenue cap for each year.

  
  A discrepancy arises annually between Statnett's actual operating revenues from regulated operations (the total of the tariff and congestion revenues) and Statnett's permitted revenue determined by the NVE. This discrepancy is called higher or lower revenue. Higher revenue means that Statnett has had higher actual operating revenues than the revenue cap set by the NVE for a particular year. Lower revenue means that Statnett's actual operating revenues have been lower than the permitted revenue cap.
  
  Pursuant to NVE regulations any higher revenues, including interest, must be returned to the customers in the form of lower prices in subsequent years. Correspondingly lower revenues, including interest, can be recouped by charging higher prices in subsequent years. The obligation to reduce future tariffs and the opportunity to collect increased tariffs do not qualify for capitalisation according to IFRS, consequently representing a latent obligation (in the event of accumulated higher revenue) and a latent receivable (in the event of accumulated lower revenue). Consequently, an annual change in these items will not be included in the income statement.
  
  Statnett's actual operating revenues from regulated operations equal the total of Statnett's permitted revenue set by the NVE and the higher/lower revenue the same year.

  
  Specification of income by regional grid (R Grid) and the main grid (M Grid)

  (Amounts in NOK million)

  Operating revenues	R Grid	M Grid	Total 2011	R Grid	M Grid	Total 2012
  Tariff revenues fixed element generation	29	964	993	28	940	968
  Tariff revenues fixed element consumption	33	2 852	2 885	42	2 720	2 762
  Other rental income	78	75	153	84	46	130
  Tariff revenues energy element	-7	784	777	-	586	586
  Congestion revenues	-	768	768	-	877	877
  Income from other owners in shared grids	-38	-222	-260	-47	-186	-233
  Total operating revenues regulated activities	95	5 221	5 316	107	4 983	5 090
  Permitted revenue
  Revenue cap without grid losses	88	2 604	2 692	91	2 902	2 993
  Revenue cap, grid losses	21	867	888	12	555	567
  Supplement to revenue cap	4	712	716	1	465	465
  Total permitted revenue	113	4 183	4 296	104	3 921	4 025
  This year's provision for interest higher/lower (-/+) revenue	-	-44	-44	-	-45	-45
  This year's higher/lower (-/+) revenue	18	-1 038	-1 020	-6	-1 058	-1 065
  Higher/lower (-/+) revenue decision as at 31 December 2011	-	-	-	40	232	272
  This year's changed balance for higher/lower (-/+) revenue	18	-1 082	-1 064	34	-872	-838
  Balance higher/lower (-/+) revenue, incl. interest as at 1 Jan.	-18	-1 535	-1 553	-	-2 617	-2 617
  Changed balance for higher/lower (-/+) revenue, incl. interest	18	-1 082	-1 064	34	-872	-838
  Balance higher/lower (-/+) revenue, incl. interest as at 31 Dec.	-	-2 617	-2 617	34	-3 489	-3 455

  
  Total operating revenues from regulated operations fell by NOK 226 million from 2011 to 2012, mainly due to lower tariff revenues as a result of lower stipulated tariffs for 2012 compared with 2011.

  Statnett has received the decision from NVE for the higher/lower revenue balance as at 31 December 2011. This reduced the main grid higher revenue balance by NOK 232 million. For the regional grid the decision entails a reduction in higher revenue of NOK 40 million, resulting in a lower revenue balance of NOK 34 million as at 31 December 2012. The adjustment of the regional main grid lower revenue was mainly related to the fact that tariffs for previous years did not include quality-adjustment revenue of the cap of energy not supplied.
  
  Other operating revenues
  Other operating revenues are revenues outside of the regulated operations and consist of mainly external consultancy commissions and rental income.
  
  External assignments within the rest of the group are carried out by Statnett Transport AS.

  
  Balance settlement
  Statnett SF has a special licence to manage the regulating power settlement system in Norway. This involves effectuating a financial settlement of the difference the market participant have between planned electricity consumption and actually measured values. This market is referred to as the regulating power market. Participant in the regulating power market must have:

  1. A trading licence from the NVE
  2. A balance agreement between the customer and Statnett (or be part of another regulating power operator)
  3. Access to power, either generation, bilaterally or at Nord Pool Spot. Most regulating power participants are also participants at Nord Pool Spot, in which case the member agreement is used (between Nord Pool Spot and the customer).

  In 2012, the revenues for this service totalled NOK 87 million, including fee revenues of NOK 24 million. Outstanding trade account receivables relating to the balance settlement totalled NOK 41 million as at 31 December 2012 and are disclosed as trade accounts and other short-term receivables.
  
  By accepting the Balance Agreement, approved members (regulating power members) undertake to furnish satisfactory security for financial settlement of power trading in the regulating power market. The security requirement is calculated weekly under the rules in the Balance Agreement. The calculation is based on trading volume and market prices and reflects the regulating power members' settlement risk. Statnett also assesses the security on an ongoing basis and may demand more security at any time if necessary. The minimum security requirement for trading is NOK 200 000, which must be registered with Statnett before trading starts.
  
  Security is posted as a guarantee on demand or as a cash deposit in a pledged bank account, or in any other manner approved by Statnett in accordance with the applicable rules. The rules for posting security can be amended at one week's notice. The amount of security posted totalled NOK 1 254 million at year-end. The security posting requirement for regulating power members on the same date was NOK 788 million. All regulating power members had posted satisfactory security under the Balance Agreement.

• Note 3 System services and transmission losses
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  System services

   

  Parent company			Group
  2011	2012	(Amounts in NOK million)	2012	2011
  5	22	Net regulating and peak power	22	5
  199	98	Primary reserves	98	199
  0	12	Secondary reserves	12	0
  31	65	Tertiary reserves	65	31
  98	126	Transit costs	126	98
  173	124	Special adjustments	124	173
  69	58	Other system services	58	69
  575	505	Total system services	505	575

   

  System services are costs relating to the exercise of Statnett's system responsibility as defined in the Regulations relating to the system responsibility in the power system (FoS).

   

  The frequency in the power grid must be 50Hz. Statnett, as Transmission System Operator (TSO), is responsible for ensuring that this frequency remains stable. The requirement to maintain a reserve capacity for regulating purposes imposes limitations on the producers as they are unable to generate and sell the full generator capacity. We distinguish between three different forms of reserve capacity.

   

  Primary regulation

  The primary regulation is automatic and is activated immediately if any changes occur in the power grid frequency. This takes place by using a pre-agreed reserve capacity. The requirement to maintain a reserve capacity for regulating purposes imposes limitations on the producers as they are unable to generate and sell the full generator capacity. Primary reserves are costs Statnett incurs by buying reserve capacity from the producers.
  

   

  Secondary reserves

  Automatic secondary reserves are activated to release the primary reserves so that they in turn can quickly handle any new faults or imbalances. Automatic secondary reserves function by the TSO sending a signal to a market player/power plant, which will then change the plant's generation. Secondary reserves are also referred to as Load Frequency Control (LFC) and in the Nordic countries they are mainly used to handle frequency deviations. The extent of secondary reserves is determined by agreements on a Nordic level and the costs by a market solution.

   

  Tertiary regulation

  In Norway there is an options market for regulating power. This is used to ensure that we have sufficient regulating resources available in the Norwegian section of the regulating power market, also during periods of demand for increased output, such as in the winter months. In the winter, the TSO sets up a market where they purchase a guarantee ensuring that market members submit bids for the regulating power lists for the subsequent week. The guarantees can apply for both consumption and production.

   

  Transit costs

  Transit costs are compensation for the use of grids abroad. The power system in Europe is connected through transmission lines/cables crossing international borders.

   

  Special adjustments

  In some cases there are restrictions in the transmission capacity (bottlenecks) which make it impossible to utilise the bids in the regulating power market in the "correct" price order. These adjustments are categorised as special adjustments and are compensated for by the associated price of the bid without this affecting the stipulation of the regulating power price. Thus, Statnett will incur a cost equal to the difference between the price of activated bids used for special adjustments and the current hourly price mainly aimed at the regulating power market multiplied by the especially adjusted volume.

   

  Transmission losses

  Statnett buys transmission losses (volume) from external suppliers at spot price (market price) for the hour the transmission loss applies.
  The main grid transmission loss result is distributed between the grid owners in accordance with their proportionate shareholding in the main grid. 6.7 per cent of the facilities are owned by other companies than Statnett SF.
  

   

  Parent company			Group
  2011	2012		2012	2011
  2 322	2 465	Volume (GWh)	2 465	2 322
  367	241	Price (NOK/MWh)	241	367
  		(Amounts in NOK million)
  852	593	Transmission losses	593	852
  2	-2	Transmission losses result other	-2	2
  854	591	Total transmission losses	591	854

• Note 4 Salaries and personnel costs
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  Parent company			Group
  2011	2012		2012	2011
  633	684	Salaries	692	641
  104	122	Employer's national insurance contributions (NICs)	124	105
  130	211	Pension costs (Note 5)	212	131
  75	78	Other benefits	74	66
  942	1 095	Total salaries costs	1 102	943
  -283	-300	Of which own investment projects	-300	-283
  659	795	Net salaries costs	802	660
  900	973	Number of full-time equivalents	986	913

   

  Loans to employees

  Employees had loans in the company totalling NOK 1 million as at 31 December 2012. The loans are repaid by wage deductions over a period of up to two years. The loans are interest-free for the employee. The interest gain of loans exceeding 3/5 of the basic amount is taxed in relation to the current standard interest rate set by the authorities.

• Note 5 Pensions and pension liabilities
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  The parent company and subsidiaries have pension schemes entitling the employees to future pension benefits in the form of defined benefit schemes. The Group's pension schemes meet the requirements in the Norwegian Mandatory Occupational Pension Act.
  
  The pension benefits are based on the number of service years and final wage at retirement age. The full retirement is 70 per cent of pensionable income less calculated disbursements under the Norwegian National Insurance Scheme. The pensionable income is limited upward to 12 times the basic amount under the National Insurance Scheme. The full contribution period is 30 years and the normal retirement age is 67. The pension scheme also includes disability pensions, spouse pensions and children's pensions.
  
