Annual Report 2012 - lysekonsern.no · 22. Income 78 23. Other operating costs 79 24. Salaries 80 25. Financial income / expenditure 81 26. Tax costs 82 27. Securities and guarantees

Annual Report 2012

ANNUAL REPORT2012

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Annual report and accounts

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Contents

LYSE

Lyse in brief 3

Lyse - key events in 2012 4

ANNUAL REPORT

Key figures 6

Annual report 8

Declaration 15

Income statement 16

Balance sheet 17

Statement of comprehensive income 19

Cash flow statement 20

Statement of changes in consolidated equity 21

Auditor's report 22

Notes on the accounts:

1. General information 24

2. Summary of the most important accounting policies 24

3. Financial risk management 33

4. Important accounting estimates and discretionary assessments 45

5. Business areas 46

6. Plant and machinery 52

7. Intangible assets 54

8. Investments in associated companies and joint ventures 56

9. Financial assets available for sale 60

10. Derivatives 61

11. Trade and other receivables 64

12. Stock 65

13. Cash and cash equivalents 65

14. Share capital and premium reserve 66

15. Equity 67

16. Trade payables, other current liabilities and provisions 68

17. Loans 68

18. Deferred tax 71

19. Pensions 73

20. Other non-current liabilities and provisions 76

21. Net losses/(gains) 77

22. Income 78

23. Other operating costs 79

24. Salaries 80

25. Financial income / expenditure 81

26. Tax costs 82

27. Securities and guarantees 83

28. Financial leasing 83

29. Contingencies 84

30. Business integration 84

31. Off-balance sheet commitments 84

32. Close associates 85

33. Companies included in the consolidation 86

34. Events after the balance sheet date 87

BOARD OF DIRECTORS AND MANAGEMENT

Governing bodies spring 2012 89

Group executive management team 90

2012Annual report and accounts LYSE2012Annual report and accounts

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Lyse in brief

Group business operations Lyse is a Norwegian industrial group active within energy and telecommunications and the associated infrastructure. Lyse is owned by 16 municipalities in the Sør-Rogaland region district of Norway. The business encompasses the production and sale of energy and telecommunication products, plus the construction and operation of infrastructure. The Group carries out its main operations and has its principal market in Sør-Rogaland, but it also supplies broadband services in a national market to its collaborative partners. Lyse shareholders have a long-term industrial perspective concerning the development of the Group. High priority is given to profitability and to returns on investments in business activities.

Position and vision Lyse intends to simplify the everyday lives of its customers with useful, safe and future-oriented products and services. Lyse aims to be a creative, socially-aware and customer-oriented energy and telecommunications company. The Group intends to secure a strong market position by means of well-developed infrastructure and a varied range of products and services.

Values Lyse shall be a straight forward, responsible and courageous team player.

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Lyse - key events in 2012

January

ALtibox Forum. 10 years of fibre optic cable were marked with the largest ever Altibox Forum in Stavanger. NEw ViSitor rEcord For LYSE.No. Lyse.no sets a new visitor record with more than 500 000 visitors per month.

February

ALtibox NAmEd EuroPE'S bESt FibrE oPErAtor.The organisation Fibre to the Home names Altibox Europe's best fibre operator for entrepreneurial creativity and success in a highly competitive market.

FASt chArGiNG StAtioN iN bYrkJEdAL. Lyse announces it will build at fast charging station in Byrkjedal, which will eliminate some of the concerns potential Norwegian electric car owners have about range.

NEw Grid comPANY. The Ministry of Petroleum and Energy grants a licence to establish a new company, Lyse Sentralnett, which is a collaboration between Lyse and Statnett on con-structing a new central transmission line into Nord-Jæren.

march

NEw worLd rEcord. Altibox sets another world record in data transmission speeds at The Gathering, a gaming event. The speed achieved, 200 gigabits per second, is double the old world record set in 2011.

mAJor coNtrAct For SkANGASS. Skangass signs a contract with the Swedish company Preem in Lysekil for the delivery of up to 200 000 tonnes of LNG a year. The contract will be worth around NOK 1 billion a year for the next 15 years.

PArtNErShiP ExPANdEd. Altibox Telekom and Energiselskapet Buskerud jointly acquire BOF, an internet, TV and telephony

operator in Røyken and Hurum. Nord-Trøndelag Elektrisitetsverk renews a distribution contract for Altibox for two more years.

