rsted
Salg & Service
Annual report 2020
Contents
Overview
Company information
Group structure
Performance highlights
Statement by the Executive Board and the
Board of Directors
Independent auditor's report
Management’s review
Financial statements
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated cash flow statement
Parent company statement of comprehensive income
Parent company balance sheet
Parent company statement of changes in equity
Parent company cash flow statement
Notes
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Contents
Note summaryØrsted Salg & Service Annual report 2020
Company information
Company Ørsted Salg & Service A/S
Kraftværksvej 53
Skærbæk
7000 Fredericia
Denmark
Telephone: +45 99 55 11 11
Email: orsted@orsted.dk
Company registration number: 27210538
Shareholder The entire share capital is held by Ørsted A/S
Board of Directors Marianne Wiinholt (Chairman)
Anja Forup (Deputy Chairman)
Jeppe Hoff Nielsen
Executive Board Martin Neubert
Auditor PricewaterhouseCoopers, Statsautoriseret Revisionspartnerselskab
Annual general meeting 17 May 2021
Other managerial posts Managerial posts held by the members of the Board of Directors and the
Executive Board of Ørsted Salg & Service A/S in other Danish public limited
companies, with the exception of managerial posts in the company’s own
wholly-owned subsidiaries.
Marianne Wiinholt ØRSTED A/S (Chief Financial Officer), HEMPEL A/S (member of the Board
of Directors), COLOPLAST A/S (member of the Board of Directors), EM EL
HOLDING A/S (Chairman of the Board of Directors), ENERGIGRUPPEN
JYLLAND EL HOLDING A/S (Chairman of the Board of Directors), ØRSTED
WIND POWER HOLDING A/S (Chairman of the Board of Directors), ØRSTED
BIOENERGY & THERMAL POWER A/S (Chairman of the Board of Directors),
ENERGIGRUPPEN JYLLAND EL A/S (Chairman of the Board of Directors),
ØRSTED EGJ A/S (Chairman of the Board of Directors), ØRSTED EL A/S
(Chairman of the Board of Directors), ØRSTED SERVICES A/S (Chairman
of the Board of Directors), ØRSTED WIND POWER A/S (Chairman of the
Board of Directors), ØRSTED WIND POWER DENMARK A/S (Chairman of
the Board of Directors), ØRSTED NR. 1 2014 A/S (Chairman of the Board
of Directors), ØRSTED ONSHORE HOLDING A/S (Chairman of the Board
of Directors), ØRSTED NORTH AMERICA HOLDING A/S (Chairman of the
Board of Directors), ØRSTED REAL ESTATE A/S (Chairman of the Board of
Directors), ØRSTED COMMERCIAL COMMODITIES A/S (Chairman of the
Board of Directors)
Anja Forup EM EL HOLDING A/S (Deputy Chairman of the Board of Directors),
ENERGIGRUPPEN JYLLAND EL HOLDING A/S (Deputy Chairman of the
Board of Directors), ENERGIGRUPPEN JYLLAND EL A/S (Deputy Chairman
of the Board of Directors), ØRSTED EGJ A/S (Deputy Chairman of the Board
of Directors), ØRSTED EL A/S (Deputy Chairman of the Board of Directors),
ØRSTED WIND POWER DENMARK A/S (Deputy Chairman of the Board
of Directors), ØRSTED NR. 1 2014 A/S (Deputy Chairman of the Board of
Directors), ØRSTED NORTH AMERICA HOLDING A/S (Deputy Chairman of
the Board of Directors), ØRSTED REAL ESTATE A/S (President)
Jeppe Hoff Nielsen EM EL HOLDING A/S (President), ENERGIGRUPPEN JYLLAND EL HOLDING
A/S (President), ENERGIGRUPPEN JYLLAND EL A/S (President), ØRSTED
EGJ A/S (President), ØRSTED EL A/S (President), ØRSTED SERVICES A/S
(President), ØRSTED NORTH AMERICA HOLDING A/S (President), ØRSTED
INSURANCE A/S (Deputy Chairman of the Board), ØRSTED REAL ESTATE
A/S (Deputy Chairman of the Board)
Martin Neubert ØRSTED A/S (President), ØRSTED WIND POWER HOLDING A/S (President),
ØRSTED WIND POWER A/S (President), ØRSTED WIND POWER DENMARK
A/S (President)
Overview
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Contents
Note summaryØrsted Salg & Service Annual report 2020
100%
100%
100%
100%
100%
100%
100%
8.23%
100%
100%
100%
Ørsted Salg & Service A/S
CVR no. 27210538
Ørsted Markets GmbH
Amtsgericht Hamburg
Reg. no. HRB117696
Ørsted Sales GmbH
Amtsgericht Hamburg
Reg. no. HRB136926
Ørsted AB
Reg. no. 556626-9345
Danish Offshore
Gas Systems A/S
CVR no. 34881057
Ørsted Pipelines A/S
CVR no. 27921825
Ørsted Energy Solutions
(UK) Limited
Reg. no. 11111174
Ørsted Salg & Service A/S
(UK branch)
Reg. no. BR017278
Nordic Impact Bridge ApS
CVR no. 39237407
Ørsted S&D (UK) Limited
Reg. no. 07805315
Group structure
Company name Registered office Currency
Share capital
in million
Group owner-
ship interest
Ørsted Salg & Service A/S Fredericia, Denmark DKK ,. %
Ørsted Markets GmbH Hamburg, Germany EUR . %
Ørsted Sales GmbH Hamburg, Germany EUR . %
Ørsted AB Gothenburg, Sweden SEK . %
Danish Offshore Gas Systems A/S Fredericia, Denmark DKK . %
Ørsted Pipelines A/S Fredericia, Denmark DKK . %
Ørsted Energy Solutions (UK) Limited London, UK GBP . %
Ørsted Salg & Service A/S (UK branch) UK GBP - %
Nordic Impact Bridge ApS Copenhagen, Denmark DKK . . %
Ørsted S&D (UK) Limited London, UK GBP . %
Ørsted Salg & Service NL, branch of
Ørsted Salg & Service A/S Denmark
's-Gravenhage, the
Netherlands EUR - %
Ørsted Sales (UK) Limited London, UK GBP . %
Ørsted Power Sales (UK) Limited London, UK GBP . %
Ørsted Commercial Commodities A/S Fredericia, Denmark DKK . %
Ørsted Salg & Service NL,
branch of Ørsted Salg &
Service A/S Denmark
Reg. no. 73829749
Ørsted Sales (UK) Limited
Reg. no. 02405635
Ørsted Power Sales (UK)
Limited
Reg. no. 07489052
100%
Ørsted Commercial
Commodities A/S
CVR-nr. 41965533
100%
Overview
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Contents
Note summaryØrsted Salg & Service Annual report 2020
Performance highlights
DKKm
Business performance:
Statement of comprehensive income
Revenue , , , , ,
Profit (loss) before interest, tax, depreciation, and amortisation (EBITDA) ,
Operating profit (loss) (EBIT) ,
Profit (loss) for the year () () ,
Financial ratios
EBITDA margin % % % % %
EBIT margin (profit margin) n/a n/a % % %
IFRS:
Statement of comprehensive income
Revenue , , , , ,
Profit (loss) before interest, tax, depreciation, and amortisation (EBITDA) () , ,
Operating profit (loss) (EBIT) () , ,
Net financial income and expenses () () () () ()
Profit (loss) before tax () ,
Profit (loss) for the year (.) ()
Balance sheet
Equity , , , , ,
Balance sheet total , , , , ,
Cash flows
Operating activities , (,) , (,) ,
Investments in property, plant, and equipment - () () () ()
Other investing activities () , (,)
Financing activities () () () ()
Financial ratios
EBITDA margin ( %) % % % %
EBIT margin (profit margin) ( %) % % % %
Net interest-bearing debt (,) (,) (,) (,) (,)
Capital employed , , , ()
Average number of employees
Financial ratios have been calculated in accordance
with ‘Recommendations & Ratios’ published by the
Danish Society of Financial Analysts. For definitions,
see the accounting policies section.
Business performance vs. IFRS
Business performance represents the underlying
financial performance of the Group in the reporting
period as results are adjusted for temporary fluctu-
ations in the market value of contracts (including
hedging transactions) relating to other periods.
Apart from this, there is no difference between
business performance and IFRS results. Read more
in note 30 'Description of accounting policies'.
Overview
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Contents
Note summaryØrsted Salg & Service Annual report 2020
Statement by the Executive Board
and the Board of Directors
Skærbæk, 7 May 2021
Executive Board:
Martin Neubert
President
Board of Directors:
Marianne Wiinholt
Chairman
Anja Forup
Deputy chairman
Jeppe Hoff Nielsen
Board member
Overview
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ContentsNote summaryØrsted Salg & Service Annual report 2020
Opinion
Basis for Opinion
Independent auditor’s report
Statement on Management’s Review
Management’s Responsibilities for the
Financial Statements
Auditor’s Responsibilities for the Audit of
the Financial Statements
Overview
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ContentsNote summaryØrsted Salg & Service Annual report 2020
Copenhagen, 7 May 2021
PricewaterhouseCoopers
Statsautoriseret Revisionspartnerselskab
CVR no. 33771231
Rasmus Friis Jørgensen
State Authorised Public Accountant
mne28705
Michael E. Jacobsen
State Authorised Public Accountant
mne16655
Overview
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ContentsNote summaryØrsted Salg & Service Annual report 2020
Highlights 2020
— We won significant new third-party power
balancing contracts with renewable assets
in the UK and the Netherlands.
— We entered into an agreement to resell
some of the natural gas Ørsted receives
under our legacy gas purchasing contracts
to PGNiG Supply and Trading (PST).
— We completed the divestment of our LNG
activities and our Danish energy efficiency
consulting business.
— We entered into an agreement to divest
our UK B2B gas and power portfolios to
Total Gas & Power.
Financial performance
Revenue from continued operations decreased
by 35 % compared to 2019 and amounted to
DKK 20.4 billion. The decrease was mainly
driven by an average decrease of 31 % in gas
prices relative to 2019 combined with lower gas
volumes in 2020. Sold power volumes increased
by 10 %, but decreased power prices contributed
to the lower revenue.
EBITDA amounted to DKK 0.7 billion compared
to DKK 0.9 billion in 2019.
To reflect end-to-end value chain thinking in
Ørsted, earnings from trading related to hedging
of power exposures and power portfolio opti-
misation activities are reported as Offshore and
Onshore earnings.
EBITDA from Offshore and Onshore Sales de-
creased by DKK 0.5 billion to DKK 0.4 billion in
2020. The decrease was primarily due to a more
normal level of earnings from trading related
to hedging of our power exposure, which was
exceptional good in 2019.
EBITDA from Gas Markets & Infrastructure
increased by 56 % and amounted to DKK 0.5 bil-
lion. Higher earnings from revaluation of our gas
at storage and a positive impact from storage
hedges was partly offset by lower transported
and sold volumes due to the shutdown of the
Tyra gas field from late 2019 until 2023.
EBITDA from Other business activities amount-
ed to DKK -0.3 billion, an increase of 28%, which
was primarily due to reduced operating costs.
Cash flows from operating activities amounted
to DKK 0.8 billion in 2020. The increase of DKK
1.9 billion was mainly due to lower paid taxes
(receipt of on account taxes in 2020 versus
payment of taxes on-account in 2019), higher
funds from operations which was partly offset
by more funds tied up in net working capital
compared to 2019.
Management’s review
Performance highlights %
Business drivers
Gas sales
TWh . . ( %)
Power sales
TWh . . %
Gas price, TTF EUR/MWh . . ( %)
Power price, DK EUR/MWh . . ( %)
Power price, LEBA UK GBP/MWh . . ( %)
Financial results
Revenue DKKm , , ( %)
EBITDA (Continued Operations) DKKm ( %)
Offshore and Onshore ( %)
Gas Markets & Infrastructure %
Other, incl. end-customer sale () () %
EBITDA (Discontinued Operations) DKKm () () %
Depreciation DKKm () () ( %)
EBIT DKKm ( %)
Cash flows from operating
activities DKKm (,) n/a
Gross investments DKKm %
Divestments DKKm () n/a
Free cash flow DKKm - () n/a
Capital employed DKKm , , ( %)
1
Of total gas volumes, 91.9 TWh (2019: 127.1 TWh) and 51.0 TWh (2019: 91.5 TWh)
relate to continuing operations and 40.9 TWh (2019: 35.6 TWh) to discontinued
operations.
2
Of total power volumes 41.1 TWh and 36.7 TWh relates to continuing operations
and 4.4 TWh to discontinued operations..
Overview
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Contents
Note summaryØrsted Salg & Service Annual report 2020
Cash flows from gross investments amounted to
DKK 0.8 billion, mainly due to transactions with
Ørsted´s internal bank.
Following the agreement to divest our LNG
activities and UK B2B gas and power portfolios,
we have decided to present these activities as
discontinued operations. The UK B2B gas and
power portfoios are not considered as assets
held for sale. Reference is made to note 11
‘Discontinued operations’.
Ørsted uses business performance as an alter-
native to the results prepared in accordance
with IFRS. Business performance represents the
underlying financial performance of the Group
in the reporting period as results are adjusted
for temporary fluctuations in the market value
of contracts (including hedging transactions)
relating to other periods. The difference
between the two principles will be eliminated as
the contracts expire. Apart from this, there is no
difference between business performance and
the IFRS results.
EBITDA calculated in accordance with IFRS
amounted to DKK -0.2 billion in 2020 against
DKK 1.8 billion in 2019. Calculated in accordance
with the business performance principle, EBITDA
was DKK 0.7 billion in 2020 and DKK 0.9 billion
in 2019. The difference between the two princi-
ples was thus DKK -0.9 billion in 2020 compared
with DKK 0.9 billion in 2019 and can be specified
as shown in the table to the left.
In the presentation of the results according to
IFRS, Ørsted does not apply the provisions on
hedge accounting of commodities and related
currency exposures. The market value adjust-
ments of these are continuously recognised
in the income statement, which means that
the IFRS results for the individual years are not
comparable. IFRS results do not reflect the
commercial risk hedging, according to which
the business units and the Group are managed
and evaluated. In the management’s review,
comments are made on business performance
only, unless otherwise specified. Reference is
also made to note 2 "Business Performance".
Outlook 2021
For the Ørsted Salg & Service Group, a lower
EBITDA is expected for 2021. EBITDA is expect-
ed to total DKK 0.3-0.5 billion in 2021.
For 2021, EBITDA according to IFRS is expect-
ed to DKK 0.2 billion higher than what we
would have expected if we had kept reporting
according to the business performance prin-
ciple. This effect is included in our directional
guidance described above. Reference is made
to note 1 and 2, page 25 and 27 respectively.
Earnings from trading related to hedging of
our power exposure are expected to be in line
with 2020.
Earnings in ‘Gas Markets & Infrastructure’
are expected to be lower than 2020, mainly
because the positive effects from revaluation
of gas at storage caused by the increasing gas
prices, especially during Q4 2020, are expect-
ed to partly reverse in 2021.
Events after the end of the financial year
No events have occurred after the end of the
financial year which would have influenced
the evaluation of this annual report.