  Accrued pension rights are secured chiefly through pension schemes in Statnett SF's pensjonskasse. In addition, the parent company has early retirement pension obligations that are funded through operations.
  
  Contributions to the pension fund are made in accordance with actuarial calculations. The pension assets in Statnett Pensjonskasse are invested primarily in securities. See the table relating to percentage distribution of pension assets in investment categories.
  
  The Group management has separate additional agreements under which the normal retirement age is 65, but with the possibility of retirement after reaching the age of 62. The retirement pension is 66 per cent of the pensionable income. The pensionable income also includes incomes that exceeds 12 times the basic amount under the National Insurance Scheme.
  For personnel employed after 1 March 2011, additional agreements will be entered into exceeding 12 times the Norwegian national insurance scheme's basic amount within the framework of the Guidelines relating to terms of employment for senior executives in state-owned enterprises and companies, stipulated on 31 March 2011.
  For more information, cf. Note 14 Remuneration/benefits to the Group management. Annual premium payments will be limited to 30 per cent of the salary exceeding 12 G.
  
  The Group is a member of the private contractual early retirement scheme (AFP scheme) that came into force in 2011. The scheme entails that employees will receive a lifelong supplement to the national insurance retirement pension. The pension can be drawn from age 62, also if an employee decides to keep working. The AFP scheme is a defined-benefit multi-company scheme organised through a general office and financed through premiums stipulated as a percentage of the salaries. There is no reliable way of measuring and allocating liabilities and assets under the scheme. Consequently, the scheme is treated as a defined contribution scheme, according to the accounting rules, and premium payments are recognised on a current basis, and no provisions are made in the accounts. The premium for 2012 is 1.75 per cent of overall wage payments between 1G and 7.1G to the company's employees, estimated at NOK 8 million. There is currently no accumulation of funds under the scheme, and premiums are therefore expected to increase in the time ahead.

  
  The old AFP scheme will be discontinued from 1 January 2011. Spekter will remain the Group's contracting party under the scheme which now only applies to personnel born before 1 December 1948 who drew a pension from the scheme on 1 December 2010 at the latest.
  
  Pension liabilities are calculated in accordance with IAS 19 "Employee Benefits". The mortality risk table K2005, based on the best estimates for the populations in Norway, is applied.
  
  The net pension liabilities in the balance sheet are determined after adjustment for deferred recognition in the income statement of the effect of changes in estimates and pension schemes, as well as discrepancies between the actual and expected return on pension assets that have not yet been realised in the income statement. The net pension liabilities are reported as provisions for liabilities.
  
  Employees who leave the enterprise before retirement age receive a paid-up policy. The paid-up policies are managed by the life insurance company Storebrand Livsforsikring AS. From the date the paid-up policy is issued, Statnett is exempt from any obligation to employees to which the paid-up policies apply. Assets and liabilities are measured at the date of issue of the paid-up policies, and are separated from pension assets and liabilities.
  
  An independent actuary calculated the pension liabilities in January 2013 as en estimate of the situation at 31 December 2012.
  
  When calculating the pension liabilities, the National Insurance contributions that the enterprise is required to pay on the payment of direct pensions or the payment of premiums for fund-based schemes are taken into account. The National Insurance contribution is a component of the enterprise's benefit and is recorded as part of the pension liabilities.

   

  Parent company			Group
  2011	2012	Members of the pension scheme	2012	2011
  1 328	1 419	Members of the pension fund	1 441	1 347
  338	364	Of which pensioners	368	341
  990	1 055	No. of active pension scheme members	1 073	1 006

   

  Financial/actuarial assumptions, parent company and Group				2012	2011
  Discount rate corporate covered bonds (OMF)				3,90%	-
  Discount rate				-	2,60%
  Expected return on pension assets				4,00%	4,10%
  Expected wage adjustments				3,50%	3,50%
  Expected pension adjustments				3,25%	3,25%
  Expected adjustment of basic amount (G) under NIS				3,25%	3,25%
  Remaining service period				19 years	16 years

   

  Percentual breakdown of pension assets into investment categories, parent company and Group as at 31 December.				2012	2011
  Property				5%	4%
  Held-to-maturity bonds				30%	32%
  Norwegian bonds				22%	26%
  Foreign bonds				5%	4%
  High-interest bonds				4%	0%
  Norwegian money market				12%	13%
  Foreign shares				15%	15%
  Norwegian shares				4%	4%
  Bank deposits				3%	2%
  Total				100%	100%

   

   

  Pension costs

  Parent company		Defined benefit schemes	Group
  2011	2012	(Amounts in NOK million)	2012	2011
  125	181	Present value of this year's pension contributions	182	126
  56	49	Interest cost of pension liability	49	57
  -51	-51	Expected return on pension assets	-51	-51
  -23	32	Actuarial gains/losses in income statement	32	-1
  130	211	Net pension costs	212	131
  18	30	Employer's contributions	30	18
  148	241	Net pension costs, incl. employer's cont.	242	149

   

  The expected pension premium for 2013 is NOK 150 million for the parent company and NOK 151 million for the Group.

   

   

  Secured and unsecured pension liabilities and pension assets

  Parent company			Group
  2011	2012	Defined-benefit schemes	2011	2011
  		(Amounts in NOK million)
  		Change in gross pension liability
  1 685	2 293	Gross pension liability at 1 Jan.	2 310	1 699
  139	198	Present value of the year's pension contributions	200	140
  64	57	Interest costs of pension liability	57	65
  447	-626	Actuarial gains and losses	-631	450
  -16	-22	Employer's contribution on premium paid	-22	-17
  -26	-30	Disbursed pension/paid-up policies	-30	-27
  2 293	1 870	Gross pension liabilities as at 31 Dec.	1 884	2 310
  		Change in gross pension assets
  1 028	1 177	Fair value of pension assets at 1 Jan.	1 187	1 038
  58	51	Actual return on pension assets	51	58
  -4	-38	Actuarial gains and losses	-37	-4
  116	155	Premium paid	156	117
  -21	-25	Pension/paid-up policies disbursed	-25	-22
  1 177	1 320	Actual value of pension assets as at 31 Dec.	1 332	1 187
  1 116	550	Net pension liabilities as at 31 Dec.	552	1 123
  -765	-144	Estimate variances not rec. in income statement	-145	-771
  351	406	Net capitalised pension liability incl. employer's contribution at 31 Dec.	407	352
  344	352	Net pension liabilities as at 1 Jan.	353	345
  145	235	Pension costs recognised in income statement	236	147
  -138	-181	Premium payments (excl. adm. expenses)	-182	-140
  351	406	Net capitalised pension liabilities incl. employer's contr. at 31 Dec.	407	352
  -	-	Capitalised pension assets at 31 Dec.	-	-
  344	406	Capitalised pension liabilities at 31 Dec.	407	352
  2 149	1 764	Gross secured pension liabilities at 31 Dec.	1 778	2 166
  144	106	Gross unsec. pension liabilities at 31 Dec.	106	144

   

   

  Total liabilities, assets and estimate variances for the last five years

   

  Parent company	2012	2011	2010	2009	2008
  Gross defined-benefit pension liabilities at 31 Dec.	1 870	2 294	1 685	1 657	1 595
  Fair value of pension assets at 31 Dec.	1 320	1 177	1 028	877	762
  Net defined-benefit pension liabilities	550	1 117	657	780	833
  Estimate variances not recognised in income statement	-144	-765	-313	-411	-491
  Book pension liabilities	406	352	344	369	342
  Changes in estimate variances for the year
  Discount rate	-625	530
  Rate of return assets	37	4
  Salaries growth	-	-82
  Adjustments to G	-	22
  Pension adjustments	-34	-105
  Member movements	-	83
  Total changes in estimate variances for the year	-622	452
  Group	2012	2011	2010	2009	2008
  Gross defined-benefit pension liability at 31 Dec.	1 884	2 311	1 699	1 670	1 608
  Fair value of pension assets at 31 Dec.	1 332	1 184	1 038	886	770
  Net defined-benefit pension liabilities	552	1 124	661	784	838
  Estimate variances not recognised in income statement	-145	-771	-316	-415	-496
  Book pension liability	407	353	345	369	342
  Changes in estimate variances for the year
  Discount rate	-626	533
  Rate of return assets	37	4
  Salaries growth	-	-82
  Adjustments to G	-33	22
  Pension adjustments	-	-106
  Member movements	-	84
  Total changes in estimate variances for the year	-622	455

   

   

  Sensitivity analysis

  The figures below give an estimate of the potential effect of a change in certain assumptions for defined-benefit pension schemes in Norway for Statnett.

   

  The following estimates and estimated pension costs for 2013 are based on the facts and circumstances at 31 December 2012. Actual results may differ significantly from these estimates.

   

  Pension liabilities and costs	Current assumptions	Discount rate		Annual salaries growth and change in basic amount (G)		Annual adjustment of pensions
  Change in percentage points		-1%	+1%	-1%	+1%	-1%	+1%

   

  (Amounts in NOK million)

  Parent company
  Pension cost before adjustment for interest costs and return on pension assets (SC)	156	203	121	138	178	137	181
  Defined-benefit pension liabilities - minimum pension liability (ABO)	1 433	1 719	1 213	1 433	1 433	1 273	1 626
  Defined-benefit pension liabilities - present value of pension liability (PBO)	1 798	2 200	1 493	1 677	1 938	1 597	2 039

   

  Group
  Pension cost before adjustment for interest costs and return on pension assets (SC)	158	205	123	139	180	138	182
  Defined-benefit pension liabilities - minimum pension liability (ABO)	1 444	1 732	1 222	1 444	1 444	1 283	1 626
  Defined-benefit pension liabilities - present value of pension liability (PBO)	1 812	2 216	1 505	1 690	1 953	1 609	2 057

   

  Risk tables for mortality and disability are based on tables in general use in Norway updated with historical data from the life companies' population. These data entail an adjustment of available tables in the form of increased life expectancy and increased disability probability. The average life expectancy for all age groups in the tables used is 80 years for men and 84 years for women. An extract from these tables is shown below. The table shows life expectancy and probability of disability and death within one year for different age groups.

