Contents
Management's review
CEO's review
Personal remarks from the CEO At a glance
Outlook Results Q2 Results H1 Business units' results Performance highlights Quarterly overview
Financial statements
Consolidated interim financial statement Notes
Management statement
Management statement
Forward-looking statements
EARNINGS CALL
-
In connection with the presentation of the interim financial
5 report an earnings call for investors and analysts will be held
6 on Wednesday 12 August 2020 at 14:00 CEST:
7
- Denmark: +45 78 15 01 10
- International: +44 333 300 9035
- USA: +1 844 625 1570
18 The earnings call can be followed live at: https://edge.media-server.com/mmc/p/fm7kbt6i
- Presentation slides will be available prior to the earnings call
- at: www.orsted.com/en/investors/ir-material/financial-reports-
and-presentations#0
41
42
The interim financial report can be downloaded at: www.orsted.com/en/investors/ir-material/financial-reports-and-presentations#0
FURTHER INFORMATION
Media Relations | Investor Relations |
Martin Barlebo | Allan Bødskov Andersen |
+45 9955 9552 | +45 9955 7996 |
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Ørsted A/S
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Tel. +45 9955 1111
- interim financial report - H1 2020
CEO's review - first half year 2020
Strong first half
- Operating profit (EBITDA) increased by 11% |
to DKK 9.8 billion. |
- EBITDA from offshore and onshore wind |
farms in operation increased by 17% to DKK |
8.2 billion. |
- Operations have remained stable through- |
out the COVID-19 crisis. |
especially the UK power market due to lower demand for electricity. This has led to higher balancing tariffs (BSUoS) from National Grid, some periods with negative prices and lower expected ROC recycle prices.
Return on capital employed (ROCE) for the last 12 months amounted to 11% after H1 2020.
"
On 11 June, we reached a significant milestone with the installation of Ørsted's offshore wind turbine number 1,500, which was the 25th of Borssele 1 & 2's 8MW wind turbines
- 2020 EBITDA guidance re-iterated despite |
COVID-19. |
- Green share of heat and power generation |
increased from 82% to 88%. |
- 78 turbines installed at Borssele 1 & 2. |
- Signed largest-ever renewable corporate |
PPA for our Greater Changhua 2b & 4 off- |
shore wind project in Taiwan. |
- Ørsted co-founded the 'Green fuels for |
Denmark' partnership. |
- WESTKÜSTE 100 received funding from the |
German government. |
- Plum Creek Onshore Wind Farm commis- |
sioned ahead of schedule and on budget. |
Financial results
Our operating profit (EBITDA) for the first half of the year amounted to DKK 9.8 billion, an 11% increase compared to the same period last year.
Earnings from our offshore and onshore wind farms in operation increased by 17%, driven by ramp-up of power generation from Hornsea 1, Lockett and Sage Draw together with high wind speeds and as H1 2019 was impacted by a higher number of outages and curtailments across the portfolio than normal. This was partly offset by lower earnings from trading related to hedging of our power exposures and power portfolio optimisation activities, which had very high earnings in H1 2019. In addition, we saw adverse COVID-19 related impacts on
We re-iterate our EBITDA guidance of DKK 16-17 billion but lower our expectation to gross investments by DKK 2 billion to DKK 28-30 billion in 2020.
COVID-19
Our Corporate Crisis Management Organisation has met regularly throughout the second quar- ter, focusing on business continuity and the partial re-opening of our locations in Continental Europe and Taiwan.
During Q2 2020, our asset base has continued to be fully operational and we have maintained normal availability rates on our offshore and onshore wind farms. However, as described above, we have seen negative effects on Euro- pean power markets, especially in the UK, driven by lower demand for electricity.
Our construction projects have largely progressed according to plans, both in Europe, Asia and the US. The most affected part of our portfolio is the construction of topsides for the offshore substations at Hornsea 2 and Greater Changhua 1 & 2a. These topsides are being constructed at two shipyards in Singapore, which were closed down for two months due to COVID-19. However, the shipyards began to slowly ramp-up in June. Although we still expect to be able to complete both projects within our current budget and time schedule, we see an
increased risk of delays; especially at Hornsea 2. In general, we continue to see an increased risk of moderate delays across our portfolio, but we expect any such delays to have a limited overall impact on project economics.
Offshore
On 11 June, we reached a significant milestone with the installation of Ørsted's offshore wind turbine number 1,500, which was the 25th of Borssele 1 & 2's 8MW wind turbines. We are set to more than double our offshore wind capacity in the coming five years using ever larger tur- bines.
At our Dutch Borssele 1 & 2 site, the offshore construction work is progressing well and in August we installed the 78th wind turbine out of
94. We still expect the 752MW wind farm to be completed during Q4 2020. In 2022, we expect to complete Hornsea 2 (1,386MW) in the UK and Greater Changhua 1 & 2a (900MW) in Taiwan.
In July, the Holland Coast North offshore wind project was awarded to a local Dutch consorti- um. When we join a tender we obviously want to win and as such the outcome was disappoint- ing. We will extract any learning available and leverage the insight for future tenders in Continental Europe. With that said, it should also be reiterated that we cannot and should not win all the auctions and tenders we join. The important thing is that we stay disciplined in our
bidding to make sure we build a healthy, sustainable business, and over time secure enough wins to fulfil our long-term ambitions. We remain confident that Ørsted will reach its target of 15GW of installed offshore wind capacity by 2025 and more than 30GW of renewable capacity by 2030.
In the US, the Bureau of Ocean Energy Management (BOEM) released a draft of their Supplemental Environmental Impact Statement (SEIS) in June. The SEIS provides an evaluation of the foreseeable cumulative impacts of offshore wind projects from North Carolina to Maine and provides a framework for future development of the industry on the US East Coast.
Based on our assessment we do not believe that BOEM identifies any significant impact that cannot be mitigated by the offshore wind developers. The framework confirms the consensus developer layout in the Northeast clus- ter, a uniform one nautical mile by one nautical mile turbine layout, as the most viable configu- ration. An approach which has been supported by a recent US Coast Guard study. We expect that BOEM could decide on the preferred layout as early as this month. Given commentary in the SEIS, we remain optimistic that the 1 by 1 nautical mile layout will be the preferred alternative. A different alternative layout considered in the SEIS includes wide transit lanes going through the offshore development areas. As implement-
- interim financial report - H1 2020 | 3 | Management's review |
CEO's review - first half year 2020 continued
ing such transit lanes would be detrimental to the offshore wind industry in the US, and as noted in the SEIS, it would reduce the technical capacity of North-East development areas to less than the demand from the states, we consider it unlikely that this alternative lay-out will be chosen. We also note that the 1 by 1 nautical mile turbine spacing is materially wider than any other offshore wind project worldwide to accommodate for the navigation of other
447m (100%). Walney Extension is located in the UK with a capacity of 659MW.
Together with Copenhagen Airport, A.P. Moller - Maersk, DSV Panalpina and SAS, we have founded the partnership - 'Green fuels for Den- mark' - to develop an industrial-scale facility to produce sustainable fuels for road, maritime and air transport in the Copenhagen area. The partnership brings together the demand and
"
In July, we signed a corporate power purchase agreement (CPPA) with Taiwan-based TSMC, who will offtake the full generation from our 920MW Greater Changhua 2b & 4 offshore wind farm, making it the largest ever renewable energy CPPA
ocean users.
We are still awaiting the 'Notices of Intent' for most of our US projects, outlining the timeline for 'Construction and Operations Plan' (COP) approval. We expect to have more clarity during the second half of the year.
At the 12MW Coastal Virginia demonstration project in the US, which we are constructing for Dominion Energy as an EPC contractor, we successfully installed both monopile foundations and turbines in June. The wind farm is the first ever to be federally permitted and installed in US federal waters.
In July, we signed a corporate power purchase agreement (CPPA) with Taiwan-based TSMC, the world's largest semiconductor foundry.
TSMC will offtake the full generation from our 920MW Greater Changhua 2b & 4 offshore wind farm, making it the largest ever renewable energy CPPA. The 20-yearfixed-price contract period will start once Greater Changhua 2b & 4 reaches commercial operations expectedly in 2025/2026, subject to grid availability and Ørsted's final investment decision.
In June, we divested the offshore transmission assets at Walney Extension to Diamond Transmission Partners at a total asset value of GBP
supply side of sustainable fuels with a vision to realise what could become one of the world's largest electrolyser and sustainable fuel production facilities.
In August, the German Federal Ministry for Economic Affairs and Energy confirmed funding for the WESTKÜSTE 100 project in which we partner with nine other organisations to develop the first large-scale hydrogen project in Germany under the Reallabor funding program. WESTKÜSTE 100 is our third hydrogen project to receive public funding and a significant step forward in our exploration of industrial-scale production of green hydrogen. The project includes a 30MW electrolyser plant which can support heavy industries and heavy transport with renewable alternatives and a vision to scale-up at a later stage.
Onshore
In June, we commissioned the onshore wind farm Plum Creek in Nebraska ahead of schedule and on budget and we received tax equity funding from our partners. The 230MW wind farm has performed as expected since commissioning and will generate enough energy to power up to 100,000 US households.
In July, we acquired the 227MWac solar PV project Muscle Shoals, located in Alabama.
When completed, expectedly in Q3 2021, it will be the largest solar energy asset in the southeastern US. The project is eligible for 30% ITC and has a fully contracted 20-year utility PPA.
In addition, we are currently constructing the onshore wind farm Willow Creek (103MW) in South Dakota and the combined solar (420MWac) and storage (40MWac) project Permi- an Energy Center in Texas. We expect Willow Creek to be commissioned in Q4 2020 whereas Permian Energy Center is expected to be commissioned by mid-2021. We are eligible for 100% PTC for Willow Creek and 30% ITC for Permian.
Markets & Bioenergy
In June, the Danish competition authorities and the Danish Energy Agency approved the divestment of our Danish power distribution (Radius), residential customer and city light businesses to SEAS-NVE. As part of the competition approval, SEAS-NVE has agreed to sell the residential gas customers to OK, a Danish energy group. With the approval by the authorities, the transaction is expected to close by the end of August 2020. In 2019, we signed an agreement to divest our LNG activities to Glencore. We expect to close the transaction by late Q3 2020.
Following upgrades to our Renescience facility in the UK late 2019 and a shut-down throughout
spring due to COVID-19, the plant has processed waste again since June. We expect the plant to be commissioned later this year.
Concluding remarks
The world continues to navigate a health crisis which has a severe impact on the lives and livelihoods of people across the globe as well as on global and local economies. In this challenging situation, Ørsted continues to focus on the health and well-being of its employees and their families while supporting a stable power supply in the markets where we operate. Our business model and organisation have proven very resilient and we remain confident about the company's ability to deliver on both its short- term and long-term performance targets. We continue to see strong political and public support for an accelerated transition to green energy and Ørsted's long-term growth prospects are as strong as ever.
Henrik Poulsen
CEO and President
- interim financial report - H1 2020 | 4 | Management's review |
Personal remarks from the CEO
On 15 June, I announced my resignation as CEO of Ørsted after eight years with the company. It has been an incredible ride, and I have a tremendous amount of affection for Ørsted, its vision, and not least its people. Together, we have transformed a Danish utility company predominantly based on fossil fuels into a global leader in green energy, now ranked as the world's most sustainable company. We are now at a point where the transformation is completed, and we have built a strong platform for global growth. I have concluded that it is the right time for me to step down to pursue other challenges. I owe a lot of gratitude to Ørsted's shareholders, the Board of Directors, and Group Executive Management for their confidence and support - and to all Ørsted team members for what we have achieved as a company during my tenure.
I will continue as CEO of Ørsted until 31 January 2021 at the latest and will remain fully committed during that time. The Board of Directors has offered to nominate me for the Ørsted Board at the annual general meeting in March next year and I have happily accepted the nomination. This will allow me to remain part of the Ørsted team and support the continued strategic development of the company.
The Board of Directors is in the process of finding my successor. The process is progressing as planned and Ørsted will make an announcement when completed, expectedly later this year.
"
Together, we have transformed a Danish utility company predominantly based on fossil fuels into a global leader in green en- ergy, now ranked as the world's most sustainable company
Henrik Poulsen
CEO and President
- interim financial report - H1 2020 | 5 | Management's review |
2019 | 2020 | 2019 | 2020 | |
Outlook 2020
EBITDA
Our EBITDA guidance is unchanged relative to the guidance in our interim financial report for Q1 2020. EBITDA (business performance), excluding new partnership agreements, is expected to amount to DKK 16-17 billion.
The directional EBITDA guidance for Offshore and Onshore is unchanged relative to the guidance in our Q1 2020 report. However, for Off- shore, we now expect higher earnings from existing partnerships compared to our previous expectations, whereas we expect lower growth from operating wind farms due to adverse COVID-19 impacts.
The directional guidance for Markets & Bioener- gy has changed from 'lower' to 'in line'. The increase in expected earnings compared to our directional guidance in the Q1 2020 report, is mainly due to inclusion of earnings from power distribution, residential customer, and city light businesses for eight months of 2020 instead of the previously expected six months and due to higher sale of ancillary services at our CHP plants.
Gross investments
Gross investments are expected to amount to DKK 28-30 billion, down by DKK 2 billion relative to the guidance in our annual report for 2019. The adjustment is due to changed timing of payments.
Guidance | Guidance | Guidance | Guidance | 2019 | |
Outlook for 2020, DKK billion | 12 Aug 2020 | 29 Apr 2020 | 4 Mar 2020 | 30 Jan 2020 | realised |
EBITDA (without new partnerships) | 16-17 | 16-17 | 16-17 | 15-16 | 17.5 |
Offshore (without new partnerships) | Lower | Lower | Lower | Lower | 15.2 |
Onshore | Higher | Higher | Higher | Higher | 0.8 |
Markets & Bioenergy | In line | Lower | Lower | Lower | 1.5 |
Gross investments | 28-30 | 30-32 | 30-32 | 30-32 | 23.3 |
Our EBITDA guidance for the Group is the prevailing guidance, whereas the directional earnings development per business unit serves as a means to support this. Higher/lower indicates the direction of the business unit's earnings relative to the results for 2019.
- interim financial report - H1 2020 | 7 | Management's review |
Results Q2
EBITDA
Operating profit (EBITDA) totalled DKK 3.0 billion compared with DKK 3.6 billion in Q2 2019. The decrease of DKK 0.7 billion was expected and was mainly due to high construction activity at Hornsea 1 in Q2 2019. EBITDA excluding construction agreements increased with DKK 0.6 billion (29%).
Earnings from offshore and onshore wind farms in operation amounted to DKK 2.9 billion in Q2 2020, an increase of 7% compared to the same period last year. The increase was due to ramp- up of Hornsea 1, Lockett and Sage Draw, and a higher number of outages and curtailments across the portfolio in Q2 2019. This was partly offset by lower earnings from trading related to hedging of our power exposures and power portfolio optimisation activities, which had very high earnings in Q2 2019. In addition, we have seen adverse COVID-19 related impacts on especially the UK power market due to lower demand for electricity. This has led to higher balancing tariffs (BSUoS) from National Grid, some periods with negative prices and lower expected ROC recycle prices in Q2 2020.
Earnings from construction agreements for partners decreased by DKK 1.2 billion compared with Q2 2019 and amounted to DKK 0.4 billion in Q2 2020. The construction agreements in Q2 2020 primarily concerned the construction of Virginia Coastal Wind as well as minor updates regarding completed construction projects. Q2 2019 primarily concerned construction activity at Hornsea 1.
EBITDA from CHP plants increased by DKK 0.3 billion and amounted to DKK 0.2 billion, mainly due to increased sale of ancillary services and timing of fixed costs.
Earnings from our gas activities were DKK -0.2 billion, in line with Q2 2019. A less negative effect from revaluation of our gas at storage and storage hedges (gas prices had a steeper decline during Q2 2019 than in Q2 2020) was offset by lower earnings due to shut-down of the Tyra gas field from late 2019 until 2022.
Profit for the period
Profit for the period from continuing operations totalled DKK -0.8 billion, DKK 1.9 billion lower than Q2 2019. The decrease was due to the lower EBITDA, higher depreciation and higher net financial expenses due to a loss on interest rate swaps in June in connection with termination of local project financing and related swaps in the US (DKK -0.4 billion).
Furthermore, tax on profit for the period was higher in Q2 2020 due to the initial recognition of deferred taxes of DKK 0.9 billion related to tax equity at Sage Draw and Plum Creek.
Adjusted for these one-off effects, net profit amounted to DKK 0.4 billion.
Cash flows from operating activities
Cash flows from operating activities totalled DKK 8.2 billion in Q2 2020. The increase of DKK 0.7 billion compared to the same period last year was mainly due to tax equity contributions from our partners at the Sage Draw and Plum Creek wind farms, lower trade receivables due to lower revenue as well as the divestment of the offshore transmission asset at Walney Extension in Q2 2020. This was partly offset by received milestone payments related to the construction of Hornsea 1 in Q2 2019.