Introduction to Ørsted Salg & Service
Route-to-market and trading
We serve as an efficient route-to-market for both
Ørsted companies and external partners, by
providing balancing services for renewable gener-
ation portfolios and by selling green certificates
to the market. In doing so, we manage large
volumes of power contracts that we optimise by
leveraging the size of our combined portfolio as
well as our origination and trading capabilities.
We proactively manage the merchant risks
arising from Ørsteds generation assets and con-
tracts by trading commodities, and we mitigate
risks and create value through time-to-market
decisions, proxy hedging, and netting.
We ensure efficient operations and maximise the
commercial value of our legacy gas portfolio.
Gas pipelines and storage facilities
We handle the commercial activities relating to
parts of the Ørsted Group’s gas infrastructure.
We own pipelines in the Danish sector of the
North Sea and have leased capacity across the
European pipeline system, securing access to
most gas markets in Northern Europe.
We have access to gas storage facilities in
Denmark and Germany where we have capacity
in the short and long term. Besides a higher
security of supply, these storage facilities provide
flexibility in our gas optimisation and trading.
Environment
As part of the Ørsted Group, we work for an
increase in the use of renewable energy, while
remaining dependent on traditional energy
sources to ensure a stable distribution of power.
Reference is made to the Ørsted Group’s
2020 annual report, which includes the Group’s
statutory environmental statement.
Business performance vs. IFRS, DKKm
EBITDA – business performance
Market value adjustments for the year regarding financial and physical
hedging contracts relating to a future period ()
Reversal of deferred gain (loss) relating to hedging contracts from
previous periods where the hedged production or trade is recognised in
business performance EBITDA in this period ()
EBITDA – IFRS () ,
Overview
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Contents
Note summaryØrsted Salg & Service Annual report 2020
Strategic and operational performance
2020
In 2020, we made great strides in the devel-
opment of our core activities, while continuing
to streamline business activities through
divestments.
Provide and develop a competitive
route-to-market
Having consistently reduced balancing
costs over the last few years, we provide an
increasingly efficient route-to-market for
Ørsted’s generation portfolio. In 2020, with
the addition of the Borssele 1 asset, we grew
the portfolio of Ørsted projects under our
management to 5.6 GW.
Our balancing services are also an increasingly
competitive option for third-party renewable
operators. We currently provide balancing
services for nearly 600 MW of third-party ca-
pacity, and in 2020, we won a major contract
with the Dogger Bank Wind Farm, which is
currently under construction. We will provide
balancing for 40 % of the volume from phases
A and B of this project, amounting to 960 MW
when fully completed. We also made success-
ful bids for providing balancing services for
onshore third-party renewable projects in the
Netherlands and in Denmark.
Spearhead market risk management
Our market trading activities had another
strong year in 2020, stemming from the
successful hedging and trading of our energy
exposures. We have especially benefitted
from the flexibility embedded in the contract
structures of our north-western European
energy portfolio which we leverage to protect
and extract value for the Ørsted Group.
As part of our digital strategy for short-term
trading, we rolled out a smart bidding tool
which uses a parametric algorithm to auto-
matically trade volumes in small increments
and improve the speed of our trade execution.
The tool enhances our ability to capture
stronger market prices in the UK, Germany,
and the Netherlands.
Optimise our gas portfolio
With the Danish Undergrund Consorti-
um-owned Tyra gas field in the North Sea shut
down for redevelopment until June 2023, we
have ensured continuous supply for our Danish
and Swedish gas customers by importing
piped volumes from Germany. When Tyra
reopens, and as domestic biogas production
increases, the dependence on importing gas to
Denmark will decrease.
In October 2020, we entered into a contract
with the Polish natural gas company PST to
sell approx. 70 TWh of natural gas over the
period from 2023-2028. Under the agreement,
Ørsted Salg & Service will resell some of the
natural gas received from the Danish North
Sea as part of our legacy gas purchasing con-
tracts. The agreement reduces our exposure
to long-term financial risk in our gas portfolio
and supports Poland’s decarbonisation agen-
da. Poland aims to reduce the share of coal in
its energy mix from 75 % today to 11-28 % by
2040 by substituting it with renewables and
natural gas.
We developed and launched a first-of-its-kind
trading contract for renewable hydrogen
certificates in the UK. Specifically targeting
the decarbonisation of the transport sector,
this contract builds on our other partnerships
wihtin renewable hydrogen technology.
Deliver on divestments
In 2020, we continued streamlining business
activities to focus on our growth platform.
At the end of July, we divested our energy
efficiency consulting business to EBAS, and
we completed the divestment of our LNG
business to Glencore in December. Finally, we
signed an agreement with Total Gas & Power
to divest our UK B2B gas and power portfolios
in September. This transaction was completed
in March 2021.
Risk management
The activities, financial position, results, and
future growth of the Ørsted Group are affect-
ed by a number of non-financial and financial
commercial risks. Therefore, we regularly
review our risk profile and the associated risk
policies to ensure the appropriate balancing
of risk exposure and activities at all times.
Formalised risk management is divided into:
– management of general commercial risks,
– management of financial risks and
– management of insurable risks.
Commercial risks are defined as events that
may, with a certain probability, adversely
impact the realisation of the Ørsted Group’s
financial results or strategy. The manage-
ment of commercial risks is anchored in the
individual segments in the Ørsted Group and
consolidated at corporate level. Once annual-
ly, the Ørsted Group identifies and prioritises
its risks in a risk matrix based on materiality
and probability.
In addition to these risks, we are involved in
litigation and arbitration proceedings, the
outcome of which may impact our financial
position. Reference is made to note 27 ‘Con-
tingent liabilities and other liabilities’.
Group management
The member of the Executive Board are:
Martin Neubert
CEO since 4 February 2021.
The members of the Board of Directors are:
Marianne Wiinholt
Chairman of the Board of Directors.
Anja Forup
Deputy Chairman of the Board of Directors.
Jeppe Hoff Nielsen
Member of the Board of Directors.
For further details regarding remuneration,
see note 5 'Employee costs' and note
6 ' Share-based payment'.
Retention and development of skills
Our business is generally highly complex,
requiring special skills. Coupled with the
growing demand for talent, this increases the
challenge of attracting and retaining employ-
ees. Much emphasis is placed on making us an
attractive workplace, and various initiatives
have been put in motion for this purpose.
These include management development,
skills development, performance systems,
talent development, and collaboration with
educational institutions.
Overview
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ContentsNote summaryØrsted Salg & Service Annual report 2020
Liquidity and financing risks
Our liquidity and financing risks are managed
centrally by the Ørsted Group in accordance
with the defined principles and delegated
authorities laid down by the Board of Direc-
tors of Ørsted A/S, in such a way as to ensure
that we have an adequate capital base and
adequate cash resources at all times. One of
the most important financial management
tasks in the Ørsted Group is to secure suffi-
cient and flexible financial resources in relation
to the Ørsted Group’s day-to-day operations
and investment programme. For this purpose,
internal management objectives have been
established determining required level of fi-
nancial resources, taking into account primar-
ily factors such as the investment programme,
cash flows from operating activities, and the
debt maturity profile. It is the Ørsted Group’s
financing policy to concentrate loans in the
parent company in order to optimise the loan
portfolio on a consolidated basis.
Insurable risks
The Ørsted Group has an extensive facility and
liability insurance programme, while the scope
of consequential loss insurance is very limited.
Also, separate insurance is taken out for cer-
tain large construction projects. The facilities
insurance largely relates to the membership of
the reinsurance company ´Oil Insurance Ltd.´
Through this, assets up to USD 300 million
are insured, with an excess of USD 10 million
per insurance event. With a view to achieving
adequate cover for a number of large assets,
this cover has been supplemented by a
number of supplementary insurance policies
through Lloyd’s of London and others. As part
of the optimisation of its insurance portfolio,
the Ørsted Group has established a captive,
Ørsted Insurance A/S, that is authorised to
carry on insurance business and is subject to
supervision by the Danish Financial Superviso-
ry Authority. Ørsted Insurance A/S is primarily
used to provide insurance cover for facilities
and certain construction projects. For further
details of risk management, reference is made
to note 25.
Environmental, social, and governance
statement (ESG)
We are part of the Ørsted Group, and refer-
ence is consequently made to the Ørsted
Group’s 2020 annual report, which includes
the Group’s statutory ESG report. Further
details on ESG can be found at www.orsted.
com/en/sustainability.
Policies
We would like to unfold the full potential of all
employees and ensure that men and women
have the same opportunities for obtaining
leadership positions. We have a policy on
women in management. We also have targets
for increasing the proportion of women at all
management levels.
To promote Ørsted as a diverse workplace, we
encourage all candidates to apply, regardless
of gender, race, age, and cultural background.
Recruitment processes include required fe-
male representation on shortlists, and recruit-
ers and hiring managers have been trained to
be aware of – and avoid – unconscious bias in
their selection of candidates.
Translation of policies into action
High-potential development programmes
have historically had too few female
participants, and a decision was made to have
30 % females on all the high-potential devel-
opment programmes from professional level
career development to mid-level leadership.
High-potential female candidates are identi-
fied in the annual People Review process and
have a structured dialogue about develop-
ment wishes and possibilities in the following
People Development Dialogue.
For female senior managers, we have initiated
a 'female spotlight initiative' that prepares tal-
ented women for senior leadership positions.
Ørsted has joined the UN Convention on
Discrimination against Women.
Target figures and gender representation at
management level
Due to equal representation of men and wom-
en on the Board of Directors in accordance
with the rules of the Danish Companies Act,
no targets for the share of the underrepresent-
ed gender have been set.
We seek to ensure everyone, regardless of
their demography or location, has equal
opportunity to help deliver our vision. We
have defined our 2023 goals around gender
balance in senior leadership.
To support our gender diversity goals, we
have a 66/34 gender balance among partici-
pants in our 2020 high-potential development
programmes. By 2023, we aim for this balance
to be 60/40. To bring in more diverse talent,
we encourage all candidates to apply, regard-
less of gender, race, age and cultural back-
ground; we have introduced a new format for
our job ads, with the specific aim of making
them more appealing to diverse candidates.
Recruitment processes include an expectation
of diverse shortlists, reduction of bias in inter-
views, and a diverse interview panel.
Achieved results
We have trained managers to reduce uncon-
scious bias during people review meetings
and job interviews, and our senior leaders are
building more diversity in our talent pipelines.
We have also introduced an inclusion index
into our 2020 annual employee satisfaction
survey to help all managers understand the
sense of inclusion in their team. We conducted
an inclusion survey which had a 60 % response
rate and have set a goal of encouraging a
multi-cultural mix at leadership levels globally.
High-potential diverse talents are identified in
the annual People Review process and have
a structured dialogue about development
wishes and possibilities in the following People
Development Dialogue.
Ørsted has joined ‘the UN Convention on the
Elimination of All Forms of Discrimination
against Women’. Description of the results
achieved from the company's efforts to
increase the ratio of the underrepresented
gender. Since 2018, we have progressed from
90/10 (male/female ratio) to 80/20 at senior
leadership levels (Leadership Conference) due
to a focus on gender diversity in promotions
and recruitment at senior levels.
Overview
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ContentsNote summaryØrsted Salg & Service Annual report 2020
Consolidated statement of comprehensive income
1 January - 31 December
Note DKKm
Business
performance Adjustments IFRS
Business
performance Adjustments IFRS
Revenue 20,358 (1,649 ) 18,709 31,443 1,637 33,080
Cost of sales (18,876 ) 743 (18,133 ) (29,475 ) (690 ) (30,165 )
Other external expenses (529 ) - (529 ) (713 ) - (713 )
, Employee costs (275 ) - (275 ) (390 ) - (390 )
Other operating income 9 - 9 20 - 20
Other operating expenses (3 ) - (3 ) (5 ) - (5 )
Operating profit (loss) before depreciation, amortisation, and
impairment losses (EBITDA) 684 (906 ) (222 ) 880 947 1,827
,
Depreciation, amortisation and impairment losses on intangible
assets and property, plant, and equipment (124 ) - (124 ) (151 ) - (151 )
Operating profit (loss) (EBIT) 560 (906 ) (346 ) 729 947 1,676
Gain (loss) on divestment of enterprises - - - (1 ) - (1 )
Financial income 1,147 - 1,147 1,153 - 1,153
Financial expenses (1,292 ) - (1,292 ) (1,240 ) - (1,240 )
Profit (loss) before tax 415 (906 ) (491 ) 641 947 1,588
Tax on profit (loss) for the year (18 ) 199 181 (570 ) (208 ) (778 )
Profit (loss) for the year from continuing operations 397 (707 ) (310 ) 71 739 810
Profit (loss) for the year from discontinued operations (453 ) (293 ) (746 ) (778 ) 721 (57 )
Profit (loss) for the year (56 ) (1,000 ) (1,056 ) (707 ) 1,460 753
Other comprehensive income
:
Exchange rate adjustments - - 4 - - (6 )
Other comprehensive income - - 4 - - (6 )
Total comprehensive income - - (1,052 ) - - 747
Profit (loss) for the year is attributable to:
Shareholder in Ørsted Salg & Service A/S (56 ) (1,000 ) (1,056 ) (707 ) 1,460 753
Profit (loss) for the year (56 ) (1,000 ) (1,056 ) (707 ) 1,460 753
Comprehensive income for the year is attributable to:
Shareholder in Ørsted Salg & Service A/S - - (1,052 ) - - 747
Total comprehensive income - - (1,052 ) - - 747
1
All items in "Other comprehensive income" may be recycled to the income statement.
Business performance
The business performance principle is our alternative
performance measure. According to IFRS, market
value adjustments of energy contracts and related
currency risks (including hedging) are recognised
on an ongoing basis in the profit (loss) for the year,
whereas under the business performance principle,
they are deferred and recognised in the period
in which the hedged exposure materialises. The
difference between IFRS and business performance
is specified in the 'Adjustments' column. Read
more about the business performance principle in
note30 'Description of accounting priciples'.
Financial statements
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Contents
Note summaryØrsted Salg & Service Annual report 2020
Note Equity and liabilities, DKKm
Share capital 1,110 1,110
Translation reserve (3 ) (7 )
Retained earnings 7,840 8,978
Equity 8,947 10,081
Provisions 1,826 1,931
Lease liabilities 93 183
Payables to group enterprises 133 141
Contract liabilities 4 4
Other paybles 2 9
Non-current liabilities 2,058 2,268
Provisions 393 235
Lease liabilities 76 79
Bank debt 64 108
Derivatives 4,820 5,109
Contract liabilities 179 224
Trade payables 2,469 3,431
Payables to group enterprises 1,811 3,138
Other payables 371 646
Income tax 319 -
Current liabilities 10,502 12,970
Liabilities 12,560 15,238
Liabilities relating to assets classified as held for sale - 2,277
Equity and liabilities 21,507 27,596
Consolidated balance sheet
31 December
Note Assets, DKKm
Rights 10 10
Completed development projects 67 71
Development projects in progress 46 69
Intangible assets 123 150
Land and buildings 4 4
Production assets 480 607
Fixtures and fittings, tools, and equipment - 9
Property, plant, and equipment under construction 2 14
Property, plant and equipment 486 634
Investment in associates and joint ventures - 1
Deferred tax 606 141
Other non-current assets 606 142
Non-current assets 1,215 926
Inventories 2,217 1,971
Derivatives 4,680 7,735
Trade receivables 3,973 5,507
Receivables from group enterprises 8,051 9,258
Other receivables 675 830
Income tax 84 707
Securities 356 361
Cash 256 301
Current assets 20,292 26,670
Assets classified as held for sale - -
Assets 21,507 27,596
Assets and related liabilities held for sale
In December, we completed the divestment of our
LNG business to Glencore.