   

  	Probability of disability		Probability of death		Life expectancy
  Age	Men	Women	Men	Women	Men	Women
  20	0,13%	0,16%	0,01%	0,01%	79	84
  40	0,21%	0,35%	0,07%	0,04%	80	84
  60	1,48%	1,94%	0,63%	0,36%	82	85
  80	-	-	5,91%	3,91%	87	89

   

  Pension disbursement flow Statnett SF

  The average weighted maturity for pension liabilities, related to the main scheme in Statnett SF, is estimated at 21 years based on the pension assumptions at 31 Dec. 2012. Average weighted maturity has been taken into account when choosing discount rate.

   

  Current value of future disbursements at 31 Dec. 2012

  

• Note 6 Tangible fixed assets
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  Parent company

  (Amounts in NOK million)	Electrotechnical equipment	ICT equipment	Buildings and land	Other operating equipment	Total
  Acquisition cost at 1 Jan. 2011	21 435	1 243	2 191	248	25 117
  Additions, acquisition cost	1 193	217	307	58	1 775
  Disposals, acquisition cost	158	132	9	11	310
  Acquisition cost at 1 Jan. 2011	22 470	1 328	2 489	295	26 582
  Additions, acquisition cost	544	261	435	76	1 316
  Disposals, acquisition cost	110	105	6	13	234
  Acquisition cost at 31 Dec. 2012	22 904	1 484	2 918	358	27 664
  Ordinary depreciation at 1 Jan. 2011	7 512	853	438	139	8 942
  Ordinary depreciation for the year	583	103	73	27	786
  Disposals, ordinary depreciation	158	129	3	8	298
  Ordinary depreciation at 1 Jan. 2012	7 937	827	508	158	9 430
  Ordinary depreciation for the year	567	132	79	34	812
  Disposals, ordinary depreciation	81	102	3	13	199
  Ordinary depreciation at 31. Dec. 2012	8 423	857	584	179	10 043
  Book value at 31 Dec. 2011	14 533	501	1 981	137	17 152
  Book value at 31. Dec. 2012	14 481	627	2 334	179	17 621

   

  Of which financial leasing:
  31 Dec. 2011	225	99	204	-	528
  31 Dec. 2012	217	98	189	-	504

   

  Acquisition cost for tangible fixed assets fully depreciated, but still in use	1 046	526	50	80	1 702
  Depreciation rate (straight-line) in percentage	2 - 7	5 - 33	0 - 2	10 - 33

   

   

  Group

  (Amounts in NOK million)	Electrotechnical equipment	ICT equipment	Buildings and land	Other operating equipment	Total
  Acquisition cost at 1 Jan. 2011	21 435	1 243	2 191	508	25 377
  Additions, acquisition cost	1 193	217	307	91	1 808
  Disposals, acquisition cost	158	132	9	12	311
  Acquisition cost at 1 Jan. 2012	22 470	1 328	2 489	587	26 874
  Additions, acquisition cost	544	261	435	102	1 342
  Disposals, acquisition cost	110	105	6	14	235
  Acquisition cost at 31 Dec. 2012	22 904	1 484	2 918	675	27 981
  Ordinary depreciation at 1 Jan. 2011	7 512	853	438	178	8 981
  Ordinary depreciation for the year	583	103	73	37	796
  Disposals, ordinary depreciation	158	129	3	9	299
  Ordinary depreciation at 1 Jan. 2012	7 937	827	508	206	9 478
  Ordinary depreciation for the year	567	132	79	47	825
  Disposals, ordinary depreciation	81	102	3	13	199
  Ordinary depreciation at 31. Dec. 2012	8 423	857	584	240	10 104
  Book value at 31. Dec. 2011	14 533	501	1 981	381	17 396
  Book value at 31. Dec. 2012	14 481	627	2 334	435	17 877

   

  Of which financial leasing:

  31 Dec. 2011	225	99	204	-	528
  31 Dec. 2012	217	98	189	-	504

   

  Acquisition cost for tangible fixed assets fully depreciated, but still in use	1 046	526	50	80	1 702
  Depreciation rate (straight-line) in percentage	2 - 7	5 - 33	0 - 2	10 - 33

   

  The category electro-technical equipment mainly comprises installations in transformer and switching stations, overhead lines and earth and subsea cables.
  
  Installations in transformer and switching stations have varing depreciation periods. Transformers and other main components have a depreciation period of 30-50 years. Control systems normally have a depreciation period of 15 years.
  
  Overhead lines have a depreciation period of 55 years. Earth/subsea cables have a 40-55-year depreciation period.
  
  Financial leasing is paid for in full in advance. This means that there are no future lease obligations related to financial leasing.

• Note 7 Plants under construction
  Download to Excel

  Parent company			Group
  2011	2012	(Amounts in NOK million)	2012	2011
  1 857	2 429	Acquisition cost at 1 January	2 429	1 857
  2 108	3 152	Additions during the year	3 152	2 108
  -1 533	-1 339	Transferred to tangible fixed assets	-1 339	-1 533
  -3	-9	Write-offs	-9	-3
  2 429	4 233	Acquisition cost at 31 December	4 233	2 429
  -8	-2	Accumulated write-downs	-2	-8
  16	46	Effect, hedged forward exchange contracts	46	16
  2 437	4 277	Balance sheet value at 31 December	4 277	2 437

   

  Specification of additions during the year:

   

  Parent company			Group
  2011	2012	(Amounts in NOK million)	2012	2011
  1 297	2 104	Materials and subcontractors	2 104	1 297
  283	300	Saleries, social security costs	300	283
  459	645	Other operating costs	645	459
  2 039	3 049	Total operating costs	3 049	2 039
  69	103	Construction interest	103	69
  2 108	3 152	Total	3 152	2 108

   

   

  Average capitalisation rate used to determine the loan expense amount that can be capitalised:			2012	2011
  			3,34%	3,41%

   

  Major contractual obligations, projects as at 31 Dec. 2012

  The selection only includes future contractual obligations exceeding NOK 50 million.

  (Amounts in NOK million)			Future contractual obligations	Accrued costs
  Project
  Ørskog-Sogndal			1 637	1 143
  Skagerrak 4			705	566
  Ytre Oslofjord			373	187
  Voltage upgrades Eastern Corridor			264	107
  Upgrading of Statnett's central operations system			107	196
  Varangerbotn - Skogfoss			60	333
  Total			3 146	2 532
  Other				1 745
  Total plants under construction				4 277

• Note 8 Financial items - profit/loss
  Download to Excel

  Parent company			Group
  2011	2012	(Amounts in NOK million)	2012	2011
  		Financial income
  6	20	Income from investment in subsidiaries	-	-
  2	15	Income from investment in associates	-	-
  43	42	Interest income	48	55
  -2	-2	Change in value of derivatives	-2	-2
  19	30	Gain on exchange	30	19
  3	-	Other financial income	19	8
  71	105	Total financial income	95	80
  		Financial costs
  374	435	Interest costs	430	374
  -69	-104	Capitalised construction interest	-103	-69
  13	37	Loss on exchange	38	13
  94	8	Other financial costs	10	38
  412	376	Total financial costs	375	356

• Note 9 Financial items - balance sheet
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  Financial assets and liabilities

  The fair value of forward exchange contracts is determined by applying the forward exchange rate on the balance sheet date.
  The fair value of currency swaps and interest rate swap is calculated as the present value of future cash flows.
  Fair value is mainly confirmed by the financial institution with which Statnett has entered into such contracts.
  
  The fair value of financial assets and long-term liabilities accounted for at amortised cost has been calculated:
  - using quoted market prices,
  - using interest rate terms for liabilities with a corresponding maturity and credit risk, or
  - using the present value of estimated cash flows discounted by the interest rate that applies to corresponding liabilities and assets on the balance sheet date.
  
  In the case of financial instruments such as financial assets available for sale, trade account receivables and other short-term receivables, liquid assets, trade accounts payable and other current liabilities, it is assumed that the book value is a good estimate of fair value, due to the short-term nature of the items.
  

  Included in liquid assets as at 31 December 2012 are reserved tax withholdings of NOK 50 million and securities to Nord Pool Spot AS of NOK 33 million in the parent company. Corresponding figures of the group are NOK 50 million and NOK 33 million respectively.
  
  

  (Amounts in NOK million)

  Parent company	Category	2012 Book value	2012 Fair value	2011 Book value	2011 Fair value
  Assets
  Fixed assets
  Long-term receivables	Loans and receivables	300	300	199	199
  Subord. capital in Statnett SFs pension fund	Fair value through profit/loss	75	75	75	75
  Financial assets available for sale	Available for sale	5	5	5	5
  Derivatives	Fair value through profit/loss	1 037	1 037	1 111	1 111
  Total fixed asset investments		1 417	1 417	1 390	1 390
  Current assets
  Trade accounts receivable	Loans and receivables	199	199	137	137
  Derivatives	Fair value through profit/loss	3	3	364	364
  Other short-term receivables	Loans and receivables	862	862	685	685
  Total trade accounts and other short-term receivables		1 064	1 064	1 186	1 186
  Investment in market-based securities	Fair value through profit/loss	327	327	272	272
  Liquid assets	Fair value through profit/loss	561	561	917	917
  Liabilities
  Long-term interest-bearing debt	Other liabilities	12 375	12 482	11 018	11 125
  Derivatives	Fair value through profit/loss	248	248	92	92
  Total long-term interest-bearing debt		12 623	12 730	11 110	11 217
  Short-term interest-bearing debt	Other liabilities	1 884	1 885	2 298	2 305
  Derivatives	Fair value through profit/loss	22	22	4	4
  Total short-term interest-bearing debt		1 906	1 907	2 302	2 309
  Trade accounts payable and other short-term debt	Other liabilities	1 234	1 234	1 224	1 224

   

   

  (Amounts in NOK million)