Financial results, DKKm | Q2 2020 | Q2 2019 | % |
Revenue | 11,625 | 16,443 | (29%) |
EBITDA | 2,956 | 3,625 | (18%) |
Depreciation | (1,827) | (1,689) | 8% |
EBIT | 1,129 | 1,936 | (42%) |
Gain (loss) on divestment of enterprises | (3) | (18) | (83%) |
Profit (loss) from associates and joint ventures | 3 | 3 | 0% |
Financial items, net | (1,010) | (545) | 85% |
Profit before tax | 119 | 1,376 | (91%) |
Tax on profit (loss) for the period | (928) | (283) | 228% |
Tax rate | 780% | 21% | n.a. |
Profit (loss) for the period, continuing operations | (809) | 1,093 | n.a. |
Profit (loss) for the period, discontinued operations | (16) | (18) | (11%) |
Profit (loss) for the period | (825) | 1,075 | n.a. |
Cash flow and net debt, DKKm | Q2 2020 | Q2 2019 | % |
Cash flows from operating activities | 8,197 | 7,510 | 9% |
EBITDA | 2,956 | 3,625 | (18%) |
Change in derivatives, other adjustments | 680 | (358) | n.a. |
Change in provisions | (349) | 39 | n.a. |
Reversal of gain (loss) on divestments of assets | (71) | (190) | (63%) |
Other items | (43) | 85 | n.a. |
Interest expense, net | (634) | (683) | (7%) |
Paid tax | (86) | (30) | 187% |
Change in work in progress | (177) | 4,271 | n.a. |
Change in tax equity partner liabilities | 3,017 | (138) | n.a. |
Change in other working capital | 2,904 | 889 | 227% |
Gross investments | (3,757) | (3,368) | 12% |
Divestments | 45 | (11) | n.a. |
Free cash flow | 4,485 | 4,131 | 9% |
Net debt, beginning of period | 27,084 | 9,111 | 197% |
Free cash flow from continuing operations | (4,485) | (4,131) | 9% |
Free cash flow from discontinued operations | (102) | 3 | n.a. |
Dividends and hybrid coupon paid | 378 | 378 | 0% |
Addition of lease obligations | 138 | 63 | 119% |
Interest bearing receivable re. O&G divestment | 16 | 16 | 0% |
Exchange rate adjustments, etc. | (757) | (460) | 65% |
Net debt, end of period | 22,272 | 4,980 | 347% |
- interim financial report - H1 2020 | 8 | Management's review |
Results H1
Financial results
Revenue
Power generation from offshore and onshore wind increased by 42% and totalled 9.8TWh in H1 2020, mainly due to ramp-up of generation from Hornsea 1, Lockett and Sage Draw and to some extent Borssele 1 & 2, as well as higher wind speeds throughout H1 2020. Furthermore, H1 2019 saw a higher number of outages and curtailments across the offshore portfolio than normal. This was partly offset by a cable replacement campaign at Hornsea 1 at the beginning of this year as well as some periods with negative prices due to lower demand for electricity driven by COVID-19.
Our production-based availability in Offshore amounted to 93%, up one percentage point compared to the same period last year.
Thermal power generation amounted to 2.5TWh and heat generation amounted to 4.1TWh, down 6% and 15%, respectively, compared to the same period last year. The decreases were driven by windy and wet weather and a warm first quarter of 2020. The underly-
ing decline in power generation was even high- er, but was partly offset by generation associated with higher delivery of ancillary services.
Offshore and onshore wind accounted for 80% of our total power generation, while the renewable energy share of our total heat and power generation accounted for 88% in H1 2020 compared with 82% in H1 2019.
Revenue amounted to DKK 27.0 billion. The decrease of 20% relative to H1 2019 was primarily due to significantly lower gas and power prices, lower sale of gas, limited construction work on wind farms for partners and lower thermal heat and power generation, partly offset by the increase in wind based power generation.
EBITDA
Operating profit (EBITDA) totalled DKK 9.8 billion compared with DKK 8.8 billion in H1 2019. The increase was mainly driven by a 17% increase in earnings from offshore and onshore wind farms in operation, which was due to ramp -up of Hornsea 1, Lockett and Sage Draw together with high wind speeds, partly offset by
EBITDA, DKK billion
Offshore | Markets & Bioenergy |
Onshore
12%
5%
DKK 9.8bn
83%
lower earnings from trading related to hedging of our power exposures and power portfolio optimisation activities, which achieved very high results in H1 2019.
Earnings from construction agreements for partners totalled DKK 1.5 billion compared with DKK 2.5 billion in H1 2019. The construction agreements in H1 2020 primarily concerned the
Business performance vs IFRS
We use business performance as an alternative to the results prepared in accordance with IFRS. Business performance represents the underlying financial performance of the Group in the reporting period as results are adjusted for temporary fluctuations in the market value of contracts (including hedging transactions) relating to other periods. The difference between the two principles will be eliminated as the contracts expire. Apart from this, there is no difference between business performance and the IFRS results.
EBITDA in accordance with IFRS amounted to DKK 11.0 billion in H1 2020 against DKK 10.4 billion in the same period in 2019. In accordance with the business performance principle, EBITDA was DKK 9.8 billion and DKK 8.8 billion, respec- tively. The difference between the two principles was thus DKK 1.3 billion in H1 2020 against DKK 1.7 billion in H1 2019.
In the presentation of the results according to IFRS, we have elected not to apply the provisions on hedge accounting of commodities and related currency exposures. The market value adjust-
Financial results, DKKm | H1 2020 | H1 2019 | % | |
Revenue | 27,001 | 33,682 | (20%) | |
EBITDA | 9,761 | 8,755 | 11% | |
Depreciation | (3,581) | (3,307) | 8% | |
EBIT | 6,180 | 5,448 | 13% | |
Gain (loss) on divestment of enterprises | (17) | (35) | (51%) | |
Profit (loss) from associates and joint ventures | 6 | 4 | 50% | |
Financial items, net | (1,786) | (444) | 302% | |
Profit before tax | 4,383 | 4,973 | (12%) | |
Tax on profit (loss) for the period | (1,846) | (1,241) | 49% | |
Tax rate | 42% | 25% | 17%p | |
Profit (loss) for the period, continuing operations | 2,537 | 3,732 | (32%) | |
Profit (loss) for the period, discontinued operations | (44) | (61) | (28%) | |
Profit (loss) for the period | 2,493 | 3,671 | (32%) |
updated assumptions regarding the divestment of the transmission asset for Hornsea 1, the construction of Virginia Coastal Wind as well as minor updates regarding completed construction projects. H1 2019 included earnings from construction activity at Hornsea 1 and Borkum Riffgrund 2.
EBITDA from CHP plants increased by DKK 0.2 billion relative to the same period last year and totalled DKK 0.7 billion in H1 2020. The increase was primarily driven by higher sale of ancillary
ments of these are continuously recognised in the income statement, which means that the IFRS results for the individual years are not com- parable. IFRS results do not reflect the commercial risk hedging, according to which the business units and the Group are managed and evaluated. In the management's review, comments are made on business performance only.
Business performance vs IFRS | H1 2020 | H1 2019 |
EBITDA - Business performance | 9,761 | 8,755 |
Adjustments | 1,280 | 1,677 |
EBITDA - IFRS | 11,041 | 10,432 |
- interim financial report - H1 2020 | 9 | Management's review |
Results H1 continued
services.
EBITDA from Gas Markets & Infrastructure increased by DKK 0.1 billion and amounted to DKK -0.2 billion. The increase was mainly due to a less negative effect from revaluating our gas at storage (gas prices had a steeper decline during H1 2019 than in H1 2020) and a positive impact from storage hedges. This was partly offset by lower earnings due to shut-down of the Tyra gas field from late 2019 until 2022 as well as a provision for bad debt in our B2B business to cover the extraordinary COVID-19 related default risk among our customers.
EBIT
EBIT increased by DKK 0.7 billion to DKK 6.2 billion in H1 2020, primarily as a result of the higher EBITDA partly offset by higher depreciation driven by more wind farms in operation.
Financial income and expenses
Net financial income and expenses amounted to an expense of DKK 1.8 billion compared with DKK 0.4 billion in the same period last year. The increase was mainly due to higher net interest expenses, a loss on interest rate swaps in June in
April and Plum Creek in June. The effective tax rate was 42%.
Profit for the period
Profit for the period from continuing operations totalled DKK 2.5 billion, DKK 1.2 billion lower than H1 2019. The decrease was primarily due to the higher net financial expenses, higher taxes and higher depreciation, only partly offset by the higher EBITDA.
Cash flows and net debt
Cash flows from operating activities
Cash flows from operating activities totalled DKK 7.8 billion in H1 2020 compared with DKK
7.4 billion in H1 2019. The increase of DKK 0.4 billion was mainly due to lower paid taxes in Denmark, tax equity contributions from our partners at the Sage Draw and Plum Creek wind farms, lower trade receivables due to lower revenue as well as the divestment of the off- shore transmission asset at Walney Extension. This was partly offset by H1 2019 being positive- ly affected by received milestone payments related to the construction of Hornsea 1.
Cash flow and net debt, DKKm | H1 2020 | H1 2019 | % | |
Cash flows from operating activities | 7,769 | 7,392 | 5% | |
EBITDA | 9,761 | 8,755 | 11% | |
Change in derivatives, other adjustments | (514) | (224) | 129% | |
Change in provisions | (365) | 33 | n.a. | |
Reversal of gain (loss) on divestments of assets | (1,288) | (308) | 318% | |
Other items | (7) | 83 | n.a. | |
Interest expense, net | (1,163) | (774) | 50% | |
Paid tax | (1,353) | (4,857) | (72%) | |
Change in work in progress | (2,015) | 5,272 | n.a. | |
Change in tax equity partner liabilities | 2,892 | (219) | n.a. | |
Change in other working capital | 1,821 | (369) | n.a. | |
Gross investments | (9,065) | (7,267) | 25% | |
Divestments | 52 | 2,667 | (98%) | |
Free cash flow | (1,244) | 2,792 | n.a. | |
Net debt, beginning of period | 17,230 | (2,219) | n.a. | |
Free cash flow from continuing operations | 1,244 | (2,792) | n.a. | |
Free cash flow from discontinued operations | 44 | 1 | n.a. | |
Dividends and hybrid coupon paid | 4,921 | 4,615 | 7% | |
Addition of lease obligations | 147 | 5,285 | (97%) | |
Interest bearing receivable re. O&G divestment | 8 | 8 | 0% | |
Exchange rate adjustments, etc. | (1,322) | 82 | n.a. | |
Net debt, end of period | 22,272 | 4,980 | 347% |
connection with early termination of local project financing and swaps in the US, less positive effects from exchange rate adjustments due to a weakening of GBP and capital losses on the bond portfolio due to the increasing interest rates.
Tax and tax rate
Tax on profit for the period amounted to DKK
1.8 billion, DKK 0.6 billion higher than the same period last year. The increase was mainly due to initial recognition of deferred taxes of DKK 0.9 billion related to tax equity at Sage Draw in
In H1 2020, we had a net cash outflow from work in progress of DKK 2.0 billion. This was mainly due to supplier payments related to the construction of Hornsea 1 for partners, the construction of Virginia Coastal Wind and construction of the offshore transmission asset at Hornsea 2, only partly offset by the divestment of the offshore transmission asset at Walney Extension.
Investments and divestments
Gross investments amounted to DKK 9.1 billion against DKK 7.3 billion in H1 2019. The main in-
vestments in H1 2020 were:
- offshore wind farms (DKK 7.1 billion), includ- ing Borssele 1 & 2 in the Netherlands, Hornsea 2 in the UK, Greater Changhua 1 & 2a in Taiwan and Ocean Wind in the US.
- onshore wind and solar farms (DKK 1.5 bil- lion), including Sage Draw, Plum Creek and Permian Energy Center, all three in the US.
- Markets & Bioenergy (DKK 0.4 billion), mainly related to maintenance of the pow- er distribution grid.
Cash flow from divestments in H1 2020 related to the divestment of our 10MWac Oak Solar farm in New Jersey and Inbicon production facilities partly offset by compensations paid under our partnership agreements. Cash flow from divestments in H1 2019 related to the receipt of deferred proceeds from the farm- down of 50% of Hornsea 1 in 2018 (DKK 1.7 billion) and to the strengthening of our strategic partnership with Eversource as they became a 50% partner in our activities in the New England area in February 2019 (DKK 1.0 billion).
- interim financial report - H1 2020 | 10 | Management's review |
Results H1 continued
Interest-bearing net debt
Interest-bearing net debt totalled DKK 22.3 billion at the end of June 2020 against DKK 17.2 billion at the end of 2019. The DKK 5.0 billion increase was mainly due to negative free cash flow of DKK 1.2 billion and dividend and hybrid coupon payments of DKK 4.9 billion.
Equity
Equity was DKK 85.9 billion at the end of June 2020 against DKK 89.6 billion at the end of 2019.
Capital employed
Capital employed was DKK 108.2 billion at 30 June 2020 against DKK 106.8 billion at the end of 2019. The increase was mainly due to invest- ments. Capital employed in Markets & Bioener- gy amounted to DKK 13.7 billion of which DKK
8.2 billion relates to assets and liabilities to be divested.
Financial ratios
Return on capital employed (ROCE)
Return on capital employed (ROCE, last 12 months) was 11% at the end of H1 2020. The decrease compared to the same period last year was attributable to the lower EBIT over the 12-month period, which in H1 2019 was significantly impacted by the farm-down of Hornsea 1 in Q4 2018.
Credit metric (FFO/adjusted net debt)
The funds from operations (FFO)/adjusted net debt credit metric was 23% at the end of June 2020 against 58% in the same period last year. The low ratio by H1 2020 is adversely impacted by current tax related to both 2019 and 2020,
and is expected to be around the target level of 30% at the end of the year.
Non-financial results
Green share of heat and power generation
The green share of heat and power generation amounted to 88% in H1 2020, up six percentage points relative to the same period last year. The increase came from higher generation from offshore and onshore wind farms due to additional capacity and higher wind speeds. Further- more, the green share increased from lower fossil fuel-based heat and power generation due to the more wet and windy weather in H1 2020, which led to reduced heat and power demand from the CHP plants. This was partly offset by power generation associated with the delivery of ancillary services.
Greenhouse gas emissions
Greenhouse gas intensity from our heat and power generation and other operating activities (scope 1 and 2), decreased to 64g CO2e/kWh in H1 2020 against 80g CO2e/kWh in H1 2019. The emissions per kWh decreased for the same reasons as mentioned above.
Greenhouse gas emissions from our supply chain and sales activities (scope 3) decreased by 16% to 13.1 million tonnes in H1 2020 driven by a 19% decrease in gas sales.
Safety
In H1 2020, we have had 39 total recordable injuries (TRIs), of which 29 injuries were related to contractors' employees. This was a decrease of three injuries compared to H1 2019 or a 7% reduction. The number of hours worked was 10.5
Key ratios, DKKm, % | H1 2020 | H1 2019 | % |
ROCE1 | 10.8 | 29.3 | -19%p |
Adjusted net debt | 36,106 | 17,755 | 103% |
FFO/adjusted net debt1 | 23.1 | 57.5 | -34%p |
- See page 79 in the annual report for 2019 for definitions.
Capital employed, %
Offshore | Markets & Bioenergy |
Onshore
13%
8%
DKK 108.2bn
79%
million hours, in line with H1 2019. Consequent- ly, the total recordable injury rate (TRIR) over the last 6 months decreased from 4.0 in H1 2019 to 3.7 in H1 2020.
- interim financial report - H1 2020 | 11 | Management's review |
Offshore
Highlights Q2 2020
- 78 turbines installed at Borssele 1 & 2.
- We signed the largest-ever renewable cor- porate PPA for our Greater Changhua 2b & 4 offshore wind project in Taiwan.
- We divested the offshore transmission asset at Walney Extension.
- We co-founded the 'Green fuels for Den- mark' partnership.
- WESTKÜSTE 100 received funding from the German government.
Financial results Q2 2020
Power generation increased by 20% relative to Q2 2019, primarily due to ramp-up of generation from Hornsea 1 and to some extent Borssele 1 &
2. Furthermore, Q2 2019 saw a higher number of outages and curtailments across the portfolio. In Q2 2020 we have seen adverse COVID-19 impacts on especially the UK power market due to lower demand for electricity. This led to high- er balancing tariffs (BSUoS) from National Grid, some periods with negative prices and lower expected ROC recycle prices in Q2 2020. Most wind farms in the UK under the CfD regime do not receive subsidies in periods where the day- ahead prices are negative for more than six consecutive hours. Consequently, we shut down part of our UK capacity in such periods. In Ger- many, we also experienced more hours with negative prices than in the same period last year.
Wind speeds were in line with Q2 2019 and amounted to a portfolio average of 8.0m/s. This was below a normal wind year (8.2m/s). Howev- er, availability reached 95%, which was significantly higher than Q2 2019 due to the various outages and curtailments last year.
Revenue decreased by 16% to DKK 9.4 billion. Revenue from offshore wind farms in operation increased 18% to DKK 3.6 billion primarily due to the ramp-up of Hornsea 1 partly offset by more periods with negative prices. Revenue from power sales decreased by DKK 0.5 billion due to lower power prices.
Revenue from construction agreements decreased by DKK 1.7 billion due to high activity in Q2 2019 related to the construction of the Hornsea 1 offshore wind farm for partners. In Q2 2020, revenue from construction agreements was primarily related to the divestment of the offshore transmission assets at Walney Exten- sion, the construction of Virginia Coastal Wind and the completion of Hornsea 1.
EBITDA decreased DKK 1.2 billion relative to Q2 2019 and amounted to DKK 2.4 billion.
EBITDA from Sites, O&M and PPAs amounted to DKK 2.6 billion in Q2 2020. The 1% increase was due to Hornsea 1 ramp-up partly offset by the above-mentioned adverse COVID-19 impacts (approx. DKK 150 million) and by lower earnings from trading related to hedging of our power exposures and power portfolio optimisation activities, which achieved very high results in Q2 2019 (DKK 0.3 billion).
EBITDA from partnerships decreased by DKK 1.2 billion and amounted to DKK 0.4 billion. In Q2 2020, earnings from construction agreements were primarily related to the construction of Virginia Coastal Wind, the completion of Hornsea 1 and minor updates regarding finalised construction projects. In Q2 2019, earnings from construction agreements primarily concerned Hornsea 1.