Financial statements
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Contents
Note summaryØrsted Salg & Service Annual report 2020
DKKm
Share
capital
Translation
reserve
Retained
earnings Tota l
Share
capital
Translation
reserve
Retained
earnings Tota l
Equity at January 1,110 (7 ) 8,978 10,081 1,110 (1 ) 8,271 9,380
Comprehensive income for the year:
Profit (loss) for the year - - (1,056 ) (1,056 ) - - 753 753
Other comprehensive income:
Exchange rate adjustments, foreign companies - 4 - 4 - (6 ) - (6 )
Total comprehensive income - 4 (1,056 ) (1,052 ) - (6 ) 753 747
Transactions with owners:
Demerger of assets and liabilities - - (80 ) (80 ) - - (45 ) (45 )
Share-based payment - - (2 ) (2 ) - - (1 ) (1 )
Total changes in equity - 4 (1,138 ) (1,134 ) - (6 ) 707 701
Equity at December 1,110 (3 ) 7,840 8,947 1,110 (7 ) 8,978 10,081
Consolidated statement of changes in equity
1 January - 31 December
Demerger in 2019 comprises transfer of assets and
liabilities regarding the divestment of the residential
customer business to a separate legal entity fully
owned by Ørsted A/S. The demerger took effect on 1
January 2019. With effect from 1 July 2019, the owner-
ships of the UK sales companies have been merged
into Ørsted Salg & Service A/S.
Demerger in 2020 comprises of adjustments related
to the divestment of the residual customer business,
which took place in 2019.
Financial statements
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Contents
Note summaryØrsted Salg & Service Annual report 2020
Note DKKm
Cash flows from operations (operating activities) 796 (392 )
Interest income and similar items 872 960
Interest expenses and similar items (1,056 ) (944 )
Income tax paid 800 (723 )
Cash flows from operating activities 1,412 (1,099 )
Acquisition of intangible assets (11 ) (56 )
Acquisition of property, plant, and equipment - (18 )
Sale of tangible assets and property, plant, and equipment 2 -
Sale of enterprises - (1 )
Financial transactions with the Ørsted Group´s internal bank 781 724
Cash flows from investing activities 772 649
Payables to group enterprises 59 1
Instalments on leases (71 ) (74 )
Capital transactions principal shareholders - (6 )
Paid dividend (3 ) -
Cash flows from financing activities (15 ) (79 )
Cash flows from continuing operations 2,169 (529 )
Cash flows from discontinuing operations (2,169 ) (48 )
Total net change in cash and cash equivalents - (577 )
Cash and cash equivalents at January 193 688
Merger of cash and cash equivalents - 76
Net increase/(decrease) in cash - (577 )
Exchange rate adjustments (8 ) 6
Cash and cash equivalents at December 185 193
Consolidated cash flow statement
1 January - 31 December
Financial statements
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ContentsNote summaryØrsted Salg & Service Annual report 2020
Parent company statement of
comprehensive income
1 January - 31 December
Note DKKm
Business
performance Adjustments IFRS
Business
performance Adjustments IFRS
Revenue , () , , ,
Cost of sales (,) - (,) (,) - (,)
Other external expenses () - () () - ()
, Employee costs () - () () - ()
Other operating income - -
Other operating expenses () - () () - ()
Operating profit (loss) before depreciation, amortisation and
impairment losses (EBITDA) () () , ,
,
Depreciation, amortisation and impairment losses on intangible
assets and property, plant and equipment () - () () - ()
Impairment on investments in subsidiaries - - - () - ()
Operating profit (loss) (EBIT) () () ,
Gain (loss) on divestment of enterprises - - - () - ()
Financial income , - , , - ,
Financial expenses (,) - (,) (,) - (,)
Profit (loss) before tax () () ,
Tax on profit (loss) for the year () () () ()
Profit (loss) for the year from continuing operations () () ()
Profit (loss) for the year from discontinued operations () () () () ()
Profit (loss) for the year () () () ,
Other comprehensive income - - - - - -
Total comprehensive income - - () - -
Profit (loss) for the year is attributable to:
Shareholder in Ørsted Salg & Service A/S () () () ,
Profit (loss) for the year () () () ,
Total comprehensive income for the year is attributable to:
Shareholder in Ørsted Salg & Service A/S - - () - -
Total comprehensive income - - () - -
Business performance
The business performance principle is our alternative
performance measure. According to IFRS, market
value adjustments of energy contracts and related
currency risks (including hedging) are recognised
on an ongoing basis in the profit (loss) for the year,
whereas under the business performance principle,
they are deferred and recognised in the period
in which the hedged exposure materialises. The
difference between IFRS and business performance
is specified in the 'Adjustments' column. Read more
about the business performance principle in note
30 'Description of accounting principles'.
Financial statements
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Contents
Note summaryØrsted Salg & Service Annual report 2020
Note Equity and liabilities, DKKm
Share capital , ,
Development costs reserve
Retained earnings , ,
Equity , ,
Provisions , ,
Lease liabilities
Contract liabilities
Other payables
Non-current liabilities , ,
Provisions
Lease liabilities
Bank debt
Derivatives , ,
Contract liabilities
Trade payables , ,
Payables to group enterprises , ,
Other payables
Income tax -
Current liabilities , ,
Liabilities , ,
Liabilities relating to assets classified as held for sale - ,
Equity and liabilities , ,
Parent company balance sheet
31 December
Note Assets, DKKm
Rights
Completed development projects
Development projects in progress
Intangible assets
Land and buildings
Production assets
Property, plant, and equipment under construction
Property, plant and equipment
Investments in subsidiaries
Deferred tax
Other receivables -
Other non-current assets
Non-current assets , ,
Inventories , ,
Derivatives , ,
Trade receivables , ,
Receivables from group enterprises , ,
Other receivables
Income tax -
Securities
Cash
Current assets , ,
Assets classified as held for sale - -
Assets , ,
Assets and related liabilities held for sale
In December, we completed the divestment of our
LNG business to Glencore.
Financial statements
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Contents
Note summaryØrsted Salg & Service Annual report 2020
DKKm
Share
capital
Development
cost reserve
Retained
earnings Tota l
Share
capital
Development
cost reserve
Retained
earnings Tota l
Equity at January , , , , , ,
Comprehensive income for the year:
Profit (loss) for the year - () () () -
Total comprehensive income - () () () -
Transactions with owners:
Demerger of assets and liabilities - - () () - () ()
Share-based payment - - () () - - - -
Total changes in equity - () () () -
Equity at December , , , , , ,
Parent company statement of changes in equity
1 January - 31 December
Demerger in 2019 comprises transfer of assets and
liabilities regarding the divestment of the residential
customer business to a separate legal entity fully
owned by Ørsted A/S. The demerger took effect on 1
January 2019. With effect from 1 July 2019, the owner-
ships of the UK sales companies have been merged
into Ørsted Salg & Service A/S.
Demerger in 2020 comprises of adjustments related
to the divestment of the residual customer business,
which took place in 2019.
Financial statements
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Contents
Note summaryØrsted Salg & Service Annual report 2020
Note DKKm
Cash flows from operations (operating activities) ,
Interest income and similar items
Interest expenses and similar items (,) ()
Income tax paid ()
Cash flows from operating activities , ()
Acquisition of intangible assets () ()
Acquisition of property, plant, and equipment - ()
Sale of enterprises - ()
Financial transactions with the Ørsted Group´s internal bank ()
Investments in subsidiaries () ()
Other investments () -
Cash flows from investing activities () ()
Instalments on leases () ()
Capital transactions principal shareholders - ()
Instalments on loans () -
Paid dividend () -
Cash flows from financing activities () ()
Cash flows from continuing operations , ()
Cash flows from discontinuing operations (,) ()
Total net change in cash and cash equivalents ()
Cash and cash equivalents at January ()
Net increase/(decrease) in cash ()
Cash and cash equivalents at December () ()
Parent company cash flow statement
1 January - 31 December
Financial statements
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ContentsNote summaryØrsted Salg & Service Annual report 2020
Notes
Index of notes
Basis of reporting
Business performance
Revenue
Cost of sales
Employee costs
Share-based payment
Auditor’s fees
Financial income
Financial expenses
Tax on profit (loss) for the year
Discontinued operations
Intangible assets
Property, plant, and equipment
Investments in subsidiaries
Deferred tax
Inventories
Derivatives
Receivables
Income tax receivable, and payable
Cash, cash equivalents, and securities
Assets classified as held for sale
Equity
Provisions
Contract liabilities
Other payables
Cash flows from operations
Financial risks and risk management
Contingent liabilities and other liabilities
Related-party transactions
Description of accounting policies
Calculation of financial ratios
Notes
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ContentsNote summaryØrsted Salg & Service Annual report 2020
Accounting policies
Ørsted Salg & Service A/S is a public limited
liability company based in Denmark.
The financial statements for the period 1
January - 31 December 2020 comprise the
consolidated financial statements of Ørsted
Salg & Service A/S and its subsidiaries (the
Group) as well as the financial statements of
the parent company Ørsted Salg & Service
A/S. Reference is made to note 30 'Description
of accounting policies'.
The consolidated financial statements have
been prepared in accordance with the Inter-
national Financial Reporting Standards (IFRS)
as adopted by the EU and further require-
ments in the Danish Financial Statements Act
(Årsregnskabsloven).
The financial statements are presented in
million Danish kroner (DKK), unless otherwise
stated.
Cease the use of business performance as
of 1 January 2021
With the implementation of IFRS 9 in 2018, it
has become significantly easier to apply IFRS
hedge accounting to our commodity hedges.
We have concluded that IFRS 9 can replace
our business performance principle, for which
reason we only will be reporting based on
IFRS from 1 January 2021. Thus, the business
performance and adjustment columns will
no longer be included. This will simplify our
reporting and avoid potential conflicts with
future reporting requirements for alternative
performance measures.
Among other things, IFRS 9 has made it easier
to apply hedge accounting by the removal of
the 80-125 % effectiveness requirement which
can be difficult to comply with at all times
when we engage in proxy hedging. An exam-
ple of proxy hedging is when we hedge our
power exposure 4-5 years into the future with
gas hedges due to illiquidity in the market for
power hedges with this time horizon.
At the end of 2020, the value of our business
performance hedges deferred to a future
period amounted to a loss of DKK 628 million.
This loss has already been recognised in the
income statement under IFRS, as we have
not previously applied hedge accounting for
these. Consequently, for the period 2021-2025,
EBITDA (according to IFRS) will be higher
with a similar amount compared to what the
business performance EBITDA would have
been in the same period, if we had continued
to report based on this principle. See also note
2 "Business Performance".
Measurement basis
The consolidated financial statements have
been prepared on historical cost basis except
for derivatives, financial instruments, and car-
bon emission allowances in trading portfolio
that are measured at market value.
The accounting policies have been applied
consistently to the financial year and for the
comparative figures.
The accounting policies applied to the con-
solidated financial statements as a whole are
described in note 30 'Description of account-
ing policies'.
Key accounting estimates and judgements
The use of reasonable estimates and judge-
ments is an essential part of the preparation
of the consolidated financial statements.
Given the uncertainties inherent in our busi-
ness activities, we make a number of esti-
mates regarding valuation and judgements.
The estimates and judgements are based on
assumptions concerning future developments
which affect our application of accounting
policies and reported amounts of our assets,
liabilities, sales, costs, cash flows, and relat-
ed disclosures. Actual amounts may differ
from the amounts estimated and estimates
made as more detailed information becomes
available.
We regularly reassess these estimates and
judgements, based among other things on
1. Basis of reporting
Note Key accounting estimates and judgements
Estimate/
judgement
Extent of accounting
estimates and judgements
Provisions and contingent assets
and liabilities
Assumptions for decommissioning obligations
Estimate of onerous contracts
Estimate of litigation outcomes
Estimate
Estimate
Estimate
Extent of accounting estimates and judgements
relates to objectivity and business practice.
Very objective/market-conforming
Objective/partially conforming
Partially subjective/partially distinctive
Subjective/distinctive for Ørsted
Notes
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Contents
Note summaryØrsted Salg & Service Annual report 2020
historical experience, the current situation in
the financial markets, and a number of other
relevant factors, e.g. the expected effects
of Brexit.
Accounting estimates, judgements and
assumptions which may entail a risk of materi-
al adjustments in subsequent years are listed
in the table on page 25.
In addition, we make judgements when we
apply the accounting policies.
Reference is made to the specific notes for
further information on the key accounting
estimates and judgements as well as the
assumptions applied.
Consolidated financial statements
The consolidated financial statements include
the parent company Ørsted Salg & Service A/S
and subsidiaries controlled by Ørsted Salg &
Service A/S, see the Group structure on page 5.
The consolidated financial statements have
been prepared as a consolidation of the par-
ent company’s and the individual subsidiaries’
financial statements prepared in accordance
with the Group’s accounting policies. Intra-
group income and expenses, shareholdings,
balances, and dividends as well as realised
and unrealised gains and losses arising from
intragroup transactions are eliminated at
consolidation.
If we hold or have the ability to exercise,
directly or indirectly, 20-50 % of the voting
rights and do not exercise control, such enter-
prises are accounted for as associates. How-
ever, we carry out a specific assessment of
our ability to exercise influence, including our
ability to influence financial and operational
decisions and thus our return.
Foreign currency translation
For each reporting enterprise in the Group,
items are determined in the currency of the
primary economic environment in which
the individual reporting enterprise operates
(functional currency). Transactions in curren-
cies other than the functional currency of
each enterprise are accounted for as transac-
tions in foreign currencies and translated on
initial recognition at the exchange rate at the
transaction date. Exchange differences arising
between the exchange rate at the transaction
date and at the date of payment are recog-
nised in profit (loss) for the year as financial
income or expenses.
Receivables, payables, and other monetary
items in foreign currencies are translated at
the exchange rates at the balance sheet date.
The difference between the exchange rate at
the balance sheet date and the date at which
the receivable or payable arose is recognised
in profit (loss) for the year as financial income
or expenses.
For foreign subsidiaries, the statements of
comprehensive income are translated at
monthly average exchange rates in so far
as these do not deviate materially from the
actual exchange rates at the transaction
dates. Balance sheet items are translated at
the exchange rates at the balance sheet date.
All exchange differences are recognised in
profit (loss) for the year, except for exchange
differences arising on:
– translation of the opening equity of these
entities at the exchange rates at the bal-
ance sheet date
– translation of the statements of compre-
hensive income of these enterprises from
the exchange rates at the transaction
date to the exchange rates at the balance
sheet date
– translation of balances accounted for as
part of the total net investment
– translation of the portion of loans and
derivative financial instruments that has
been entered into to hedge the net invest-
ment in these enterprises, and that provides
an effective hedge against corresponding
foreign exchange gains (losses) on the net
investment in the enterprise.
The above types of exchange differences are
recognised in other comprehensive income.
Such exchange rate adjustments are allocated
to the parent company’s equity.
