rsted
Salg & Service
Annual report 2021
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 shareholder’s equity
Consolidated statement of cash flows
Parent company statement of comprehensive income
Parent company balance sheet
Parent company statement of shareholder’s equity
Parent company statement of cash flows
Notes
Ørsted Salg & Service, Annual report 2021
Company information
Company Ørst ed Sal g & Service A/S
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 Daniel Lerup (Chairman)
Anja Forup (Deputy Chairman)
Pernille Nygaard Rasmussen
Executive Board Martin Neubert
Auditor PricewaterhouseCoopers, Statsautoriseret Revisionspartnerselskab
Annual general meeting 22 June 2022
Overview
Ørsted Salg & Service, Annual report 2021
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
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 . %
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
Ørsted Salg & Service, Annual report 2021
Performance highlights
DKKm
Business performance (Prior to )
Statement of comprehensive income
Revenue , , , , ,
Operating profit (loss) before 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 n/a % %
IFRS:
Statement of comprehensive income
Revenue , , , , ,
Operating profit (loss) before 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 , , , , ,
Assets , , , , ,
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
The income statement (Business performance com-
parables) shows business performance numbers for
2017-2020 to form a better like-for-like comparison,
in line with comparison numbers used throughout
the management's review. Please refer to note 2 for
ellaboration on Business performance
Overview
Ørsted Salg & Service, Annual report 2021
Statement by the Executive Board
and the Board of Directors
Executive Board:
Board of Directors:
Overview
Ørsted Salg & Service, Annual report 2021
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
Ørsted Salg & Service, Annual report 2021
CVR no. 33771231
Overview
Ørsted Salg & Service, Annual report 2021
Financial performance
Revenue from continued operations increased
by 124 % compared to 2020 and amounted to
DKK 45.7 billion. The increase was driven by
five times higher average gas prices and four
times higher average UK power prices, which
led to higher revenue in our gas and power
sales businesses. The increase in revenue led
by the higher prices was partly offset by lower
sold gas and power volumes. Power volumes
decreased by 11 %, mainly due to lower offtake
of power from Ørsted windfarms, as significant
lower windspeeds has reduced power gener-
ated compared to 2020. Sold gas volumes
decreased by 9 %, primarily due to expiration
of sourcing contracts in the UK.
EBITDA amounted to DKK 43 million com-
pared to DKK 684 million in 2020.
To reflect end-to end value chain thinking
in Ørsted, earnings from trading related
to hedging of power exposures and power
portfolio optimisation activities are reported
as Offshore earnings.
EBITDA from Offshore sales decreased from
DKK 402 million in 2020 to a loss of DKK
1.948 million in 2021. Earnings were negatively
impacted by the energy crunch, the last four
months of the year, with very high power prices
and high volatility. This impacted earnings
through higher balancing and intermittency
costs and through costs related to buy-back
of hedges. In addition, earnings from trading
related to hedging of power exposure from
the Ørsted Group's power generation, were
negatively impacted by the general market
development.
EBITDA from Gas Markets & Infrastructure
amounted to DKK 2.082 million in 2021, a
DKK 1.550 million increase relative to last
year. The positive effect was mainly driven
by a one-off effect in connection with the
renego tiation of gas purchase contracts
together with strong underlying performance,
especially in H2 2021, in a very volatile and
bullish gas market where we were able to
optimise purchase from our long-term gas
contracts.
EBITDA from Other business activities
amounted to DKK -91 million, an increase
of 159 million, which was primarily due to
reduced operating costs.
Cash flows from operating activities amounted
to DKK -9,557 million in 2021. The negative
cash flow was driven by the high and volatile
gas and power prices, leading to large margin
payments on unrealized financial instruments
and initial margin payments to clearing houses
(DKK -7,238 million). Significantly higher spend
to fill our gas at storage due to the increasing
gas prices (DKK -2,873 million).
Management’s review
Performance highlights %
Business drivers
Gas sales (continued operations)
TWh . . ( %)
Power sales (continued operations)
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 (,) n/a
Gas Markets & Infrastructure , %
Other, incl. end-customer sale () () ( %)
EBITDA (discontinued operations) DKKm () () ( %)
Depreciation, amortisation , and impairment losses DKKm () () ( %)
EBIT DKKm () n/a
Cash flows from operating activities DKKm (,) , n/a
Gross investments DKKm n/a
Divestments DKKm n/a
Cash flows from financing activites DKKm , n/a
Free cash flow from continued operations DKKm , n/a
Free cash flow from discontinued operations DKKm (,) n/a
Capital employed DKKm , , n/a
1
Gas volumes from discontinued operations 15.8 TWh (2020: 40.9 TWh)
2
Power volumes from discontinued operations 3.1 TWh (2020: 4.4 TWh)
3
Business performance for 2020
Cash flows from gross investments amounted
to DKK 84 million mainly due to development
of IT systems and investment in securities used
for collateral.
Cash flow from financing activities amounted
to DKK 9.891 million mainly due to transactions
with Ørsted internal bank.
Overview
Ørsted Salg & Service, Annual report 2021
Discontinued operations
Following the decision to exit our UK B2B
business, partly divested in March 2021, we
have decided to present this activity as
discontinued operations. Reference is made
to note 11 ‘Discontinued operations’.
Business performance
Ørsted has decided ceasing to report according
to the business performance principle as of
1 January 2021 and applying hedge accounting
from 1 January 2021.
Reference is made to note 2.