Financial results | Q2 2020 | Q2 2019 | % | H1 2020 | H12019 | % | |||
Business drivers | |||||||||
Decided (FID'ed) and installed capacity, | |||||||||
offshore wind | GW | 9.9 | 9.9 | 0% | 9.9 | 9.9 | 0% | ||
Installed capacity, offshore wind | GW | 6.8 | 5.6 | 22% | 6.8 | 5.6 | 22% | ||
Generation capacity, offshore wind | GW | 3.8 | 3.3 | 13% | 3.8 | 3.3 | 13% | ||
Wind speed | m/s | 8.0 | 8.0 | 0% | 10.1 | 9.2 | 9% | ||
Load factor | % | 32 | 31 | 1%p | 46 | 41 | 5%p | ||
Availability | % | 95 | 87 | 8%p | 93 | 92 | 1%p | ||
Power generation | TWh | 2.6 | 2.2 | 20% | 7.2 | 5.3 | 36% | ||
Denmark | 0.4 | 0.5 | (12%) | 1.1 | 1.1 | 6% | |||
United Kingdom | 1.7 | 1.2 | 35% | 4.7 | 3.1 | 53% | |||
Germany | 0.4 | 0.4 | (4%) | 1.2 | 1.0 | 14% | |||
Other | 0.1 | 0.1 | 0% | 0.1 | 0.1 | 0% | |||
Power sales (net of internally sourced | |||||||||
generation) | TWh | 5.5 | 5.7 | (3%) | 14.3 | 12.9 | 11% | ||
Power price, LEBA UK | GBP/MWh | 25.4 | 41.4 | (39%) | 29.5 | 47.0 | (37%) | ||
British pound | DKK/GBP | 8.4 | 8.5 | (1%) | 8.5 | 8.5 | 0% | ||
Financial performance | |||||||||
Revenue | DKKm | 9,364 | 11,107 | (16%) | 17,339 | 19,474 | (11%) | ||
Sites, O&M and PPAs | 3,625 | 3,078 | 18% | 9,350 | 7,518 | 24% | |||
Power sales | 3,208 | 3,660 | (12%) | 4,872 | 5,689 | (14%) | |||
Construction agreements | 2,486 | 4,200 | (41%) | 3,049 | 6,190 | (51%) | |||
Other | 46 | 169 | (73%) | 68 | 77 | (12%) | |||
EBITDA | DKKm | 2,361 | 3,572 | (34%) | 7,993 | 7,890 | 1% | ||
Sites, O&M and PPAs | 2,578 | 2,552 | 1% | 7,514 | 6,512 | 15% | |||
Construction agreements and divestment gains | 396 | 1,638 | (76%) | 1,495 | 2,526 | (41%) | |||
Other incl. project development | (613) | (618) | (1%) | (1,016) | (1,148) | (11%) | |||
Depreciation | DKKm | (1,452) | (1,355) | 7% | (2,860) | (2,653) | 8% | ||
EBIT | DKKm | 909 | 2,217 | (59%) | 5,133 | 5,237 | (2%) | ||
Cash flow from operating activities | DKKm | 4,338 | 8,036 | (46%) | 2,785 | 6,073 | (54%) | ||
Gross investments | DKKm | (2,802) | (1,563) | 79% | (7,094) | (4,442) | 60% | ||
Divestments | DKKm | (150) | (45) | 233% | (141) | 2,648 | n.a. | ||
Free cash flow | DKKm | 1,386 | 6,428 | (78%) | (4,450) | 4,279 | n.a. | ||
Capital employed | DKKm | 84,311 | 67,345 | 25% | 84,311 | 67,345 | 25% |
O&M: Operation and maintenance agreements
PPAs: Power purchase agreements
- interim financial report - H1 2020 | 12 | Management's review |
Offshore continued
EBITDA from other activities, including project development amounted to DKK -0.6 billion and was in line with Q2 2019.
Depreciation increased by 7% and amounted to DKK 1.5 billion. The increase was mainly due to the commissioning of Hornsea 1.
Cash flow from operating activities amounted to DKK 4.3 billion, which was DKK 3.7 billion lower than in Q2 2019. This was primarily due to the lower EBITDA and higher net cash inflow from work in progress in Q2 2019 due to received milestone payments related to the construction of Hornsea 1.
In Q2 2020, we had a net cash outflow from work in progress of DKK 0.2 billion, mainly from the construction of Virginia Coastal Wind and construction of the offshore transmission asset at Hornsea 2, partly offset by the divestment of the offshore transmission asset at Walney Ex- tension.
Gross investments amounted to DKK 2.8 billion and mainly related to Borssele 1 & 2, Hornsea 2, Greater Changhua 1 & 2a and Ocean Wind.
Financial results H1 2020
Power generation increased by 36% relative to H1 2019, primarily due to ramp-up of generation from Hornsea 1 and to some extent Borssele 1 & 2 as well as higher wind speeds throughout H1 2020. Furthermore, H1 2019 saw a higher number of outages and curtailments across the portfolio than normal. This was partly offset by a cable replacement campaign at Hornsea 1 at the beginning of this year as well as some periods with negative prices due to lower demand for electricity driven by COVID-19.
Wind speeds amounted to 10.1m/s for the port- folio, which was above a normal wind year with very strong wind in January and February. Availability reached 93%, which was above H1 2019 due to the various campaigns and curtailments and outages across the portfolio last year.
Revenue decreased by 11% to DKK 17.3 billion.
Revenue from offshore wind farms in operation increased 24% to DKK 9.4 billion due to the above-mentionedramp-up from Hornsea 1 and higher wind speeds partly offset by more periods with negative prices. Despite of higher volumes sold, revenue from power sales decreased by DKK 0.8 billion due to lower power prices.
Revenue from construction agreements decreased by DKK 3.2 billion primarily due to high activity in H1 2019 related to the construction of the Hornsea 1 offshore wind farm for partners. In H1 2020, revenue from construction agreements primarily related to the divestment of the offshore transmission assets at Walney Extension, construction of Virginia Coastal Wind and the finalisation of Hornsea 1.
EBITDA increased by 1% relative to H1 2019 and amounted to DKK 8.0 billion.
EBITDA from Sites, O&M and PPAs amounted to DKK 7.5 billion in H1 2020. The 15% increase was due to Hornsea 1 ramp-up and higher wind speeds partly offset by the above-mentioned adverse COVID-19 impacts and by lower earnings from trading related to hedging of our power exposures and power portfolio optimisation activities, which achieved very high
Wind speed, (m/s) for our offshore wind farms
results in H1 2019.
EBITDA from partnerships decreased by DKK
1.0 billion and amounted to DKK 1.5 billion. In
H1 2020, our earnings from construction agreements mainly related to the lowered assumptions regarding the preferred bidder's expected return requirement on the Hornsea 1 transmission asset, the construction of Virginia Coastal Wind and minor updates regarding completed construction projects which posi- tively impacted EBITDA. In H1 2019, earnings from construction agreements primarily con- cerned Hornsea 1 and Borkum Riffgrund 2.
EBITDA from other activities, including project development amounted to DKK -1.0 billion. The decreased spend relative to H1 2019 was mainly due to higher expensed project development activities in the US and Taiwan in H1 2019.
Depreciation increased by 8% and amounted to DKK 2.9 billion. The increase was mainly due to commissioning of Hornsea 1.
Cash flow from operating activities amounted to DKK 2.8 billion, which was DKK 3.3 billion
The wind speed indicates how many metres per second the wind has blown in the areas where we have offshore wind farms. The weighting is based on our generation capacity.
- Indicates m/s for full year 2020 (if Q3 and Q4 follows the normal wind year)
below H1 2019. This was mainly due to funds tied up in work in progress in H1 2020 versus a release in H1 2019, partly offset by less paid tax in H1 2020. In H1 2020, we had a net cash outflow from work in progress of DKK 2.0 bil- lion. This was mainly due to supplier payments related to the construction of Hornsea 1 for partners, the construction of Virginia Coastal Wind and construction of the offshore transmission asset at Hornsea 2, partly offset by the divestment of the offshore transmission asset at Walney Extension.
Gross investments amounted to DKK 7.1 billion and mainly related to Borssele 1 & 2, Hornsea 2, Greater Changhua 1 & 2a and Ocean Wind.
Cash flow from divestments in H1 2020 related to compensations paid under the partnership agreements for Walney Extension. In H1 2019, cash flow from divestments related to the receipt of deferred proceeds from the farm -down of 50% of Hornsea 1 in 2018 (DKK 1.7 billion) and to the strengthening of our strategic partnership with Eversource as they became a 50% partner in our activities in the New England area in February (DKK 1.0 billion).
- interim financial report - H1 2020 | 13 | Management's review |
Onshore
Highlights Q2 2020
- Plum Creek Onshore Wind Farm (230MW) commissioned ahead of schedule and on budget.
- We acquired the 227MWac solar PV project Muscle Shoals, located in Alabama.
- We divested our 10MW Oak Solar farm in New Jersey.
Financial results Q2 2020
Power generation increased by 83% relative to Q2 2019. The increase was due to new wind farms in operation (Sage Draw, Lockett and Plum Creek). Wind speeds amounted to a portfolio average of 8.0m/s, which was higher than same period last year, but slightly lower than a normal wind year (8.1m/s).
Revenue from wind farms in operation increased by 19% due to the higher generation partly offset by lower prices for the part of the portfolio not covered by PPAs.
the divestment of our 10MW Oak Solar farm in New Jersey.
Financial results H1 2020
Power generation increased by 61% relative to H1 2019. The increase was due to new wind farms in operation (Sage Draw, Lockett and Plum Creek). Wind speeds amounted to a portfolio average of 7.8m/s, slightly below a normal wind year (7.9m/s), however, above the average wind speed in H1 2019.
Revenue from wind farms in operation increased by 20% due to the higher generation partly offset by lower prices.
EBITDA increased by 59% and amounted to DKK 0.5 billion. The increase was primarily due to the above-mentioned factors.
Cash flow from operating activities amounted to DKK 3.2 billion which primarily comprised tax equity contribution from our partners for the Sage Draw and Plum Creek wind farms.
Financial results | Q2 2020 | Q2 2019 | % | H1 2020 | H1 2019 | % | |||
Business drivers | |||||||||
Decided (FID'ed) and installed capacity | MW | 2,088 | 1,438 | 45% | 2,088 | 1,438 | 45% | ||
Installed capacity | MW | 1,565 | 813 | 92% | 1,565 | 813 | 92% | ||
Wind speed | m/s | 8.0 | 7.7 | 4% | 7.8 | 7.7 | 1% | ||
Load factor | % | 49 | 47 | 2%p | 47 | 47 | 0%p | ||
Availability | % | 96 | 97 | (1%p) | 96 | 97 | (1%p) | ||
Power generation | TWh | 1.6 | 0.8 | 95% | 2.7 | 1.7 | 61% | ||
Net realised price | USD/MWh | 11.3 | 16.3 | (31%) | 12.1 | 16.9 | (28%) | ||
US dollar | DKK/USD | 6.8 | 6.6 | 2% | 6.8 | 6.6 | 3% | ||
Financial performance | |||||||||
Revenue | DKKm | 160 | 134 | 19% | 297 | 248 | 20% | ||
EBITDA | DKKm | 312 | 162 | 93% | 499 | 313 | 59% | ||
Sites | 103 | 75 | 37% | 176 | 159 | 11% | |||
Production tax credits and tax attributes | 268 | 140 | 91% | 477 | 282 | 69% | |||
Other incl. project development | (59) | (53) | 11% | (154) | (128) | 20% | |||
Depreciation | DKKm | (109) | (78) | 40% | (207) | (158) | 31% | ||
EBIT | DKKm | 203 | 84 | 142% | 292 | 155 | 88% | ||
Cash flow from operating activities | DKKm | 3,209 | 78 | n.a. | 3,162 | (16) | n.a. | ||
Gross investments | DKKm | (733) | (1,258) | (42%) | (1,481) | (1,798) | (18%) | ||
Divestments | DKKm | 114 | - | n.a. | 114 | - | n.a. | ||
Free cash flow | DKKm | 2,590 | (1,180) | n.a. | 1,795 | (1,814) | n.a. | ||
Capital employed | DKKm | 8,608 | 8,033 | 7% | 8,608 | 8,033 | 7% |
EBITDA almost doubled and amounted to DKK
0.3 billion. The increase was primarily due to the above-mentioned factors.
Cash flow from operating activities amounted to DKK 3.2 billion which primarily comprised tax equity contributions from our partners at the Sage Draw and Plum Creek wind farms, in April and June, respectively.
Gross investments amounted to DKK 0.7 billion in Q2 2020 and related to the construction of Permian Energy Center, Sage Draw and Plum Creek.
Cash flow from divestments in Q2 2020 related
Gross investments amounted to DKK 1.5 billion in H1 2020 and related to the construction of Permian Energy Center, Sage Draw and Plum Creek.
Wind speed, (m/s) for our onshore wind farms
* Indicates m/s for full year 2020 (if Q3 and Q4 follows the normal wind year)
The wind speed indicates how many metres per second the wind has blown in the areas where we have onshore wind farms. The weighting is based on our generation capacity.
- interim financial report - H1 2020 | 14 | Management's review |
Markets & Bioenergy
Highlights Q2 2020
- Divestment of our Danish power distribution (Radius), residential customer and city light business to SEAS-NVE approved by the Dan- ish competition authorities.
- We divested the Inbicon production facilities.
- Our Renescience facility in the UK has pro- cessed waste again since June.
Financial results Q2 2020
Revenue decreased by 47% compared to Q2 2019 and amounted to DKK 3.9 billion. The decrease was mainly driven by a significant decrease in average gas and power prices relative to the same period last year as well as lower gas and power volumes sold.
Power generation was 0.2TWh higher than in Q2 2019, driven by generation associated with delivery of ancillary services (see box on following page). Heat generation decreased by 0.1TWh despite of colder weather.
EBITDA amounted to DKK 0.2 billion compared to DKK -0.1 billion in Q2 2019.
EBITDA from CHP plants increased by DKK 0.3 billion and amounted to DKK 0.2 billion. The increase was mainly due to higher sale of ancillary services, lower fixed costs due to timing and a positive one-off gain from divestment of the closed Inbicon production facilities in April.
EBITDA from Gas Markets & Infrastructure was in line with the same period last year and amounted to DKK -0.2 billion. A less net negative effect from revaluating our gas at storage (gas prices had a steeper decline during Q2 2019 than in Q2 2020) was partly offset by lower earnings due to the shut-down of the Tyra gas
field from late 2019, and lasting until 2022.
EBITDA from LNG amounted to DKK 0 billion. Following the agreement to divest our LNG activities we have made provisions to offset the negative earnings.
EBITDA from Distribution, B2C and city light was in line with the same period last year and amounted to DKK 0.3 billion.
Cash flow from operating activities amounted to DKK 0.8 billion in Q2 2020. The increase of DKK 1.4 billion was mainly due to lower trade receivables due to the lower revenue, partly offset by lower trade payables.
Financial results H1 2020
Revenue decreased by 32% compared to H1 2019 and amounted to DKK 11.4 billion. The decrease was mainly driven by a significant decrease in average gas and power prices relative to the same period last year as well as lower gas and power volumes sold.
Power generation was 6% lower than in H1 2019, driven by more windy and wet weather and a warm first quarter 2020. Heat generation decreased by 15% in H1 2020 mainly due to warmer weather in Q1 2020. In contrast, demand for ancillary services increased.
EBITDA amounted to DKK 1.1 billion compared to DKK 0.6 billion in H1 2019.
EBITDA from CHP plants increased by DKK 0.2 billion relative to the same period last year and totalled DKK 0.7 billion in H1 2020. Higher sale of ancillary services was partly offset by the decrease in power and heat generation and the negative spread development.
Financial results | Q2 2020 | Q2 2019 | % | H1 2020 | H1 2019 | % | |
Business drivers | |||||||
Degree days | Number | 436 | 269 | 62% | 1,501 | 1,409 | 7% |
Heat generation | TWh | 1.0 | 1.1 | (13%) | 4.1 | 4.8 | (15%) |
Power generation | TWh | 0.9 | 0.7 | 37% | 2.5 | 2.6 | (6%) |
Gas sales | TWh | 20.1 | 31.8 | (37%) | 46.7 | 57.5 | (19%) |
Power sales | TWh | 3.0 | 3.3 | (8%) | 6.6 | 7.3 | (9%) |
Gas price, TTF | EUR/MWh | 5.3 | 13.0 | (59%) | 7.5 | 15.7 | (52%) |
Power price, DK | EUR/MWh | 20.5 | 36.8 | (44%) | 20.8 | 39.9 | (48%) |
Power price, LEBA UK | GBP/MWh | 25.4 | 41.4 | (39%) | 29.5 | 47.0 | (37%) |
Green dark spread, DK | EUR/MWh | (12.2) | (3.4) | 261% | (13.7) | (2.0) | 569% |
Green spark spread, DK | EUR/MWh | 1.2 | 0.1 | 851% | (3.2) | (1.6) | 98% |
Financial performance | |||||||
Revenue | DKKm | 3,895 | 7,411 | (47%) | 11,404 | 16,821 | (32%) |
EBITDA | DKKm | 185 | (115) | n.a. | 1,118 | 569 | 96% |
CHP plants | 152 | (126) | n.a. | 672 | 428 | 57% | |
Gas Markets & Infrastructure | (190) | (163) | 17% | (179) | (280) | (36%) | |
LNG | - | (41) | n.a. | - | (111) | n.a. | |
Distribution, B2C and city light | 305 | 261 | 17% | 781 | 671 | 16% | |
Other, incl. project development | (82) | (46) | 78% | (156) | (139) | 12% | |
Depreciation | DKKm | (208) | (203) | 2% | (400) | (388) | 3% |
EBIT | DKKm | (23) | (318) | (93%) | 718 | 181 | 297% |
Cash flow from operating activities | DKKm | 817 | (641) | n.a. | 2,374 | 1,346 | 76% |
Gross investments | DKKm | (179) | (495) | (64%) | (423) | (962) | (56%) |
Divestments | DKKm | 81 | 35 | 131% | 80 | 20 | 300% |
Free cash flow | DKKm | 719 | (1,101) | n.a. | 2,031 | 404 | 403% |
Capital employed | DKKm | 13,670 | 14,238 | (4%) | 13,670 | 14,238 | (4%) |
Reporting
We run our business on an end-to-end value chain thinking. All activities and earnings that relate to Offshore and Onshore are reported in these segments, even if the daily activities are performed on behalf of the group in Markets & Bioenergy. Therefore, earnings from trading related to hedging of our power exposures and power portfolio optimisation activities in relation to Offshore and Onshore are presented in these business units.