On full or partial disposal of the net in-
vestment, the accumulated exchange rate
adjustments are recognised as follows:
– Disposal results in loss of control. The accu-
mulated exchange rate adjustments, includ-
ing any associated hedges, are recognised
in the profit (loss) for the year if a foreign
exchange gain (loss) is realised by the selling
enterprise. Any foreign exchange gain (loss)
is transferred to the item in which the gain
(loss) is recognised. The part of the foreign
currency translation reserve that relates to
non-controlling interests is not transferred
to profit (loss) for the year.
– Disposal does not result in loss of control. A
proportionate share of the foreign currency
translation reserve is transferred from the par-
ent company shareholders’ share of equity to
the minority shareholders’ share of equity.
Repayment of balances that are considered
part of the net investment does not constitute
a partial disposal of the subsidiary.
Implementation of new standards and
interpretations
We regularly assess the impact of new IFRS
standards and interpretations. We implement
new IFRS standards and interpretations from
their mandatory effective dates at the latest.
Effective from 1 January 2020, we have
implemented the following new or changed
standards (IAS and IFRS) and interpretations:
– Amendments to IAS 1 and IAS 8: Definition of
Material.
– Amendments to IFRS 3: Definition of a
Business.
– Amendments to IFRS 9 and IFRS 7: Interest
Rate Benchmark Reform.
The adoption of the new and amended
standards has not impacted our consolidated
financial statements for 2020.
New standards and interpretations
IASB has issued a number of new or amended
standards and interpretations which have
not yet entered into force, and which have
consequently not been incorporated into the
consolidated financial statements for 2020.
None of these amended standards and inter-
pretations are expected to have any signifi-
cant impact on our financial statements.
Notes
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ContentsNote summaryØrsted Salg & Service Annual report 2020
Specification of the difference between EBITDA according to
business performance and according to IFRS, DKKm
EBITDA – business performance
Business performance adjustments ()
EBITDA – IFRS () ,
Total business performance adjustments for the year comprise:
Market value adjustments for the year of financial and physical hedging
contracts relating to a future period ()
Reversal of deferred gains (losses) relating to hedging contracts from
previous periods where the hedged trade is recognised in business
performance EBITDA in this period ()
Total adjustments ()
Expected impact on business performance EBITDA from energy and currency hedging, DKKm
Deferred for subsequent recognition
at December
Deferred for subsequent recognition
at December
after To ta l after To ta l
Oil () () () () ()
Gas
Power () () () () () () () ()
Currency ()
To t a l () () () () () ()
Cease the use of business performance as
of 1 January 2021
As of 1 January 2021, we will apply hedge ac-
counting to all commodity hedges and related
currency hedges except for hedges related to
our gas portfolio which account for approx.
26 % of our total commodity hedges. We
expect to implement hedge accounting to
hedges in our gas portfolio during the first half
of 2021.
Expected impact on business performance
EBITDA from energy and currency hedges
Market value adjustments deferred for
recognition in the business performance
results in a subsequent period are specified in
the table below. At 31 December 2020, a loss
of DKK628 million had been deferred (2019:
gain of DKK312 million), which would affect
business performance EBITDA in subsequent
years had we continued to apply the business
performance principle.
Difference between IFRS and business
performance for the year
The difference between IFRS and business
performance is specified in the table to the
upper right. Market value adjustments in
2. Business performance
respect of future periods totalled a loss of DKK
641 million (2019: gain of DKK 624 million) and
primarily related to the hedging of power.
Reversal of deferred gain (loss) recognised
according to business performance in 2020
totalled a loss of DKK 265 million (2019: gain
of DKK 323 million) and primarily relates to
gains on the hedging of gas and currencies.
These gains are recognised in business
performance EBITDA in the current year, but
have already been recognised in IFRS EBITDA
in a previous period.
Notes
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ContentsNote summaryØrsted Salg & Service Annual report 2020
3. Revenue
Group Parent company
DKKm
Business
performance Adjustments IFRS
Business
performance Adjustments IFRS
Sale of gas , () , , () ,
Sale of power , () , , () ,
Distribution and transmission - - - -
Trading activities, net - -
Other revenue () - () -
Total revenue from customers , () , , () ,
Effect of economic hedging, net () () (,) () ()
Total revenue , (,) , , () ,
Timing of revenue recognition from customers, IFRS
At a point in time - - , - - ,
Over time - - , - - ,
Total revenue from customer, IFRS - - , - - ,
Sale of gas , , , , ,
Sale of power , , , , ,
Distribution and transmission - - - -
Trading activities, net - -
Other revenue - -
Total revenue from customers , , , , , ,
Effect of economic hedging, net () () () () () ()
Total revenue , , , , ,
Timing of revenue recognition from customers, IFRS
At a point in time - - , - - ,
Over time - - , - - ,
Total revenue from customer, IFRS - - , - - ,
Of the total revenue of DKK 18,709 million
(2019: DKK 33,080 million), DKK 18,077 million
(2019: DKK 32,278 million) represent revenue
from the sale of goods, while DKK 632 million
(2019: DKK 802 million) represent revenue from
the sale of services.
Geographical distribution of revenue
Revenue is broken down, as far as possible, by
the customer’s geographical location based
on supply point.
DKKm Denmark Germany The UK The Netherlands Other, EU
Consolidated
total
, , , , ,
, , , , ,
Notes
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Contents
Note summaryØrsted Salg & Service Annual report 2020
4. Cost of sales
Group Parent company
DKKm
Business
performance Adjustments IFRS
Business
performance Adjustments IFRS
Gas (,) (,) (,) - (,)
Power (,) - (,) (,) - (,)
Distribution and transmission costs () - () (,) - (,)
Other cost of sales () () - ()
Cost of sales (,) (,) (,) - (,)
Gas (,) () (,) (,) - (,)
Power (,) - (,) (,) - (,)
Distribution and transmission costs (,) - (,) () - ()
Other cost of sales () - () () - ()
Cost of sales (,) () (,) (,) - (,)
Notes
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Contents
Note summaryØrsted Salg & Service Annual report 2020
5. Employee costs
Group Parent company
DKKm
Wages, salaries, and remuneration () () () ()
Share-based payment () () () ()
Pensions () () () ()
Other social security costs () () () ()
Other employee costs () () () ()
Employee costs before transfer to
assets () () () ()
Transfer to assets
Total employee costs () () () ()
Number of full-time employees
Average for the financial year
The total remuneration stated in the note
only includes remuneration attributable to
Ørsted Salg & Service A/S. The Executive Board
is made up of one person. A bonus plan has
been established for the Executive Board.
The contract of service of the Executive
Remuneration for the Board of
Directors and the Executive Board,
DKKm
Parent company Board of Directors Parent company Executive Board
Salary - - (.) (.)
Bonus - - (.) (.)
Share-based payments - - (.) (.)
Pension - - (.) (.)
To t a l - - (.) (.)
Board includes a termination package under
which the Executive Board will be entitled to
the equivalent of 24 months’ salary if their
contract of service is terminated by the com-
pany. The board of directors has not been paid
remuneration.
Share programme
The Executive Board and a limited number of
other members of senior management parti-
cipate in our share programme established
in 2016. Today, approximately eight senior
executives participate in the programme. As a
condition for the award of performance share
units (PSUs), the participant must own a num-
ber of shares in Ørsted A/S corresponding to a
part of the individual participant’s annual base
salary. The ownership requirement is between
15-75 % of the fixed salary.
If the participants meet the shareholding
requirement at the award date, the parti-
cipants will be awarded a number of PSUs
each year, representing a value corresponding
to 150-20 % of their annual base salary at the
award date.
The awarded PSUs have a vesting period of
approx. three years, after which each PSU
entitles the holder to receive one share free of
charge. The final number of PSUs for each par-
ticipant will be determined based on Ørsted
A/S's total shareholder return compared to
tenEuropean peer energy companies.
The rate will vary from 0 % to 200 % of the
number that is set as the target for the award-
ed PSUs. The maximum value is 30-40 % of
the fixed annual salary at the time of granting.
In addition to this also comes the change in
fair value of the Ørsted share since grant.
The highest rate will be triggered if Ørsted
A/S delivers the highest return among the
peer companies. For each lower position, the
number of PSUs will decline by 20 percentage
points.
For example, a second place entitles
the participants to 180 % of the target. If
Ørsted A/S is number 11 in the comparison, the
participants will receive no PSU’s. The right to
PSUs is subject to continued employment.
6. Share-based payment
Notes
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ContentsNote summaryØrsted Salg & Service Annual report 2020
7. Auditor’s fees 8. Financial income
9. Financial expenses
Group Parent company
DKKm
Statutory audit () () () ()
Total fees to PwC () () () ()
Group Parent company
DKKm
Interest income
Interest income from group
enterprises - -
Foreign exchange gains , , , ,
Other financial income
Financial income , , , ,
Group Parent company
DKKm
Interest expenses () () () ()
Interest expenses to group
enterprises () () () ()
Interest element of provisions () () () ()
Foreign exchange losses (,) (,) (,) (,)
Other financial expenses - () - -
Financial expenses (,) (,) (,) (,)
Revenue for the year includes
exchange rate and fair value
adjustments of:
PwC is Ørsted’s auditor appointed by the
general meeting. PwC audits the consolidated
financial statements of Ørsted and the
subsidiaries’ financial statements in all the
countries where we are represented.
Notes
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ContentsNote summaryØrsted Salg & Service Annual report 2020
10. Tax on profit (loss) for the year
Group Parent company
DKKm
Tax for the year can be specified as follows:
Tax on profit (loss) for the year () ()
Tax for the year () ()
Tax on profit (loss) for the year can be broken down as follows:
Current tax () () () ()
Deferred tax () ()
Adjustments to current tax in respect of prior years () ()
Adjustments to deferred tax in respect of prior years ()
Tax on profit (loss) for the year () ()
Tax on profit (loss) for the year can be explained as follows:
Calculated .% tax on profit (loss) before tax () ()
Adjustments of calculated tax in foreign subsidiaries () - -
Tax effect of:
Non-deductible expenses () ()
Gains from taxable demerger - () - ()
Tax effect of tax loss carryforward () () - -
Adjustments to tax in respect of prior years () ()
Tax on profit (loss) for the year () ()
Effective tax rate % % % %
Notes
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Contents
Note summaryØrsted Salg & Service Annual report 2020
Group Parent company
Profit from discontinued operations, DKKm
Business
performance Adjustments IFRS
Business
performance Adjustments IFRS
Revenue , (,) , , () ,
Cost of sales (,) (,) (,) - (,)
Other external expenses () - () () - ()
Employee costs () - () () - ()
Other operating expenses () - () - - -
Operating profit (loss) (EBITDA) () () () () ()
Gain (loss) on divestment of enterprises () - () () - ()
Financial expenses () - () () - ()
Profit (loss) before tax () () () () () ()
Tax on profit (loss) for the year
Profit from discontinued operations () () () () () ()
11. Discontinued operations
Financial performance
EBIT from LNG increased by DKK 956 million
to DKK 0 million in 2020. The loss on the di-
vestment was DKK 42 million. Total cash flows
in 2020 amounted to DKK -1.964 million (2019:
DKK -48 million), of which DKK -465 million
were from operating activities, and cash flow
from the divestment was DKK -1.499 million
(payment from Ørsted Salg & Service).
EBIT from UK B2B gas and power portfolios
amounts to DKK -408 million, including a
negative impact of DKK -217 million due to
contractual obligations in the UK B2B portfo-
lio that we have provided for. Cash flows from
operating activities amounted to DKK -205
million in 2020.
Outlook 2021
We expect earnings in the UK B2B gas and
power portfolios to break even in 2021. In
2020, we provided for the expected loss from
the divestment concluded in 2021.
Group Parent company
Profit from discontinued operations, DKKm
Business
performance Adjustments IFRS
Business
performance Adjustments IFRS
Revenue , , , ,
Cost of sales (,) - (,) (,) - (,)
Other external expenses () - () () - ()
Employee costs () - () () - ()
Operating profit (loss) (EBITDA) () () () ()
Financial expenses () - () () - ()
Profit (loss) before tax () () () ()
Tax on profit (loss) for the year () ()
Profit from discontinued operations () () () ()
Notes
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Contents
Note summaryØrsted Salg & Service Annual report 2020
Group Parent company
Tax for the period, discontinued
operations, DKKm
Current tax
Deferred tax - () - ()
Total tax
11. Discontinued operations (continued)
Group Parent company
Cash flows for the period,
discontinued operations, DKKm
Cash flows from operating activities () () () ()
Cash flows from investing activities (,) - (,) -
Total cash flows (,) () (,) ()
Notes
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Contents
Note summaryØrsted Salg & Service Annual report 2020
12. Intangible assets
Group
DKKm Goodwill Rights
Completed
development
projects
Development
projects in
progress To ta l
Cost at January ,
Additions - -
Disposals - () () - ()
Reclassified assets - - () -
Cost at December
Amortisation and impairment losses at January () () () - (,)
Foreign exchance adjustments - - -
Amortisation and impairment losses - () () - ()
Disposals - -
Amortisation and impairment losses at December () () () - ()
Carrying amount at December -
Cost at January , ,
Addition by merger January - ()
Additions -
Disposals () (,) - - (,)
Reclassified assets - - () -
Cost at December ,
Amortisation and impairment losses at January () (,) () - (,)
Addition by merger January - () -
Amortisation and impairment losses - () () - ()
Disposals , - - ,
Amortisation and impairment losses at December () () () - (,)
Carrying amount at December -
Amortised over - - years - years - -
Impairment testing
Development projects in progress are annually
tested for impairment. The carrying amounts
of rights and completed development projects
are assessed annually to determine whether
there is any indication of impairment. If any
such indication exists, an impairment test is
carried out.
Rights
Rights consist predominantly of customer-
related rights and a connection right relating
to gas transportation. At 31 December 2020,
the carrying amount of rights was calculated
to DKK 10 million (2019: DKK 10 million).
There were no indications of impairment of
rights in 2020.
Completed development projects
Completed development projects related to IT
software. At 31 December 2020, the carrying
amount of development projects was calcu-
lated to DKK 67 million (2019: DKK 71 million).
Notes
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ContentsNote summaryØrsted Salg & Service Annual report 2020
12. Intangible assets (continued)
Parent company
DKKm Rights
Completed
development
projects
Development
projects in
progress To ta l
Cost at January ,
Additions -
Disposals () () - ()
Reclassified assets - () -
Cost at December
Amortisation and impairment losses at January () () - ()
Amortisation and impairment losses () () - ()
Disposals -
Amortisation and impairment losses at December () () - ()
Carrying amount at December
Cost at January , ,
Addition by merger January -
Additions
Disposals (,) - - (,)
Reclassified assets - () -
Cost at December ,
Amortisation and impairment losses at January (,) () - (,)
Addition by merger Januray - () - ()
Disposals , - - ,
Amortisation and impairment losses () () - ()
Amortisation and impairment losses at December () () - ()
Carrying amount at December
Amortised over - years - years - -
Notes
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Contents
Note summaryØrsted Salg & Service Annual report 2020
13. Property, plant and equipment
Group
DKKm
Land and
buildings
Production
assets
Fixtures and
fittings, tools
and equipment
Property, plant
and equipment
under
construction Tota l
Cost at January , ,
Foreign exchange adjustment - - () - ()
Adjustment of decommissioning obligations - () - - ()
Disposals - () - - ()
Reclassified assets - - () -
Cost at December , ,
Depreciation and impairment losses at January () (,) () - (,)
Foreign exchange adjustment - - -
Depreciation and impairment losses - () () - ()
Depreciation and impairment losses at December () (,) () - (,)
Carrying amount at December -
Cost at January , ,
Addition by merger January - -
Change in accounting policy - -
Additions - -
Disposals - () - - ()
Reclassified assets - - () -
Cost at December , ,
Depreciation and impairment losses at January () (,) () - (,)
Addition by merger January () () ()
Depreciation and impairment losses - () () - ()
Depreciation and impairment losses at December () (,) () - (,)
Carrying amount at December
Depreciated over years - years - years - -
Impairment testing of property, plant and
equipment
The carrying amounts of property, plant and
equipment are assessed annually to determine
whether there is any indication of impairment.