Earnings related to expected development
assumed in previous report
Financial performance for 2021 was below ex-
pectations primarily driven by lower earnings
in our Offshore related trading activities com-
bined with the energy crunch. However this
was partly offset by one-off effects from our
gas sourcing contract. Consequently, realised
EBITDA ended lower than our expected range
for 2021 of 0.3-0.5 bDKK.
Outlook 2022
For the Ørsted Salg & Service Group, a higher
EBITDA is expected for 2022. EBITDA is expected
to total DKK 0.7 - 1.0 billion in 2022.
– Earnings from trading related to hedging
of our power exposure is expected to be
positive in 2022, with less negative impact
from energy crunch, but continued negative
impact from high balancing and intermit-
tency costs.
– In 2022, earnings in ‘Gas Markets & Infra-
structure’, is expect earnings to be fairly
limited, reflecting normal margins on these
activities compared to extraordinary high
earnings in 2021.
Events after the end of the financial year
In the beginning of June 2022 Gazprom Export
has decided to stop the supplies on our
long-term gas contract, as we have rejected
Gazprom Export's demands for payment
in roubles.
Since Russia's invasion of Ukraine, we have
taken decisions to unwind gas hedges related
to the Gazprom Export contract to balance
our risk of gas supplies from Russia were
terminated. The unwinding of hedges have
had negative impact on our earnings from the
Gazprom Export sourcing contract in 2022.
The halted gas supplies from Gazprom Export,
or any other events occurred after the end
of the financial year, have not influenced the
evaluation of the annual report for 2021.
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 generation 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
contracts 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.
We are utilizing our gas and power portfolio by part of the volumes being sold to our
B2B customers in Denmark and the southern part of Sweden.
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
2021 annual report, which includes the Group’s statutory environmental statement.
Overview
Ørsted Salg & Service, Annual report 2021
Strategic and operational performance 2021
During 2021, our power portfolio and trading
related to hedging of power generation was
significant challenged by the energy crunch
hitting the European energy market the last
four months of the year. But also, less power
than normal generated by Ørsted windfarms
due to low wind speeds has led to higher
balancing cost and intermittency costs, driving
the earnings in 2021 down.
Our gas business had a strong financial per-
for mance in 2021, giving Ørsted Salg & Service
a strong diversification effect, where the
positive earnings in the gas business offset-
ting the negative impacts from the Offshore
power activities.
During the year, we also concluded the
renegotiations of some of our long-term gas
contracts. Besides obtaining a satisfactory
financial result from the renegotiations,
we managed to further reduce the risk of
our exposure in the contracts as the future
indexation will be towards gas prices rather
than oil prices.
In 2021, we completed the divestment of the
majority of our UK B2B customers to Total
Gas & Power. The remaining part of the UK
B2B activities will be phased out in step with
the expiry of our obligations, to a significant
extent during 2022.
Going forward, our B2B activities will be
centred around Denmark and the southern
part of Sweden, serving as a natural outlet
for our long-term gas sourcing contracts,
with cross-selling of power.
Risk management
The activities, financial position, results, and
future growth of the Ørsted Salg & Service
Group are affected by a number of non-finan-
cial and financial commercial risks. Therefore,
we regularly review our risk profile and the
associated risk policies to ensure the appropri-
ate 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 Salg &
Service Group’s financial results or strategy.
The management of commercial risks is
anchored in the individual segments in the
Ørsted Salg & Service Group and consolidated
at corporate level. Once annually, the Ørsted
Salg & Service 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 28 ‘Contin-
gent liabilities and other liabilities’.
Group management
The member of the Executive Board is:
Martin Neubert
CEO
The members of the Board of Directors are:
Daniel Lerup
Chairman of the Board of Directors.
Anja Forup
Deputy Chairman of the Board of Directors.
Pernille Nygaard Rasmussen
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.
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 finan-
cial resources, taking into account primarily
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 450 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
the commercial insurance market. 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 in-
surance business and is subject to supervision
by the Danish Financial Supervisory 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 27.
Overview
Ørsted Salg & Service, Annual report 2021
Environmental, social, and governance
statement (ESG)
In pursuance to Section 99a (7) of the Danish
Financial Statements Act, the Company has
omitted information on corporate social
resonsibility. We are part of the Ørsted Group,
and reference is consequently made to the
Ørsted Group’s 2021 annual report, which
includes the Group’s statutory ESG report.
Further details on ESG can be found at
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 female
representation on shortlists, and recruiters
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 partici-
pants, and a decision was made to have 30 %
females on all the high-potential development
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
talented women for senior leadership positions.
Ørsted has joined the UN Convention on
Discrimination against Women.
Target figures and gender representation at
management level
Statement of policy for data ethics
In pursuance of Section 99d of the Danish
Financial Statements Act, the Company has
omitted information on data ethics.