In H1 2020, EBITDA of DKK 151 million and DKK -6 million were transferred to Offshore and On- shore, respectively (DKK 590 million and DKK -6 million respectively in H1 2019). In Q2 2020, EBITDA of DKK -46m and DKK 4 million were transferred to Offshore and Onshore, respectively (DKK 271 million and DKK -6 million respectively in Q2 2019).
- interim financial report - H1 2020 | 15 | Management's review |
Markets & Bioenergy continued
EBITDA from Gas Markets & Infrastructure increased by DKK 0.1 billion and amounted to DKK -0.2 billion. The increase was mainly due to a positive impact from storage hedges and a less negative effect from revaluating our gas at storage (gas prices had a steeper decline during H1 2019 than in H1 2020). This was partly offset by lower earnings due to the shut-down from late 2019 of the Tyra gas field as well as a provision for bad debt of DKK 0.1 billion in our B2B business to cover the extraordinary COVID-19 related default risk among our customers.
EBITDA from LNG amounted to DKK 0 billion. Following the agreement to divest our LNG activities we have made provisions to offset the negative earnings.
EBITDA from Distribution, B2C and city light increased by DKK 0.1 billion to DKK 0.8 billion. The increase was mainly due to lower costs.
Cash flow from operating activities amounted to DKK 2.4 billion in H1 2020. The increase of DKK 1.0 billion was mainly due to lower paid taxes (receipt of on account taxes in H1 2020 versus payment of taxes on account in H1 2019) and lower trade receivables due to lower reve- nue. This was partly offset by changes in the value of derivatives and more gas at storage.
Gross investments amounted to DKK 0.4 billion in H1 2020 and were mainly related to maintenance of the power distribution grid and concluding work related to the bioconversion of Asnæs Power Station.
Ancillary services
Ancillary services are different types of services where power market participants provide flexible capacity (generation or consumption) to balance the power system and to support security of supply.
From early 2020, one of these services (automatic Frequency Restoration Reserves, aFRR) has been offered through tenders in western Denmark after having been supplied via a contract with the TSO in Norway for the last five years. The services are offered for one month at a time and require the market participants to be able to increase or decrease its generation/consumption with the awarded amount (up to 100MW) for up to 15 minutes.
As a large thermal generator in Denmark, Ørsted is obliged to offer its available power generation capacity to the market at marginal costs, including for delivery of ancillary services. This implies, that we are not allowed to prioritise delivery of ancillary services from green energy sources to support our green strategy and targets.
In H1 2020, we were awarded a substantial share of the aFRR being tendered by Energinet, and we have consequently supplied up to 100MW additional power generation from Esbjerg and Studstrup power stations, which we would otherwise not have supplied. This led to an increase in the carbon emissions from these power stations.
- interim financial report - H1 2020 | 16 | Management's review |
Performance highlights
Income statement | H1 2020 | H1 2019 | Q2 2020 | Q2 2019 | 2019 | |||||||
(Business performance), DKKm | Business drivers | H1 2020 | H1 2019 | Q2 2020 | Q2 2019 | 2019 | ||||||
Revenue | 27,001 | 33,682 | 11,625 | 16,443 | 67,842 | Offshore | ||||||
EBITDA | 9,761 | 8,755 | 2,956 | 3,625 | 17,484 | Decided (FID'ed) and installed capacity3, offshore wind, GW | 9.9 | 9.9 | 9.9 | 9.9 | 9.9 | |
Offshore | 7,993 | 7,890 | 2,361 | 3,572 | 15,161 | Installed capacity, offshore wind, GW | 6.8 | 5.6 | 6.8 | 5.6 | 6.8 | |
- Sites, O&M and PPAs | 7,514 | 6,512 | 2,578 | 2,552 | 13,750 | |||||||
Generation capacity, offshore wind, GW | 3.8 | 3.3 | 3.8 | 3.3 | 3.6 | |||||||
- Construction agreements and other | 479 | 1,378 | (217) | 1,020 | 1,411 | |||||||
Wind speed3, m/s | 10.1 | 9.2 | 8.0 | 8.0 | 9.2 | |||||||
Onshore | 499 | 313 | 312 | 162 | 786 | |||||||
Load factor3, % | 46 | 41 | 32 | 31 | 42 | |||||||
Markets & Bioenergy | 1,118 | 569 | 185 | (115) | 1,495 | |||||||
Other activities | 151 | (17) | 98 | 6 | 42 | Availability3, % | 93 | 92 | 95 | 87 | 93 | |
Depreciation and amortisation | (3,581) | (3,307) | (1,827) | (1,689) | (6,864) | Power generation, TWh | 7.2 | 5.3 | 2.6 | 2.2 | 12.0 | |
Impairment losses | - | - | - | - | (568) | Power sales, TWh | 14.3 | 12.9 | 5.5 | 5.7 | 27.6 | |
Operating profit (loss) (EBIT) | 6,180 | 5,448 | 1,129 | 1,936 | 10,052 | Onshore | ||||||
Gain (loss) on divestment of enterprises | (17) | (35) | (3) | (18) | (63) | |||||||
Decided (FID'ed) and installed capacity3, GW | 2.1 | 1.4 | 2.1 | 1.4 | 2.1 | |||||||
Net financial income and expenses | (1,786) | (444) | (1,010) | (545) | (1,135) | |||||||
Installed capacity3, GW | 1.6 | 0.8 | 1.6 | 0.8 | 1.0 | |||||||
Profit (loss) before tax | 4,383 | 4,973 | 119 | 1,376 | 8,856 | |||||||
Wind speed3, m/s | 7.8 | 7.7 | 8.0 | 7.7 | 7.3 | |||||||
Tax | (1,846) | (1,241) | (928) | (283) | (2,756) | |||||||
Load factor3, % | 47 | 47 | 49 | 47 | 45 | |||||||
Profit (loss) for the period from continuing operations | 2,537 | 3,732 | (809) | 1,093 | 6,100 | |||||||
Profit (loss) for the period | 2,493 | 3,671 | (825) | 1,075 | 6,044 | Availability3, % | 96 | 97 | 96 | 97 | 98 | |
Balance sheet | Power generation3, TWh | 2.7 | 1.7 | 1.6 | 0.8 | 3.5 | ||||||
Assets | 193,124 | 185,949 | 193,124 | 185,949 | 192,860 | Markets & Bioenergy | ||||||
Equity | 85,930 | 86,446 | 85,930 | 86,446 | 89,562 | Degree days3, number | 1,501 | 1,409 | 436 | 269 | 2,399 | |
Shareholders in Ørsted A/S | 69,789 | 69,960 | 69,789 | 69,960 | 73,082 | Heat generation, TWh | 4.1 | 4.8 | 1.0 | 1.1 | 8.3 | |
Non-controlling interests | 2,909 | 3,247 | 2,909 | 3,247 | 3,248 | |||||||
Power generation, TWh | 2.5 | 2.6 | 0.9 | 0.7 | 4.6 | |||||||
Hybrid capital | 13,232 | 13,239 | 13,232 | 13,239 | 13,232 | |||||||
Power sales, TWh | 6.6 | 7.3 | 3.0 | 3.3 | 14.7 | |||||||
Interest-bearing net debt | 22,272 | 4,980 | 22,272 | 4,980 | 17,230 | |||||||
Gas sales, TWh | 46.7 | 57.5 | 20.1 | 31.8 | 125.0 | |||||||
Capital employed | 108,203 | 91,426 | 108,203 | 91,426 | 106,792 | |||||||
Additions to property, plant, and equipment | 14,844 | 7,431 | 10,011 | 3,755 | 22,440 | People and environment | ||||||
Cash flow | Employees (FTE), end of period number | 6,731 | 6,312 | 6,731 | 6,312 | 6,526 | ||||||
Cash flow from operating activities | 7,769 | 7,392 | 8,197 | 7,510 | 13,079 | Total recordable injury rate (TRIR)4 | 4.7 | 4.1 | 12.9 | 4.1 | 4.9 | |
Gross investments | (9,065) | (7,267) | (3,757) | (3,368) | (23,305) | Fatalities, number | 0 | 1 | 0 | 1 | 1 | |
Divestments | 52 | 2,667 | 45 | (11) | 3,329 | Green share of heat and power generation, % | 88 | 82 | 86 | 85 | 86 | |
Free cash flow | (1,244) | 2,792 | 4,485 | 4,131 | (6,897) | Greenhouse gas intensity, g CO2e/kWh | 64 | 80 | 84 | 71 | 65 | |
Financial ratios |
Return on capital employed (ROCE)1,4, % | 10.8 | 29.3 | 10.8 | 29.3 | 10.6 |
FFO/adjusted net debt2,4, % | 23.1 | 57.5 | 23.1 | 57.5 | 31.0 |
Number of outstanding shares, end of period, '000 | 419,985 | 419,985 | 419,985 | 419,985 | 419,985 |
Share price, end of period, DKK | 765 | 533 | 765 | 504 | 689 |
Market capitalisation, end of period, DKK billion | 321 | 224 | 321 | 212 | 290 |
Earnings per share (EPS) (BP), DKK | 5.2 | 7.9 | (2.7) | 1.9 | 12.7 |
Dividend yield, % | 1.5 | ||||
Income statement (IFRS) | |||||
Revenue | 28,194 | 36,040 | 9,962 | 17,277 | 70,398 |
EBITDA | 11,041 | 10,432 | 1,592 | 4,425 | 19,020 |
Profit (loss) for the period from continuing operations | 3,537 | 5,040 | (1,870) | 1,718 | 7,291 |
Business performance vs. IFRS
Business performance represents the underlying financial performance of the Group in the reporting period as results are adjusted for temporary fluctuations in the market value of contracts (including hedging transactions) relating to other periods. Apart from this, there is no difference between business performance and IFRS results. Read more in note 2.
- EBIT (last 12 months)/average capital employed.
- Net debt including 50% of hybrid capital, cash and secu- rities not available for use (with the exception of repo transactions), and decommissioning obligations less de- ferred tax.
- See definition on page 164 and 'ESG statements' in the annual report for 2019.
- Last 12 months.
- interim financial report - H1 2020 | 17 | Management's review |
Quarterly overview
Income statement | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | |||
(Business performance), DKKm | 2020 | 2020 | 2019 | 2019 | 2019 | 2019 | 2018 | 2018 | Business drivers | 2020 | 2020 | 2019 | 2019 | 2019 | 2019 | 2018 | 2018 | ||
Revenue | 11,625 | 15,376 | 18,679 | 15,481 | 16,443 | 17,239 | 23,527 | 15,018 | Offshore | ||||||||||
EBITDA | 2,956 | 6,805 | 4,613 | 4,116 | 3,625 | 5,130 | 19,206 | 2,225 | Decided (FID'ed) and installed capacity3, | ||||||||||
Offshore | 2,361 | 5,632 | 4,048 | 3,223 | 3,572 | 4,318 | 18,847 | 1,987 | offshore wind, GW | 9.9 | 9.9 | 9.9 | 9.9 | 9.9 | 9.0 | 9.0 | 8.9 | ||
- Sites, O&M and PPAs | 2,578 | 4,936 | 4,626 | 2,612 | 2,552 | 3,960 | 4,109 | 2,004 | Installed capacity, offshore wind, GW | 6.8 | 6.8 | 6.8 | 5.6 | 5.6 | 5.6 | 5.6 | 5.1 | ||
- Construction agreements and other | (217) | 696 | (578) | 611 | 1,020 | 358 | 14,738 | (17) | Generation capacity, offshore wind, GW | 3.8 | 3.6 | 3.6 | 3.6 | 3.3 | 3.0 | 3.0 | 2.9 | ||
Onshore | 312 | 187 | 165 | 308 | 162 | 151 | 44 | - | Wind speed, m/s | 8.0 | 12.1 | 10.0 | 8.5 | 8.0 | 10.4 | 10.3 | 7.7 | ||
Markets & Bioenergy | 185 | 933 | 490 | 436 | (115) | 684 | 303 | 259 | Load factor3, % | 32 | 60 | 50 | 37 | 31 | 51 | 53 | 32 | ||
Other activities | 98 | 53 | (90) | 149 | 6 | (23) | 12 | (21) | Availability3, % | 95 | 93 | 93 | 93 | 87 | 96 | 93 | 92 | ||
Depreciation and amortisation | (1,827) | (1,754) | (1,876) | (1,681) | (1,689) | (1,618) | (1,697) | (1,437) | Power generation, TWh | 2.6 | 4.6 | 3.9 | 2.8 | 2.2 | 3.1 | 3.3 | 1.9 | ||
Impairment losses | - | - | (568) | - | - | - | 603 | - | Power sales, TWh | 5.5 | 8.8 | 7.7 | 7.0 | 5.7 | 7.2 | 7.7 | 5.0 | ||
Operating profit (loss) (EBIT) | 1,129 | 5,051 | 2,169 | 2,435 | 1,936 | 3,512 | 18,112 | 788 | Onshore | ||||||||||
Gain (loss) on divestment of enterprises | (3) | (14) | (13) | (15) | (18) | (17) | (28) | 181 | Decided (FID'ed) and installed capacity3, GW | 2.1 | 2.1 | 2.1 | 1.7 | 1.4 | 1.0 | 1.0 | - | ||
Net financial income and expenses | (1,010) | (776) | (644) | (47) | (545) | 101 | (43) | (436) | Installed capacity3, GW | 1.6 | 1.3 | 1.0 | 1.0 | 0.8 | 0.8 | 0.8 | - | ||
Profit (loss) before tax | 119 | 4,264 | 1,515 | 2,368 | 1,376 | 3,597 | 18,038 | 535 | Wind speed3, m/s | 8.0 | 7.5 | 7.3 | 6.6 | 7.7 | 7.8 | 7.3 | - | ||
Tax | (928) | (918) | (590) | (925) | (283) | (958) | (2,878) | (117) | Load factor3, % | 49 | 44 | 46 | 39 | 47 | 47 | 41.0 | - | ||
Profit (loss) for the period from continuing | Availability3, % | 96 | 95 | 98 | 98 | 97 | 97 | 98.0 | - | ||||||||||
operations | (809) | 3,346 | 925 | 1,443 | 1,093 | 2,639 | 15,160 | 418 | Power generation, TWh | 1.6 | 1.1 | 1.0 | 0.9 | 0.8 | 0.8 | 0.6 | - | ||
Profit (loss) for the period | (825) | 3,318 | 896 | 1,477 | 1,075 | 2,596 | 15,194 | 405 | Markets & Bioenergy | ||||||||||
Degree days3, number | 436 | 1,065 | 882 | 108 | 269 | 1,140 | 884 | 76 | |||||||||||
Balance sheet | |||||||||||||||||||
Heat generation, TWh | 1.0 | 3.1 | 3.0 | 0.5 | 1.1 | 3.7 | 2.8 | 0.3 | |||||||||||
Assets | 193,124 | 193,636 | 192,860 | 194,521 | 185,949 | 182,783 | 174,575 | 150,909 | |||||||||||
Equity | 85,930 | 89,015 | 89,562 | 87,369 | 86,446 | 85,843 | 85,115 | 68,701 | Power generation, TWh | 0.9 | 1.6 | 1.6 | 0.4 | 0.7 | 1.9 | 1.8 | 0.7 | ||
Shareholders in Ørsted A/S | 69,789 | 72,728 | 73,082 | 70,977 | 69,960 | 69,193 | 68,488 | 52,029 | Power sales, TWh | 3.0 | 3.6 | 4.1 | 3.3 | 3.3 | 4.0 | 4.2 | 3.5 | ||
Non-controlling interests | 2,909 | 3,055 | 3,248 | 3,153 | 3,247 | 3,411 | 3,388 | 3,433 | Gas sales, TWh | 20.1 | 26.7 | 36.6 | 30.8 | 31.8 | 25.8 | 25.5 | 31.3 | ||
Hybrid capital | 13,232 | 13,232 | 13,232 | 13,239 | 13,239 | 13,239 | 13,239 | 13,239 | People and environment | ||||||||||
Interest-bearing net debt | 22,272 | 27,084 | 17,230 | 12,082 | 4,980 | 9,111 | (2,219) | 8,957 | Employees (FTE) end of period, number | 6,731 | 6,608 | 6,526 | 6,454 | 6,312 | 6,176 | 6,080 | 5,882 | ||
Capital employed | 108,203 | 116,098 | 106,792 | 99,451 | 91,426 | 94,954 | 82,896 | 77,658 | Total recordable injury rate (TRIR)4 | 4.7 | 4.7 | 4.9 | 4.5 | 4.1 | 4.3 | 4.7 | 5.0 | ||
Additions to property, plant, equipment | 10,011 | 4,833 | 6,560 | 8,449 | 3,755 | 3,676 | 4,575 | 2,942 | Fatalities, number | 0 | 0 | 0 | 0 | 1 | 0 | 0 | 0 | ||
Green share of heat and power generation, % | 86 | 90 | 90 | 87 | 85 | 80 | 83 | 71 | |||||||||||
Cash flow | |||||||||||||||||||
Greenhouse gas intensity, g CO2e/kWh | 84 | 53 | 44 | 62 | 71 | 85 | 87 | 212 | |||||||||||
Cash flow from operating activities | 8,197 | (428) | 4,816 | 871 | 7,510 | (118) | 7,565 | (117) | |||||||||||
Gross investments | (3,757) | (5,308) | (8,816) | (7,222) | (3,368) | (3,899) | (14,916) | (4,385) | |||||||||||
Divestments | 45 | 7 | 402 | 260 | (11) | 2,678 | 18,749 | 380 | |||||||||||
Free cash flow | 4,485 | (5,729) | (3,598) | (6,091) | 4,131 | (1,339) | 11,398 | (4,122) |
Financial ratios | ||||||||
Return on capital employed (ROCE)1,4, % | 10.8 | 11.0 | 10.6 | 29.3 | 29.3 | 28.2 | 32.1 | 23.0 |
FFO/adjusted net debt2,4, % | 23.1 | 21.3 | 31.0 | 47.4 | 57.5 | 46.2 | 69.0 | 41.7 |
Numberofoutstandingshares,endofperiod,'000 | 419,985 | 419,985 | 419,985 | 419,985 | 419,985 | 420,045 | 420,045 | 420,155 |
Share price, end of period, DKK | 765 | 666 | 689 | 637 | 533 | 504 | 436 | 436 |
Marketcapitalisation,endofperiod,DKKbillion | 321 | 280 | 290 | 267 | 224 | 212 | 183 | 183 |
Earnings per share (EPS) (BP), DKK | (2.7) | 8.0 | 1.1 | 3.5 | 1.9 | 6.2 | 35.6 | 1.1 |
Income statement (IFRS) | ||||||||
Revenue | 9,962 | 18,232 | 19,815 | 14,543 | 17,277 | 18,763 | 26,165 | 12,798 |
EBITDA | 1,592 | 9,449 | 5,260 | 3,328 | 4,425 | 6,007 | 20,914 | 567 |
Profit (loss) for the period from continuing | ||||||||
operations | (1,870) | 5,407 | 1,429 | 822 | 1,718 | 3,322 | 16,472 | (875) |
Business performance vs. IFRS
Business performance represents the underlying financial performance of the Group in the reporting period as results are adjusted for temporary fluctuations in the market value of contracts (including hedging transac- tions) relating to other periods. Apart from this, there is no difference between business performance and IFRS results. Read more in note 2.