If any such indication exists, an impairment
test is carried out.
There were no other indications of impairment
of property, plant and equipment in 2020.
Notes
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ContentsNote summaryØrsted Salg & Service Annual report 2020
13. Property, plant and equipment (continued)
Parent company
DKKm
Land and
buildings
Production
assets
Fixtures and
fittings, tools
and equipment
Property, plant
and equipment
under
construction Tota l
Cost at January , ,
Adjustment of decommissioning obligations - () - - ()
Disposals - () - - ()
Reclassification - - () -
Cost at December , ,
Depreciation and impairment losses at January () (,) () - (,)
Depreciation and impairment losses - () - - ()
Depreciation and impairment losses at December () (,) () - (,)
Carrying amount at December -
Cost at January , ,
Addition by merger January - - -
Change in accounting policy - - -
Additions - - -
Disposals - () - - ()
Cost at December , ,
Depreciation and impairment losses at January () (,) () - (,)
Addition by merger January - () - - ()
Depreciation and impairment losses - - - ()
Depreciation and impairment losses at December () (,) () - (,)
Carrying amount at December -
Depreciated over years - years - years - -
Notes
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Contents
Note summaryØrsted Salg & Service Annual report 2020
14. Investments in subsidiaries
Parent company
DKKm
Cost at January ,
Additions
Disposals - ()
Cost at December , ,
Value adjustments at January () ()
Impairment losses - ()
Value adjustments at December () ()
Carrying amount at December
We have tested investments in subsidiaries for
impairment by comparing the expected future
income in the individual subsidiary with their
carrying amounts.
The impairment test in 2020 did not give
rise to any impairment of investments in
subsidiaries.
In 2020, additions are related to capital
contribution to the new established subsidaty
Orsted Commercial Commodities A/S.
In 2019, additions are related to additional
capital contribution in Ørsted Pipelines A/S
and to the acquisition of Orsted S&D (UK)
Limited. Disposals relate to Obviux A/S.
Impairment losses for 2019 relate to Ørsted
Pipelines A/S, Ørsted Sales GmbH, and Ørsted
Markets GmbH.
Notes
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ContentsNote summaryØrsted Salg & Service Annual report 2020
15. Deferred tax
Deferred tax assets are expected to be utilised
for offsetting against the settlement of
deferred tax liabilities in companies included
in joint taxation in the Ørsted Group.
Unrecognised deferred tax assets relate to
losses in foreign companies as well as impair-
ment losses in foreign companies where we
deem that such tax assets cannot be utilised
in the foreseeable future. Unrecognised tax
assets can be carried forward indefinitely.
The amount of unrecognised tax losses was
DKK32 million in 2020 (2019: DKK 26 million).
Group Parent company
DKKm
Deferred tax at January () (,) () (,)
Merger January - () - -
Exchange rate adjustment () - -
Deferred tax for the year recognised in profit (loss) () ()
Deferred tax discontinued operations -
Adjustments in respect of prior years () () ()
Deferred tax at December () () () ()
Deferred tax is recognised in the balance sheet as follows:
Deferred tax (assets) () () () ()
Deferred tax at December, net () () () ()
Deferred tax concerns:
Non-current assets
Non-current liabilities () () () ()
Current liabilities () ()
Deferred tax at December () () () ()
Change in temporary differences
during the year, DKKm
Group Parent company
Balance sheet
at January
Recognised
in profit (loss)
for the year Other changes
Balance
sheet at
December
Balance sheet
at January
Recognised
in profit (loss) for
the year Other changes
Balance
sheet at
December
Non-current assets () - () -
Non-current liabilities () - () () - ()
Current liabilities () - () () - ()
To t a l () () - () () () - ()
Non-current assets () () () -
Non-current liabilities () () () ()
Current liabilities () - () -
To t a l (,) () () (,) ()
Notes
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Contents
Note summaryØrsted Salg & Service Annual report 2020
Group Parent company
DKKm
Gas , , , ,
Green certificates
Carbon emission allowances
(purchased)
Other inventories
Inventories at December , , , ,
The carrying amount of inventories recognised
at fair value was DKK 1,388 million (2019:
DKK910 million).
16. Inventories
Notes
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ContentsNote summaryØrsted Salg & Service Annual report 2020
Maturity analysis of financial liabilities , DKKm Carrying amount Payment obligation After
Bank overdrafts - - - - -
Payables to group enterprises , , , - - - - -
Trade payables , , , - - - - -
Fair value of derivative financial instruments , , ,
Other payables - - - - -
December , , ,
Maturity analysis of financial liabilities , DKKm Carrying amount Payment obligation After
Bank overdrafts - - - - -
Payables to group enterprises , , , - - - - -
Trade payables , , , - - - - -
Fair value of derivative financial instruments , , ,
Other payables - - - - -
December , , ,
17. Derivatives
Financial instruments by category, DKKm Carrying amount Fair value Carrying amount Fair value
Assets
Derivative financial instruments held for trading , , , ,
Securities
Financial assets measured at fair value via the income statement , , , ,
Trade receivables , , , ,
Other receivables, cash, and cash equivalents , , , ,
Loans and receivables , , , ,
Equity and liabilities
Derivative financial instruments held for trading , , , ,
Financial liabilities measured at fair value via the income statement , , , ,
Bank loans
Other payables , , , ,
Financial liabilities measured at amortised cost , , , ,
Categories of financial instruments
Financial instruments are used for various
purposes. The purpose determines the
category, and whether the value adjustment
of the instrument should be recognised in
the profit (loss) for the year or as part of the
hedging reserve in equity.
The fair value of financial instruments
measured at amortised cost is identical to the
carrying amount.
Notes
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ContentsNote summaryØrsted Salg & Service Annual report 2020
Economic hedging of
fair values, DKKm
Receivables Payables
Hedging
instruments Net position Receivables Payables
Hedging
instruments Net position
EUR , (,) - , (,) - ,
USD () - () -
GBP , (,) - (,) , (,) - ()
Other - () -
To t a l , (,) - , (,) - ,
Trading portfolio and economic hedging, DKKm Nominal amount Fair value Nominal amount Fair value
Oil swaps ,
Gas swaps , , ,
Gas options
Power swaps , ,
Power options , ()
Coal forwards
Carbon emission allowances ()
Currency forwards ,
To t a l , , ,
All assets and liabilities measured at fair value
are measured on a recurring basis.
Quoted prices comprise derivative financial
instruments that are traded in active markets.
It is customary to settle these trades on a
daily basis.
Observable inputs comprise derivative
financial instruments where valuation models
with observable inputs are used to measure
fair value.
Non-observable inputs comprise primarily
long-term contracts related to the purchase
or sale of, in particular, power. The fair values
are based on assumptions concerning the
long-term prices, volatilities, and premiums in
respect of liquidity and market risks.
The fair value of financial instruments based
on non-observable inputs is significantly
affected by the non-observable inputs used.
As a result of the long-term and illiquid nature
of the contracts, the fair value may change
significantly in the event of a change in the
Group’s reasonable expectations relating to
the non-observable inputs used.
In 2019, we entered into an agreement to
divest our LNG business and reclassified all
hedges related to the period after the expect-
ed closing date from economic hedging to
IFRS cash flow hedges. In 2020, we closed the
LNG divestment, and all hedges related to the
LNG have been terminated.
Fair value hierarchy of
financial instruments
DKKm
Quoted prices
Observable
inputs
Non-observable
inputs Tota l Quoted prices
Observable
inputs
Non-observable
inputs Tota l
Commodity derivatives , , , , ,
Currency derivatives - - - , - ,
Total derivatives , , , , ,
Securities - - - -
Total assets measured at
fair value , , , , ,
Commodity derivatives , , , () (,) () (,)
Currency derivatives - - - () - ()
Total liabilities measured
at fair value , , , () (,) () (,)
Notes
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Contents
Note summaryØrsted Salg & Service Annual report 2020
Derivatives valued on the basis of non-observable inputs, DKKm
Market value at January
Transferred to level due to market data having become available () -
Gains and losses recognised in profit (loss) for the year as revenue () ()
Transferred from observable inputs -
Sales and redemptions () ()
New trades
Market value at December
Net assets can be specified as follows:
Assets
Liabilities () ()
Netting of financial assets and liabilities
The netting agreements with the individual
counterparties are often limited to offsetting
within specific products. In addition, the settle-
ment of liabilities and the realisation of assets
do often not take place simultaneously.
We only offset positive and negative values if
we are entitled to and intend to settle several
financial instruments net.
Consequently, only some of the Group’s net-
ting agreements meet the provisions in IFRS
on offsetting.
The table below to the right show financial
assets and liabilities that are subject to
netting agreements and related security.
Net derivative assets valued on the basis of
non-observable inputs are specified in the
table to the left.
Valuation principles and material
assumptions
In order to minimise the use of subjective
estimates or modifications of parameters
and calculation models, it is our policy to
determine fair values based on the external
information that most accurately reflects
the market values.
We use pricing and benchmark services to
increase data quality. Market values are
determined by the Group Treasury & Risk Man-
agement function, which reports to the Group
CFO. The developments in market values are
monitored on a continuing basis and reported
to the Executive Committee.
Financial
liabilities, offset
Related amounts not netted in the balance sheet
Netting of financial assets, DKKm
Recognised
financial assets,
gross
Financial assets
presented in the
balance sheet
Liabilities with
offsetting rights Security received Net amount
December
Derivative financial instruments , (,) , () - ,
Trade receivables , (,) , - - ,
December
Derivative financial instruments , (,) , () - ,
Trade receivables , (,) , - - ,
Related amounts not netted in the balance sheet
Netting of financial liabilities, DKKm
Recognised
financial liabilities,
gross
Financial assets,
offset
Financial liabilities
presented in the
balance sheet
Assets with
offsetting rights
Security provided
in the form of
bonds Net amount
December
Derivative financial instruments , (,) , () () ,
Trade payables , (,) , - - ,
December
Derivative financial instruments , (,) , () () ,
Trade payables , (,) , - - ,
The main non-observable input is German power
prices in the period 2025-2034. The average power
price for the period is estimated at EUR 54 per
MWh, based on an inflation-adjusted extrapolation
of the observable price. An increase or decrease
in the German power prices of 10 % would impact
the fair value by +/- DKK 400 million.
Notes
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Contents
Note summaryØrsted Salg & Service Annual report 2020
Receivables
Receivables consist of trade receivables and
other receivables. Other receivables total DKK
566 million and include margin account de-
posits, DKK 415 million in total (2019: DKK466
million), which have been pledged as collateral
for trading in financial instruments.
Trade receivables by credit quality
Ørsted Salg & Service A/S’s main credit expo-
sure in connection with sales relates to sale of
gas. Besides credit exposure on gas customers
in Denmark, the exposure primarily relates to
international energy companies and banks.
Ørsted Salg & Service A/S’s internal control of
its credit exposure is based on internal credit
limits for each counterparty and structured
and ongoing monitoring and reporting. Credit
limits and any requirements concerning secu-
rity are determined on the basis of the credit
rating of the counterparty, partly using input
from external rating agencies such as Moody’s,
S&P, and Fitch. For all significant counterpar-
ties, framework and netting contracts setting
out credit conditions are also entered into. The
maximum credit risk related to receivables
corresponds to the values recognised in the
balance sheet. There are no special concen-
trations of credit risks. The receivables are not
credit insured.
Trade receivables that are overdue, but not
individually impaired
Expected credit losses on trade receivables are
assessed on the basis of due date and histori-
cal experience. For receivables with a general
credit risk, a write-down of 0-1 % is carried out
on initial recognition.
The Group’s trade receivables at 31 December
2020 DKK 675 million (2019: DKK 830 million)
include receivables that have been written
down by DKK 81 million following general
assessment (2019: DKK 51 million).
18. Receivables
Trade receivables by credit
quality, DKKm
Group Parent company
Denmark , ,
Rest of the EU , ,
Rest of the world ,
Trade receivables at December , , , ,
Trade receivables that are overdue,
but not individually impaired DKKm
Group Parent company
Days past due:
Up to days
- days ()
More than days ()
Trade receivables, write-downs () () () ()
Trade receivables overdue at
December
Notes
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Contents
Note summaryØrsted Salg & Service Annual report 2020
19. Income tax
receivable and
payable
Group Parent company
DKKm
Income tax receivable at January -
Merger - -
Exchange rate adjustments - - -
Adjustments to current tax in
respect of prior years () -
Payments in respect of prior years () () () -
Current tax for the year () - ()
Current tax discontinued operations - -
Payments in respect of the year -
Income tax receivable at
December -
Income tax payable at January -
Exchange rate adjustments - - -
Adjustments to current tax in
respect of prior years - -
Payments in respect of prior years - () - ()
Current tax for the year - -
Current tax discontinued operations () - () -
Payments in respect of the year - -
Income tax payable at
December -
20. Cash, cash
equivalents,
and securities
Group Parent company
DKKm
Cash and cash equivalents at
December include:
Cash, available
Bank overdrafts () () () ()
Cash and cash equivalents at
December () ()
Group Parent company
DKKm
Cash at December can be
broken down into the following
balance sheet items:
Cash, available
Cash, not available for use - -
Cash at December
Securities at December can be
broken down into the following
balance sheet items:
Securities, available - - - -
Securities, not available for use
Securities at December
Other bank loans at December
can be broken down into the
following balance sheet items:
Bank overdrafts () () () ()
Bank loans at December () () () ()
Notes
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Contents
Note summaryØrsted Salg & Service Annual report 2020
21. Assets classified as held for sale
At 31 December 2019, assets classified as held
for sale comprised our LNG business. The trans-
action was completed on 1 December 2020.
Assets classified as held for sale
DKKm
Group Parent company
Other provisions - , - ,
Total liabilities relating to assets
classified as held for sale - , - ,
Net assets classified as held for sale - , - ,
Notes
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Contents
Note summaryØrsted Salg & Service Annual report 2020
Development in share capital, DKKm
Group and parent company
Share capital at January , ,
Share capital at December , ,
22. Equity
Composition of share capital,
Number of shares
Group and parent company
Nominal value Tota l
,, of DKK , = DKK ,,,
, of DKK , = DKK ,,
, of DKK , = DKK ,,
DKK ,,,
Ownership
The company’s annual report forms part of
the consolidated financial statements of
Ørsted A/S, Fredericia, which owns the entire
share capital.
All shares rank equally. There are no restric-
tions on voting rights.
Dividend
The Board of Directors recommends that divi-
dend of DKK 0 million be paid for the financial
year 2020 (2019: DKK 0 million).