Reference is made to the Data Ethics state-
ment 2021 for Ørsted A/S:
Overview
Ørsted Salg & Service, Annual report 2021
Consolidated statement of comprehensive income
January - December
Note DKKm 2021 2020
3 Revenue 45,666 18,709
4 Cost of sales (44,867 ) (18,133 )
Other external expenses (513 ) (529 )
5, 6 Employee costs (241 ) (275 )
Other operating income - 9
Other operating expenses (2 ) (3 )
Operating profit (loss) before depreciation, amortisation, and impairment losses (EBITDA) 43 (222 )
12, 13 Depreciation, amortisation and impairment losses on intangible assets and property, plant, and equipment (121 ) (124 )
Operating profit (loss) (EBIT) (78 ) (346 )
Gain (loss) on divestment of enterprises (2 ) -
8 Financial income 1,491 1,147
9 Financial expenses (1,370 ) (1,292 )
Profit (loss) before tax 41 (491 )
10 Tax on profit (loss) for the year 523 181
Profit (loss) for the year from continuing operations 564 (310 )
11 Profit (loss) for the year from discontinued operations (115 ) (746 )
Profit (los) for the year 449 (1,056 )
Other comprehensive income
:
Value adjustments of cash flow hedging (4,154 ) -
Cash flow hedging transferred to income statement 81 -
Exchange rate adjustments relating to net investments in foreign enterprises (22 ) 4
Tax on other comprehensive income 898 -
Other comprehensive income (3,197 ) 4
Total comprehensive income (2,748 ) (1,052 )
Profit (loss) for the year is attributable to:
Shareholder in Ørsted Salg & Service A/S 449 (1,056 )
Profit (loss) for the year 449 (1,056 )
Comprehensive income for the year is attributable to:
Shareholder in Ørsted Salg & Service A/S (2,748 ) (1,052 )
Total comprehensive income (2,748 ) (1,052 )
1
All items in “Other comprehensive income” may be recycled to the income statement.
Ceasing to report according to the business perfor-
mance principle as of 1 January 2021
From 1 January 2021, we have only reported IFRS
figures. Thus the business performance and adjust-
ment columns are no longer included in our financial
reporting.
See note 30 'Description of accounting policies'.
Financial statements
Ørsted Salg & Service, Annual report 2021
Note Equity and liabilities, DKKm 2021 2020
Share capital 1,110 1,110
Translation reserve (25 ) (3 )
Hedging reserve (3,175 ) -
Retained earnings 8,288 7,840
23 Equity 6,198 8,947
24 Provisions 1,084 1,826
Lease liabilities 21 93
17 Derivatives 3,275 -
Payables to group enterprises 522 133
25 Contract liabilities 4 4
16 Deferred tax 15 -
Other paybles - 2
Non-current liabilities 4,921 2,058
24 Provisions 348 393
Lease liabilities 75 76
Bank debt - 64
17 Derivatives 40,899 4,820
25 Contract liabilities 383 179
Trade payables 6,233 2,469
Payables to group enterprises 8,976 1,811
20 Other payables 514 371
21 Income tax 1,970 319
Current liabilities 59,398 10,502
Liabilities 64,319 12,560
Equity and liabilities 70,517 21,507
Consolidated balance sheet
December
Note Assets, DKKm 2021 2020
Rights 4 10
Completed development projects 35 67
Development projects in progress 76 46
12 Intangible assets 115 123
Land and buildings 4 4
Production assets 392 480
Property, plant, and equipment under construction - 2
13 Property, plant and equipment 396 486
17 Derivatives 328 -
16 Deferred tax 4,226 606
Other non-current assets 4,554 606
Non-current assets 5,065 1,215
15 Inventories 5,089 2,217
17 Derivatives 39,081 4,680
19 Trade receivables 7,728 3,973
Receivables from group enterprises 4,217 8,051
20 Other receivables 8,122 675
21 Income tax 12 84
22 Securities 414 356
22 Cash 789 256
Current assets 65,452 20,292
Assets 70,517 21,507
Financial statements
Ørsted Salg & Service, Annual report 2021
2021 2020
DKKm
Share
capital
Hedging
reserve
Translation
reserve
Retained
earnings Tota l
Share
capital
Hedging
reserve
Translation
reserve
Retained
earnings To ta l
Equity at 1 January 1,110 - (3 ) 7,840 8,947 1,110 - (7 ) 8,978 10,081
Comprehensive income for the year:
Profit (loss) for the year - - - 449 449 - - - (1,056 ) (1,056 )
Other comprehensive income:
Impact from cash flow hedging - (4,073 ) - - (4,073 ) - - - - -
Tax on cash flow hedging - 898 - - 898 - - - - -
Exchange rate adjustments, foreign companies - - (22 ) - (22 ) - - 4 - 4
Total comprehensive income - (3,175 ) (22 ) 449 (2,748 ) - - 4 (1,056 ) (1,052 )
Transactions with owners:
Demerger of assets and liabilities - - - (5 ) (5 ) - - - (80 ) (80 )
Share-based payment - - - 1 1 - - - (2 ) (2 )
Other adjustments - - - 3 3 - - - - -
Total changes in equity - (3,175 ) (22 ) 448 (2,749 ) - - 4 (1,138 ) (1,134 )
Equity at December 1,110 (3,175 ) (25 ) 8,288 6,198 1,110 - (3 ) 7,840 8,947
Consolidated statement of shareholder’s equity
January - December
Financial statements
Ørsted Salg & Service, Annual report 2021
Note DKKm 2021 2020
Operating profit (loss) before depreciations and amortisation (EBITDA) 43 (222 )
Other items
(245 ) 2,153
26 Change in working capital (8,660 ) (1,135 )
Cash flows from operations (operating activities) (8,862 ) 796
Interest income and similar items 786 872
Interest expenses and similar items (858 ) (1,056 )
Income tax paid (623 ) 800
Cash flows from operating activities (9,557 ) 1,412
12 Acquisition of intangible assets (36 ) (11 )
13 Sale of tangible assets and property, plant, and equipment - 2
Sale of enterprises 9 -
Other Investments (48 ) -
Cash flows from investing activities (75 ) (9 )
Financial transactions with the Ørsted Group's internal bank 9,821 1,142
Loan from group enterprises 380 -
Instalments on loans (232 ) (302 )
Instalments on leases (73 ) (71 )
Paid dividend (5 ) (3 )
Cash flows from financing activities 9,891 766
Cash flows from continuing operations 259 2,169
11 Cash flows from discontinuing operations 90 (2,169 )
Total net change in cash and cash equivalents 349 -
Cash and cash equivalents at 1 January 185 193
Net increase/(decrease) in cash 349 -
Exchange rate adjustments 15 (8 )
22 Cash and cash equivalents at December 549 185
1
‘Other items’ primarily comprise changes in other provisions and changes in value adjustments of derivative financial instruments.