- EBIT (last 12 months)/average capital employed.
- Net debt including 50% of hybrid capital, cash and securities not available for use (with the exception of repo transactions), present value of lease obligations (in 2018), and decommissioning obligations less deferred tax.
- See definition on page 164 and 'ESG statement' in the annual report for 2019.
- Last 12 months.
- interim financial report - H1 2020 | 18 | Management's review |
Contents
Consolidated financial statements | Notes | |||
Income statement H1 | 20 | 1. | Basis of reporting | 27 |
Statement of comprehensive income H1 | 21 | 2. | Business performance | 28 |
Income statement Q2 | 22 | 3. | Segment information | 29 |
Statement of comprehensive income Q2 | 23 | 4. | Revenue | 32 |
Balance sheet | 24 | 5. | Other operating income and expenses | 34 |
Statement of changes in equity | 25 | 6. | Gross and net investments | 34 |
Statement of cash flows | 26 | 7. | Assets classified as held for sale | 35 |
8. | Discontinued operations | 35 | ||
9. | Financial income and expenses | 36 | ||
10. | Tax on profit (loss) for the year | 37 | ||
11. | Reserves | 38 | ||
12. | Market risks | 38 | ||
13. | Fair value measurement | 39 | ||
14. | Interest-bearing debt and FFO | 40 |
Management statement
Statement by the Executive Board and the | |
Board of Directors | 41 |
Forward-looking statements | 42 |
- Interim financial report - H1 2020 | 19 | Consolidated financial statements |
Income statement
1 January - 30 June
H1 2020 | H1 2019 | |||||||
Income statement, DKKm | Business | Business | ||||||
Note | performance | Adjustments | IFRS | performance | Adjustments | IFRS | ||
4 | Revenue | 27,001 | 1,193 | 28,194 | 33,682 | 2,358 | 36,040 | |
Cost of sales | (14,623) | 87 | (14,536) | (21,066) | (681) | (21,747) | ||
Other external expenses | (2,467) | - | (2,467) | (2,954) | - | (2,954) | ||
Employee costs | (2,115) | - | (2,115) | (1,873) | - | (1,873) | ||
Share of profit (loss) in associates and joint ventures | 11 | - | 11 | (13) | - | (13) | ||
5 | Other operating income | 2,101 | - | 2,101 | 1,138 | - | 1,138 | |
5 | Other operating expenses | (147) | - | (147) | (159) | - | (159) | |
Operating profit (loss) before depreciation, | ||||||||
amortisation and impairment losses (EBITDA) | 9,761 | 1,280 | 11,041 | 8,755 | 1,677 | 10,432 | ||
Amortisation, depreciation and impairment losses on | ||||||||
intangible assets and property, plant and equipment | (3,581) | - | (3,581) | (3,307) | - | (3,307) | ||
Operating profit (loss) (EBIT) | 6,180 | 1,280 | 7,460 | 5,448 | 1,677 | 7,125 | ||
Gain (loss) on divestment of enterprises | (17) | - | (17) | (35) | - | (35) | ||
Share of profit (loss) in associates and joint ventures | 6 | - | 6 | 4 | - | 4 | ||
9 | Financial income | 1,357 | - | 1,357 | 2,598 | - | 2,598 | |
9 | Financial expenses | (3,143) | - | (3,143) | (3,042) | - | (3,042) | |
Profit (loss) before tax | 4,383 | 1,280 | 5,663 | 4,973 | 1,677 | 6,650 | ||
10 | Tax on profit (loss) for the period | (1,846) | (280) | (2,126) | (1,241) | (369) | (1,610) | |
Profit (loss) for the period from continuing operations | 2,537 | 1,000 | 3,537 | 3,732 | 1,308 | 5,040 | ||
8 | Profit (loss) for the period from discontinued operations | (44) | - | (44) | (61) | - | (61) | |
Profit (loss) for the period | 2,493 | 1,000 | 3,493 | 3,671 | 1,308 | 4,979 | ||
Profit (loss) for the period is attributable to: | ||||||||
Shareholders in Ørsted A/S | 2,178 | 1,000 | 3,178 | 3,374 | 1,308 | 4,682 | ||
Interests and costs, hybrid capital owners of Ørsted A/S | 326 | 326 | 256 | 256 | ||||
Non-controlling interests | (11) | (11) | 41 | 41 | ||||
Profit (loss) per share, DKK: | ||||||||
From continuing operations | 5.3 | 7.7 | 8.2 | 11.3 | ||||
From discontinued operations | (0.1) | (0.1) | (0.1) | (0.1) | ||||
Total profit (loss) per share | 5.2 | 7.6 | 8.1 | 11.2 |
Profit (loss) per share
Diluted profit (loss) per share corresponds to profit (loss) per share, as the dilutive effect of the share incentive programme is less than 0.1% of the share capital.
Accounting policies
Business performance
The business performance principle is our alternative performance measure. Under business performance, the market value adjustment of our energy hedges, where we do not apply IFRS hedge accounting, are deferred and recognised in the profit (loss) in the period in which the hedged exposure materialises. Energy hedges comprise hedging of energy and associated currency risks as well as fixed-price physical gas and power contracts. According to IFRS, the market value of energy hedges, where we do not apply IFRS hedge accounting, are recognised on an ongoing basis in the profit (loss) for the period. The difference between IFRS and business performance is specified in the 'Adjustments' column. Read more about the business performance principle in note 2 'Business performance' as well as note 1.5 'Business performance' in the annual report 2019.
- Interim financial report - H1 2020 | 20 | Consolidated financial statements |
Statement of comprehensive income
1 January - 30 June
H1 2020 | |||
Statement of comprehensive income, DKKm | Business | ||
performance | Adjustments | IFRS | |
Profit (loss) for the period | 2,493 | 1,000 | 3,493 |
Other comprehensive income: | |||
Cash flow hedging: | |||
Value adjustments for the period | 844 | (1,925) | (1,081) |
Value adjustments transferred to income statement | (131) | 645 | 514 |
Exchange rate adjustments: | |||
Exchange rate adjustments relating to net investment in | |||
foreign enterprises | (4,260) | - | (4,260) |
Value adjustment of net investment hedges | 2,111 | - | 2,111 |
Tax: | |||
Tax on hedging instruments | (183) | 280 | 97 |
Tax on exchange rate adjustments | 476 | - | 476 |
Other: | |||
Share of other comprehensive income of associated companies, | |||
after tax | (7) | - | (7) |
Other comprehensive income | (1,150) | (1,000) | (2,150) |
Total comprehensive income | 1,343 | - | 1,343 |
Comprehensive income for the period is attributable to: | |||
Shareholders in Ørsted A/S | 1,173 | ||
Interest payments and costs, hybrid capital owners of Ørsted A/S | 326 | ||
Non-controlling interests | (156) | ||
Total comprehensive income | 1,343 |
H1 2019
Business | ||
performance | Adjustments | IFRS |
3,671 | 1,308 | 4,979 |
2,491 | (1,249) | 1,242 |
552 | (428) | 124 |
(585) | - | (585) |
293 | - | 293 |
(566) | 369 | (197) |
85 | - | 85 |
(8) | - | (8) |
2,262 | (1,308) | 954 |
5,933 | - | 5,933 |
5,620 | ||
256 |
57
5,933
Statement of comprehensive income
All items in 'Other comprehensive income' may be recycled to the income statement.
- Interim financial report - H1 2020 | 21 | Consolidated financial statements |
Income statement
1 April - 30 June
Q2 2020 | Q2 2019 | ||||||||
Income statement, DKKm | Business | Business | |||||||
Note | performance | Adjustments | IFRS | performance | Adjustments | IFRS | |||
4 | Revenue | 11,625 | (1,663) | 9,962 | 16,443 | 834 | 17,277 | ||
Cost of sales | (6,816) | 299 | (6,517) | (10,703) | (34) | (10,737) | |||
Other external expenses | (1,208) | - | (1,208) | (1,554) | - | (1,554) | |||
Employee costs | (1,092) | - | (1,092) | (951) | - | (951) | |||
Share of profit (loss) in associates and joint ventures | 7 | - | 7 | (11) | - | (11) | |||
5 | Other operating income | 514 | - | 514 | 465 | - | 465 | ||
5 | Other operating expenses | (74) | - | (74) | (64) | - | (64) | ||
Operating profit (loss) before depreciation, | |||||||||
amortisation and impairment losses (EBITDA) | 2,956 | (1,364) | 1,592 | 3,625 | 800 | 4,425 | |||
Amortisation, depreciation and impairment losses on | |||||||||
intangible assets and property, plant and equipment | (1,827) | - | (1,827) | (1,689) | - | (1,689) | |||
Operating profit (loss) (EBIT) | 1,129 | (1,364) | (235) | 1,936 | 800 | 2,736 | |||
Gain (loss) on divestment of enterprises | (3) | - | (3) | (18) | - | (18) | |||
Share of profit (loss) in associates and joint ventures | 3 | - | 3 | 3 | - | 3 | |||
9 | Financial income | 552 | - | 552 | 938 | - | 938 | ||
9 | Financial expenses | (1,562) | - | (1,562) | (1,483) | - | (1,483) | ||
Profit (loss) before tax | 119 | (1,364) | (1,245) | 1,376 | 800 | 2,176 | |||
10 | Tax on profit (loss) for the period | (928) | 303 | (625) | (283) | (175) | (458) | ||
Profit (loss) for the period from continuing operations | (809) | (1,061) | (1,870) | 1,093 | 625 | 1,718 | |||
8 | Profit (loss) for the period from discontinued operations | (16) | - | (16) | (18) | - | (18) | ||
Profit (loss) for the period | (825) | (1,061) | (1,886) | 1,075 | 625 | 1,700 | |||
Profit (loss) for the period is attributable to: | |||||||||
Shareholders in Ørsted A/S | (1,140) | (1,061) | (2,201) | 764 | 625 | 1,389 | |||
Interests and costs, hybrid capital owners of Ørsted A/S | 326 | 326 | 291 | 291 | |||||
Non-controlling interests | (11.0) | (11.0) | 20 | 20 | |||||
Profit (loss) per share, DKK: | |||||||||
From continuing operations | (2.7) | (5.2) | 1.9 | 3.4 | |||||
From discontinued operations | 0.0 | 0.0 | 0.0 | 0.0 | |||||
Total profit (loss) per share | (2.7) | (5.2) | 1.9 | 3.4 |
Profit (loss) per share
Diluted profit (loss) per share corresponds to profit (loss) per share, as the dilutive effect of the share incentive programme is less than 0.1% of the share capital.
Accounting policies
Business performance
The business performance principle is our alternative performance measure. Under business performance, the market value adjustment of our energy hedges, where we do not apply IFRS hedge accounting, are deferred and recognised in the profit (loss) in the period in which the hedged exposure materialises. Energy hedges comprise hedging of energy and associated currency risks as well as fixed-price physical gas and power contracts. According to IFRS, the market value of energy hedges, where we do not apply IFRS hedge accounting, are recognised on an ongoing basis in the profit (loss) for the period. The difference between IFRS and business performance is specified in the 'Adjustments' column. Read more about the business performance principle in note 2 'Business performance' as well as note 1.5 'Business performance' in the annual report 2019.
- Interim financial report - H1 2020 | 22 | Consolidated financial statements |
Statement of comprehensive income
1 April - 30 June
Q2 2020 | |||
Statement of comprehensive income, DKKm | Business | ||
performance | Adjustments | IFRS | |
Profit (loss) for the period | (825) | (1,061) | (1,886) |
Other comprehensive income: | |||
Cash-flow hedging: | |||
Value adjustments for the period | (1,740) | 1,269 | (471) |
Value adjustments transferred to income statement | 353 | 95 | 448 |
Exchange rate adjustments: | |||
Exchange rate adjustments relating to net investment in | |||
foreign enterprises | (1,991) | - | (1,991) |
Value adjustment of net investment hedges | 963 | - | 963 |
Tax: | |||
Tax on hedging instruments | 388 | (303) | 85 |
Tax on exchange rate adjustments | 203 | - | 203 |
Other: | |||
Share of other comprehensive income of associated companies, | |||
after tax | 3 | - | 3 |
Other comprehensive income | (1,821) | 1,061 | (760) |
Total comprehensive income | (2,646) | - | (2,646) |
Comprehensive income for the period is attributable to: | |||
Shareholders in Ørsted A/S | (2,877) | ||
Interest payments and costs after tax, hybrid capital owners of | |||
Ørsted A/S | 326 | ||
Non-controlling interests | (95) | ||
Total comprehensive income | (2,646) |
Q2 2019
Business | ||
performance | Adjustments | IFRS |
1,075 | 625 | 1,700 |
1,120 | (676) | 444 |
164 | (124) | 40 |
(2,558) | - | (2,558) |
1,367 | - | 1,367 |
(265) | 175 | (90) |
112 | - | 112 |
(7) | - | (7) |
(67) | (625) | (692) |
1,008 | - | 1,008 |
824 |
291
(107)
1,008
Statement of comprehensive income
All items in 'Other comprehensive income' may be recycled to the income statement.
- Interim financial report - H1 2020 | 23 | Consolidated financial statements |
Balance sheet
Assets, DKKm | 30 June | 31 December | 30 June | Equity and liabilities, DKKm | 30 June | 31 December | 30 June | |||
Note | 2020 | 2019 | 2019 | Note | 2020 | 2019 | 2019 | |||
Intangible assets | 504 | 672 | 564 | Share capital | 4,204 | 4,204 | 4,204 | |||
Land and buildings | 5,073 | 5,177 | 4,897 | 11 | Reserves | (1,585) | 413 | (881) | ||
Production assets | 80,463 | 76,682 | 70,096 | Retained earnings | 67,170 | 64,051 | 66,637 | |||
Fixtures and fittings, tools and equipment | 588 | 652 | 711 | Proposed dividends | - | 4,414 | - | |||
Property, plant and equipment under construction | 27,868 | 23,502 | 16,096 | Equity attributable to shareholders in Ørsted A/S | 69,789 | 73,082 | 69,960 | |||
Property, plant and equipment | 113,992 | 106,013 | 91,800 | Hybrid capital | 13,232 | 13,232 | 13,239 | |||
Investments in associates and joint ventures | 542 | 497 | 527 | Non-controlling interests | 2,909 | 3,248 | 3,247 | |||
Other securities and equity investments | 227 | 217 | 213 | Equity | 85,930 | 89,562 | 86,446 | |||
Deferred tax | 8,441 | 6,847 | 5,753 | Deferred tax | 3,903 | 3,371 | 4,695 | |||
Other receivables | 3,019 | 1,713 | 2,144 | Provisions | 12,203 | 12,063 | 12,860 | |||
Other non-current assets | 12,229 | 9,274 | 8,637 | Lease liabilities | 4,444 | 4,728 | 4,479 | |||
Non-current assets | 126,725 | 115,959 | 101,001 | 14 | Bond and bank debt | 32,975 | 36,039 | 32,400 | ||
Inventories | 11,417 | 14,031 | 13,087 | Contract liabilities | 3,703 | 3,762 | 3,720 | |||
13 | Derivatives | 7,841 | 7,740 | 6,303 | Tax equity liabilities | 7,595 | 4,563 | 3,654 | ||
Contract assets | 1,216 | 739 | - | Other payables | 463 | 469 | 242 | |||
Trade receivables | 4,723 | 8,140 | 7,303 | Non-current liabilities | 65,286 | 64,995 | 62,050 | |||
Other receivables | 4,294 | 5,253 | 3,609 | Provisions | 455 | 538 | 597 | |||
Income tax | 1,176 | 346 | 6,308 | Lease liabilities | 653 | 604 | 595 | |||
13 | Securities | 12,327 | 16,552 | 25,485 | 14 | Bond and bank debt | 2,052 | 801 | 235 | |
Cash | 6,754 | 7,148 | 6,968 | 13 | Derivatives | 5,387 | 6,958 | 5,647 | ||
Current assets | 49,748 | 59,949 | 69,063 | Contract liabilities | 435 | 784 | 3,009 | |||
8 | Assets classified as held for sale | 16,651 | 16,952 | 15,885 | Trade payables | 12,933 | 10,832 | 12,291 | ||
Assets | 193,124 | 192,860 | 185,949 | Tax equity liabilities | 630 | 632 | 446 | |||
Other payables | 4,846 | 4,247 | 3,915 | |||||||
Income tax | 6,048 | 4,075 | 5,931 | |||||||
Current liabilities | 33,439 | 29,471 | 32,666 | |||||||
Liabilities | 98,725 | 94,466 | 94,716 | |||||||
Liabilities relating to assets classified | ||||||||||
8 | as held for sale | 8,469 | 8,832 | 4,787 | ||||||
Equity and liabilities | 193,124 | 192,860 | 185,949 |
Assets and liabilities classified as held for sale
Assets classified as held for sale at 30 June 2020 comprised our Danish power distribution, residential customer, and city light businesses, our oil pipe system in Denmark as well as our LNG business.