Capital management
Ørsted Salg & Service A/S’s liquidity and
financing risks are managed centrally by
Ørsted in accordance with principles and del-
egated authorities laid down by the Board of
Directors of Ørsted A/S in order to ensure that
Ørsted Salg & Service A/S has an adequate
capital base and adequate cash resources at
all times. One of the most important finan-
cial management tasks in the Ørsted Group
is to secure sufficient and flexible financial
resources in relation to the day-to-day
operations and the Ørsted Group’s investment
programme. For this purpose, internal man-
agement objectives have been set for the
required level of financial resources, primarily
considering factors such as the investment
programme, cash flows from operating activi-
ties, and the debt maturity profile.
It is the Ørsted Group’s financing policy to
concentrate loans in the parent company
in order to optimise the loan portfolio on a
consolidated basis.
Notes
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ContentsNote summaryØrsted Salg & Service Annual report 2020
Group
Provisions, DKKm
Decom-
missioning
obligations
Onerous
contracts
Other
liabilities Tota l
Decom-
missioning
obligations
Onerous
contracts
Other
liabilities Tota l
Provisions at January , , ,
Foreign exchance adjustment - - - - -
Change in accounting policy - - - - - () - ()
Provisions used during the year - () () () - () - ()
Provisions reversed during the year - - () () - - () ()
Provisions made during the year - - , ,
Interest element of obligations - -
Change in other abandonment
factors () - - () - - - -
Transferred to assets and liabilities
classified as held for sale - () - () - (,) - (,)
Total provisions , , ,
Falling due as follows:
- year - - -
- years - , - ,
After years - -
23. Provisions
Onerous contracts comprise contracts for
leasing of gas storage capacity in Germany,
DKK 699 million (2019: DKK 814 million),
and the contract regarding the Stenlille Gas
Storage Facility, DKK 96 million (2019: DKK 164
million). Also, a provision of DKK 216 million
related to our UK B2B gas and power portfoli-
os has been made in 2020.
Decommissioning obligations relates to
expected future costs for restoration and
decommissioning of the Group’s production
assets.
The estimated obligations have been
discounted to present value. A discount rate
of 3.5 % has been used, which is the same
as the discount rate used by the Group at
31 December 2020. The equivalent value of
these obligations is recognised in production
assets (property, plant and equipment) and
depreciated together with the production
asset.
Notes
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ContentsNote summaryØrsted Salg & Service Annual report 2020
Parent company
Provisions, DKKm
Decom-
missioning
obligations
Onerous
contracts
Other
liabilities Tota l
Decom-
missioning
obligations
Onerous
contracts
Other
liabilities Tota l
Provisions at January , , ,
Change in accounting policy - - - - - () - ()
Provisions used during the year - () () () - () - ()
Provisions reversed during the year - - () () - - () ()
Provisions made during the year - - - , ,
Interest element of obligations - -
Change in other abandonment
factors () - - () - - - -
Transferred to assets and liabilities
classified as held for sale - () - () - (,) - (,)
Total provisions , , ,
Falling due as follows
- year - - -
- years - , , - ,
After years - -
23. Provisions (continued)
Key accounting estimates
In the course of the Group’s operations, a
number of commercial contracts have been
entered into with fixed terms of contract that
may result in the contracts becoming onerous
depending on market developments, etc.,
and the obligations incurred by the Ørsted
Salg & Service Group as a result of these
contracts may also be subject to uncertainty.
The judgements concerning these complex
contracts and their future effects are subject
to significant uncertainties.
Decommissioning obligations comprise esti-
mated expenses related to decommissioning
and disposal of production assets. Estimates
of the obligations are based on expectations
of the future cost level, timing of decommis-
sioning and the structural risk-free interest
rate. The expectation for calculating the
provision may depend on future events which
are uncertain by nature.
Notes
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ContentsNote summaryØrsted Salg & Service Annual report 2020
25. Other payables
Other payables, DKKm
Group Parent company
VAT and other indirect taxes
Other payables
Other current liabilities
at December
24. Contract liabilities
Contract liabilities primarily relate to prepay-
ments of gas and power contracts.
Contract balances, DKKm
Group Parent company
Contract liabilities
Non-current contract liabilities
Current contract liabilities 179 224 179 223
Total contract liabilities
Notes
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Note summaryØrsted Salg & Service Annual report 2020
26. Cash flows from
operations
(operating activities)
Group Parent company
DKKm
Operating profit (loss) EBIT () , () ,
Amortisation, depreciation,
impairment losses, and write-downs
Operating profit (loss) before
depreciation and amortisation
(EBITDA) () , () ,
Other items
, (,) , (,)
Cash flows from operations
(operating activities) before
changes in working capital , () , ()
Change in inventories () ()
Change in contract assets and
liabilities () () () ()
Change in trade receivables , () , ()
Change in other receivables
Change in trade payables (,) (,)
Change in other payables, etc. () () () ()
Change in working capital (,) () ()
Cash flows from operations
(operating activities) () ,
1
´Other items´ primarily comprise changes in other provisions and changes in value adjustments of derivative
financial instruments.
Notes
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Note summaryØrsted Salg & Service Annual report 2020
Financial risks
Ørsted Salg & Service A/S is exposed to several
different financial risks, including fluctuations
in commodity prices, exchange rates, credit
risks, and interest rates. The management of
these risks is an important focus area in the
Group.
Risk management is aimed at identifying the
various risk areas and determining a strategy
for managing them. A special Risk Committee
has been appointed who is responsible for
monitoring the Ørsted Group’s risk manage-
ment and risk control relating to market
and credit risks. A centralised corporate risk
management function has also been set up in
Ørsted A/S to support the Risk Committee.
Various strategies have been put in place to
manage the risks and align the risk profile.
The risk profile is managed through the
conclusion of financial and physical contracts
for commodities, interest, and currencies over
the next five years.
In connection with – and partly to support –
these activities, the Group engages in limited
energy trading for its own account, including in
gas, power, coal, oil, oil products, and carbon
emission allowances.
The operating profit may fluctuate consid-
erably from year to year because of price
developments.
Commodity price risks
Our price risk arise from the purchase and sale
of power and gas. The price risks associated
with the purchase and sale of gas result from
differences in the indexing of sales and pur-
chase prices. Our largest gas purchase con-
tracts include the option of renegotiating the
contract price if it no longer reflects market
conditions. We have completed most of these
renegotiations in recent years; as a result, the
contract prices have largely been indexed to
pure gas prices and not to oil prices, as was
previously the case. Therefore, we are less
sensitive to differences in the oil and gas price
development than before.
The price risks associated with power purchases
and sales are given by the difference between
the purchase and sales prices. The price risks
primarily relate to timing differences between
purchases, sales, and the related hedges, and is
therefore considered to be limited.
Market trading
When the Ørsted Group’s desired hedging
level has been determined, the exposures are
transferred to the market trading function,
which is part of Ørsted Salg & Service A/S.
Market Trading is responsible for executing
the physical and financial transactions in the
market. It is not always possible to hedge
the transferred price risks in full. Therefore,
Ørsted Salg & Service A/S has some remaining
exposure resulting from these activities.
The market trading function also balances the
physical volumes in the market and, to a lesser
extent, engages in active position taking to
ensure an ongoing market presence and thus
gain more detailed market insights. Further-
more, Ørsted Salg & Service A/S has assumed
the role of market maker in the Danish power
market, which entails further market risks.
Currency risks
Currency risks arise primarily from:
– Purchase and sale of power and gas.
– Energy trading, which is typically priced in
currencies other than DKK.
– Other activities, for example in subsidiaries
abroad. The main currency risk is related
to GBP.
Currency exposure is hedged using forward
exchange contracts, swaps, and options.
Interest rate risks
Interest rate risks primarily relate to loan
portfolio, cash, and financial hedging.
These risks are managed in relation to the
Ørsted Salg & Service Group’s net financing
requirement and capital structure.
Interest rate risk is measured on a net basis,
and both debt and any placing of excess cash
are included. Interest rate risk is adjusted
through the interest terms attaching to the
Group’s loans.
Credit risks
Credit risks arise primarily from transacting
in power and gas – both wholesale, physical,
and financial transactions, including placing
surplus cash.
We conclude contracts with customers and
suppliers on the physical delivery of energy
products and hedging contracts with other
energy companies, specialised trading houses
and international banks. Physical contracts
with a term of more than one year are normal,
and gas purchase contracts can have terms
of more than five years. All such contracts
involve a risk of loss in the event of a counter-
party failing to perform its obligations. Such
risks are quantified and managed as credit
risks and are a significant focus area in the
Ørsted Salg & Service Group.
Credit risk is managed based on internal credit
limits for counterparties and structured moni-
toring of the actual exposure. Credit limits are
established based on an assessment of the
counterparty’s credit rating. If the counterpar-
ty has an external credit rating, for example
from Moody’s or Standard & Poor’s, this is an
important factor in determining the counter-
party’s credit rating.
27. Financial risks and risk management
Notes
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ContentsNote summaryØrsted Salg & Service Annual report 2020
Sensitivity Analysis Estimated effect on profit (loss)
December
Estimated effect on equity
December
Risks, DKKm Price change
Oil + % () -
- % () - ()
Gas + % () () - ()
- % -
Power + % () - -
- % () - -
Coal + % () - -
- % () - -
USD + % -
- % () () - ()
GBP + % () - -
- % () - -
SEK + % - -
- % () () - -
EUR + % - ()
- % () () -
Credit risks are coordinated in relation to all
business activities, so that the Ørsted Salg &
Service Group does not assume inappropriately
large exposures to individual counterparties.
With a view to reducing its credit exposure,
the Group endeavours, as far as possible, to
clear transactions via a clearing centre, such
as Nord Pool, and uses formalised framework
agreements, such as ISDA and EFET agree-
ments and master netting agreements. To this
should be added the limited use of security,
such as bank guarantees.
As part of its risk management, the Group
monitors its credit exposure in relation to all
trading counterparties daily as well as monthly
or quarterly in the case of other counterparties.
Historically, losses due to default by counter-
parties have been small.
Financing and capital resources
One of the main financial management
responsibilities is to secure sufficient, flexible
financial resources for the day-to-day
operations and for the implementation of
Ørsted Salg & Service’s strategy, consider-
ing the Ørsted Group’s rating. To this end,
internal management objectives have been
established for the required level of financial
resources, taking into account factors such as
investment programme, operating cash flow,
and debt maturity profile.
Sensitivity analysis
The sensitivity analysis in the tabel shows
the effect of market value changes assuming
a relative price change at 31 December. The
illustrated effect on profit (loss) comprises
financial instruments that remained open at
the balance sheet date and have an effect on
profits in the financial year in question. Besides
derivative financial instruments on commodi-
ties and currency, financial instruments in this
context include receivables and payables in
foreign currencies.
It should be noted that the illustrated sensitiv-
ities only comprise Ørsted Salg & Service A/S’s
financial instruments and therefore exclude
the effect from contracts concluded under
which physical delivery of the underlying
assets is made, as these are not recognised
as financial instruments in accordance with
IFRS 9. Thus, the sensitivity only comprises the
derivative financial instruments and not the
physical contracts they hedge.
Estimated effect on profit (loss)
The illustrated effect on profit (loss) is the
effect from financial instruments that
remained open at the balance sheet date and
have an effect on profit (loss) in the financial
year in question. Besides derivative financial
instruments on commodities and currencies,
financial instruments in this context include
receivables and payables in foreign currencies.
It should be noted that the shown sensitivities
only comprise the Group’s financial instru-
ments and consequently are not representa-
tive of the Group’s total risk profile in relation
to commodity prices and exchange rates.
Furthermore, the sensitivities only reflect the
effect of changes at the balance sheet date
and not for an entire accounting period.
Estimated effect on equity
The illustrated effect on equity is the effect
from financial instruments that remained
open at the balance sheet date and affect
equity at the balance sheet date, excluding
instruments that affect the income statement.
Here, financial instruments include derivative
financial instruments on commodities and
currency, which are accounted for as hedges
of cash flows. The table below represents the
Ørsted Salg & Service Group, which largely
corresponds to the parent company Ørsted
Salg & Service A/S.
Estimated effect on equity as of 31 December 2019 relates to the cashflow hedge of the proceeds from the
divestment of the LNG business.
Notes
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Note summaryØrsted Salg & Service Annual report 2020
At year-end, the Group and the parent com-
pany had the following contingent and other
liabilities:
Indemnities
The Group and the parent company are taxed
jointly with other companies in the Ørsted
Group. The companies have unlimited as well
as joint and several liability together with the
other taxed companies for Danish income
taxes and withholding taxes on dividends,
interest, and royalties within the jointly taxed
companies.
Ørsted A/S is the management company. Ref-
erence is made to the Ørsted Group’s annual
report 2020.
Liability to pay compensation
(absolute liability)
According to legislation, Ørsted Salg & Service
is liable in tort for any damage caused by the
companies’ gas activities even where there is
no proof of negligence (absolute liability). The
usual insurance has been taken out to cover
any such claims.
Litigation
The Group and the parent company are
parties to a number of litigation proceedings
and legal disputes that are not estimated to
have any material effect on the Group’s or the
parent company’s financial position, neither
individually nor collectively.
The outcome of litigation proceedings and
legal disputes is based on the expeceted legal
assessment, which is updated quarterly. The
expectations may depend on future events
which are uncertain by nature.
28. Contingent liabilities
and other liabilities
Notes
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ContentsNote summaryØrsted Salg & Service Annual report 2020
Ørsted A/S Group enterprises Associates Joint ventures
Group, DKKm
Sale of goods and services () , - - - -
Purchase of goods and services - - (,) (,) () () - ()
Interest, net - () - - - - - -
Receivables , , , , - - - -
Payables () () (,) (,) () () - -
Ørsted A/S Subsidiaries Group enterprises Joint ventures and associates
Parent compan, DKKm
Sale of goods and services , , () , - -
Purchase of goods and services - - () () (,) (,) () ()
Interest, net () - - - - - -
Receivables , , , , , , - -
Payables () () () () (,) (,) () ()
Related parties with a controlling interest
in the Group and the parent company are
Ørsted A/S and the Danish state, represented
by the Danish Ministry of Finance, which has
a majority holding in the parent company
Ørsted A/S.
Related parties with significant influence
include the companies’ boards of directors,
executive boards, executive employees, and
members of their families. Related parties
also comprise companies in which the persons
referred to above have significant influence
and group enterprises and associates in the
Ørsted Group.
As part of its ordinary operations, Ørsted Salg
& Service A/S sells to and buys its products
from related parties on market terms.
The Group was involved in the following trans-
actions with related parties in the financial
year under review.
Ørsted Salg & Service A/S uses the exception
set out in IAS 24.25 concerning entities in
which the state is a related party, and transac-
tions with state enterprises are therefore not
disclosed.
Specific transactions
The parent company has had transactions
with group enterprises as part of its respon-
sibility for the trading function for the Ørsted
Group’s companies in relation to commodity
instruments, etc. Furthermore, balances with
group enterprises have been established as
part of the normal financing of the Group’s
activities.
Remuneration of the Board of Directors and the
Executive Board is disclosed in note 5 'Em-
ployee costs' and note 6 'Share-based payment'.
29. Related-party transactions
Notes
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ContentsNote summaryØrsted Salg & Service Annual report 2020
Business performance principle
Description of business performance
In 2011, we introduced an alternative perfor-
mance measure, business performance, as
a supplement to the financial statements
prepared in accordance with IFRS. The busi-
ness performance result reflects our internal
risk management and shows the result for the
period under review. Under the business per-
formance principle, the value of the hedging
transaction is deferred and recognised for the
period in which the hedged risk materialises.