Consolidated statement of cash flows
January - December
Financial statements
Ørsted Salg & Service, Annual report 2021
Parent company statement of
comprehensive income
January - December
Note DKKm 2021 2020
3 Revenue 45,785 20,519
4 Cost of sales (44,981) (19,922)
Other external expenses (485) (517)
5, 6 Employee costs (238) (254)
Other operating income - 9
Other operating expenses (2) (4)
Operating profit (loss) before depreciation, amortisation and impairment losses (EBITDA) ()
12, 13 Depreciation, amortisation and impairment losses on intangible assets and property, plant and equipment (120) (111)
14 Impairment on investments in subsidiaries (852) -
Operating profit (loss) (EBIT) () ()
Gain (loss) on divestment of enterprises (1) -
8 Financial income 1,505 1,143
9 Financial expenses (1,359) (1,295)
Profit (loss) before tax () ()
10 Tax on profit (loss) for the year 512 173
Profit (loss) for the year from continuing operations () ()
11 Profit (loss) for the year from discontinued operations () ()
Profit (loss) for the year () ()
Other comprehensive income
:
Value adjustments of cash flow hedging (4,154) -
Cash flow hedging transferred to income statement 81 -
Tax on other comprehensive income 898 -
Total comprehensive income (,) ()
Profit (loss) for the year is attributable to:
Shareholder in Ørsted Salg & Service A/S (267) (638)
Profit (loss) for the year () ()
Total comprehensive income for the year is attributable to:
Shareholder in Ørsted Salg & Service A/S (3,442) (638)
Total comprehensive income (,) ()
1
All items in “Other comprehensive income” may be recycled to the income statement.
Ceasing to report according to the business perfor-
mance principle as of 1 January 2021
From 1 January 2021, we have only reported IFRS
figures. Thus the business performance and adjust-
ment columns are no longer included in our financial
reporting.
See note 30 'Description of accounting policies'.
Financial statements
Ørsted Salg & Service, Annual report 2021
Note Equity and liabilities, DKKm 2021 2020
Share capital 1,110 1,110
Development costs reserve 110 89
Hedging reserve (3,175) -
Retained earnings 7,858 8,149
23 Equity , ,
24 Provisions 1,529 2,270
Lease liabilities 19 91
17 Derivatives 3,275 -
25 Contract liabilities 4 4
Other payables - 2
Non-current liabilities , ,
24 Provisions 170 176
Lease liabilities 75 76
Bank debt - 64
17 Derivatives 40,863 4,814
25 Contract liabilities 383 179
Trade payables 5,807 2,057
Payables to group enterprises 8,991 1,472
20 Other payables 147 139
21 Income tax 2,049 315
Current liabilities , ,
Liabilities , ,
Equity and liabilities , ,
Parent company balance sheet
December
Note Assets, DKKm 2021 2020
Rights 4 4
Completed development projects 35 68
Development projects in progress 75 45
12 Intangible assets
Land and buildings 2 2
Production assets 392 479
Property, plant, and equipment under construction - 2
13 Property, plant and equipment
14 Investments in subsidiaries 262 287
17 Derivatives 328 -
16 Deferred tax 4,226 580
Other receivables 1 3
Other non-current assets ,
Non-current assets , ,
15 Inventories 5,088 2,215
17 Derivatives 39,044 4,674
19 Trade receivables 5,639 2,258
Receivables from group enterprises 5,337 9,408
20 Other receivables 8,100 566
22 Securities 414 356
22 Cash 268 60
Current assets , ,
Assets , ,
Financial statements
Ørsted Salg & Service, Annual report 2021
2021 2020
DKKm
Share
capital
Hedging
Reserve
Development
cost reserve
Retained
earnings To ta l
Share
capital
Hedging
Reserve
Development
cost reserve
Retained
earnings To ta l
Equity at 1 January 1,110 - 89 8,149 9,348 1,110 - 97 8,860 10,067
Comprehensive income for the year:
Profit (loss) for the year - - 21 (288) (267) - - (8) (630) (638)
Impact from cash flow hedging - (4,073) - - (4,073) - - - - -
Tax on cash flow hedging - 898 - - 898 - - - - -
Total comprehensive income - (,) () (,) - - () () ()
Transactions with owners:
Demerger of assets and liabilities - - - (4) (4) - - - (80) (80)
Share-based payment 1 1 - - - (1) (1)
Total changes in equity - (,) () (,) - - () () ()
Equity at December , (,) , , , - , ,
Parent company statement of shareholder's equity
January - December
Demerger in 2020 comprises of adjustments related
to the divestment of the residual customer business,
which took place in 2019.