- Interim financial report - H1 2020 | 24 | Consolidated financial statements |
Statement of changes in equity
1 January - 30 June
2020 | 2019 | ||||||||||||||||
Share- | Non-con- | Share- | Non-con- | ||||||||||||||
Share | Retained | Proposed | holders in | Hybrid | trolling | Total | Share | Retained | Proposed | holders in | Hybrid | trolling | Total | ||||
DKKm | capital | Reserves* | earnings | dividends | Ørsted A/S | capital | interests | Group | capital | Reserves* | earnings | dividends | Ørsted A/S | capital | interests | Group | |
Equity at 1 January | 4,204 | 413 | 64,051 | 4,414 | 73,082 | 13,232 | 3,248 | 89,562 | 4,204 | (1,827) | 62,012 | 4,099 | 68,488 | 13,239 | 3,388 | 85,115 | |
Comprehensive income | |||||||||||||||||
for the period: | |||||||||||||||||
Profit (loss) for the period | - | - | 3,178 | - | 3,178 | 326 | (11) | 3,493 | - | - | 4,682 | - | 4,682 | 256 | 41 | 4,979 | |
Other comprehensive | |||||||||||||||||
income: | |||||||||||||||||
Cash-flow hedging | - | (567) | - | - | (567) | - | - | (567) | - | 1,366 | - | - | 1,366 | - | - | 1,366 | |
Exchange rate adjustments | - | (2,004) | - | - | (2,004) | - | (145) | (2,149) | - | (308) | - | - | (308) | - | 16 | (292) | |
Tax on other comprehensive | |||||||||||||||||
income | - | 573 | - | - | 573 | - | - | 573 | - | (112) | - | - | (112) | - | - | (112) | |
Share of other comprehensive | |||||||||||||||||
income of associated | |||||||||||||||||
companies, after tax | - | - | (7) | - | (7) | - | - | (7) | - | - | (8) | - | (8) | - | - | (8) | |
Total comprehensive | |||||||||||||||||
income | - | (1,998) | 3,171 | - | 1,173 | 326 | (156) | 1,343 | - | 946 | 4,674 | - | 5,620 | 256 | 57 | 5,933 | |
Transactions with owners: | |||||||||||||||||
Coupon payments, hybrid | |||||||||||||||||
capital | - | - | - | - | - | (326) | - | (326) | - | - | - | - | - | (327) | - | (327) | |
Tax, hybrid capital | - | - | - | - | - | - | - | - | - | - | - | - | - | 71 | - | 71 | |
Dividends paid | - | - | 4 | (4,414) | (4,410) | - | (185) | (4,595) | - | - | 3 | (4,099) | (4,096) | - | (198) | (4,294) | |
Purchases of treasury shares | - | - | (58) | - | (58) | - | - | (58) | - | - | (99) | - | (99) | - | - | (99) | |
Other changes | - | - | 2 | - | 2 | - | 2 | 4 | - | - | 47 | - | 47 | - | - | 47 | |
Total transactions with | |||||||||||||||||
owners | - | - | (52) | (4,414) | (4,466) | (326) | (183) | (4,975) | - | - | (49) | (4,099) | (4,148) | (256) | (198) | (4,602) | |
Equity at 30 June | 4,204 | (1,585) | 67,170 | - | 69,789 | 13,232 | 2,909 | 85,930 | 4,204 | (881) | 66,637 | - | 69,960 | 13,239 | 3,247 | 86,446 |
* See note 11 'Reserves' for more information about reserves.
- Interim financial report - H1 2020 | 25 | Consolidated financial statements |
Statement of cash flows
Note | Statement of cash flows, DKKm | H1 2020 | H1 2019 | Q2 2020 | Q2 2019 | Note Statement of cash flows, DKKm | H1 2020 | H1 2019 | Q2 2020 | Q2 2019 | |||
Operating profit (loss) before | Proceeds from raising of loans | 328 | 7,839 | (3,311) | 3,550 | ||||||||
depreciation, amortisation and | Instalments on loans | (977) | (2,202) | (407) | (2,202) | ||||||||
impairment losses (EBITDA), IFRS | 11,041 | 10,432 | 1,592 | 4,425 | |||||||||
Instalments on leases | (226) | (197) | (112) | (102) | |||||||||
Change in derivatives, business | |||||||||||||
2 | performance adjustments | (1,280) | (1,677) | 1,364 | (800) | Coupon payments on hybrid capital | (326) | (327) | (326) | (327) | |||
Change in derivatives, other | Dividends paid to shareholders in | ||||||||||||
adjustments | (514) | (224) | 680 | (358) | Ørsted A/S | (4,410) | (4,096) | - | - | ||||
Change in provisions | (365) | 33 | (349) | 39 | Purchase of own shares | (58) | (99) | (58) | (99) | ||||
Reversal of gain (loss) on | Transactions with non-controlling | ||||||||||||
divestment of assets | (1,288) | (308) | (71) | (190) | interests | (228) | (204) | (89) | (61) | ||||
Other items | (7) | 83 | (43) | 85 | Net proceeds from tax equity | ||||||||
Change in work in progress | (2,015) | 5,272 | (177) | 4,271 | partners | 3 | (9) | 23 | (8) | ||||
Change in tax equity partner | Collateral related to derivaties | 2,376 | 41 | 586 | 2,266 | ||||||||
liabilities | 2,892 | (219) | 3,017 | (138) | Cash flows from financing activities | (3,518) | 746 | (3,694) | 3,017 | ||||
Change in other working capital | 1,821 | (369) | 2,904 | 889 | Cash flows from continuing | ||||||||
Interest received and similar items | 2,326 | 2,141 | 694 | 1,402 | operations | (639) | 3,656 | 1,578 | 3,268 | ||||
Interest paid and similar items | (3,489) | (2,915) | (1,328) | (2,085) | Cash flows from discontinued | ||||||||
operations | (44) | - | 102 | (2) | |||||||||
Income tax paid | (1,353) | (4,857) | (86) | (30) | Total net change in cash and | ||||||||
Cash flows from operating activities | 7,769 | 7,392 | 8,197 | 7,510 | cash equivalents for the period | (683) | 3,656 | 1,680 | 3,266 | ||||
Cash and cash equivalents at the | |||||||||||||
Purchase of intangible assets and | |||||||||||||
beginning of the period | 6,459 | 2,663 | 4,223 | 3,120 | |||||||||
property, plant and equipment | (9,008) | (6,882) | (3,770) | (3,100) | |||||||||
Total net change in cash and cash | |||||||||||||
Sale of intangible assets and | |||||||||||||
equivalents | (683) | 3,656 | 1,680 | 3,266 | |||||||||
property, plant and equipment | 80 | 2,683 | 57 | 8 | |||||||||
Other change in cash and cash | |||||||||||||
Acquisition of enterprises | 1 | (271) | (3) | (149) | |||||||||
equivalents | 80 | (7) | 1 | (7) | |||||||||
Divestment of enterprises | (22) | (40) | (5) | (19) | Exchange rate adjustments of cash | ||||||||
Purchase of other equity | and cash equivalents | 23 | (1) | (25) | (68) | ||||||||
investments | (11) | (2) | (2) | (8) | Cash and cash equivalents | ||||||||
Purchase of securities | (4,133) | (12,782) | (593) | (10,175) | at 30 June | 5,879 | 6,311 | 5,879 | 6,311 | ||||
Sale/maturation of securities | 8,250 | 12,918 | 1,373 | 6,289 | |||||||||
Change in other non-current assets | - | (2) | - | (1) | |||||||||
Transactions with associates and | Statement of cash flows | ||||||||||||
joint ventures | (47) | (110) | 18 | (110) | Our supplementary statement of gross and net investments | ||||||||
Dividends received and capital | appears from note 6 'Gross and net investments' and free cash | ||||||||||||
reduction | - | 6 | - | 6 | flows (FCF) from note 3 'Segment information'. | ||||||||
Cash flows from investing activities | (4,890) | (4,482) | (2,925) | (7,259) | 'Cash' according to the balance sheet includes 'Cash, not | ||||||||
available for use', amounting to DKK 876 million as at 30 June 2020.
Change in work in progress
'Change in work in progress' consists of elements in contract assets, contract liabilities, and construction management agreements related to construction of offshore wind farms and construction of offshore transmission assets as well as the related trade payables.
- Interim financial report - H1 2020 | 26 | Consolidated financial statements |
1. Basis of reporting
This section provides an overall description of our accounting policies as well as an overview of our implementation of new and amended accounting standards and interpretations.
Accounting policies
Ørsted is a listed public company, headquartered in Denmark.
This interim financial report for the first half- year of 2020 comprises the interim financial statements of Ørsted A/S (the parent compa- ny) and subsidiaries controlled by Ørsted A/S.
The interim financial report has been pre-
pared in accordance with the International Financial Reporting Standards (IFRS) and IAS 34 as adopted by the EU and further requirements in the Danish Financial Statements Act for the presentation of quarterly interim reports by listed companies.
The interim financial report for the first half- year of 2020 follows the same accounting policies as the annual report for 2019, except for any new, amended, or revised accounting standards and interpretations (IFRSs) endorsed by the EU, effective for the accounting period beginning on 1 January 2020.
In the sections below, the most relevant new or amended standards and interpretations are presented.
Definitions of alternative performance measures can be found on page 79 of the annual report for 2019.
This interim financial report contains selected accounting policies and should therefore be read in conjunction with the annual report for 2019.
Implementation of new or changed accounting standards and interpretations
Effective from 1 January 2020, we have
implemented the following new or changed accounting standards (IAS and IFRS) and interpretations:
- Amendments to IFRS 3: Business Combina- tions.
- Amendments to IFRS 9 and IFRS 7: Interest Rate Benchmark Reform.
The adoption of the new and changed accounting standards has not impacted our interim financial report and is not expected to impact the consolidated financial statements for 2020.
- Interim financial report - H1 2020 | 27 | Consolidated financial statements |
2. Business performance
Specification of the difference between EBITDA according | ||||
to business performance and according to IFRS, DKKm | H1 2020 | H1 2019 | Q2 2020 | Q2 2019 |
EBITDA - business performance | 9,761 | 8,755 | 2,956 | 3,625 |
Business performance adjustments in respect of revenue for | ||||
the period | 1,193 | 2,358 | (1,663) | 834 |
Business performance adjustments in respect of cost of sales | ||||
for the period | 87 | (681) | 299 | (34) |
EBITDA - IFRS | 11,041 | 10,432 | 1,592 | 4,425 |
Total business performance adjustments for the period comprise: | ||||
Market value adjustments for the period of financial and physical | ||||
hedging contracts relating to a future period | 1,925 | 1,249 | (1,269) | 676 |
Reversal of deferred gains (losses) relating to hedging contracts | ||||
from previous periods where the hedged production or trade is | ||||
recognised in business performance EBITDA in this period | (645) | 428 | (95) | 124 |
Total adjustments | 1,280 | 1,677 | (1,364) | 800 |
The table shows the difference between the income statement according to business performance and according to IFRS, which is shown in the adjustments column in the income statement.
The difference between business performance and IFRS EBITDA in 2020 is mainly due to gains on currency hedges partly countered by the reversal of gains on gas hedges recognised in IFRS in prior years.
Financial impact of hedging
Our hedging of market risks is based on a number of different accounting principles, depending on the type of exposure being hedged.
In the business performance result, the value of hedging contracts concerning energy and related currencies is deferred for recognition in the period in which the hedged exposure
materialises.
Exposures from the proceeds from partial sales of new offshore wind farms and power purchase agreements in Onshore, among other things, are hedged as cash flow hedging in accordance with the IFRS principles and are transferred to both IFRS and business performance EBITDA in the period in which the hedged exposures materialise.
Expected value for recognition in business performance
EBITDA, DKKbn
The figure shows the time of the transfer of the market value of hedging contracts in business performance EBITDA for both business performance and IFRS hedges.
- Interim financial report - H1 2020 | 28 | Consolidated financial statements |
3. Segment information
H1 2020 | Other | ||||||||
Markets & | Reportable | activities/ | Business | ||||||
Income statement, DKKm | Offshore | Onshore | Bioenergy | segments | eliminations | performance | Adjustments | IFRS | |
External revenue | 15,066 | 302 | 11,627 | 26,995 | 6 | 27,001 | 1,193 | 28,194 | |
Intra-group revenue | 2,273 | (5) | (223) | 2,045 | (2,045)1 | - | - | - | |
Revenue | 17,339 | 297 | 11,404 | 29,040 | (2,039) | 27,001 | 1,193 | 28,194 | |
Cost of sales | (7,853) | 5 | (8,706) | (16,554) | 1,931 | (14,623) | 87 | (14,536) | |
Employee costs and other external expenses | (2,892) | (315) | (1,635) | (4,842) | 260 | (4,582) | - | (4,582) | |
Gain (loss) on disposal of non-current assets | 1,217 | 34 | 37 | 1,288 | - | 1,288 | - | 1,288 | |
Additional other operating income and expenses | 171 | 478 | 18 | 667 | (1) | 666 | - | 666 | |
Share of profit (loss) in associates and joint ventures | 11 | - | - | 11 | - | 11 | - | 11 | |
EBITDA | 7,993 | 499 | 1,118 | 9,610 | 151 | 9,761 | 1,280 | 11,041 | |
Depreciation and amortisation | (2,860) | (207) | (400) | (3,467) | (114) | (3,581) | - | (3,581) | |
Impairment losses | - | - | - | - | - | - | - | - | |
Operating profit (loss) (EBIT) | 5,133 | 292 | 718 | 6,143 | 37 | 6,180 | 1,280 | 7,460 | |
Key ratios | |||||||||
Intangible assets, property, plant and equipment | 85,620 | 18,819 | 8,306 | 112,745 | 1,751 | 114,496 | - | 114,496 | |
Equity investments and non-current receivables | 1,849 | - | 239 | 2,088 | 153 | 2,241 | - | 2,241 | |
Net working capital, work in progress | 10,029 | - | 1 | 10,030 | - | 10,030 | - | 10,030 | |
Net working capital, tax equity | - | (7,588) | - | (7,588) | - | (7,588) | - | (7,588) | |
Net working capital, capital expenditures | (9,006) | (89) | (26) | (9,121) | - | (9,121) | - | (9,121) | |
Net working capital, other items | 3,777 | 80 | (2,964) | 893 | 199 | 1,092 | - | 1,092 | |
Derivatives, net | 552 | (241) | 2,007 | 2,318 | 136 | 2,454 | - | 2,454 | |
Assets classified as held for sale, net | - | - | 8,182 | 8,182 | - | 8,182 | - | 8,182 | |
Decommissioning obligations | (4,797) | (383) | (1,310) | (6,490) | - | (6,490) | - | (6,490) | |
Other provisions | (3,797) | - | (1,639) | (5,436) | (732) | (6,168) | - | (6,168) | |
Tax, net | 717 | (1,990) | 856 | (417) | 83 | (334) | - | (334) | |
Other receivables and other payables, net | (633) | - | 18 | (615) | 24 | (591) | - | (591) | |
Capital employed at 30 June | 84,311 | 8,608 | 13,670 | 106,589 | 1,614 | 108,203 | - | 108,203 | |
Of which, capital employed for discontinued operations | (34) | - | (34) | ||||||
Of which, capital employed for continuing operations | 108,237 | - | 108,237 | ||||||
Return on capital employed (ROCE) % | - | - | - | - | - | 10.8 | - | - | |
Cash flow from operating activities | 2,785 | 3,162 | 2,374 | 8,321 | (552) | 7,769 | - | 7,769 | |
Gross investments | (7,094) | (1,481) | (423) | (8,998) | (67) | (9,065) | - | (9,065) | |
Divestments | (141) | 114 | 80 | 53 | (1) | 52 | - | 52 | |
Free cash flow (FCF) | (4,450) | 1,795 | 2,031 | (624) | (620) | (1,244) | - | (1,244) | |
Profit (loss) and cash flows are shown only for continuing operations.
The column 'Other activities/eliminations' primarily covers the elimination of inter- segment transactions. It also includes income and costs, assets and liabilities, investment activity, taxes, etc., handled at Group level.
1 Including the elimination of other activities, the total elimination of intra-group revenue amounts to
DKK 3,440 million, which primarily relates to our Shared Functions services as well as our B2B, B2C, and power distribution businesses.