April

PoSt oFFicE VEhicLES ruN oN bioGAS. The first 200 of a total of 1 300 post office vehicles that will run on biogas take to the roads.

thE cALL cENtrE iS wELL LikEd. Lyse's call centre achieved its highest customer score since 2008 following measures to improve responses and shorten waiting times.

may

NEw ELEctricitY coNtrActS. Following customer feedback, Lyse chooses to offer spot price and variable price customers a new Lyse purchase price contract. This allows customers to pay the same price Lyse pays for electricity.

10 YEArS oF FibrE oPtic cAbLE. Lyse started its fibre venture on 31 May 2002. The target then was to gain 28 000 customers by 2017. Altibox had more than 300 000 customers by the end of 2012.

June

rEorGANiSAtioN oF LYSE. The reorganisation process in spring 2012 involves a number of measures. These include commercialising the product houses and making changes in Lyse Elnett and Lyse Infra.

mobiLE oPErAtor oF thE YEAr. An expert jury names Altibox the mobile operator of the year for its efforts to bring mobile solutions to a broader range of users.

tAbLEt comPutErS iN iNFrA. Tablet computers with easier access to work orders are rolled out to all electricians in Lyse Infra.

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LYSE2012

July

wiNd LicENcE For måkAkNutEN. Lyse receives a licence for the Måkaknuten wind farm. Licences were also granted for Skinansfjellet and Bjerkreim, two other wind farms Lyse co-owns.

mAJor coNtrActS with muNiciPALitiES. Lyse lands a contract to deliver the internet, TV and telephony to a total of 400 locations in the municipalities of Stavanger and Sandnes.

August

LiNE routE ALtErNAtiVES PrESENtEd. Lyse and Statnett present five proposed routes for the region's new central transmission line.

roYAL ViSit to oNS. King Harald visits Lyse's Smart Energy Region stand at ONS.

September

iNcrEASEd cAPAcitY oN FiNNøY. A new 25 MVA transformer is installed on Finnøy. In the long-term this will also supply electricity via Finnfast to Rennesøy and via Sjernarøy to Hjelmeland.

coNtiNuEd PArtNErShiP with thE coNcErt hALL. Lyse delivers energy solutions, the internet and TV to Stavanger Concert Hall, continuing their good teamwork.

october

NEw mobiLE Product From ALtibox. Altibox Loop enables customers to make mobile phone calls via WiFi and home phones at their home phone rates from anywhere in the world.

GrEEN LiGht For SmArt SoLutioNS. On 25 October, the group executive management team approve the establishment of Lyse Smart AS, which will sell smart house solutions to Lyse's network customers.

ForuS ENErGiGJENViNNiNG oPENEd. "This is an environ-mental project for the future," says Eirin Sund, the deputy leader of the Standing Committee on Energy and the Environ-ment, as she opens Forus Energigjenvinning on 26 October.

moSt SAtiSFiEd cuStomErS. Altibox is the clear winner for the third year in a row in EPSI Norway's digital TV and broadband customer satisfaction survey.

November

diStrict hEAtiNG For Jåttå. The district heating mains from Forus to Jåttåvågen open. The conversion from natural gas to district heating reduces CO2 emissions by 2 200 tonnes a year.

NorwAY'S LArGESt FibrE oPErAtor. Lyse and Energiselskapet Buskerud integrate their fibre companies in Østfold, Oslo, Grenland and Buskerud forming Norway's largest fibre company with 82 000 customers.

hiGh-tEch bEdS. Lyse and Altibox become partners in a new Stavanger University Hospital project. "Eseng 2015" intends to use tablet computers to improve hospital stays for patients admitted to the cancer ward.

december

roYAL NAmiNG. The vessel that will carry LNG from Skangass in Risavika to customer terminals in Norway and Sweden is named in Rotterdam by Princess Máxima of the Netherlands.

NEw PowEr PLANt APProVEd. Lyse's corporate assembly approves construction of the new Lysebotn II power plant. As one of Norway largest hydroelectricity projects, it will generate 15% more energy than the old power plant without major disturbances to the environment.


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Key figures for Lyse

2012 2011 2010 2009 2008

From income statementOperating income MNOK 6 053 5 296 5 144 4 273 4 395Operating costs MNOK 3 489 3 032 2 614 2 163 2 062EBITDA (1) MNOK 2 564 2 263 2 530 2 110 2 333Depreciation and write-downs - plant and machinery MNOK 841 781 652 539 477Operating profit/loss (EBIT) (2) MNOK 1 853 2 231 1 449 1 637 2 445Net financial items MNOK 530 853 500 508 422Profit/loss for the year before tax MNOK 1 322 1 377 949 1 129 2 023Profit/loss for the year after tax *) MNOK 630 602 257 485 966

*) Of which:Unrealised changes in value (after tax) MNOK 94 539 -311 64 443Returned profit or loss effect higher/lower income (after tax) MNOK 46 98 49 97 -122