Financial statements
Ørsted Salg & Service, Annual report 2021
Note DKKm 2021 2020
Operating profit (loss) before depreciation and amortisation (EBITDA) ()
Other items
(323) 2.111
26 Change in working capital (9,787) (208)
Cash flows from operations (operating activities) (,) ,
Interest income and similar items 798 873
Interest expenses and similar items (849) (1,060)
Income tax paid (600) 777
Cash flows from operating activities (,) ,
12 Acquisition of intangible assets (35) (11)
Sale of enterprises 9 -
14 Investments in subsidiaries (827) (1)
Other investments (45) (3)
Cash flows from investing activities () ()
Instalments on leases (73) (70)
Financial transactions with the Ørsted Croup's internal bank 11,783 (277)
Instalments on loans (232) (7)
Paid dividend (4) (2)
Cash flows from financing activities , ()
Cash flows from continuing operations ,
11 Cash flows from discontinuing operations () (,)
Total net change in cash and cash equivalents
Cash and cash equivalents at 1 January (11) (47)
Net increase/(decrease) in cash 39 36
22 Cash and cash equivalents at December ()
1
‘Other items’ primarily comprise changes in other provisions and changes in value adjustments of derivative financial instruments.
Parent company statement of cash flows
January - December
Financial statements
Ørsted Salg & Service, Annual report 2021
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
Inventories
Deferred tax
Derivatives
Maturity analysis of financial liabilities
Trade receivables
Other receivables and other payables
Income tax receivable, and payable
Cash, cash equivalents, and securities
Equity
Provisions
Contract liabilities
Change in working capital
Financial risks and risk management
Contingent liabilities and other liabilities
Related-party transactions
Description of accounting policies
Calculation of financial ratios
Notes
Ørsted Salg & Service, Annual report 2021
Accounting policies
Ørsted Salg & Service A/S is a public limit ed
The financial statements for the period 1
January - 31 December 2021 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 and
parent financial statements have been pre-
pared in accordance with the International
Financial Reporting Standards (IFRS) as
adopted by the EU and further requirements
in the Danish Financial Statements Act
(Årsregnskabsloven).
The financial statements are presented in million
Danish kroner (DKK), unless otherwise stated.
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 and
parent financial statements are described in
note 30 'Description of accounting 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
business activities, we make a number of
estimates regarding valuation and judge-
ments. 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 related 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
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 as-
sumptions which may entail a risk of material
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.
. 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
Ørsted Salg & Service, Annual report 2021
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.
We have not implemented any standards (IAS
and IFRS) or interpretations in 2021.
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 2021.
None of these amended standards and inter-
pretations are expected to have any signifi-
cant impact on our financial statements.
Notes
Ørsted Salg & Service, Annual report 2021
Business Performance highlights , DKKm
Business
Performance Adjustments IFRS
Revenue , (,) ,
Cost of sales (,) (,)
Operating profit (loss) before depreciation,
amortisation, and impairment losses (EBITDA) () ()
Operating profit (loss) (EBIT) () ()
Profit (loss) for the year () (,) (,)
Expected impact on business performance EBITDA from energy and currency hedging, DKKm
Deferred for subsequent recognition at December
after Tota l
Oil () () () ()
Gas
Power () () () ()
Currency ()
To t a l () () () ()
Ceasing to report according to the business
performance principle as of 1 January 2021
From 1 January 2021, we have applied IFRS
hedge accounting to all commodity hedges
and related currency hedges, and therefore we
only report IFRS numbers. Thus, the business
performance and adjustment columns are
no longer included in our financial reporting.
However, throughout the management’s
review, we will use business performance as
comparable numbers for 2020 for a better
like-for-like comparison.
Impact from ceasing to report according to
the business performance principle
At the end of 2020, the value of our business
performance hedges deferred to a future pe-
riod was DKK -628 million, of which DKK -198
million related to 2021. This net loss was rec-
ognised in the income statement under IFRS
in previous years, as we have not previously
applied hedge accounting for these hedges.
Consequently, for the period 2021-2025,
EBITDA (according to IFRS) will, all other things
being equal, be higher by a similar amount
compared to what the business performance
EBITDA would have been if we had continued
to report based on this principle.
The transition to sole report accourding to
IFRS simplifies our reporting, and potential
. Business performance
conflicts with future reporting requirements
for alternative performance measures are
avoided.
Background for business performance
In 2011, we introduced an alternative perfor-
mance measure, business performance, as a
supplement to the financial statements pre-
pared in accordance with IFRS. The business
performance results reflected our internal risk
management and showed the results for the
period under review. The main reason for the
introduction of business performance was that
applying hedge accounting under the old IFRS
standard IAS 39 was very time-consuming and
often not possible when we use proxy hedging.
Description of business performance
Under the business performance principle, the
value of all commodity hedges and related
currency hedges were deferred and recognised
for the period in which the hedged risk materi-
alised. Prior to 1 January 2021, all these hedges
were accounted for at fair value through profit
and loss under IFRS. The accounting treatment
of all other transactions were identical with
IFRS.
Please refer to note 30 in the 2020 annual
report for further descriptions of the business
performance principle.
Notes
Ørsted Salg & Service, Annual report 2021
DKKm Denmark Germany The UK
The
Netherlands Other, EU
Consolidated
total
, , , , ,
, , , , ,
. Revenue
Geographical distribution of revenue
Revenue is broken down, as far as possible,
bythe customer’s geographical location
based on supply point.