This is illustrated in the example overleaf.
Our reason for introducing the business perfor-
mance principle was:
– that we could not achieve the same timing
of recognition of our commercial exposure
and hedging contracts in accordance with
the IFRS rules, for example with respect to
option premiums and certain commercial
fixed-price contracts
– there was a high risk of hedging contracts
not being consistent with the IFRS rules on
hedge accounting, requiring us to recognise
the hedging contracts at market value with
value adjustment via the income state-
ment, whereas our commercial exposure
is accrued.
Business performance – background
We hedge market risks for up to five years
with the aim of stabilising our cash flows and
creating certainty about our finances. With
a view to ensuring transparency, it is desired
that the financial impact of the hedging
transactions is reflected in the financial
reporting simultaneously with the hedged
exposure (for example sale of power). We can
normally achieve this by applying the IFRS
rules on hedge accounting. However, for
energy companies, it is sometimes difficult
to ensure simultaneity. This is due to the fact
that hedging instruments are not always
available which precisely match the exposure
which must be hedged, or that no sufficiently
liquid market is available. Consequently, some
hedging takes place in alternative markets
or subject to alternative time horizons. For
example, power generation in Denmark is to
some extent hedged by financial contracts for
nearby trading areas, such as EEX (Germany)
and the Nord Pool areas (Scandinavia). These
areas normally develop relatively uniformly
over time compared to Denmark.
This hedging method means that only some
of the financial hedging transactions comply
with the IFRS rules on hedge accounting even
though the financial risk has been reduced. In
case of non-compliance, the hedging trans-
actions must be recognised in the income
statement on a regular basis. This may give
rise to considerable fluctuations in the income
statement, as the effect of the hedging
and for example the sale of power are not
recognised in the same period.
As a result, we do not apply the IFRS rules on
hedge accounting to transactions hedging
energy prices and associated currency risks.
Value adjustments of these hedges are
therefore recognised in the income statement
in accordance with IFRS.
Recognition
In the income statement, the business per-
formance result is shown alongside the IFRS
results. In the income statement, the difference
between the two performance measures is
shown in a separate column, 'Adjustments'.
Two types of contracts are included in the
business performance principle:
– Hedging contracts concerning energy and
related currencies.
– Commercial contracts concerning energy
recognised at market value.
When we use hedging instruments which do
not fully correspond to the underlying risk,
any difference between the hedging instru-
ments and the underlying risk is recognised
immediately in the income statement.
The accounting treatment under business
performance is otherwise identical with the
accounting treatment under IFRS. Our balance
sheet, cash flows, and equity are consequently
not affected. The accounting treatment of
our hedging contracts according to IFRS and
business performance is summarised in the
table below.
30. Description of accounting policies
Hedging type IFRS Business
Hedging of energy and
associated currency risks as well
as fixed-price physical gas and
power contracts
Fair value via income statement Fair value adjustments are
deferred and recognised in the
period in which the exposure
materialises
Hedging of currency risks
associated with net investments
in foreign entities
Fair value adjustments
are recognised in other
comprehensive income
Recognition is the same as
under IFRS
Trading portfolio Fair value via income Recognition is the same as
under IFRS
Notes
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Contents
Note summaryØrsted Salg & Service Annual report 2020
Example of the business performance
principle
In 20x1, Ørsted enters into a hedging contract
which expires in 20x5 with a positive market
value of 80. The development in market value
for the individual years is shown in column 2.
Column 3 shows that the hedging contract
is recognised in the business performance
income statement in 20x5, at the same time
as the hedged exposure. However, the devel-
opment in market value is recognised on an
ongoing basis in the IFRS income statement,
see column 4. Upon the expiry of the contract
in 20x5, the total effect on results over the
period is the same under the IFRS and the
business performance principles. Only the
timing differs.
The business performance principle ensures
simultaneity of recognition of the underlying
exposure and the hedging contract.
Derivative financial instruments
Derivative financial instruments and loans are
used to hedge currency and interest rate risks
and risks related to the price of oil, gas, power,
coal, and carbon emission allowances.
Derivative financial instruments are recog-
nised from the trading date as receivables
(positive fair values) and other payables
(negative fair values), respectively, and are
measured in the balance sheet at fair value.
Transaction costs are added to the fair value
on initial recognition, unless the financial asset
or financial liability is measured at fair value
with recognition of fair value adjustments in
profit (loss) for the year. Positive and negative
values are only offset if the company is enti-
tled to and intends to settle several financial
instruments net (in cash).
The fair value of derivative financial instru-
ments is determined on the basis of current
market data and assumptions as well as
recognised valuation methods.
Value adjustments of derivative financial in-
struments that act as economic hedges of the
Group’s primary activities, but do not satisfy
the criteria for hedge accounting, are recog-
nised as revenue. Likewise, value adjustments
of financial contracts offered to customers
with a view to price hedging are recognised
as revenue. Value adjustments of financial
contracts that are not used as economic
hedges of the Group’s principal activities or
are part of the Group’s trading portfolio, are
recognised as financial income and expenses.
Under IFRS, contracts that involve physical
delivery may, in certain circumstances, be ac-
counted for as derivative financial instruments.
The classification is determined based on an
evaluation of the purpose of the contract
compared with the Group’s other activities.
Contracts entered into in the course of the
Group’s trading activities or as part of certain
hedging activities are classified and accounted
for as derivative financial instruments, even
though they are settled on physical delivery.
Income statement
Revenue
Revenue is measured based on the consider-
ation specified in a contract with a customer
(transaction price) and excludes amounts
collected on behalf of third parties, i.e. VAT.
We recognise revenue when we transfer control
over a product or service to a customer.
If a part of the transaction price is variable,
i.e. bonus payments, incentive payments for
unmissed deadlines, etc., the variable consider-
ation is recognised in revenue when it is highly
probable that the revenue will not be reversed
in subsequent periods.
We adjust the transaction price for the time
value of money if the payments exceed
twelve months.
Sales agreements are divided into individually
identifiable performance obligations. If a sales
agreement includes several performance
obligations, the sales agreement's transaction
price is allocated to each performance obliga-
tion's stand-alone selling price.
In the comparative period, revenue was
measured at the fair value of the consideration
received or receivable. Revenue from the sale
of goods was recognised when the significant
risks and rewards of ownership had been
transferred to the customer, recovery of the
consideration was probable, the associated
costs and possible return of goods could be
estimated reliably, there was no continuing
management involvement with the goods,
and the amount of revenue could be measured
reliably. Revenue from rendering of services
was recognised in proportion to the stage
of completion of the work performed at the
reporting date.
Sale of gas
Timing of satisfaction of delivery obligations
and significant estimates
Revenue is recognised when control of the gas
is transferred to the buyer. Transfer of control
occurs either when the gas is injected into the
distribution system or physically delivered to
the customer.
Significant terms of payment and associated
estimates and assessments
Sales contracts for a fixed amount of gas at a
variable price, or where we are exclusive
suppliers to the customer at a variable price,
are considered one performance obligation
with multiple deliveries to be satisfied over
Exampl of h buin pfomanc pincipl
Recognised in the income
statement as follows
Year
Development in
market value
Business
performance IFRS
x
x
x () ()
x () ()
x
Total market value
Notes
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Contents
Note summaryØrsted Salg & Service Annual report 2020
time. For such contracts, we recognise revenue
in the amount up to which we have a right to
invoice.
Some long-term gas sales contracts include
clauses which give the right to renegotiate
the fixed sales prices. Expectations for the
outcomes of renegotiations are not included
in revenue before we know the outcome of the
individual renegotiations.
In most cases, the consideration for the gas is
due when the gas is injected into the distribu-
tion system or delivered to the customer. The
delivery of gas is invoiced on a monthly basis,
and the payment is due within 10-30 days.
Sale of power
Types of goods and services
Revenue from sale of power includes the sale
of power produced at own wind farms and
power stations, the sale of power sourced
from other producers, and the sale of ancillary
services.
Timing of satisfaction of delivery obligations
and significant estimates
Revenue is recognised when control of the
goods is transferred to the buyer. Transfer
of control occurs when the actual power is
delivered to the customer, which for power
generated by us occurs when it is produced.
Significant terms of payment and associated
estimates and assessments
Revenue from ancillary services consists of
fees for having power stations on standby
in periods with a demand for power gener-
ation. Ancillary services are considered one
perform ance obligation which is fulfilled over
time when the power stations are on standby.
Sales contracts for a fixed amount of power
at a variable price, or where we are exclusive
suppliers to the customer at a variable price,
are considered one performance obligation
with multiple deliveries to be satisfied over
time. For such contracts and for long-term
agreements on selling power at a fixed price,
we recognise revenue in the amount up to
which we have a right to invoice.
In most cases, the consideration for the power
is due when the actual power is delivered to
the customer. The delivery of power is invoiced
on a monthly basis, and the payment is due
within 10-30 days.
Ancillary services are invoiced on a monthly
basis, and consideration is payable when
invoiced.
Distribution and transmission
Timing of satisfaction of delivery obligations
and significant estimates
Revenue from the distribution and transmis-
sion of gas and power is recognised when the
gas or power is delivered to the buyer, or when
the capacity is made available.
Significant terms of payment and associated
estimates and assessments
Revenue is calculated as the amount we are
entitled to when the service is delivered to
the customer and invoiced on a monthly basis,
and consideration is payable when invoiced.
Other revenue
Types of goods and services
Other revenue primarily includes consultancy
services.
Timing of satisfaction of delivery obligations
and significant estimates
Revenue from providing services is recognised
in the accounting period in which the services
are rendered.
For fixed-priced contracts, revenue is recog-
nised based on the actual service rendered
at the end of the reporting period as a
proportion of the total services to be rendered
because the customer receives and uses the
benefits simultaneously. This is determined
based on the actual labour hours spent rela-
tive to the total labour hours expected.
Significant terms of payment and associated
estimates and assessments
Fixed-price contracts are invoiced on a monthly
basis, and consideration is payable when
invoiced. Variable fee services are generally
due after the services are rendered.
Cost of sales
Cost of sales for fuel and energy comprises the
Group’s purchases of fuel in the form of gas and
power and transportation costs in connection
with the above as well as costs related to
carbon emission allowances. Costs are recog-
nised in profit for the year as incurred.
Other external expenses
Other external expenses comprise expenses for
maintenance of production equipment, rent,
external assistance, research and development
and office supplies, etc.
Employee costs
Employee costs comprise wages, salaries,
remuneration, pensions, social security costs
and other employee-related costs.
Share programme
The share programme is classified as an
equity-based programme, as the programme
is settled in shares. The market value of the
PSUs and the estimated number of PSUs
granted are measured at the time of granting
and recognised in the income statement under
employee costs over the vesting period and
in the balance sheet under equity over the
vesting period.
The valuation of the PSUs and the estimated
number of PSUs granted are carried out as a
probability simulation based on the expected
performance of Ørsted’s total shareholder
return relative to ten comparable European
energy companies. The expectations are
factored into the market value and are not
adjusted subsequently.
Other operating income and other
operating expenses
Other operating income and expenses com-
prise items secondary in nature to the Group’s
and the parent company’s activities, including
gains and losses on ongoing disposal and re-
placement of intangible assets, and property,
plant and equipment.
Other operating income and expenses are
recognised as earned or incurred.
Gains and losses on disposal of intangible
assets and property, plant, and equipment
Notes
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ContentsNote summaryØrsted Salg & Service Annual report 2020
are determined as the selling price less selling
costs and the carrying amount at the date
of disposal.
Dividend from investments in subsidiaries in
the parent company financial statements
Dividend from investments in subsidiaries is
recognised in the income statement in the
financial year in which it is declared.
Financial income and financial expenses
Financial income and financial expenses
comprise interest, capital gains and losses,
and impairment losses relating to securities,
payables, and transactions denominated in
foreign currencies, amortisation of financial
assets and liabilities, including lease com-
mitments under finance leases, as well as
surcharges and refunds under the on-account
tax scheme, etc.
Financial income and financial expenses also
include realised and unrealised gains and
losses relating to derivative financial instru-
ments that have not been entered into to
hedge revenue or production costs. Interest
is recognised in accordance with the accrual
basis of accounting.
Borrowing costs relating to general borrowing
or loans directly attributable to the acquisition,
construction, or development of qualifying
assets form part of the cost of such assets.
Tax on profit (loss) for the year
The Ørsted Group is subject to the Danish
rules on compulsory joint taxation and has
also opted for international joint taxation
with the Group’s foreign subsidiaries. The
Group’s subsidiaries are included in the joint
taxation from the date they are included in
the consolidation in the consolidated financial
statements and up to the date at which they
are no longer included in the consolidation.
The parent company, Ørsted A/S, is the
administration company in relation to the
joint taxation and thus settles all payments of
income tax with the tax authorities.
The current Danish income tax is allocated
among the jointly taxed Danish subsidiaries
in proportion to their taxable income. In this
connection, Danish subsidiaries with tax losses
receive a joint taxation contribution from the
parent company corresponding to the tax
value of the unutilised losses (full allocation),
while companies that use tax losses in other
Danish companies pay a joint taxation contri-
bution to the parent company corresponding
to the tax value of the utilised losses.
Being made up of the year’s current income
tax, the year’s joint taxation contributions and
changes in deferred tax, including – as a con-
sequence of changed tax rates – tax for the
year is recognised in the income statement
with the part attributable to the profit (loss)
for the year and directly in equity with the
part attributable to entries directly in equity.
The Group is included in a Danish on-account
tax scheme. Tax refunds and tax surcharges
are allocated between the jointly taxed
Danish companies in accordance with the
allocation of the Danish income tax and
recognised as financial income and financial
expenses, respectively.
Balance sheet
Goodwill
Goodwill is measured initially in the balance
sheet at cost. Subsequent to initial recognition,
goodwill is measured at cost less accumulated
impairment losses. Goodwill is not amortised.
The carrying amount of goodwill is allocated
to the Group’s cash-generating units at
the acquisition date. The determination of
cash-generating units follows the Group’s
organisational and internal reporting structure.
Rights
Rights comprise gas purchase rights, acquired
customer rights, IT software licences, etc.,
and are measured at cost less accumulated
amortisation and impairment losses.
Gas purchase rights are amortised using
the unit-of-production method, taking into
account the expected earnings profile, so that
the amortisation pattern reflects the expected
earnings patterns. Other rights are amortised
on a straight-line basis over their expected
economic lives, which are determined on the
basis of management’s experience of the spe-
cific business units, and the assets to which the
rights relate. Capitalised rights are estimated
to have a life of 5-20 years.
Development projects
Development projects comprise development
of IT systems, etc.
Development projects that are clearly defined
and identifiable, and for which technical fea-
sibility, adequate resources, a potential future
market, or an application in the company can
be demonstrated, and which the company
intends to manufacture, market, or use, are
recognised in intangible assets if the cost can
be determined reliably, and if there is reason-
able certainty that the future earnings or the
net selling price will cover production costs,
selling costs, administrative expenses, and
development costs. Other development costs
are recognised in the income statement as
incurred.
Recognised development costs are measured
at cost less accumulated depreciation and
impairment losses. Cost comprises salaries,
amortisation, and other costs attributable
to the company’s development activities as
well as borrowing costs relating to specific
and general borrowing directly attributable to
development projects.