  Group	Category	2012 Book value	2012 Fair value	2011 Book value	2011 Fair value
  Assets
  Fixed assets
  Long-term receivables	Loans and receivables	125	125	-	-
  Subord. capital in Statnett SF's pension fund	Fair value through profit/loss	75	75	75	75
  Financial assets available for sale	Available for sale	5	5	5	5
  Derivatives	Fair value through profit/loss	1 037	1 037	1 108	1 108
  Total financial fixed assets		1 242	1 242	1 188	1 188
  Current assets
  Trade accounts receivable	Loans and receivables	209	209	137	137
  Derivatives	Fair value through profit/loss	3	3	364	364
  Other short-term receivables	Loans and receivables	764	764	637	637
  Total trade accounts and other short-term receivables		976	976	1 138	1 138
  Investment in market-based securities	Fair value through profit/loss	668	668	600	600
  Liquid assets	Fair value through profit/loss	634	634	1 002	1 002
  Liabilities
  Long-term interest-bearing debt	Other liabilities	12 236	12 343	10 882	10 989
  Derivatives	Fair value through profit/loss	248	248	92	92
  Total long-term interest-bearing debt		12 484	12 591	10 974	11 081
  Short-term interest-bearing debt	Other liabilities	1 884	1 885	2 298	2 305
  Derivatives	Fair value through profit/loss	22	22	4	4
  Total short-term interest-bearing debt		1 906	1 907	2 302	2 309
  Trade accounts payable and other short-term debt	Other liabilities	1 251	1 251	1 232	1 232

   

   

  The table below shows financial instruments recognised at fair value according to the valuation method

   

  As at 31 Dec. 2012
  Parent company	Level 1	Level 2	Level 3	Total
  (Amounts in NOK million)
  Assets
  Subord. capital in Statnett SF's pension fund	-	-	75	75
  Financial assets available for sale	-	-	5	5
  Derivatives	-	1 039	-	1 039
  Investment in market-based securities	327	-	-	327
  Liquid assets	561	-	-	561
  Total assets	888	1 039	80	2 007

   

  Liabilities
  Derivatives	-	270	-	270
  Total liabilities	-	270	-	270

   

  Group
  (Amounts in NOK million)
  Assets
  Subord. capital in Statnett SF's pension fund	-	-	75	75
  Financial assets available for sale	-	-	5	5
  Derivatives	-	1 039	-	1 039
  Investment in market-based securities	668	-	-	668
  Liquid assets	634	-	-	634
  Total assets	1 302	1 039	80	2 421

   

  Liabilities
  Derivatives	-	270	-	270
  Total liabilities	-	270	-	270

   

   

  Reconciliation of level 3 in fair value measurements.

  Parent company			Group
  2011	2012		2012	2011
  75	75	Subord. capital in Statnett SF's pension fund	75	75
  5	5	Financial assets available for sale	5	5
  80	80	Total fair value level 3	80	80

   

  Level 1: Fair value is used for quoted prices from active markets for identical financial instruments. No adjustments are made with regard to these prices.
  
  Level 2: Fair value is measured using other observable input than for Level 1, either direct (prices) or indirect (derived from prices).
  
  Level 3: Fair value is measured using input based on non observable market data.

   

  Interest-bearing assets and liabilities

   

  Repayment profile for interest-bearing debt for the parent company

  The loans are measured at amortised cost adjusted for the effect of fair value hedging

   

  (Amounts in NOK million)

  Maturity date	2013	2014	2015	2016	2017-	Upon demand*	Total
  Fixed rate loans
  Certificate issues	1 700	-	-	-	-	-	1 700
  Bond issues	-	637	561	595	6 865	-	8 658
  Total fixed rate loans	1 700	637	561	595	6 865	-	10 358
  Floating rate loans
  Other interest-bearing debt	114	36	15	22	175	139	501
  Bond issues	-	400	-	-	170	-	570
  Loans from financial institutions	92	92	92	92	2 732	-	3 100
  Total floating rate loans	206	528	107	114	3 077	139	4 171
  Total short-term debt	1 906						1 906
  Total long-term debt		1 165	668	709	9 942	139	12 623
  Total interest-bearing debt	1 906	1 165	668	709	9 942	139	14 529

   

  * Statnett SF intra-group loans of NOK 139 million, payable on demand.

   

  Loans by currency as at 31 Dec. 2012

  (Amounts in millions)

  Information about interest-bearing debt		Average interest rate 1)	Loans in currency	Loans in NOK
  Currency
  NOK		3,24%	10 314	10 314
  JPY		2,11%	9 000	613
  CHF		2,82%	400	2 771
  SEK		2,42%	200	170
  USD		3,10 %	100	568
  EUR*		**	13	93
  Total				14 529

   

  * Amounts in EUR are linked to collateral under CSA (Credit Support Annex) agreements, which reflect higher/lower value of derivatives.
  ** EONIA overnight - daily interest rates announced by the European Banking Federation (EBF)
  *** The amount in USD relates to three swaps with a forward start in January 2013, but with a market value as at 31 Dec. 2012
  
  1) All loans in foreign currency are converted into NOK using cross currency interest swap agreements.
  The average interest rate for the loans includes interest swap agreements. The average interest rate is the average rate as at 31 Dec. 2012.

   

  Maturity of fixed interest of the loan portifolio	2013	2014	2015	2016	2017-	Total
  (Amounts in NOK million)	10 630	491	599	686	2 123	14 529

   

   

  Market-based securities

  Parent company			Group
  Acquisition cost	Book value	(Amounts in NOK million)	Acquisition cost	Book value
  74	74	Government	74	74
  63	64	Municipality/municipal operations	71	73
  97	98	Financial institutions, including banks	325	331
  90	91	Private/industry	133	135
  324	327	Total bonds	603	613
  -	-	Norwegian equity funds	27	28
  -	-	Foreign equity funds	27	27
  -	-	Total equity funds	54	55
  324	327	Total market-based securities	657	668

   

  All market based securitres are terminated in Norwegian kroner (NOK). Unrealised interest gain/loss changed from NOK 4,5 million to 2,7 million during the period.

  Unrealised interest gain/losses changed from NOK 4,5 million to NOK 2,7 during the period.

  Which resulted in a loss of NOK 1.8 million, recognised in Other financial income.

   

  Age distribution trade receivable

   

  	Not due	1-30 days	31-60 days	61-90 days	Over 90 days	Total trade acc. rcvb.
  Parent company	182	10	4	2	1	199
  Group	186	16	4	2	1	209

   

  Derivatives

   

  Interest rate and currency swaps

  These are agreements where the contracting parties exchange currency and/or interest rate terms for an agreed amount over a defined future period.
  
  All interest rate and currency swaps are related to underlying loans. Any loss/gain on the swap will therefore correspond to the gain/loss on the loan.

   

  (Amounts in NOK million)

  Maturity	Principal lending		Principal borrowing		Market value* 2011	Cash flow 2012	Market value* 2012	Change in value***	Intr. rate terms Statnett receives		Intr. Rate terms Statnett pays
  Free-standing derivatives**
  2015	NOK	200	NOK	200	14	5	14	5	Fixed		Nibor 6 months
  2015	NOK	200	NOK	200	-8	-3	-9	-4	Nibor 6 months		Fixed
  2028	USD	80	NOK	456,8			-7	-7	Fixed USD		Nibor 6 months
  2028			USD	80			7	7			Fixed USD
  2033	USD	220	NOK	1256,2			-33	-33	Fixed USD		Nibor 6 months
  2033			USD	220			33	33			Fixed USD
  2043	USD	30	NOK	171,3			-7	-7	Fixed USD		Nibor 6 months
  2043			USD	30			7	7			Fixed USD
  Total					6	2	5	1
  Derivatives, cash flow hedges
  2014	NOK	200	NOK	200	-7	-3	-6	-2	Nibor 6 months		Fixed
  2014	NOK	200	NOK	200	-6	-2	-5	-2	Nibor 6 months		Fixed
  2016	NOK	400	NOK	400	-12	-3	-20	-11	Nibor 6 months		Fixed
  2021	NOK	400	NOK	400			-11	-11	Nibor 6 months		Fixed
  2021	NOK	500	NOK	500			-14	-14	Nibor 6 months		Fixed
  2021	NOK	400	NOK	400			-12	-12	Nibor 6 months		Fixed
  2022	NOK	393,25	NOK	393,25	-34	-6	-49	-21	Nibor 6 months		Fixed
  Total					-59	-14	-117	-73

   

   

  (Amounts in NOK million)

  Fair value hedging**** Maturity:	Principal lending		Principal borrowing		Market value* 2011	Market value* 2012	Intr. rate terms Statnett receives		Intr. Rate terms Statnett pays
  2014	NOK	300	NOK	300	6	6	Fixed		Nibor 6 months
  2014	JPY	5000	NOK	295,8	111	35	Fixed JPY		Nibor 6 months
  2015	NOK	50	NOK	50	3	3	Fixed		Nibor 6 months
  2017	CHF	250	NOK	1290	506	445	Fixed CHF		Nibor 6 months
  2019	JPY	4000	NOK	201	138	81	Fixed JPY		Nibor 6 months
  2020	NOK	300	NOK	300	41	50	Fixed		Nibor 6 months
  2020	NOK	60	NOK	60	2	5	Fixed		Nibor 6 months
  2021	SEK	200	NOK	180	-11	-10	SEK Stibor 3 months		Nibor 6 months
  2021	CHF	150	NOK	923,25	139	114	Fixed CHF		Nibor 6 months
  2023	NOK	600	NOK	600	72	94	Fixed		Nibor 6 months
  2024	USD	100	NOK	602,9		-33	Fixed USD		Nibor 6 months
  2025	NOK	600	NOK	600	80	102	Fixed		Nibor 6 months
  2027	NOK	1000	NOK	1000		40	Fixed		Nibor 6 months
  Total					1 087	932

   

  * Accrued interest is not included in the market value. In the case of combined interest rate and currency swaps, the unrealised currency effect is included in the market value.

  ** Free-standing derivatives of NOK 200 million are related to underlying loans, but hedge accounting is not used.

  As at 31 Dec. 2012, Statnett had entered into loan agreements totalling USD 330 million with associated interest rate/currency swaps with disbursement on 22 January 2013.