- Interim financial report - H1 2020 | 29 | Consolidated financial statements |
3. Segment information (continued)
H1 2019 | Other | ||||||||
Markets & | Reportable | activities/ | Business | ||||||
Income statement, DKKm | Offshore | Onshore | Bioenergy | segments | eliminations | performance | Adjustments | IFRS | |
External revenue | 16,446 | 248 | 17,055 | 33,749 | (67) | 33,682 | 2,358 | 36,040 | |
Intra-group revenue | 3,028 | - | (234) | 2,794 | (2,794)1 | - | - | - | |
Revenue | 19,474 | 248 | 16,821 | 36,543 | (2,861) | 33,682 | 2,358 | 36,040 | |
Cost of sales | (9,122) | (2) | (14,665) | (23,789) | 2,723 | (21,066) | (681) | (21,747) | |
Employee costs and other external expenses | (3,048) | (215) | (1,695) | (4,958) | 131 | (4,827) | - | (4,827) | |
Gain (loss) on disposal of non-current assets | 312 | - | (4) | 308 | - | 308 | - | 308 | |
Additional other operating income and expenses | 285 | 282 | 114 | 681 | (10) | 671 | - | 671 | |
Share of profit (loss) in associates and joint ventures | (11) | - | (2) | (13) | - | (13) | - | (13) | |
EBITDA | 7,890 | 313 | 569 | 8,772 | (17) | 8,755 | 1,677 | 10,432 | |
Depreciation and amortisation | (2,653) | (158) | (388) | (3,199) | (108) | (3,307) | - | (3,307) | |
Impairment losses | - | - | - | - | - | - | - | - | |
Operating profit (loss) (EBIT) | 5,237 | 155 | 181 | 5,573 | (125) | 5,448 | 1,677 | 7,125 | |
Key ratios | |||||||||
Intangible assets, property, plant and equipment | 68,468 | 12,757 | 9,128 | 90,353 | 2,011 | 92,364 | - | 92,364 | |
Equity investments and non-current receivables | 373 | - | 291 | 664 | 746 | 1,410 | - | 1,410 | |
Net working capital, work in progress | 4,551 | - | - | 4,551 | - | 4,551 | - | 4,551 | |
Net working capital, tax equity | - | (3,528) | - | (3,528) | - | (3,528) | - | (3,528) | |
Net working capital, capital expenditures | (3,852) | (23) | (82) | (3,957) | - | (3,957) | - | (3,957) | |
Net working capital, other items | 4,421 | (34) | (3,368) | 1,019 | 307 | 1,326 | - | 1,326 | |
Derivatives, net | (1,043) | 525 | 1,041 | 523 | 133 | 656 | - | 656 | |
Assets classified as held for sale, net | - | - | 11,098 | 11,098 | - | 11,098 | - | 11,098 | |
Decommissioning obligations | (4,239) | (275) | (1,267) | (5,781) | - | (5,781) | - | (5,781) | |
Other provisions | (3,221) | - | (3,596) | (6,817) | (860) | (7,677) | - | (7,677) | |
Tax, net | 1,882 | (1,242) | 907 | 1,547 | (113) | 1,434 | - | 1,434 | |
Other receivables and other payables, net | 5 | (147) | 86 | (56) | (414) | (470) | - | (470) | |
Capital employed at 30 June | 67,345 | 8,033 | 14,238 | 89,616 | 1,810 | 91,426 | - | 91,426 | |
Of which, capital employed for discontinued operations | (186) | - | (186) | ||||||
Of which, capital employed for continuing operations | 91,612 | - | 91,612 | ||||||
Return on capital employed (ROCE) % | - | - | - | - | - | 29.3 | - | - | |
Cash flow from operating activities | 6,073 | (16) | 1,346 | 7,403 | (11) | 7,392 | - | 7,392 | |
Gross investments | (4,442) | (1,798) | (962) | (7,202) | (65) | (7,267) | - | (7,267) | |
Divestments | 2,648 | - | 20 | 2,668 | (1) | 2,667 | - | 2,667 | |
Free cash flow (FCF) | 4,279 | (1,814) | 404 | 2,869 | (77) | 2,792 | - | 2,792 | |
Profit (loss) and cash flows are shown only for continuing operations.
The column 'Other activities/eliminations' primarily covers the elimination of inter- segment transactions. It also includes income and costs, assets and liabilities, investment activity, taxes, etc., handled at Group level.
1 Including the elimination of other activities, the total elimination of intra-group revenue amounts to
DKK 4,063 million, which primarily relates to our Shared Functions services as well as our B2B, B2C, and power distribution businesses.
- Interim financial report - H1 2020 | 30 | Consolidated financial statements |
3. Segment information (continued)
Other | ||||||||
Q2 2020, Income statement and FCF, DKKm | Markets & | Reporting | activities/ | Business | ||||
Offshore | Onshore | Bioenergy | segments | eliminations | performance | Adjustments | IFRS | |
External revenue | 8,377 | 165 | 4,003 | 12,545 | (920) | 11,625 | (1,663) | 9,962 |
Intra-group revenue | 987 | (5) | (108) | 874 | (874)1 | - | - | - |
Revenue | 9,364 | 160 | 3,895 | 13,419 | (1,794) | 11,625 | (1,663) | 9,962 |
Cost of sales | (5,594) | 5 | (2,985) | (8,574) | 1,758 | (6,816) | 299 | (6,517) |
Employee costs and other external expenses | (1,512) | (157) | (767) | (2,436) | 136 | (2,300) | - | (2,300) |
Gain (loss) on disposal of non-current assets | - | 34 | 37 | 71 | - | 71 | - | 71 |
Additional other operating income and | ||||||||
expenses | 95 | 270 | 6 | 371 | (2) | 369 | - | 369 |
Share of profit (loss) in associates and joint | ||||||||
ventures | 8 | - | (1) | 7 | - | 7 | - | 7 |
EBITDA | 2,361 | 312 | 185 | 2,858 | 98 | 2,956 | (1,364) | 1,592 |
Depreciation and amortisation | (1,452) | (109) | (208) | (1,769) | (58) | (1,827) | - | (1,827) |
Impairment losses | - | - | - | - | - | - | - | - |
Operating profit (loss) (EBIT) | 909 | 203 | (23) | 1,089 | 40 | 1,129 | (1,364) | (235) |
Cash flow from operating activities | 4,338 | 3,209 | 817 | 8,364 | (167) | 8,197 | - | 8,197 |
Gross investments | (2,802) | (733) | (179) | (3,714) | (43) | (3,757) | - | (3,757) |
Divestments | (150) | 114 | 81 | 45 | - | 45 | - | 45 |
Free cash flow (FCF) | 1,386 | 2,590 | 719 | 4,695 | (210) | 4,485 | - | 4,485 |
Q2 2019, Income statement and FCF, DKKm | ||||||||
External revenue | 9,798 | 134 | 7,525 | 17,457 | (1,014) | 16,443 | 834 | 17,277 |
Intra-group revenue | 1,309 | - | (114) | 1,195 | (1,195)1 | - | - | - |
Revenue | 11,107 | 134 | 7,411 | 18,652 | (2,209) | 16,443 | 834 | 17,277 |
Cost of sales | (6,152) | (2) | (6,681) | (12,835) | 2,132 | (10,703) | (34) | (10,737) |
Employee costs and other external expenses | (1,616) | (110) | (860) | (2,586) | 81 | (2,505) | - | (2,505) |
Gain (loss) on disposal of non-current assets | 178 | - | 12 | 190 | - | 190 | - | 190 |
Additional other operating income and | ||||||||
expenses | 65 | 140 | 4 | 209 | 2 | 211 | - | 211 |
Share of profit (loss) in associates and joint | ||||||||
ventures | (10) | - | (1) | (11) | - | (11) | - | (11) |
EBITDA | 3,572 | 162 | (115) | 3,619 | 6 | 3,625 | 800 | 4,425 |
Depreciation and amortisation | (1,355) | (78) | (203) | (1,636) | (53) | (1,689) | - | (1,689) |
Impairment losses | - | - | - | - | - | - | - | - |
Operating profit (loss) (EBIT) | 2,217 | 84 | (318) | 1,983 | (47) | 1,936 | 800 | 2,736 |
Cash flow from operating activities | 8,036 | 78 | (641) | 7,473 | 37 | 7,510 | - | 7,510 |
Gross investments | (1,563) | (1,258) | (495) | (3,316) | (52) | (3,368) | - | (3,368) |
Divestments | (45) | - | 35 | (10) | (1) | (11) | - | (11) |
Free cash flow (FCF) | 6,428 | (1,180) | (1,101) | 4,147 | (16) | 4,131 | - | 4,131 |
Profit (loss) and cash flows are shown only for continuing operations.
The column 'Other activities/eliminations' primarily covers the elimination of inter- segment transactions. It also includes income and costs, assets and liabilities, investment activity, taxes, etc., handled at Group level.
1 Including the elimination of other activities, the total elimination of intra-group revenue amounts to
DKK 1,560 million (Q2 2019: DKK 1,844 million), which primarily relates to our Shared Functions services as well as our B2B, B2C, and power distribution businesses.
- Interim financial report - H1 2020 | 31 | Consolidated financial statements |
4. Revenue
Other | |||||
Revenue, DKKm | Markets & | activities/ | H1 2020 | ||
Offshore | Onshore | Bioenergy | eliminations | total | |
Sale of gas | - | - | 3,915 | 5 | 3,920 |
Generation of power | 2,023 | 222 | 840 | - | 3,085 |
Sale of power | 4,684 | - | 3,059 | (2,070) | 5,673 |
Revenue from construction of offshore wind farms | 3,049 | - | - | - | 3,049 |
Generation and sale of heat and steam | - | - | 1,602 | - | 1,602 |
Distribution and transmission | - | - | 1,128 | (2) | 1,126 |
Other revenue | 931 | 26 | 453 | (39) | 1,371 |
Total revenue from customers, IFRS | 10,687 | 248 | 10,997 | (2,106) | 19,826 |
Government grants | 6,121 | 17 | 204 | - | 6,342 |
Economic hedging | 2,307 | 32 | (280) | 216 | 2,275 |
Other revenue | (12) | (24) | (329) | 116 | (249) |
Total revenue, IFRS | 19,103 | 273 | 10,592 | (1,774) | 28,194 |
Adjustments | (1,764) | 24 | 812 | (265) | (1,193) |
Total revenue, business performance | 17,339 | 297 | 11,404 | (2,039) | 27,001 |
Timing of revenue recognition from customers, IFRS | |||||
At a point in time | 5,576 | 248 | 1,635 | (2,106) | 5,353 |
Over time | 5,111 | - | 9,362 | - | 14,473 |
Total revenue from customers, IFRS | 10,687 | 248 | 10,997 | (2,106) | 19,826 |
Other | ||||
Markets & | activities/ | H1 2019 | ||
Offshore | Onshore | Bioenergy | eliminations | total |
- | - | 7,873 | (4) | 7,869 |
2,330 | 191 | 1,345 | - | 3,866 |
5,194 | - | 4,149 | (2,692) | 6,651 |
6,190 | - | - | - | 6,190 |
- | - | 1,626 | - | 1,626 |
- | - | 1,292 | (2) | 1,290 |
950 | (9) | 332 | (45) | 1,228 |
14,664 | 182 | 16,617 | (2,743) | 28,720 |
4,301 | 14 | 299 | (14) | 4,600 |
224 | 2 | 804 | (268) | 762 |
389 | 52 | 1,555 | (38) | 1,958 |
19,578 | 250 | 19,275 | (3,063) | 36,040 |
(104) | (2) | (2,454) | 202 | (2,358) |
19,474 | 248 | 16,821 | (2,861) | 33,682 |
4,982 | 182 | 7,814 | (2,743) | 10,235 |
9,682 | - | 8,803 | - | 18,485 |
14,664 | 182 | 16,617 | (2,743) | 28,720 |
The timing of transfer of goods or services to customers is categorised as follows:
'At a point in time' mainly comprises:
- sale of gas or power in the market, e.g. North Pool, TTF, NBP
- transmission assets for offshore wind farms.
'Over time' mainly comprises:
- construction agreements for offshore wind farms and transmission assets
- long-termcontracts with customers to deliver gas, heat, or power.
Revenue decreased by 20% relative to H1 2019 and was DKK 27,001 million in
H1 2020. The decrease was mainly due to significantly lower gas and power prices, lower sold gas volumes, limited construction work on wind farms for partners, and lower thermal heat and power generation. This was only partly offset by the divestment of the Walney Extension transmission asset and the increase in government grants, mainly due to ramp-up of generation from Hornsea 1 and higher generation across the portfolio.
- Interim financial report - H1 2020 | 32 | Consolidated financial statements |
4. Revenue (continued)
Other | |||||
Revenue, DKKm | Markets & | activities/ | Q2 2020 | ||
Offshore | Onshore | Bioenergy | eliminations | total | |
Sale of gas | - | - | 1,245 | (2) | 1,243 |
Generation of power | 687 | 123 | 323 | - | 1,133 |
Sale of power | 3,146 | - | 1,365 | (1,848) | 2,663 |
Revenue from construction of offshore wind farms | 2,486 | - | - | - | 2,486 |
Generation and sale of heat and steam | - | - | 454 | - | 454 |
Distribution and transmission | - | - | 468 | (1) | 467 |
Other revenue | 511 | 13 | 164 | (31) | 657 |
Total revenue from customers, IFRS | 6,830 | 136 | 4,019 | (1,882) | 9,103 |
Government grants | 2,296 | 6 | 40 | - | 2,342 |
Economic hedging | (636) | 8 | (329) | 489 | (468) |
Other revenue | (19) | (16) | (1,068) | 88 | (1,015) |
Total revenue, IFRS | 8,471 | 134 | 2,662 | (1,305) | 9,962 |
Adjustments | 893 | 26 | 1,233 | (489) | 1,663 |
Total revenue, business performance | 9,364 | 160 | 3,895 | (1,794) | 11,625 |
Timing of revenue recognition from customers, IFRS | |||||
At a point in time | 2,696 | 136 | (529) | (1,882) | 421 |
Over time | 4,134 | - | 4,548 | - | 8,682 |
Total revenue from customers, IFRS | 6,830 | 136 | 4,019 | (1,882) | 9,103 |
Other | ||||
Markets & | activities/ | Q2 2019 | ||
Offshore | Onshore | Bioenergy | eliminations | total |
- | - | 3,594 | 201 | 3,795 |
931 | 103 | 372 | - | 1,406 |
3,431 | - | 1,930 | (2,123)1 | 3,238 |
4,200 | - | - | - | 4,200 |
- | - | 505 | - | 505 |
- | - | 589 | (1) | 588 |
466 | (6) | 167 | (33) | 594 |
9,028 | 97 | 7,157 | (1,956) | 14,326 |
1,818 | 3 | 88 | - | 1,909 |
791 | 5 | 172 | 59 | 1,027 |
174 | 34 | 38 | (231) | 15 |
11,811 | 139 | 7,455 | (2,128) | 17,277 |
(704) | (5) | (44) | (81) | (834) |
11,107 | 134 | 7,411 | (2,209) | 16,443 |
1,788 | 97 | 3,589 | (1,956) | 3,518 |
7,240 | - | 3,568 | - | 10,808 |
9,028 | 97 | 7,157 | (1,956) | 14,326 |
- Interim financial report - H1 2020 | 33 | Consolidated financial statements |
5. Other operating | 6. Gross and net |
income and expenses | investments |
Other operating income, DKKm | H1 2020 | H1 2019 | Q2 2020 | Q2 2019 |
Gain on divestment of assets | 1,332 | 362 | 99 | 226 |
Other compensation | 127 | 345 | 10 | 53 |
US tax credits and tax equity income | 477 | 282 | 269 | 140 |
Miscellaneous operating income | 165 | 149 | 136 | 46 |
Total other operating income | 2,101 | 1,138 | 514 | 465 |
Other operating expenses, DKKm | H1 2020 | H1 2019 | Q2 2020 | Q2 2019 |
Loss on divestment of assets | 44 | 54 | 28 | 36 |
Miscellaneous operating expenses | 103 | 105 | 46 | 28 |
Total other operating expenses | 147 | 159 | 74 | 64 |
Gross and net investments, DKKm | H1 2020 | H1 2019 | Q2 2020 | Q2 2019 | |
Cash flow from investing activities | (4,890) | (4,482) | (2,925) | (7,259) | |
Dividends received and capital reductions | |||||
reversed | - | (6) | - | (6) | |
Purchase and sale of securities, reversed | (4,117) | (136) | (780) | 3,886 | |
Sale of non-current assets, reversed | (58) | (2,643) | (52) | 11 | |
Total gross investments | (9,065) | (7,267) | (3,757) | (3,368) | |
Transactions with non-controlling interests in | |||||
connection with divestments | (6) | 24 | (7) | - | |
Sale of non-current assets | 58 | 2,643 | 52 | (11) | |
Total cash flows from divestments | 52 | 2,667 | 45 | (11) | |
Total net investments | (9,013) | (4,600) | (3,712) | (3,379) |
Gain on divestment of assets is mainly related to the Hornsea 1 offshore transmission asset where we lowered our assumption regarding the preferred bidder's expected return requirement in Q1 2020.
Other compensation is primarily related to compensations regarding outages and
curtailments, mainly from the German grid operator TenneT.
US tax credits and tax equity income originate from our US onshore wind farms in operation and correspond to the tax credits and other tax attributes provided to Ørsted and tax equity partners for generated power.
The table shows gross and net investments based on cash flows from investing activities.
- Interim financial report - H1 2020 | 34 | Consolidated financial statements |
7. Assets classified as | 8. Discontinued operations | |||||||||
held for sale | ||||||||||
Assets classified as held for sale, DKKm | 30 June | 31 December | 30 June | Discontinued operations | Capital employed | |||||
2020 | 2019 | 2019 | ||||||||
Intangible assets | 245 | 226 | 219 | Discontinued operations comprise assets and Our capital employed in discontinued | ||||||
Property, plant and equipment | 13,475 | 13,243 | 14,561 | liabilities related to our divested Oil & Gas | operations mainly consisted of provisions | |||||
Deferred tax | 320 | 589 | - | business, which was sold to INEOS on | relating to the divestment of the Oil & Gas | |||||
Inventories | 58 | 43 | 16 | 29 September 2017. | business (tax indemnifications and payments | |||||
Trade receivables | 657 | 736 | 647 | related to the Fredericia stabilisation plant) | ||||||
Other receivables | 1,862 | 2,113 | 380 | Financial results | as well as a receivable selling price which | |||||
Income tax | 34 | 2 | 62 | does not carry any interest. We expect to | ||||||
Loss for the period amounted to | ||||||||||
Total assets classified as held for sale | 16,651 | 16,952 | 15,885 | receive the outstanding selling price in 2020. | ||||||
DKK -43 million and primarily concerned | ||||||||||
Deferred tax | 1,126 | 1,315 | 870 | In addition, we have an interest-bearing | ||||||
adjustments related to currency. | ||||||||||
Provisions | 2,385 | 2,662 | 378 | receivable of DKK 335 million (not part of | ||||||
Cash flows for the period concerned a pay- | ||||||||||
Contract liabilities | 3,070 | 3,107 | 2,747 | capital employed), which we also expect to | ||||||
Trade payables | 351 | 333 | 105 | ment related to the Fredericia stabilisation | receive in 2020. | |||||
Other payables | 968 | 970 | 590 | plant. | ||||||
Income tax | 569 | 445 | 97 | |||||||
Total liabilities relating to assets classified as held for sale | 8,469 | 8,832 | 4,787 | |||||||
Net assets classified as held for sale | 8,182 | 8,120 | 11,098 | Performance highlights, DKKm | H1 2020 | H1 2019 | Q2 2020 | Q2 2019 |
The table shows assets and liabilities which have been put up for sale and, therefore, are not expected to contribute to our future earnings.