Group Parent company
DKKm
Sale of gas , , , ,
Sale of power , , , ,
Distribution and transmission - - -
Other revenue ()
Total revenue from customers , , , ,
Trading activities, net () ()
Effect of economic hedging, net - (,) - ()
Miscellaneous revenue - - -
Total revenue, IFRS , , , ,
Adjustment - , - -
Total revenue, business
performance , , , ,
Timing of revenue recognition from
customers, IFRS
At a point in time , , , ,
Over time , , , ,
Total revenue from customers, IFRS , , , ,
Revenue from sale of goods and
services
Revenue from sale of goods , , , ,
Revenue from sale of services
Total Revenue, IFRS , , , ,
Group Parent company
DKKm
Gas (,) (,) (,) (,)
Power (,) (,) (,) (,)
Distribution and transmission costs () () () (,)
Other cost of sales () () ()
Cost of sales (,) (,) (,) (,)
. Cost of sales
Notes
Ørsted Salg & Service, Annual report 2021
. 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 304 355
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, which is also Key
Management Person (KMP). A bonus plan has
been established for the Executive Board.
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 - - (.) (.)
The contract of service of the Executive
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 fulfil the shareholding
requirement at the time of granting, they
will be granted a number of PSUs each year,
representing a value of 15-20 %, of the annual
fixed salary on the date of granting.
The granted PSUs have a vesting period of
approximately three years, after which each
PSU entitles the holder, without payment,
to receive a number of shares corresponding
to 0-200 % of the number of PSUs granted.
The vesting is conditional upon continued
employment. Assuming no share price
development since the grant, the value would
correspond to 0-30 % or 0-40 % of the fixed
salary on the date of grant.
The final number of shares for each
participant will be determined on the basis
of the total shareholder return delivered by
Ørsted, benchmarked against ten comparable
European energy companies.
The highest rate (200 %) will be triggered
if Ørsted’s results, measured as the total
return to shareholders, outperform those of
the comparable companies. For each lower
ranking, the number of shares granted will
fall by 20 percentage points (% points). If, for
example, Ørsted ranks third, the participants
will be entitled to 160 % of the target.
If Ørsted ranks 11 in the comparison, no shares
will be granted to the participants. The right
to shares is conditional upon continued
employment.
. Share-based payment
Notes
Ørsted Salg & Service, Annual report 2021
. Auditor’s fees . Financial income
. 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
Ørsted Salg & Service, Annual report 2021
. 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
Current tax on other comprehensive income
Tax for the year , ,
Tax on profit (loss) for the year can be broken down as follows:
Current tax (,) () (,) ()
Deferred tax , ,
Uncertain tax position - -
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 ()
Movement in uncertain tax positions - -
Tax effect of tax loss carryforward () () - -
Adjustments to tax in respect of prior years () ()
Tax on profit (loss) for the year
Effective tax rate n.a. % % %
Notes
Ørsted Salg & Service, Annual report 2021
. Discontinued operations
Financial performance
EBIT from UK B2B business amounts to
DKK -93 million (2020: DKK 408 million), in-
cluding a negative impact of DKK -106 million
due to onerous contracts in the remaining UK
B2B business, that we have provided for.
Gain on divestments of UK B2B customer con-
tracts amounts to DKK 62 million, including
reversal of provisions made in 2020.
Total cash flows from UK B2B business in 2021
amounted to DKK -17 million, of which DKK 1
million where from operating activities, and
negative cash flow of DKK -18 million from
divestment of the UK B2B business.
Total cash flows from the divested LNG,
amounts to DKK 107 million from payment
of tax.
Group Parent company
Tax for the year, discontinued
operations, DKKm
Current tax
Deferred tax () - - -
Total tax ()
Group Parent company
Cash flows for the year,
discontinued operations, DKKm
Cash flows from operating activities () ()
Cash flows from investing activities () (,) - (,)
Total cash flows (,) (,)
Group Parent company
Profit from discontinued
operations, DKKm
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 () () () ()
Outlook 2022
We expect earnings in the UK B2B business
to break even in 2022. The remaining UK B2B
business are expected to be terminated in
2022.
Notes
Ørsted Salg & Service, Annual report 2021
. Intangible assets
Group
DKKm Goodwill Rights
Completed
development
projects
Development
projects in
progress Tota 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 ,
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 -
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 2021,
the carrying amount of rights was calculated
to DKK 4 million (2020: DKK 10 million).
There were no indications of impairment of
rights in 2021.
Development projects
Completed development projects related to
IT software. At 31 December 2021, the carrying
amount of development projects was calcu-
lated to DKK 35 million (2020: DKK 67 million).
Development projects in progress are related
to development of IT software.
Notes
Ørsted Salg & Service, Annual report 2021
. Intangible assets (continued)
Parent company
DKKm Rights
Completed
development
projects
Development
projects in
progress Tota 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 ,
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
Amortised over - years - years - -
Notes
Ørsted Salg & Service, Annual report 2021
. Property, plant and equipment
Group
DKKm
Land and
buildings
Production
assets
Fixtures and
fittings, tools
and equipment
Property, plant,
and equipment
under
construction To t a l
Cost at January , ,
Foreign exchange adjustment - () () - ()
Adjustment of decommissioning obligations - () - - ()
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 , ,
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 -
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 2021.
Notes
Ørsted Salg & Service, Annual report 2021
. 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 To t a l
Cost at January , ,
Adjustment of decommissioning obligations - () - - ()
Disposals - - - () ()
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 , ,
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 -
Depreciated over years - years - years - -
Notes
Ørsted Salg & Service, Annual report 2021
. Investments
in subsidiaries
Parent company
DKKm
Cost at January , ,
Adjustment, opening () -
Additions
Disposals - -
Cost at December , ,
Value adjustments at January () ()
Adjustment, opening -
Impairment losses () -
Value adjustments at December (,) ()
Carrying amount at December
Reference is made to page 5 for Ørsted Salg &
Service A/S Group Structure and overview of
the consolidated subsidiaries within the Group.