  Both the loans and swaps are classified as free-standing derivatives from the date of entry until the date of disbursement. Changes in value of loan contracts are offset changes in value of the associated swaps.

  *** Changes in market value includes cash flow for 2012.

  **** Changes in value in fair value hedges have no effect on the result.

   

  Interest rate options:

  Statnett had no interest rate options as at 31 December 2012.

   

  Forward exchange options:

  Statnett makes use of forward exchange contracts in order to the currency risk on transactions in currencies other than NOK.

   

   

  (Amounts in NOK million)	Nominal amount in currency	Nominal amount in NOK	Average hedge rate	Market rate*	Market value
  SEK	323	291	0,90	0,85	-11
  EUR	105	826	7,89	7,34	-39
  Total forward exchange contracts		1117			-50

   

  *Average forward rate.

  All contracts are related to capital expenditure on plants in foreign currency. Unrealised gains/losses on forward exchange contracts reduce/increase the cost price of the investments upon disposal.

   

  Commodity contracts:

  Statnett had no commodity contracts at 31 December 2012.

• Note 10 Financial risk management
  Download to Excel

  Financial risk

  The object of Statnett SF's financial policy is to ensure that the enterprise achieves the necessary financing of planned operational and investment programmes at the lowest possible cost, risk included. Statnett SF's financial policy also comprises aims and frameworks for minimising the enterprise's credit, interest rate and foreign exchange risks. Statnett SF uses financial derivatives to manage the financial risk.

   

  Capital management

  The enterprise has liabilities and equity as specified in the balance sheet. The loan agreements do not impose any capital requirements on the enterprise which are expected to restrict the capital structure of the enterprise. There are no explicit equity requirements other than those stipulated in applicable laws and regulations. The main objective of Statnett's capital management is to ensure that the enterprice has a sound financial position which enables the enterprise to carry out all socio-economically profitable grid investments. This is in line with statements from the owner. Specific target figures for the enterprise's financial position have not been determined. However, it is a priority with the Statnett's Board of Directors to maintain a robust A rating. Statnett may request more equity from the owner, if necessary. The need for more equity is assessed continuously on the basis of Statnett's objectives. The owner has established a long-term dividend policy of 50 per cent of the Group's annual profit after tax, adjusted for the changed balance for higher/lower revenues after tax up to and including the fiscal year 2015. Moreover, the capital structure is managed by raising and paying off short-term and long-term debt, as well as through changes in liquid assets. There have been no changes to capital management objectives or guidelines in 2012.

   

  Overview of capital included in capital structure management:

   

  Parent company			Group
  2011	2012	(Amounts in NOK million)	2012	2011
  11 110	12 623	Long-term interest-bearing liabilities	12 484	10 974
  2 302	1 906	Short-term interest-bearing liabilities	1 906	2 302
  1 189	888	Liquid assets and investment in market-based securities	1 302	1 602
  12 223	13 641	Net liabilities	13 088	11 674

   

   

  Liquidity risk

  Statnett SF aims to be able to carry out 12 months of operations, investments and refinancing without raising any new debt. This will make Statnett less vulnerable during periods of low access to capital in the financial markets and periods with unfavourable borrowing conditions.
  
  Statnett reduces liquidity risk related to maturity of financial liabilities by having an evenly distributed maturity structure, access to several sources of financing in Norway and abroad, as well as sufficient liquidity to cover scheduled operations, investment and financing needs without incurring any new debt within a time horizon of 12 months. The liquidity comprises of existing cash and cash equivalents (bank/time deposits, certificates and bonds) and a credit facility of NOK 3.5 billion running until January 2018. Statnett has also entered into a long-term loan agreement with the European Investment Bank (EIB) for a maximum borrowing of EUR 200 million. The loan can be drawn in several tranches. As of 21 March 2013, the loan from EIB remains undrawn and the credit facility had not been utilised. Liquidity is followed up continuously with weekly reporting.
  
  Statnett SF has a high credit rating. Standard & Poor's og Moody's Investor Service have given Statnett SF credit ratings for long-term borrowings of A+ and A2 respectively. The high credit ratings provides Statnett SF good borrowing opportunities.
  

   

  The table below shows all gross cash flows related to financial liabilities. The cash flows have not been discounted and are based on interest rates and exchange rates at 31 Dec. 2012.

   

  Parent company

  As at 31 Dec. 2012	Under 1 year	1 to 3 years	3 to 6 years	6 to 10 years	10 years+	Total
  Interest-bearing debt and interest payments	2 306	2 755	3 465	4 702	6 815	20 043
  Other liabilities		1	39	1	33	74
  Trade acc.payable and other short-term debt	1 234					1 234
  Derivatives	2 693	2 416	2 076	1 113	2 327	10 625
  Total	6 233	5 172	5 580	5 816	9 175	31 976

   

  Derivatives	Under 1 year	1 to 3 years	3 to 6 years	6 to 10 years	10 years+	Total
  Received	2 760	2 528	2 499	1 444	2 887	12 118
  Disbursed	-2 693	-2 416	-2 076	-1 113	-2 327	-10 625
  Net derivatives	67	112	423	331	560	1 493

   

   

  Group

  As at 31 Dec. 2012	Under 1 year	1 to 3 years	3 to 6 years	6 to 10 years	10 years+	Total
  Interest-bearing debt and interest payments	2 306	2 616	3 465	4 702	6 815	19 904
  Other liabilities		1	39	1	33	74
  Trade acc.payable and other short-term debt	1 251					1 251
  Derivatives	2 693	2 416	2 076	1 113	2 327	10 625
  Total	6 250	5 033	5 580	5 816	9 175	31 854

   

  Derivatives	Under 1 year	1 to 3 years	3 to 6 years	6 to 10 years	10 years+	Total
  Received	2 760	2 528	2 499	1 444	2 887	12 118
  Disbursed	-2 693	-2 416	-2 076	-1 113	-2 327	-10 625
  Net derivatives	67	112	423	331	560	1 493

   

  Credit risk

  Statnett SF is exposed to credit risk through the investment of surplus liquidity with issuers of securities and through the use of various interest rate and currency derivatives. In order to limit this risk, Statnett has set credit limits based on the creditworthiness of counterparties and the maximum exposure for each counterparty. Creditworthiness is assessed at least once a year, and the counterparty risk is continuously monitored to ensure that Statnett's exposure does not exceed the set credit limits and complies with internal rules.

   

  Maximum credit exposure

   

  Parent company			Group
  2011	2012	(Amounts in NOK million)	2012	2011
  867	561	Liquid assets, excl. time deposits	634	952
  50	-	Time deposits	-	50
  272	327	Bonds and certificates	613	553
  1 475	1 040	Derivatives	1 040	1 473
  198	299	Long-term receivables, excl. derivatives	124	-
  821	1 061	Trade accounts and other short-term receivables, excl. derivatives	973	774
  3 683	3 288	Total maximum credit exposure	3 384	3 802

   

  Foreign exchange risk

  Foreign exchange risk is the risk of fluctuations in foreign exchange rates that will result in changes in Statnett's income statement and balance sheet. To minimise foreign exchange risk, all foreign currency loans are converted into Norwegian Kroner (NOK) using cross currency swaps. The liabilities undertaken by Statnett in foreign currencies in connection with investment projects are mainly hedged using currency swaps. Other currency exposure as at 31 Des 2012 that had not been swapped or reserved to future payments or bank deposits in foreign currency totalled NOK 125 million for the parent company and NOK 141 million for the Group. Foreign equity funds and shares totalled NOK 19 million for the Group.

   

  Exchange rate sensitivity

  (Amounts in NOK million)

   

  Parent company		Change in NOK exchange rate			Group
  (Amounts in NOK million)		%			(Amounts in NOK million)
  2011	2012				2012	2011
  -3	-2	+5			-3	-4
  3	2	-5			3	4

   

   

  Internet rate sensitivity

  The following table shows the sensitivity of the parent company and the Group to potential changes the in interest rate. The calculation takes into account all interest-bearing instruments and associated interest rate derivatives. It shows the effect on the result of a change in the interest rate levels as at 31 December 2012.

   

  Effect on result Parent company		Change in interest rate level			Effect on result Group
  (Amounts in NOK million)		%			(Amounts in NOK million)
  2011	2012				2012	2011
  -5	-5	+1			-11	-11
  5	5	-1			11	11

   

  It has been assumed that a change of one percentage point in the short-term interest rate level will result in a change in the Group's average borrowing rate of approx.0.35 percentage points over a six-month period. Net borrowing costs will then change approx. NOK 92 million, annualy.
  
  

  Average effective interest rate

  The table below shows the average effective interest rate for the individual financial instruments for the full years 2011 and 2012. Throughout 2012, Statnett had a higher share of bank deposits in foreign currency, which resulted in lower interest yield on deposits.