EBIT | - | (7) | - | (7) | ||
Profit (loss) from discontinued operations | (44) | (61) | (16) | (18) | ||
Cash flows from discontinued operations | (44) | - | 102 | (2) | ||
Capital employed, discontinued operations | 30 June | 30 June | ||||
DKKm | 2020 | 2019 | ||||
Non-current receivables | - | 643 | ||||
Derivatives, net | (42) | (55) | ||||
At 30 June 2020 and 31 December 2019, assets and related labilities held for sale comprised our Danish power distribution, residential customer, and city light businesses, our oil pipe system in Denmark, and our LNG business. All activities are part of Markets & Bioenergy.
In June, the Danish competition authorities and the Danish Energy Agency approved the divestment of our Danish power distribution (Radius), residential customer, and city light
businesses to SEAS-NVE. Following the authorities' approval, we expect to close the transaction end of August 2020.
In 2019, we signed an agreement to divest our LNG activities to Glencore. We expect to close the transaction by late Q3 2020.
At 30 June 2019, assets and related liabilities held for sale comprised our Danish power distribution, residential customer, and city light businesses as well as our oil pipe system in Denmark.
Other provisions | (679) | (807) |
Tax, net | 14 | 33 |
Other receivables and other payables, net | 673 | - |
Total net assets | (34) | (186) |
- Interim financial report - H1 2020 | 35 | Consolidated financial statements |
9. Financial income and expenses
Net financial income and expenses, DKKm | H1 2020 | H1 2019 | Q2 2020 | Q2 2019 |
Interest expenses, net | (886) | (528) | (508) | (276) |
Interest expenses, leasing | (97) | (76) | (53) | (40) |
Interest element of provisions, etc. | (221) | (212) | (108) | (106) |
Tax equity partner's contractual return | (209) | (139) | (118) | (70) |
Capital losses on early repayment of loans | ||||
and interest rate swaps | (369) | - | (369) | - |
Value adjustments of derivatives, net | (72) | (190) | (30) | (92) |
Exchange rate adjustments, net | 195 | 536 | (3) | (42) |
Value adjustments of securities, net | (131) | 222 | 191 | 78 |
Other financial income and expenses | 4 | (57) | (12) | 3 |
Net financial income and expenses | (1,786) | (444) | (1,010) | (545) |
The table shows net financial income and expenses corresponding to our internal control.
Exchange rate adjustments and hedging contracts entered into to hedge currency risks are presented net under the item 'Exchange rate adjustments, net'.
The increase in net financial income and expenses in 2020 compared with 2019 is mainly due to:
- higher net interest expenses, mainly related to interest regarding tax
- capital losses on early repayment of loans and interest rate swaps
- a lower gain on exchange rate adjustments in 2020
- a loss on value adjustment of securities in 2020 due to an increase in interest rates.
- Interim financial report - H1 2020 | 36 | Consolidated financial statements |
10. Tax on profit (loss) for the year
Business performance | |||||||
H1 2020 | H1 2019 | ||||||
Tax for the period, DKK | Profit (loss) | Profit (loss) | |||||
before tax | Tax | Tax in % | before tax | Tax | Tax in % | ||
Deferred tax liability, new tax equity contributions | - | (885) | n.a. | - | n.a. | n.a. | |
Other items, including prior year adjustments | - | (50) | n.a. | - | (147) | n.a. | |
Ordinary business activities | 4,383 | (911) | 21% | 4,973 | (1,094) | 22% | |
Effective tax for the year | 4,383 | (1,846) | 42% | 4,973 | (1,241) | 25% |
Effective tax rate
The estimated average annual tax rate for ordinary business activities is 22% compared to 30% for the full-year of 2019.
The effective tax for the period is calculated on the basis of the profit (loss) before tax from continuing operations.
Tax on business performance profit (loss) was DKK 1,846 million in the first half year of 2020 compared to DKK 1,241 in the first half year of 2019. The effective tax rate for the first half year of 2020 was 42%. The effective tax rate was affected by recognition of a tax
liability in connection with the tax equity partnerships related to the Sage Draw and Plum Creek onshore wind farms. We received tax equity contributions from our tax equity partners in April and June, respectively.
Accounting policies
Effective tax rate
The estimated average annual tax rate is separated based on regions and into two different categories: a) ordinary business activities and
- gain (loss) on divestments and impacts from tax equity contributions.
- Interim financial report - H1 2020 | 37 | Consolidated financial statements |
11. Reserves | 12. Market risks |
Foreign | |||||
currency | |||||
Reserves 2020, DKKm | translation | Hedging | Total | ||
reserve | reserve | reserves | |||
Reserves at 1 January 2020 | 168 | 245 | 413 | ||
Exchange rate adjustments | (4,115) | - | (4,115) | ||
Value adjustments of hedging | - | 1,030 | 1,030 | ||
Value adjustments transferred to: | |||||
Revenue | - | 53 | 53 | ||
Financial income and expenses | - | 461 | 461 | ||
Tax: |
Market risks
We manage market risks to protect Ørsted against market price volatility and ensure stable and robust financial ratios that support our growth strategy as well as protect the value of our assets.
In general, we hedge price exposures for up to five years to reduce cash flow fluctua-
tions. Prices are not hedged in the long term, and therefore our long-term market risks are determined by our strategic decisions on investments in new assets, the conclusion of long-term contracts as well as any divestment of assets.
Our energy and currency exposures for the near term is shown below.
Tax on hedging and currency adjustments | 940 | (367) | 573 |
Movement in comprehensive income for the period | (3,175) | 1,177 | (1,998) |
Total reserves at 30 June | (3,007) | 1,422 | (1,585) |
Foreign | |||
currency | |||
Reserves 2019, DKKm | translation | Hedging | Total |
reserve | reserve | reserves | |
Reserves at 1 January 2019 | (1,906) | 79 | (1,827) |
Exchange rate adjustments | (601) | - | (601) |
Value adjustments of hedging | - | 1,535 | 1,535 |
Value adjustments transferred to: | |||
Revenue | - | 71 | 71 |
Financial income and expenses | - | 53 | 53 |
Tax: | |||
Tax on hedging and currency adjustments | 148 | (260) | (112) |
Movement in comprehensive income for the period | (453) | 1,399 | 946 |
Total reserves at 30 June | (2,359) | 1,478 | (881) |
Currency exposure, GBP 1 July 2020 - 30 June 2025, USD 1 July 2020 - 31 December 2036, DKKbn
Energy exposure 1 July 2020 - 30 June 2025, DKKbn
For USD, we manage our risk as a natural time spread between front-end capital expenditures and long- end revenue between
1 July 2020 - 31 Decem- ber 2036.
NTD is not a material risk for the coming five years.
We do not deem EUR to constitute a risk, as we expect Denmark to maintain its fixed exchange-rate policy.
The graph shows our energy exposure for the next five years.
Our energy exposures are significantly reduced due to hedging.
- Interim financial report - H1 2020 | 38 | Consolidated financial statements |
13. Fair value measurement
Assets | |||
Fair value hierarchy | |||
DKKm | Inventories | Securities | Derivatives |
2020 | |||
Quoted prices | 285 | - | 8 |
Observable input | - | 12,327 | 7,476 |
Non-observable input | - | - | 357 |
Total 30 June 2020 | 285 | 12,327 | 7,841 |
2019 | |||
Quoted prices | 375 | - | 7 |
Observable input | - | 25,485 | 5,058 |
Non-observable input | - | - | 1,238 |
Total 30 June 2019 | 375 | 25,485 | 6,303 |
Liabilities | |
Other | |
Derivatives | payables |
30 | - |
5,298 | - |
59 | - |
5,387 | - |
11 | - |
5,166 | - |
470 | 545 |
5,647 | 545 |
Derivatives valued on the basis of | ||
non-observable input, DKKm | 2020 | 2019 |
Market value at 1 January | 236 | (2,458) |
Value adjustments through profit or loss | 240 | 344 |
Value adjustments through other | ||
comprehensive income | - | 1,192 |
Sales/redemptions | (205) | (136) |
Purchase/issues | 27 | 7 |
Market value at 30 June before deferred | ||
gain/loss | 298 | (1,051) |
Deferred loss at initial recognition on 1 January | - | 1,819 |
Market value at 30 June | 298 | 768 |
Non-observable inputs per commodity | ||
price input, DKKm | 2020 | 2019 |
US power prices | - | 525 |
The table shows the movements during the year in the total market value (assets and liabilities) of derivatives valued on the basis of non-observable inputs.
After a change in the
The table shows assets and liabilities measured at fair value, split between inputs.
Other power prices | 63 | 48 |
Gas prices | 235 | 195 |
Total | 298 | 768 |
valuation methodology as of 31 December 2019, US power prices are no longer valued based on significant non- observable inputs.
Valuation principles and key 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 services and benchmark services to increase the data quality.
Market values are determined by the Treasury & Risk Management function which reports to the CFO. The developments in market values is monitored on a continuous basis and are reported to Group Executive Management.
Accounting policy
Quoted prices comprise gas and derivatives that are traded in active markets. Where derivatives are traded in an active market, we generally have daily settlements, for which reason the market value is zero.
Observable input comprises securities and deriva- tives, for which valuation models with observable inputs are used to measure fair value. The majority of our securities are quoted Danish mortgage or government bonds. Since these are not always traded on a daily basis, we are valuing these based on market interest rates for similar bonds. Non-observable input derivatives comprise primarily long-term contracts on the purchase or sale of power and gas. The fair values are based on assumptions concerning the long-term prices of, power and gas as well as risk premiums in respect of liquidity and market risks. Since there are no active markets for long-term prices, the fair value has been determined through an estimate of the future prices.
Normally, the energy price can be observed for a maximum of five years in the power market, after which an active market no longer exists. Beyond the five-year horizon, the energy price is thus projected on the basis of the observable forward price for year one to five.
All assets and liabilities measured at fair value are measured on a recurring basis.
- Interim financial report - H1 2020 | 39 | Consolidated financial statements |
14. Interest-bearing debt and FFO
Interest-bearing debt and interest-bearing assets | 30 June | 31 December | 30 June |
DKKm | 2020 | 2019 | 2019 |
Interest-bearing debt: | |||
Bank debt | 3,520 | 3,466 | 3,519 |
Bond debt | 31,507 | 33,373 | 29,116 |
Total bond and bank debt | 35,027 | 36,839 | 32,635 |
Tax equity liability | 638 | 608 | 572 |
Lease liability | 5,097 | 5,332 | 5,074 |
Other interest-bearing debt | 1,690 | 649 | 664 |
Total interest-bearing debt | 42,452 | 43,428 | 38,945 |
Interest-bearing assets: | |||
Securities | 12,327 | 16,552 | 25,485 |
Cash | 6,754 | 7,148 | 6,968 |
Other receivables | 1,099 | 1,781 | 823 |
Receivables in connection with divestments | - | 717 | 689 |
Total interest-bearing assets | 20,180 | 26,198 | 33,965 |
Total interest-bearing net debt | 22,272 | 17,230 | 4,980 |
Funds from operations (FFO) LTM1 | 30 June | 31 December | 30 June | ||
DKKm | 2020 | 2019 | 2019 | The table shows | |
EBITDA - business performance | 18,489 | 17,484 | 30,186 | ||
Interest expenses, net | (1,849) | (1,312) | (889) | which items are | |
included in funds | |||||
Interest expenses, leasing | (97) | (171) | (76) | ||
from operations | |||||
Reversal of interest expenses | (FFO). | ||||
transferred to assets | (377) | (344) | (428) | FFO is calculated | |
Interest element of | for the continuing | ||||
decommissioning obligations | (220) | (212) | (209) | operations. | |
50% of coupon payments on | |||||
hybrid capital | (278) | (279) | (273) | ||
Calculated interest paid on | |||||
operating lease obligations | - | - | 76 | ||
Adjusted interest expenses, net | (2,821) | (2,318) | (1,799) | ||
Reversal of gain (loss) on divestment | |||||
of assets | (878) | 101 | (15,367) | ||
Reversal of recognised operating | |||||
lease payment in profit (loss) | |||||
for the year | - | - | 376 | ||
Total current tax | (6,437) | (5,799) | (3,186) | ||
Funds from operations (FFO) | 8,353 | 9,468 | 10,210 | ||
1 Last 12 months
Market value of bond and bank debt
The market values of bond and bank debts amounted to DKK 38.4 billion and
DKK 3.7 billion, respectively, at 30 June 2020.
Interest-bearing net debt totalled DKK 22,272 million as of 30 June 2020, which was an increase of DKK 5,042 million relative to 31 December 2019. The increase was driven by a decrease in interest- bearing assets of DKK 6,018 million. In addition, interest-bearing debt decreased by DKK 976 mil- lion, which mainly related to the repayment of short-term repo debt and a decrease in bond debt due to the drop in GBP/DKK exchange rates, reducing the amount to be repaid in DKK.
Adjusted interest-bearing net debt | 30 June | 31 December | 30 June | |||
DKKm | 2020 | 2019 | 2019 | |||
Total interest-bearing net debt | 22,272 | 17,230 | 4,980 | The table shows | ||
50% of hybrid capital | 6,616 | 6,616 | 6,619 | which items are | ||
Cash and securities not available for | included in the | |||||
adjusted interest- | ||||||
distribution, excluding repo loans | 1,628 | 1,437 | 1,094 | |||
bearing debt as | ||||||
Decommissioning obligations | 6,490 | 6,158 | 5,781 | |||
well as FFO | ||||||
Deferred tax on decommissioning | ||||||
(900) | (866) | (719) | relative to | |||
obligations | adjusted interest- | |||||
Total adjusted interest-bearing | ||||||
36,106 | 30,575 | 17,755 | bearing debt. | |||
net debt | ||||||
Funds from operations (FFO)/ | 30 June | 31 December | 30 June | |||
adjusted interest-bearing net debt | 2020 | 2019 | 2019 | |||
Funds from operations (FFO)/ | ||||||
adjusted interest-bearing net debt | 23.1% | 31.0% | 57.5% | |||
- Interim financial report - H1 2020 | 40 | Consolidated financial statements |
Statement by the Executive Board and the Board of Directors
The Board of Directors and the Executive Board have today considered and approved the interim financial report of Ørsted A/S for the period 1 January - 30 June 2020.
The interim financial report, which has not been audited or reviewed by the company's independent auditors, has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the EU and
Skærbæk, 12 August 2020
additional requirements in the Danish Financial Statements Act. The accounting policies remain unchanged from the annual report for 2019.
In our opinion, the interim financial report gives a true and fair view of the Group's assets, liabilities, and financial position at
30 June 2020 and of the results of the Group's operations and cash flows for the period
1 January - 30 June 2020.
Furthermore, in our opinion, the manage- ment's review gives a fair presentation of the development in the Group's operations and financial circumstances, of the results for the period, and of the overall financial position of the Group as well as a description of the most significant risks and elements of uncertainty facing the Group.
Over and above the disclosures in the interim financial report, no changes in the Group's most significant risks and uncertainties have occurred relative to the disclosures in the annual report for 2019.
Executive Board
Henrik Poulsen | Marianne Wiinholt |
President and CEO | CFO |
Board of Directors
Thomas Thune Andersen | Lene Skole | Lynda Armstrong |
Chairman | Deputy Chairman |
Jørgen Kildahl | Peter Korsholm | Dieter Wemmer |
Hanne Sten Andersen* | Poul Dreyer* | Benny Gøbel* | *Employee representative |
- Interim financial report - H1 2020 | 41 | Consolidated financial statements |
Forward-looking statements
Forward-looking statements
This report contains certain forward-looking statements, including but not limited to, the statements and expectations contained in the 'Outlook' section of this report (p. 7).
Statements herein, other than statements of historical facts, regarding our future results related to operations, financial condition, cash flows, business strategy, plans and future objectives are forward-looking statements. Words such as 'targets', 'believe', 'expect', 'aim', 'intend', 'plan', 'seek', 'will', 'may', 'should' 'anticipate', 'continue', 'predict' or variations of these words as well as other statements regarding matters that are not historical facts or regarding future events or prospects, constitute forward-looking statements.
We have based these forward-looking statements on our current views with respect to future events and financial performance. These views involve a number of risks and uncertainties which could cause actual results to differ materially from those predicted in the forward-looking statements and from our past performance. Although, we believe that the estimates and projections reflected in the forward-looking statements are reasonable, they may prove materially incorrect, and actual results may materially differ due to a variety of factors. These factors include, but are not limited to, market risks, development and construction of assets, changes in temperature, wind conditions, wake and blockage effects, precipitation levels, the development in power, coal, carbon, gas, oil, currency, and interest rate markets, changes in legislation, regulations
or standards, the renegotiation of contracts, changes in the competitive environment in our markets, security of supply, cable break-downs, or other disruptions. Read more about the risks in the chapter 'Risk and risk management' and in note 7 of the annual report 2019 available at www.orsted.com.
Unless required by law, we are under no duty and undertake no obligation to update or
revise any forward-looking statement after the distribution of this report, whether as a result of new information, future events, or otherwise.
- Interim financial report - H1 2020 | 42 | Consolidated financial statements |
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Ørsted A/S published this content on 12 August 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 12 August 2020 08:22:12 UTC