In 2021, additions are related to capital contri-
bution in Orsted S&D (UK) Limited.
We have tested investments in subsidiaries for
impairment by comparing the expected future
income in the individual subsidiary with their
carrying amounts.
In 2021, due to general low earnings from the
UK B2B activites and the decision to termi-
nate our B2B activites in UK, the exepcted
future value of our investment in Orsted S&D
(UK) Limited is significantly lower than the
booked value of the subsidiary, which has
given rise to an impairment.
In 2020, additions are related to capital
contribution to the new established subsidiary
Orsted Commercial Commodities A/S.
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 3,161 million
(2020: DKK1,388 million).
. Inventories
Notes
Ørsted Salg & Service, Annual report 2021
. 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
DKK74 million in 2021 (2020: DKK 32 million).
Group Parent company
DKKm
Deferred tax at 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 (liability) - - -
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
Intangible assets () - () -
Property, plant, and equipment - () -
Current assets - -
Decommissioning obligations () () - () () () - ()
Other non-current liabilities () () () () - ()
Current liabilities and derivatives () (,) () (,) () (,) - (,)
Tax loss carry forward () - - - - - -
To t a l () (,) () (,) () (,) - (,)
Intangible assets - - () -
Property, plant, and equipment - () -
Current assets - -
Decommissioning obligations () () - () () () - ()
Other non-current liabilities () - () () - ()
Current liabilities () - () () - ()
Tax loss carry forward () () - () - - - -
To t a l () () - () () () - ()
Notes
Ørsted Salg & Service, Annual report 2021
Energy price cash flow hedge
accounting , DKKm
Contractual
principal
amount
Maturity analysis Market value
Recognised in
comprehensive
income
Expected transfers to EBITDA/CAPEX
After Asset Liability After
EBITDA impact
Power swaps and futures () () () ()
Power options . , , , (,) (,) (,) ()
Gas swaps and futures . . , , , () () ,
Oil futures
Currency, forwards , , ()
To t a l , , (,) (,) (,)
. 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 , , , ,
Derivative financial instruments held for hedging , , - -
Derivatives (assets) used ad hedging instruments , , - -
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 , , , ,
Derivatives finacial instruments held for hedging , , - -
Derivatives (liabilities) used as hedging instruments , , - -
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.
In 2021, we began to apply IFRS hedge accounting to
energy and related FX hedges previously accounted
for under the business performance principle.
In 2021, we recognised volume ineffectiveness
related to gas and oil hedges, primarily related to
exposure in 2022. In total, these amounted to DKK
-269 million (2020: DKK 0 million).
Notes
Ørsted Salg & Service, Annual report 2021
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 , (,) - , , (,) -
Fair value measurement
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 finan-
cial instruments where valuation models with
observable inputs are used to measure fair val-
ue. For commodity derivatives we can directly
apply the observable commodity price adjust-
ed for the credit risk on the counterparty.
Significant non-observable inputs
Market values based on non-observable input
comprise primarily long-term contracts on
the purchase or sale of power. Since there are
no active markets for the long-term prices of
power, the market values have been deter-
mined through an estimate of the future prices
based on an extrapolation of the forward
curve adjusted for inflation.
Estimating non-observable power prices
Since our corporate power puchase agree-
ments (CPPAs) are normally settled on the
actual production, and the power prices avail-
able in the market are based on a constant
production (flat profile), we take into account
that our expected production is not constant,
and thus our CPPAs will not be settled against
a flat profile price (intermittency adjustment).
For the majority of our markets, the flat profile
power price can be observed for a maximum
of four to six years in the market, after which
an active market no longer exists.
Contracts accounted for at fair value through profit or loss (EBITDA), 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 ()
Fair value hierarchy of
financial instruments
DKKm
Quoted prices
Observable
inputs
Non-observable
inputs Tot a l Quoted prices
Observable
inputs
Non-observable
inputs Tot a l
Commodity derivatives , , , , , , ,
Currency derivatives - - - -
Total derivatives , , , , , , ,
Securities - - - -
Inventories , - - , , - - ,
Total assets measured at
fair value , , , , , , ,
Commodity derivatives , , , , , , ,
Currency derivatives - - - -
Total liabilities measured
at fair value , , , , , , ,
Notes
Ørsted Salg & Service, Annual report 2021
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 (,) ()
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.
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.
Related amounts not netted in the balance sheet
Netting of financial assets, DKKm
Recognised
financial assets,
gross
Financial
liabilities, offset
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 DKK 553 per
MWh, based on an inflation-adjusted extrapolation
of the observable price. An increase or decrease
in the German power prices of 25 % would impact
the fair value by +/- DKK 1,871 million.
Notes
Ørsted Salg & Service, Annual report 2021
. Maturity analysis of financial liabilities
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 , , ,
Notes
Ørsted Salg & Service, Annual report 2021
Trade receivables by credit quality
Ørsted Salg & Service A/S’s main credit
exposure 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 security are determined on the
basis of the credit rating of the counterpar-
ty, partly using input from external rating
agencies such as Moody’s, S&P, and Fitch.
For all significant counterparties, 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 concentrations 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
historical experience. For receivables with a
general credit risk, a write-down of 0-1 % is
carried out on initial recognition.