   

  Parent company					Group
  2011	2012				2012	2011
  4,33%	4,02%	Bonds and certificates			4,77%	4,69%
  3,05%	2,39%	Deposits			2,39%	3,05%
  -	-	Shares and equity funds			12,42%	-8,10%
  3,38%	3,43%	Loans			3,43%	3,38%

• Note 11 Taxes
  Download to Excel

  Parent company				Group
  2011	2012	(Amounts in NOK million)		2012	2011
  		Tax on result
  273	221	Tax payable		220	273
  80	107	Change in deferred tax/tax benefit		105	84
  353	328	Tax		325	357
  273	221	Tax payable for the year		221	273
  -2	-11	Tax payable in conn. with group contribution		-11	-2
  271	210	Tax payable balance sheet		210	271
  80	107	Deferred tax/tax benefit as a result of changes in temporary differences		105	84
  29%	28%	Effective tax rate		28%	26%
  		Reconciliation of effective tax rate with Norwegian tax rate
  1 206	1 177	Profit before tax		1 162	1 357
  337	329	28% tax		326	380
  18	-7	Permanent differences 28%		-2	-21
  -2	6	Share of profit/loss in KS, FKV and TS		1	-2
  353	328	Tax		325	357
  		Deferred tax(-)/tax asset in the balance sheet
  -	-	Other intangible assets		-4	-4
  -515	-640	Fixed assets		-666	-537
  42	50	Profit and loss account		50	42
  -	-19	Receivables		-3	10
  -	-	Technical provisions insurance		-61	-63
  99	114	Pensions		114	99
  -	9	Securities and financial instruments (excl. cash flow hedges)		7	-1
  16	33	Cash flow hedges		33	16
  17	21	Other tax-related provisions		21	17
  -2	-11	Tax effect of Group contribution		-11	-2
  -	-	Tax loss carried forward		14	17
  -343	-443	Total deferred tax(-)/tax assets (net)		-506	-406

   

  Changes in temporary differences

  Parent company	31/12/2011	Recognised	Other comprehensive income	Group contribution	31/12/2012
  Fixed assets	1 840	446	-	-	2 286
  Profit and loss account	-149	-31	-	-	-180
  Receivables	-	66	-	-	66
  Pensions	-352	-54	-	-	-406
  Securities and financial instruments (excl. cash flow hedges)	-	-34	-	-	-34
  Cash flow hedges	-59	-	-58	-	-117
  Other provisions	-62	-13	-	-	-75
  Group contribution	6	-	-	34	40
  Total	1224	380	-58	34	1 580
  Group	31/12/2011	Recognised	Other comprehensive income	Group contribution	31/12/2012
  Other intangible assets	13	-	-	-	13
  Fixed assets	1 918	462	-	-	2 380
  Profit and loss account	-147	-31	-	-	-178
  Receivables	-37	45	-	-	8
  Technical provisions insurance	226	-6	-	-	220
  Pensions	-352	-55	-	-	-407
  Securities and financial instruments (excl. cash flow hedges)	3	-30	-	-	-27
  Cash flow hedges	-59	-	-58	-	-117
  Other provisions	-63	-13	-	-	-76
  Tax loss carried forward	-52	9	-	34	-9
  Total	1 450	381	-58	34	1 807

   

  In 2012 a Group contribution of NOK 40 million was made to Statnett Transport AS. This reduced tax loss carried forward in the limited company.
  

• Note 12 Investments in subsidiaries, joint ventures and associates
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  Statnett SF had the following investments at 31 December 2012:

   

  (Amounts in NOK thousand)

  Company	Type	Year of acquisition	Registered office	Ownership intrest	Voting rights	Book value
  Subsidiaries
  Statnett Transport AS	Subsidiary	1996	Oslo	100%	100%	79 221
  Statnett Forsikring AS	Subsidiary	1998	Oslo	100%	100%	30 200
  Nord.Link AS	Subsidiary	2010	Oslo	100%	100%	500
  Noreveien 26 AS	Subsidiary	2010	Oslo	100%	100%	100
  NorGer AS	Subsidiary	2010/2011	Oslo	100%	100%	25 265
  NorGer KS	Subsidiary	2010/2011	Oslo	100%	100%	136 617
  Total subsidiaries						271 903
  Associates
  Nord Pool Spot AS	Associate	2002/2008	Bærum	28,8%	28,8%	36 320
  Total book value subsidiaries, joint ventures and associates						308 223

   

   

  Group value of companies recorded according to the equity method

  2012	Group value at 1 Jan.	Result for the year	Dividend	Group value at 31 Dec.
  Nord Pool Spot AS, 28.8% 1)	53 667	15 430	-15 000	54 097
  Total associates	53 667	15 430	-15 000	54 097

   

  2011	Group value at 1 Jan.	Result for the year	Dividend	Group value at 31 Dec.
  Nord Pool Spot AS, 30%	51 080	4 987	-2 400	53 667
  Total associates	51 080	4 987	-2 400	53 667

   

  Changes in investments in subsidiaries, joint ventures and associates

  There were no activities in Nord.Link AS in 2012.

  There were no activities in Noreveien 26 AS in 2012.

   

  1) In connection with a private placement in Nord Pool Spot AS as at 31 July, Statnett's ownership interest was reduced from 30% to 28.8%. The profit for the year includes the Group's gain due to the reduced ownership interest through a private placing.

   

  Transactions in 2011

  In August 2011, Statnett purchased another 50 per cent of NorGer AS and 45 prosent in NorGer KS. NorGer AS had a direct ownership interest of 10 per cent in NorGer KS. Directly and indirectly, Statnett SF owns 100 per cent of NorGer KS. Both NorGer AS and NorGer KS are accounted for as subsidiaries.

• Note 13 Related parties
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  As at 31 December 2012, Statnett SF was wholly-owned by the Norwegian State through the Ministry of Petroleum and Energy (MPE). Statnett has the following relations with MPE both as owner and regulatory authority:
  

   

  Regulatory authority

  The Norwegian parliament (Storting) is the legislative authority that passes legislation based on bills put forward by the government. Regulations are adopted by the King in Council. The MPE administers its areas of responsibilities and delegates the administration of the greater part of the Energy Act to the NVE. Pursuant to the Norwegian Public Administration Act, any administrative decision made by the NVE can be appealed to the MPE as the superior authority.

   

  Other related parties:

   

  Parent company	Subsidiary	Associate
  Statnett SF	Statnett Transport AS	Nord Pool Spot AS
  	Statnett Forsikring AS
  	Noreveien 26 AS
  	Nord.Link AS
  	NorGer KS
  	NorGer AS

   

  The subsidiaries are all wholly-owned by Statnett SF, though so that Statnett owns 100 per cent of the shares in NorGer AS and 90 per cent of the shares in NorGer KS. In addition, NorGer AS owns 10 per cent of the shares in NorGer KS. This entails that Statnett SF, including indirect ownership, also controls 100 per cent of the shares in NorGer KS.
  
  Statnett SF has an ownership interest in Nord Pool Spot AS of 28.8 per cent. The ownership interest was reduced from 30 per cent following a private placement in July 2012.
  
  

  Related party transaction

  Statnett SF and its subsidiaries have entered into loan agreements and agreements relating to the purchase and sale of services. All transactions are made as part of the normal commercial operations and at current market prices. The most important transactions were:
  
  Statnett Forsikring AS is licensed to provide cover for risks associated with companies in the Statnett Group, and operates both as a direct personal insurance company and a non-life insurance company. The company is also a reinsurer of Statnett's risks covered by other insurers.
  
  Statnett Transport AS operates a heavy transport business on land and sea and supplies transport services to Statnett SF, including preparedness services relating to cables. These services are valued by an external party.
  
  Statnett SF purchases transmission losses on Nord Pool Spot AS on a daily basis. The purchase and sale of energy is settled at the power exchange's market prices.
  
  Statnett SF performs administrative services for its subsidiaries. Agreements have been entered into which specify these services, and they are priced at market terms.
  
  In 2012, Statnett SF received dividends totalling NOK 35 million from subsidiaries and associates.
  

   

  Joint venture parties

  TenneT TSO BV and Statnett SF have constructed a subsea cable to transport energy between Norway and the Netherlands, known as the NorNed cable. Each party owns its physical half of the cable, with Statnett owning the northern part and TenneT the southern part. The NorNed cable became operational in May 2008. Costs and revenues from the operation of the NorNed cable are shared equally between TenneT and Statnett.
  
  Statnett SF owns Skagerrak cables 1-3 whereas the Danish system operator Energinet.dk holds a long-term lease agreement for half of the cable capacity. Operating costs and revenues related to the operation of the cable are shared equally between Energinet.dk and Statnett. Energinet.dk and Statnett have also been granted a licence to install another cable for transmission of energy between Norway and Denmark, called Skagerrak 4. Each party will own its physical half of the cable, with Statnett owning the northern part and Energinet the southern part. The cable is currently being constructed and is scheduled to come online towards the end of 2014.
  
  Statnett SF, KfW and TenneT TSO GmbH have entered into a joint venture agreement for development, construction and operation of a 1400 MW subsea cable between Norway and Germany.

   

  Statnett SF inter-company accounts

  	Trade accounts		Long-term lending		Long-term borrowing		Trade acc. Payable
  (Amounts in NOK million)	2012	2011	2012	2011	2012	2011	2012	2011
  Subsidiaries	3	5	187	198	138	137	5	29

   

  Interest rates

  Interest rates on long-term borrowing and lending have been agreed at six months' NIBOR with a mark-up in the interval 1% - 1.75%

   

  Statnett SF's intra-group trading

  	Sales revenues		Operating costs		Financial revenues
  (Amounts in NOK million)	2012	2011	2012	2011	2012	2011
  Subsidiaries	5	4	120	238	7	7

   

  	Financial costs		Dividend received
  (Amounts in NOK million)	2012	2011	2012	2011
  Subsidiaries	5	-	20	8

• Note 14 Remuneration/benefits to the Group management
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  The Board's declaration on determination of salary and other remuneration for the Group management.

   

  The statement concerning remuneration to the President and CEO and the Group management has been prepared in accordance with the provisions in the Public Limited Liability Companies Act, the Norwegian Accounting Act, the Norwegian Code of Practice for Corporate Governance and the Guidelines relating to state-owned companies, which include an approach to executive pay, as well as the Norwegian Ministry of Petroleum and Energy's compliance expectations stipulated in its letter of 29 November 2011.
  
  The Board of Directors has established a remuneration committee, consisting of two owner-appointed board members and one employee representative. Unless otherwise agreed, the HR Director will act as committee secretary. The remuneration committee is an advisory and preparatory body for the Board of Directors, and will put forward proposals for salary adjustments in accordance with the guidelines specified below.
  
  In addition to a fixed salary the Group management is entitled to a company car and pension benefits. There is no bonus scheme for senior employees. The retirement age for the President and CEO and the Group senior management is 65. The President and CEO is entitled to 12 months' severance pay in the event of dismissal from the company. No other senior employees have agreements for saleries after the termination of employment.
  
  The Group's guiding principle for 2011 and 2012 has been to keep remuneration and other benefits for the Group management at a competitive level to ensure that the Group attracts and retains high-quality senior executives. The fixed salary does not need to be at the top of the pay scale. However, it must be competitive for our industry and compared to other companies recruiting in the same market as Statnett SF. At the same time, the salary must reflect individual experience, area of responsibility and achieved results.
  