Other IFRS effects (after tax) MNOK 20 144 43 -43 -12

From the balance SheetPlant and machinery and intangible assets MNOK 17 138 16 771 15 656 13 546 12 497Financial assets available for sale MNOK 117 330 864 830 611Cash and bank deposits MNOK 860 668 912 229 444Other assets MNOK 2 200 1 962 2 485 2 318 2 550Total assets MNOK 20 316 19 731 19 918 16 923 16 102Equity MNOK 4 552 4 364 4 294 4 136 3 346Interest-bearing liabilities MNOK 10 214 10 142 9 652 7 446 6 229 Of which: Subordinated loans from shareholders MNOK 2 600 2 700 2 800 2 900 3 000Adjusted interest-bearing liabilities (3) MNOK 10 275 10 421 9 774 7 493 6 298Capital employed (4) MNOK 14 766 14 506 13 946 11 582 9 575

cash flowNet cash flow from operational activities MNOK 2 446 2 343 2 040 2 187 2 315Net interest costs MNOK 495 501 410 416 401Tax paid MNOK 377 587 628 671 419Dividend to shareholders MNOK 358 340 327 358 311Investments in plant and machinery and intangible assets MNOK 1 252 1 204 1 350 1 173 1 003

Investments in stakes (5) MNOK -98 284 138 844 423Liquid assets MNOK 809 657 286 197 222Unused drawing rights: MNOK 1 000 1 000 1 000 1 000 1 000

Scale of financingFFO (6) MNOK 1 553 1 376 1 524 1 374 1 142EBITDA interest coverage (7) 4.8 4.2 5.7 4.5 4.6EBIT interest coverage (8) 3.5 4.2 3.2 3.5 4.9EBIT interest coverage - adjusted (9) 3.3 2.8 4.2 3.3 3.6FFO interest coverage (10) 2.9 2.6 3.4 2.9 2.3FFO/Adjusted interest-bearing liabilities (%) % 15.1% 13.2% 15.6% 18.3% 18.1%Interest-bearing debt-equity ratio (11) % 69.2% 70.5% 69.5% 64.4% 65.3%Equity ratio (12) % 22% 22.1% 21.6% 24.4% 20.8%Equity ratio - taking into consideration subordinated loans (13) % 35% 35.8% 35.6% 41.6% 39.4%

key figures, financial statementsEBITDA margin (14) % 42.4% 42.7% 49.2% 49.4% 53.1%EBIT margin - adjusted (15) % 28.5% 28.0% 36.5% 36.8% 42.2%Return on equity (16) % 14.1% 13.9% 6.1% 13.0% 28.1%Return on capital employed (17) % 12.7% 15.7% 11.4% 15.5% 26.1%Tax rate (18) % 52% 56.3% 72.9% 57.0% 52.2%

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Key figures for Lyse

2012 2011 2010 2009 2008

key figures, EnergyMean generation GWh 5 743 5 743 5 668 5 668 5 668Generation hydroelectricity (19) GWh 6 437 4 210 5 271 6 073 7 264System price Nord Pool øre/kWh 21.83 35.98 40.71 29.55 32.45Book value of hydroelectricity per KWh NOK/kWh 1.23 1.28 1.17 1.14 1.17Power supply, end-user GWh 2 881 2 910 3 146 2 985 3 000Supplied volume, Natural gas GWh 599 552 674 522 484Supplied volume, District heating GWh 110 105 114 87 75

key figures, LNGProduction capacity Tonnes 300 000 300 000No. of customers 28 14Supplied volume Tonnes 137 429 71 100Supplied volume GWh 2 085 1 079Book value LNG system and reception terminals MNOK 2 099 1 894

key figures, transmissionNo. of mains customers 132 590 130 000 127 000 125 000 122 738 Supplied energy GWh 5 632 5 286 5 514 4 872 4 780

Net capital (NVE capital) used as basis in income framework

NOK million 2 138 1 866 1 782 1 641 1 727

Measured efficiency (NVE efficiency) distribution networks % 111.5% 110.4% 113.5% 135.8% 120.3%

Measured efficiency (NVE efficiency) regional and central network % 105.4% 98.2% 99.6% 106.4% 95.5%