. Trade
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
. Other receivables
and other payables
Other receivables, DKKm
Group Parent company
Collateral provided , ,
Margin calls , () , ()
VAT and other indirect tax
receivables -
Prepayment - -
Deposits
Other
Total Other receivables , ,
Other payables, DKKm
Group Parent company
VAT and other indirect taxes
Other payables
Other current liabilities
at December
Collateral provided are margin account depositis,
which have been pledged as collateral for trading in
financial instruments.
Margin calls are receivables from banks regarding
market development in financial instruments used
for trading.
Notes
Ørsted Salg & Service, Annual report 2021
. Income tax
receivable and
payable
Group Parent company
DKKm
Income tax receivable at January -
Adjustments to current tax in
respect of prior years - -
Payments in respect of prior years () () - ()
Current tax for the year - -
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 , ,
. 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
Ørsted Salg & Service, Annual report 2021
Development in share capital, DKKm
Group and parent company
Share capital at January , ,
Share capital at December , ,
. 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 2021 (2020: 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
Ørsted Salg & Service, Annual report 2021
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 - -
Provisions used during the year - () () () - () () ()
Provisions reversed during the year - - () () - - () ()
Provisions made during the year - -
Interest element of obligations - -
Divestment of enterprises - () () - - - -
Change in estimates () - - () () - - ()
Transferred to assets and liabilities
classified as held for sale - - - - - () - ()
Total provisions , , ,
Falling due as follows:
- year - - -
- years - - ,
After years - - -
. Provisions
Decommissioning obligations
Decommissioning obligations relates to
expected future costs for restoration and
decommissioning of gas infrastructure assets.
Onerous contracts
Onerous contracts comprise primarily:
– a contract for gas storage capacity in
Germany of DKK 594 million (2020: DKK
699 million)
– a contract for gas storage in the Stenlille
Gas Storage facility of DKK 24 million (2020:
DKK 96 million)
– gas and power contracts for termination in
the UK B2B business.
Other provisions
Other provisions comprise primarily:
– obligations in relation to the divestment of
our UK B2B business in 2021
– other contractual obligations.
The estimated obligations have been
discounted to present value using either the
structural risk-free interest rate or the incre-
mental borrowing rate. The structural risk-free
rate is used for decommissioning liabilities
and onerous contracts. It is calculated as the
sum of real reuturn (Gross Domestic Product
growth rate), inflation, and inflation premium
for other risks.
Notes
Ørsted Salg & Service, Annual report 2021
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 - - -
. 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
Ørsted Salg & Service, Annual report 2021
. 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 383 179 383 179
Total contract liabilities
. Change in
working capital
Group Parent company
DKKm
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 (,) (,) (,) ()
Notes
Ørsted Salg & Service, Annual report 2021
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 man-
agement function has been set up in Ørsted 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.
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
purchase prices. Our largest gas purchase
contracts include the option of renegotiating
the contract price if it no longer reflects
market conditions.
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.
Managing short-term market risks
Our focus is on actively managing the market
risks for the first five years. We primarily hedge
future prices using derivatives to reduce cash
flow fluctuations after tax.
Minimum hedging levels are currently
determined by the Board of Directors. In the
first year, price risks are almost fully hedged.
The degree of hedging declines in subsequent
years due to:
– reduced certainty about long-term
production volumes
– increasing hedging costs in the medium
to long term, both spread costs and costs
of collateral
– adverse impacts from collateral, potentially
tying up large amounts of capital if hedging
contracts become unfavourable.
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.
. Financial risks and risk management
Notes
Ørsted Salg & Service, Annual report 2021
Sensitivity Analysis Estimated effect on profit (loss)
December
Estimated effect on equity
December
Risks, DKKm Price change
Oil + % () -
- % () () -
Gas + % (,) () () -
- % , -
Power + % (,) (,) (,) -
- % , , -
Carbon emission allowances + % () () - -
- % - -
USD + % () -
- % () () -
GBP + % () () () -
- % -
SEK + % - -
- % () () - -
EUR + % - -
- % () () - -
Credit risks are coordinated in relation to all
business activities, so that the Ørsted Salg &
Service Group does not assume inappropriate-
ly 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 counter-
parties. Historically, losses due to default by
counterparties 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.
In 2021, we began to apply IFRS hedge accounting to energy and related FX hedges previously accounted for
under the business performance principle.
Notes
Ørsted Salg & Service, Annual report 2021
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 2021.
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.
. Contingent liabilities
and other liabilities
Notes
Ørsted Salg & Service, Annual report 2021
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 st at e , 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'.
. Related-party transactions
Notes
Ørsted Salg & Service, Annual report 2021
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 con-
tracts 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 trans-
ferred to the customer, recovery of the consid-
eration 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. Reve-
nue 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
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.
. Description of accounting policies
Notes
Ørsted Salg & Service, Annual report 2021
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 generation.
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
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
Notes
Ørsted Salg & Service, Annual report 2021
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
feasibility, adequate resources, a potential
future market, or an application in the com-
pany 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
reasonable 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.
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
Notes
Ørsted Salg & Service, Annual report 2021
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
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.
Notes
Ørsted Salg & Service, Annual report 2021
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
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.
Notes
Ørsted Salg & Service, Annual report 2021
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 repay-
ment of the lease liability and payment of
interests of the lease liability. Debt repayments
are classified as cash flows from financing
activities, and payment of interests are classi-
fied 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
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
Ørsted Salg & Service, Annual report 2021
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.
. Calculation of financial ratios
Financial ratios have been calculated as
follows:
Notes
Ørsted Salg & Service, Annual report 2021