  The Board of Directors approves the annual salary adjustment for the company's president/CEO, and adopts a framework which the president/CEO uses to adjust the salaries for the rest of the Group management team.
  
  The same guidelines specified above will be used as a basis for the next fiscal year.
  

   

  Group management remuneration/benefits (Amounts in NOK)				Board remuneration	Board remuneration
  Board of Directors				2012	2011
  Kolbjørn Almlid (from June 2011)	Chair			363 000	174 000
  Bjarne Aamodt (until June 2011)	Chair			-	181 600
  Per Hjorth	Vice Chair			276 000	245 000
  Thor Håkstad (until June 2012)	Vice Chair			126 300	239 000
  Kirsten Indgjerd Værdal	Board member			198 000	185 000
  Egil R Gjesteland (from June 2012)	Board member			96 500	-
  Kristin Lian (from June 2012)	Board member			127 567	-
  Grethe Høiland (until June 2012)	Board member			118 300	225 000
  Heidi Ekrem	Board member			198 000	190 000
  Steinar Jøråndstad	Board member *)			233 000	225 000
  Per Erland Opgård	Board member *)			198 000	190 000
  Kjerstin Bakke	Board member *)			193 000	185 000
  Total remuneration				2 127 667	2 039 600

   

  All figures are exclusive of employer's NICs.
  Deputy board members and observers do not receive remuneration.
  Some board members receive compensation for their participation in the audit committee or remuneration committee. Board remunerations may therefore vary.
  *) In the case of employee representatives, only board members' fees are stated.

   

  Group management remuneration/benefits 2012 (Amounts in NOK)			Salary	Other remuneration	Pension cost	Total remuneration
  Group management
  President and CEO
  Auke Lont			2 391 762	184 735	2 908 851	5 485 348
  Executive Vice Presidents
  Gunnar G. Løvås	Strategy and Public Affairs		1 510 869	137 719	998 547	2 647 135
  Håkon Borgen	Projects Division		1 640 618	102 769	1 091 041	2 834 428
  Øivind Kristian Rue	Grid Operations Division		1 769 371	102 363	1 637 291	3 509 025
  Bente Hagem	Commercial Development		1 550 897	139 068	1 349 690	3 039 655
  Knut Hundhammer	Corporate Staff, CFO		1 937 613	159 572	712 824	2 810 009
  Peer Olav Østli	ICT		1 474 289	149 462	995 325	2 619 076
  Total remuneration			12 275 419	975 688	9 693 569	22 944 676

   

  All figures are exclusive of employer's NICs.

   

  Remuneration/benefits to the Group management/board 2011 (Amounts in NOK)			Salary	Other remuneration	Pension cost	Total remuneration
  Group management
  President and CEO
  Auke Lont			2 275 892	181 083	2 229 640	4 686 615
  Executive Vice Presidents
  Gunnar G. Løvås	Strategy and Public Affairs		1 440 860	137 788	679 236	2 257 884
  Håkon Borgen	Projects Division		1 555 835	102 949	694 968	2 353 752
  Øivind Kristian Rue	Grid Operations Division		1 687 016	130 323	1 228 155	3 045 494
  Bente Hagem	Commercial Development		1 471 466	140 515	1 053 644	2 665 625
  Knut Hundhammer (from 23 May)	Corporate Staff, CFO		1 108 515	91 764	531 636	1 731 915
  Marie Jore Ritterberg (until 23 May)	Finance		594 033	64 440	397 515	1 055 989
  Peer Olav Østli	ICT		1 403 809	140 021	726 481	2 270 311
  Kirsten Berg (until 23 May)	Corporate Staff		533 313	49 775	251 590	834 678
  Total remuneration			12 070 739	1 038 658	7 792 865	20 902 263

   

  All figures are exclusive of employer's NICs.

   

  There was a change in Statnett's Group Management as of 23 May 2011 due to reorganisation of the company.
  After the reorganisation the Group Management consists of Executive VPs for Strategy and Public Affairs, Projects Division, Grid Operations Division, Commercial Development, ICT and Corporate Staff.
  At the same time a management group for Group development was discontinued which in addition to the Group Management included Executive VPs of Corporate Staff, Finance and ICT.

   

  Terms and conditions, senior executives

  Title/name	Terms and conditions for retirement age/early retirement pension/retirement pension
  President and CEO: Auke Lont	From the age of 65, the full annual retirement pension is 66 per cent of the pension base, i.e. of the fixed, normal annual salary at retirement. The pension base is adjusted annually by the same percentage increase as in the basic amount under the National Insurance Scheme. From the age of 67, the annual retirement pension of 66 per cent will be co-ordinated with the retirement pension disbursed from Statnett SF's Group Pension Fund and the Norwegian National Insurance Scheme. Upon death, any surviving spouse and children under the age of 21 will receive a pension. Should the President become disabled before the age of 65, he or she will receive a disability pension. The full disability pension equals the retirement pension awarded at the age of 65. The disability pension disbursement will be reduced according to disability.
  Executive vice presidents: Håkon Borgen Bente Hagem Øivind Kristian Rue	The retirement age is 65, but with the right to retire with an early retirement pension at any time after the age of 62. In the event of retirement between 62 and 65 an annual payment of 66 per cent of the pension base will be disbursed. The pension base is the fixed, normal annual salary at retirement. The pension base is adjusted annually by the same percentage increase as in the basic amount under the National Insurance Scheme. In the event that income is received from others and this, together with the early retirement pension disbursed by Statnett, exceeds the final salary the early retirement pension will be reduced by 50 per cent of the amount that exceeds the final salary. From the age of 65, the full annual retirement pension is 66 per cent of the pension base, i.e. of the fixed, normal annual salary retirement. The pension base is adjusted annually by the same percentage increase as in the basic amount under the National Insurance Scheme. From the age of 67, the annual retirement pension will be coordinated with the retirement pension disbursed from Statnett SF's Pension Fund and the Norwegian National Insurance Scheme. Upon death, any surviving spouse and children under the age of 21 will receive a pension. The above persons' entitlements to pension benefits over and above paid-up policies from Statnett SF's Group Pension Fund from the age of 62 will lapse if they are no longer employed by Statnett SF on their 62nd birthday. Should any of the above persons become disabled before reaching the age of 65, he or she will receive a disability pension. The full disability pension equals the retirement pension awarded at the age of 65. The disability pension disbursement will be reduced according to disability.
  Executive vice presidents: Gunnar G Løvås Peer Olav Østli	The retirement age is 65, with the right to retire with an early retirement pension at any time after 62. The full contribution period is 30 years. In the event of retirement between ages 62 and 65, an annual payment shall be disbursed of 66 per cent of the pension base, less one percentage point for each year between 62 and 65. The pension base is the fixed, normal annual salary at retirement. The pension base is adjusted annually by the same percentage increase as in the basic amount under the National Insurance Scheme. Pension disbursement may be reduced if the member receives any salary, pension or remuneration from other companies in the Statnett Group. From the age of 65, the full annual retirement is 66 per cent of the pension base. The pension base is the fixed, normal annual salary at retirement. The pension base is adjusted annually by the same percentage increase as in the basic amount under the National Insurance Scheme. From the age of 67, the annual retirement pension is covered through the National Insurance Scheme and Statnett's group pension scheme, plus 66 per cent of the part of the pension base that exceeds 12 times the basic amount, provided that there is a full contribution period (30 years). Upon death, any children under the age of 21 will receive a children's pension. If the member leaves the company before retirement age, a pension rights certificate will be issued, which will secure retirement pension benefits from age 65. The pension rights certificate will be adjusted by 75 per cent of the increase in the basic amount for each year until retirement. Should any of the above persons become disabled before reaching the age of 65, he or she will receive a disability pension. The full disability pension equals the retirement pension awarded at the age of 67, based on the pension base at the time the disability occurred. The disability pension will be reduced according to disability.
  Executive vice president: Knut Hundhammer	The retirement age for executive positions is 65. A pension agreement has been entered into in addition to the ordinary membership in the enterprise's group pension scheme. The pension is secured through the accrued savings balance, including interest, disbursed to Hundhammer as taxable income. Statnett holds the rights to the Guarantee Account up to the moment of disbursement. The guarantee account will be disbursed to Statnett SF at retirement at the latest. The guarantee account, including interest, is used to finance the benefits which will be disbursed to Hundhammer at retirement. The pension base is the permanent ordinary salary. Statnett will, each year until retirement or resignation, pay up to 30 per cent of the difference between the ordinary salary and 12 times the Norwegian national insurance scheme basic amount to the pension fund scheme. For 2012, payments of NOK 295 260 were made. For subsequent years, this amount will be adjusted with a corresponding salary increase, with a minimum increase corresponding to the increase in G. Upon death, the surviving spouse or spouse equivalent will receive an amount corresponding to the remaining savings balance including interest from Statnett SF. This lump sum will be taxable for the spouse/spouse equivalent.

  
  The normal notice period for resignation is three months, whereas for dismissals the notice period is six months after an employment period of two years.
  
  No loans have been guaranteed or granted to members of the Group management or the Board of Directors.
  

• Note 15 Events after the balance sheet date
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  On Saturday 2 March, an outage occurred on the 420 kV interconnector between Viklandet and Fræna. This resulted in a 120 MW loss of load to Ormen Lange. General consumption was not affected. Due to adverse weather in Nordmøre the Sunndalsøra power line crew could not access the mountain to repair the fault until Tuesday 5 March. Statnett entered into a dialogue with the NVE prior to the incident to ascertain how to deal with outages in Nyhamna in terms of the quality-adjustment revenue cap for not supplied scheme and system operation costs. The financial consequences for Statnett as a result of the outage have therefore not yet been clarified.
  
  We are not aware of any other events occurring after the balance sheet date that may be of significance for the evaluation of the financial statements.
  

• Note 16 Secured debt, guarantees
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  The parent company may not pledge the enterprise's assets or provide other security, apart from providing security to financial institutions in connection with day-to-day banking transactions, and providing the customary security as part of the day-to-day operations.
  