On completion, development projects are
amortised on a straight-line basis over their
assessed future useful lives from the date the
asset is available for use. The amortisation
period is usually five years. The basis of amor-
tisation is reduced by any impairment losses.
Amortisation and impairment losses relating
to intangible assets are recognised in the
statement of comprehensive income.
Property, plant and equipment
Property, plant and equipment comprise land
and buildings, production assets and other
tools and equipment. Property, plant and
equipment which are not leases are measured
at cost less accumulated depreciation and
impairment losses.
Notes
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ContentsNote summaryØrsted Salg & Service Annual report 2020
Cost comprises the purchase price and any
costs directly attributable to the acquisition
until the date the asset is available for use.
The cost of self-constructed assets comprises
direct and indirect expenses for materials,
components, sub-suppliers, and wages.
Finance costs that can be attributed to a
preparation or production period are recog-
nised in the income statement as finance costs.
Specific and general borrowing costs attribut-
able to a construction period are recognised in
the cost of the asset constructed.
Cost is increased by the present value of the
estimated costs for dismantling and removing
the asset and restoring the site to the extent
that they are recognised as a provision. The
cost of an assembled asset can be divided
into separate components that are each
depreciated separately if the useful lives of
the individual components differ.
In the case of assets held under finance leases,
cost is determined as the lower of the fair
value of the assets and the present value of
future minimum lease payments. The present
value is determined using the interest rate
implicit in the lease as the discount rate or an
approximated value.
Subsequent costs, for example in connection
with replacement of parts of an item of
property, plant and equipment, are recognised
in the carrying amount of the asset in question
when it is probable that future economic ben-
efits will flow to the Group from the expenses
incurred. Replaced parts are derecognised
from the balance sheet, and their carrying
amounts are taken to the income statement.
All other general repair and maintenance
expenses are recognised in the income state-
ment as incurred.
Development and construction costs relating
to property, plant and equipment are recog-
nised, until entry into service, in the balance
sheet under property, plant and equipment
under construction. Following entry into service,
these assets are transferred to the relevant
items in property, plant and equipment.
In the case of gas activities, cost is depreciated
using the unit-of-production method, taking
into account the expected earnings profile,
so that the depreciation pattern reflects the
expected earnings patterns.
In the case of other property, plant and
equipment, cost is basically depreciated on a
straight-line basis over the estimated future
useful lives.
Depreciation periods for property, plant and
equipment:
Depreciation periods for PP&E Years
Buildings used for own purposes
Production assets: gas treatment plant
-
Marine pipelines
-
Fixtures and fittings, tools and equipment -
Assets under construction
-
1
Land is not depreciated.
2
The depreciation profile takes into account that
the use of the assets changes substantially over
the lives of the assets.
3
Depreciation does not commence until the date
of entry into service, at which date the assets are
transferred to production assets.
The basis of depreciation is determined on
the basis of the asset’s residual value less any
impairment losses. The residual value is deter-
mined at the acquisition date and reassessed
annually. Depreciation ceases if the residual
value exceeds the carrying amount.
If the depreciation period or the residual value
changes, the effect on depreciation is recog-
nised prospectively as a change in accounting
estimates.
Depreciation and impairment losses are
recognised in the statement of comprehensive
income to the extent that depreciation is not
recognised in the cost of self-constructed
assets.
Gains and losses on the disposal of property,
plant and equipment are determined as the
difference between the selling price less sell-
ing costs and the carrying amount at the date
of disposal. Gains and losses are recognised
in the income statement as ‘Other operating
income’ or ‘Other operating expenses’.
Investments in subsidiaries in the parent
company financial statements
Investments in subsidiaries are measured at
cost. Cost is written down to the recoverable
amount whenever it exceeds the recoverable
amount.
Long-term receivables
Long-term receivables include long-term loans
to customers.
Impairment of non-current assets
Goodwill and intangible assets with an
indefinite useful life are tested for impairment
annually, initially before the end of the year of
acquisition. Development projects in progress
are also tested annually for impairment.
The carrying amount of goodwill is tested
for impairment, along with the carrying
amounts of the other non-current assets of
the cash-generating unit to which the good-
will has been allocated, and written down
to the recoverable amount in the income
statement if the carrying amount exceeds the
recoverable amount. The recoverable amount
is generally determined as the present value
of the expected future net cash flows from the
company or activity (cash-generating unit) to
which the goodwill relates.
Deferred tax assets are reviewed annually
and recognised only to the extent that it is
probable that they will be utilised.
The carrying amounts of other non-current
assets are tested annually to determine if
any indication of impairment exists. If any
such indication exists, the asset’s recoverable
amount is determined. The recoverable
amount is the higher of an asset’s fair value
less expected disposal costs and its value
in use. The value in use is determined as the
present value of the expected future cash
flows from the asset or cash-generating unit
to which the asset belongs.
An impairment loss is recognised whenever
the carrying amount of an asset or cash-
generating unit exceeds the recoverable
Notes
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ContentsNote summaryØrsted Salg & Service Annual report 2020
amount of the asset or the cash-generating
unit. Impairment losses are recognised in the
income statement under production costs
and administrative expenses, respectively.
Impairment losses relating to goodwill are
recognised as a separate line item in the
income statement.
Impairment losses relating to goodwill are
not reversed. Impairment losses relating to
other assets are reversed to the extent that
the assumptions or estimates that led to
the impairment have changed. Impairment
losses are only reversed to the extent that the
asset’s new carrying amount does not exceed
the value of the asset after depreciation or
amortisation, had no impairment losses been
charged.
Inventories
Inventories consist of gas in storage facilities
and in gas pipelines, acquired carbon emission
allowances, and green certificates.
Gas storage in non-Danish facilities are man-
aged on a fair value basis, and therefore the
gas in these storage facilities is recognised at
fair value less sales costs. Changes in the fair
value less costs to sell are recognised in cost
of sales in the period of the change.
Gas in Danish storage facilities are recognised
at cost and determined as a weighted aver-
age of the previous month´s purchase price,
including transportation costs.
Purchased carbon emission allowances are
measured at fair value with value adjustments
recognised in the income statement.
Other inventories are measured at the
lower of cost using the first-in, first-out (FIFO)
principle or net realisable value. The net
realisable value of inventories is determined
as the expected selling price less any costs of
completion and costs incurred to execute the
sale and is determined taking into account
marketability, obsolescence, and development
of expected selling price.
Receivables
We keep our receivables until maturity, and
they are therefore measured at amortised cost.
Write-downs are carried out from initial
recognition of our receivables. Write-down
is calculated as the difference between the
carrying amount of the receivable and the net
present value of expected future cash flows
from the receivable. The discount rate used is
the effective interest rate for the individual
receivable or the individual portfolio.
We apply the simplified approach to the
write-down of trade receivables, which per-
mits calculating the write-downs as the full
loss during the entire term of the receivable.
Other receivables
Other receivables include positive fair values
of derivative financial instruments, etc.
Equity
Translation reserve
The translation reserve comprises exchange
differences arising on translation of the
financial statements of foreign entities with a
currency other than the Ørsted Salg & Service
Group’s presentation currency, exchange rate
adjustments relating to assets and liabilities
that form a part of the Group’s net investment
in such entities, and exchange rate adjust-
ments relating to hedging actions that hedge
the Group’s net investment in such entities,
less the related tax.
On realisation or partial realisation of the net
investment, the exchange rate adjustments
are recognised in the income statement.
Dividends
Proposed dividends are recognised as a
liability at the date of their adoption at the
annual general meeting (declaration date).
Up to the declaration date, proposed dividends
are disclosed as a separate item in equity.
Provisions
Provisions are recognised when the following
criteria are fulfilled:
– We have a legal or constructive obligation
as a result of an earlier event.
– The settlement of the obligation is expected
to result in an outflow of resources.
– The obligation can be measured reliably.
For onerous contracts, a provision is made
when the expected income to be derived from
a contract is lower than the unavoidable cost
of meeting our obligations under the contract.
Provisions concerning carbon emissions are
recognised when our actual emissions exceed
our holding of carbon emission allowances.
Decommissioning obligations are measured
at the present value of the future liability in
respect of decommissioning as expected at
the balance sheet date. The present value
of the provision is recognised as part of the
cost of property, plant and equipment and
depreciated together with the associated
asset. The addition of interest on provisions
is recognised in the income statement under
financial expenses.
Deferred income
Deferred income comprises payments
received in respect of income in subsequent
years, measured at cost. Deferred income
includes the value of unrecognised amounts in
respect of gas delivered under contract, which
is recognised at realisable value. The value of
gas free of charge delivered under contract
is spread proportionally over the remaining
contract period with a view to accounting for
purchased goods on an accruals basis.
Contract liabilities
We recognise a contract liability when the
invoicing on account and expected losses
exceed the transaction price of the goods or
services transferred to our customer.
Income tax and deferred tax
Current tax liabilities and current tax receiv-
ables are recognised in the balance sheet as
tax calculated on the year’s taxable income
adjusted for tax on previous years’ taxable
income and tax paid on account.
Deferred tax is measured using the balance
sheet liability method in respect of all tempo-
rary differences arising between the tax bases
Notes
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ContentsNote summaryØrsted Salg & Service Annual report 2020
of assets and liabilities and their carrying
amounts for financial reporting purposes.
However, deferred tax on temporary differ-
ences in respect of goodwill not deductible
for tax purposes, office properties, and other
items – apart from business combinations – is
not recognised where temporary differences
have arisen at the acquisition date without
having any effect on profit (loss) or taxable
income. When the tax base can be determined
applying different taxation rules, deferred tax
is measured on the basis of management’s
intended use of the asset or settlement of the
liability, respectively.
Deferred tax assets, including the tax base
of tax loss carryforwards, are recognised as
other non-current assets at the value at which
they are expected to be utilised either by
elimination against tax on future earnings or
by set-off against deferred tax liabilities within
the same legal tax entity and jurisdiction.
Deferred tax assets and deferred tax liabili-
ties are offset if the company has a legally
enforceable right to set off current tax assets
and current tax liabilities or intends either
to settle on a net basis or to realise the
asset and settle the liability simultaneously.
Adjustment of deferred tax is made relating
to eliminations made of unrealised intragroup
profits and losses. Deferred tax is measured in
accordance with the tax rules and tax rates in
the respective countries that will apply under
the legislation enacted at the balance sheet
date when the deferred tax is expected to
crystallise in the form of current tax.
Changes in deferred tax as a result of changes
in tax rates are recognised in the income
statement.
Pensions
The Group has entered into pension agree-
ments and similar agreements with most
of the Group’s employees. Contributions to
insured (defined-contribution) pension plans
are recognised in the income statement in the
period to which they relate, and any contribu-
tions payable are recognised in the balance
sheet as other payables.
Financial liabilities
Financial liabilities comprise bank loans, trade
and other payables to public authorities,
etc. Mortgage loans and other bank loans
are recognised at inception at the proceeds
received net of transaction costs incurred. In
subsequent periods, the financial liabilities
are measured at amortised cost using the
effective interest rate method. Accordingly,
the difference between the proceeds received
and the nominal amount is recognised in the
income statement as finance costs over the
term of the loan.
Other bank loans include the capitalised
residual lease commitment under finance
leases, measured at amortised cost.
Trade payables, payable income tax, and
other payables are measured at net realisable
value. Other payables include negative fair
values of derivative financial instruments, etc.
Financial liabilities whose values have been
effectively hedged are adjusted to fair value
to the extent of the hedged risk. The value
adjustment is recognised in the income
statement as financial income or financial
expenses.
Leases
Our lease liabilities are initially measured at
the net present value of the in-substance fixed
lease payments for the use of a lease asset.
If, at inception of the lease, we are reasonably
certain about exercising an option to extend
a lease, we will include the lease payments
in the option period when calculating the
lease liability. We measure the lease asset
to the value of the lease liability at initial
recognition.
Our lease assets are classified alongside our
owned assets of similar type under property,
plant and equipment. We depreciate our lease
assets during the lease term. The depreciation
method is straight-line basis for all our lease
assets.
Contracts may contain both lease and
non-lease components. We allocate the
consideration in a contract to the lease and
non-lease components based on their relative
stand-alone prices. We account for non-lease
components in accordance with the account-
ing policy applicable for such items. Non-lease
components comprise building services, etc.
Variable lease expenses are recognised in
other external expenses in the period when the
condition triggering those payments occurs.
Interests of lease liabilities are recognised in
financial expenses.
Each lease payment is separated into
repayment of the lease liability and pay-
ment of interests of the lease liability. Debt
repayments are classified as cash flows from
financing activities, and payment of interests
are classified as cash flows from operating
activities.
Statement of cash flows
The statement of cash flows shows cash
flows for the year from operating, investing,
and financing activities, the year’s changes
in cash and cash equivalents, and cash and
cash equivalents at the beginning and end of
the year.
The cash flow effect of acquisitions and di-
vestments of enterprises is disclosed separate-
ly under cash flows from investing activities.
Cash flows relating to acquired enterprises
are recognised in the statement of cash flows
from the date of acquisition, and cash flows
relating to divested enterprises are recognised
up to the date of divestment.
Cash flows from operating activities are deter-
mined using the indirect method as operating
profit adjusted for non-cash operating items,
changes in working capital, interest received
and paid, dividends received, and income tax
paid.
Cash flows from investing activities comprise
payments in connection with the acquisition
and divestment of enterprises and activities;
purchase and sale of intangible assets, property,
plant and equipment and other non-current
assets; and purchase and sale of securities
Notes
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ContentsNote summaryØrsted Salg & Service Annual report 2020
that are not recognised as cash and cash
equivalents.
Finance leases are accounted for as non-cash
transactions.
Cash flows from financing activities comprise
changes in the size or composition of share
capital and costs associated with such changes
as well as the raising of loans, repayment of
interest-bearing debt, purchases and sales of
treasury shares, and payment of dividends
to owners.
Cash flows relating to assets held under
finance leases are recognised as payment of
interest and repayment of debt.
Cash and cash equivalents comprise cash
as well as securities that form part of the
ongoing cash management, are readily
convertible to cash, and are subject to an
insignificant risk of changes in value.
Cash flows in currencies other than the func-
tional currency are translated at the average
exchange rates for the month in question,
unless these differ significantly from the rates
at the transaction date.
Notes
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ContentsNote summaryØrsted Salg & Service Annual report 2020
Unless otherwise stated, financial ratios have
been calculated in accordance with ‘Recom-
mendations & Financial Ratios’ published by
the Danish Society of Financial Analysts.
EBITDA margin Earnings before interest, tax, depreciation, and amortisation
Revenue
EBIT margin (profit margin)
Earnings before interest and tax
Revenue
Net interest-bearing debt Interest-bearing liabilities - interest-bearing assets
Capital employed Equity plus/minus gains/losses relating to hedging instruments on equity
+ net interest-bearing debt
1
Bank overdrafts that are included in the statement of cash flows as cash and cash equivalents are
included as negative interest-bearing assets.
2
The definition deviates from ‘Recommendations & Financial Ratios 2015’ published by the Danish Society
of Financial Analysts.
31. Calculation of financial ratios
Financial ratios have been calculated as
follows:
Notes
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ContentsNote summaryØrsted Salg & Service Annual report 2020