• Note 17 Disputes
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  From time to time Statnett is involved in minor disputes with landowners, customers and others with regard to the interpretation of signed contracts, statutory obligations, including property tax, discretionary assessments and disagreements related to ordinary operations and building of power lines and cable connections. Disputes of this nature are regarded as part of regular operations.

• Note 18 Other operating costs
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  Parent company			Group
  2011	2012	(Amounts in NOK million)	2012	2011
  36	51	Lease rental payable	54	38
  245	308	Contracted personnel/consultants	338	307
  53	59	Insurance	78	57
  359	261	Materials and subcontractors	269	255
  130	141	Property tax	141	130
  66	83	IT costs	83	66
  179	242	Miscellaneous	213	129
  1 068	1 145	Total other operating costs	1 176	982

   

   

  Operational lease agreements (maturity less than one year from balance sheet date)

  Parent company			Group
  2011	2012	(Amounts in NOK million)	2012	2011
  19	28	Buildings	31	22
  11	16	Contracted communication	16	11
  6	7	Miscellaneous	7	5
  36	51	Total lease rental payable	54	38

   

  Operational lease agreements falling due later than one year from balance sheet date

  The Group has entered into several minor lease agreements for buildings, communication and other operating equipment in our long and narrow country relating to ordinary onsite operations and implementation of our projects. The leases vary from a few months to 15 years. Leases are paid and carried to expense in accordance with the terms of each contract. The Group's material future lease obligations include buildings and communication. These will increase from the current level by approximately NOK 40 million from 2013.
  

   

  Auditor's fee

  Parent company			Group
  2011	2012	(Amounts in NOK thousand)	2012	2011
  680	709	Statutory audit	913	898
  344	292	Other attestation services	333	373
  246	147	Tax-related assistance	153	273
  190	659	Other assistance	659	215
  1 460	1 807	Total fees (excl. VAT)	2 058	1 759

   

  Auditor's fees are exclusive of VAT.

• Note 19 Comparative figures for the Statnett Group
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  All amounts in the income statement, balance sheet, cash flow and supplementary information are presented showing one year comparative figures.
  
  Below, comparative figures for selected amounts have been cited for four years.
  

   

  From the statement of comprehensive income

   

  Statnett Group	2012	2011	2010	2009	2008
  Permitted revenue	4 025	4 296	4 803	3 722	3 355
  Higher/lower revenue for the period	1 065	1 020	2 177	-1 059	721
  Other operating revenue	244	181	267	199	180
  Total operating revenue	5 334	5 497	7 247	2 862	4 256
  Operating costs	3 901	3 869	3 968	3 265	3 062
  Operating profit/loss	1 433	1 628	3 279	-403	1 194
  Income from joint ventures and associates	9	5	11	24	962
  Net financial items	-280	-276	-232	-289	-414
  Profit/loss before tax	1 162	1 357	3 058	-668	1 742
  Profit/loss for the year	837	1 000	2 198	-480	1 517

   

   

   

  From the statement of comprehensive income, not including higher/lower revenue

   

  Statnett Group	2012	2011	2010	2009	2008
  Permitted revenue	4 025	4 296	4 803	3 722	3 355
  Other operating revenue	244	181	267	199	180
  Total operating revenue	4 269	4 477	5 070	3 921	3 535
  Operating costs	3 901	3 869	3 968	3 265	3 062
  Operating profit/loss excl. higher/lower revenue	368	608	1 102	656	473
  Income from joint ventures and associates	9	5	11	24	962
  Net financial items	-280	-276	-232	-289	-414
  Profit/loss before tax excl. higher/lower revenue	97	337	881	391	1 021

   

   

  From the balance sheet

   

  Statnett Group	2012	2011	2010	2009	2008
  Intangible assets	66	66	66	-	-
  Fixed assets	23 450	21 075	19 413	17 858	19 349
  Current assets	2 278	2 740	2 591	1 484	1 570
  Total assets	25 794	23 881	22 070	19 342	20 919
  Equity	8 955	8 277	7 628	5 618	6 585
  Interest-bearing liabilities	14 390	13 276	11 757	12 340	12 340
  Other liability items	2 449	2 328	2 685	1 384	1 994
  Total equity and liabilities	25 794	23 881	22 070	19 342	20 919

   

   

  From cash flow

   

  Statnett Group	2012	2011	2010	2009	2008
  Net cash flow from operating activities	1 426	1 523	3 804	-466	1 529
  Net cash flow from investing activities	-3 085	-2 370	-1 740	-140	-2 670
  Net cash flow from financing activities	1 291	720	-1 277	388	1 221
  Net cash flow for the period	-368	-127	787	-218	80
  Liquid assets	634	1 002	1 129	342	556
  Dividend for the year to owner	117	315	132	499	318
• Note 20 New and amended accounting standards

  New and amended IAS, IFRS and IFRIC standards with future implementation dates

  The standards and interpretations that were adopted before submission of the consolidated accounts, but where the effective date is in the future, are stated below. The Group intends to implement the relevant amendments at the effective date, provided that the EU approves the amendments before the group accounts are presented. Only matters assumed to be relevant for Statnett have been included. However, none of the amendments below are considered to imply substantial changes in the Group’s application of accounting principles or notes. For amendments that are considered to have a significant impact on the Group's application of accounting principles or notes to the accounts, cf. Note 1.

  Amendment to IFRS 7 Financial Instruments – information

  The amendments entail that enterprises have a duty to provide several quantitative details relating to set-off of financial assets and financial liabilities. The information requirements apply to all recognised financial instruments set off pursuant to IAS 32. The amendments will be effective for fiscal years starting on 1 January 2013 or later.

  IFRS 9 – Financial Instruments

  IFRS 9, as it is currently published, reflects the first phase of IASBs work on replacing the current IAS 39, and pertains to classification and measuring of financial assets and liabilities as defined in IAS 39. Initially, the standard was to become effective for the fiscal year starting on 1 January 2013 or later. However, the effective date was postponed to 1 January 2015, due to the amendments to IFRS 9 adopted in December 2011. The later phases of this project relate to hedge accounting and write-down of financial assets. The Group will evaluate potential effects of IFRS 9 in keeping with the other phases, as soon as the final standard, including all phases, is published.  

  IFRS 10 Consolidated Financial Statements

  The new the consolidation standard – IFRS 10 – replaces the consolidated financial statements of IAS 27 Consolidated Financial Statements and Separate Financial Statements and SIC 12 Consolidation – Special Purpose Entities. The actual consolidation method will not change as a result of the introduction of IFRS 10. However, the new standard may change the assessment of whether an entity should be consolidated or not. This is due to a change in the definition of “control”. The new definition of “control” applies to investment in all entities, also structured entities (formerly referred to as special purpose entities). The following criteria must be fulfilled before an investor is considered to have control over an entity:

  • Power over the entity (“investee” in IFRS terminology),
  • Exposure, or right to, variable returns from its involvement with the entity, and
  • The ability to use its power over the entity to affect the amount of the investor's returns.

  The changes in the regulations will increase the use of discretionary assessment when determining whether the entity should be consolidated. The standard has been approved by the EU, with effect from the fiscal year starting on 1 January 2014 or later.

  IFRS 11 Joint Arrangements

  This standard replaces IAS 31 Interests in Joint Ventures, as well as SIC-13 Jointly Controlled Entities - Non-monetary Contributions by Venturers. IFRS 11 removes the option to account for joint ventures using the proportional consolidation method. Instead all entities that meet the definition of joint ventures must be accounted for using the equity method. In the EU/EEA area, IFRS 11 will apply for the fiscal year starting on 1 January 2014 or later.

  IFRS 12 Disclosure of Interests in Other Entities

  IFRS 12 applies to any entity that has an interest in subsidiaries, joint arrangements, associates and/or structured entities. Many of the IFRS 12 note requirements were previously found in IAS 27, IAS 28 and IAS 31, whereas others are new requirements. The purpose of the new note requirements is to ensure that users of financial statements understand the effect on the balance sheet, profit or loss and cash flows as a result of the enterprise's interests in other entities, as well as the nature of, and risk related to, the enterprise's interests in other entities. The changes will not have any impact on the financial standing of the Group or on profit or loss. The standard has been approved by the EU, with effect from the fiscal year starting on 1 January 2014 or later.

  IFRS 13 Fair Value Measurement

  The standard defines principles and guidelines for measuring the fair value of assets and liabilities which other standards require or permit to be measured at fair value. IFRS 13 will be effective for fiscal years starting on 1 January 2013 or later.

  Amendments to IAS 1 Presentation of Financial Statements

  The amendment to IAS 1 is a requirement to group revenues and costs in the statement of "Other revenues and costs" based on their potential to be reclassified to profit or loss, or not. The changes will only affect the presentation, and will have no impact on the Group's financial standing or on profit or loss. The amendments to IAS 1 will be effective for fiscal years starting on 1 July 2012 or later.

  IAS 28 Investment in Associates and Joint Ventures

  The scope of IAS 28 has been expanded to include investments in joint ventures. The standard describes principles for accounting of investments in affiliated companies and joint ventures, and specifies how the equity method should be applied. The amendments will be effective for fiscal years starting on 1 January 2013 or later.

  IAS 32 Financial Instruments - presentation

  IAS 32 has been amended to clarify the phrase "currently has a legal enforceable right to set-off" and to clarify the application of IAS 32's set-off criteria for settlement systems. The amendments will be effective for fiscal years starting on 1 January 2014 or later.

  Annual improvement project 2009-2011

  IAS 16 – Property, plants and equipment

  The amendment makes it clearer that major spare parts and servicing equipment that meet the definition of property, plant and equipment are not inventory.  The amendments will be effective for fiscal years starting on 1 January 2013 or later. However, the amendments have still not been approved by the EU.

  IAS 32 Financial Instruments, Presentation

  The amendment clarifies that income tax deriving from distributions to holders of an equity instrument shall be recognised in accordance with IAS 12. The amendments will be effective for fiscal years starting on 1 January 2013 or later. However, the amendments have still not been approved by the EU.