KILE cost MNOK 8.70 9.02 11.69 21.29 7.65

key figures, telecommunicationsCapital employed 2 889 2 874 2 342 1 517 1 246EBITDA 530 391 258 151 168EBITDA margin (14) % 27.0% 23.3% 19.0% 13.6% 26.3%Book value telecommunications infrastructure (20) MNOK 2 694 2 602 1 805 1 510 1 163No. of kilometres, fibre network Km 17 255 13 326 7 143 5 500 1 754No. of active fibre customers in Altibox partnership 281 923 238 535 212 931 176 148 126 293No. of Lyse's active customers 117 453 104 298 75 961 64 244 43 136No. of fibre contracts sold 300 009 265 855 233 518 203 857 156 257

ShareholdersSubordinated loans from shareholders MNOK 2 600 2 700 2 800 2 900 3 000Interest and instalments, subordinated loans MNOK 210 235 231 229 340Dividend /shareholder withdrawals MNOK 358 340 327 358 311Earnings per share (21) NOK 624 596 255 481 957

definitions:(1) EBITDA Operating result + depreciation and write-downs + share of profit associated companies/joint ventures + other net losses/gains(2) EBIT Operating profit/loss in accordance with IFRS(3) Adjusted interest-bearing liabilities Interest-bearing liabilities + tax-adjusted non-recorded estimate deviation on pension liabilities(4) Capital employed Equity + interest-bearing liabilities(5) Investments in stakes Purchase of stocks or shares, and equity expansion in other companies(6) FFO Profit/loss for the year + depreciation, write-downs, change in deferred tax and other non-cash-generating items(7) EBITDA interest coverage EBITDA/interest costs(8) EBIT interest coverage EBIT/interest costs(9) EBIT interest coverage - adjusted EBIT - unrealised changes in value/interest costs

(10) FFO interest coverage FFO/interest costs(11) Interest-bearing debt-equity ratio Interest-bearing liabilities / (interest-bearing liabilities + book equity)(12) Equity ratio Equity/total assets(13) Equity ratio - taking into consideration subordinated loans Total equity + subordinated shareholders' loan / total capital(14) EBITDA margin EBITDA/operating income(15) EBIT margin - adjusted (EBIT + share of profit associated companies/joint ventures + other net gains/losses) / operating income(16) Return on equity Profit/loss for the year as % of average equity(17) Return on capital employed Operating result as % of average capital employed(18) Tax rate Tax rate/profit/loss for the year before tax(19) Generation hydroelectricity Generation relating to outgoing generator terminal(20) Book value telecommunications infrastructure Trenches, cable conduits, fibre optic cable, and active equipment in the fibre network(21) Earnings per share Profit/loss for the year/no. of shares in the company

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Annual Report 2012

Group business operations

Lyse is a Norwegian industrial group that builds and operates large energy plants and critical public infrastructure within energy and fibre optics. Good availability and a high degree of reliability are priorities.

Lyse is a national player in green energy and the Group has built some of the country's best and most diverse energy infrastructure. Lyse is the national leader in fibre broadband.

The company's shareholders are 16 municipalities in Sør- Rogaland who intend to be long-term industrial owners and expect the company to contribute to local development with a regional, strategic perspective.

Financial performance

In 2012, the profit for the year before tax was NOK 1 322 million, compared with NOK 1 377 million in 2011. The profit for the year after tax was NOK 630 million, compared with NOK 602 million in 2011. The financial statements are presented in conformity with IFRS (International Financial Reporting Standards).

In 2012, operations produced a return of 12.7% measured by operating profits in relation to average capital employed. The return on equity was 14.1%.

Lyse generated 6.4 TWh of hydroelectricity in 2012, which is 2.2 TWh more than the Group generated in 2011 and 0.7 TWh more than the Group's mean generation. High hydro-electricity generation rates and good utilisation of the generation system, as well as substantial gains from energy and currency hedging, partly compensated for the almost 40% fall in market prices. The energy business areas contributed around NOK 757 million to the result for the year.

Even though delivery volumes in the LNG (liquefied natural gas) business area increased by almost 100% in 2012, capacity utilisation in the business area still remains below 50%. The costs structure is characterised by factory and logistics activities accounting for a large share of overhead costs. Good capacity utilisation is a prerequisite for profitable operations. Customer volumes are growing and the value chain's capacity is expected to be fully utilised during the second half of 2014. The operating result before depreciation (EBITDA) from operations was a loss of NOK -84 million and the result for the year was a loss of NOK -185 million.

Network operations contributed profit for the year of NOK 155 million. The business area enjoyed a very stable operating situation in 2012 with low downtime costs. Falling government yields weakened the network operations result.

The telecommunication business area is continuing its strategy of growing via the Altibox partnership and its market position has strengthened. The business area's profit for the year after tax was NOK 31 million. The result for the year before non-recurring items in 2011 was a loss of NOK -41 million. Fibre development in line with the model chosen by the Lyse Group takes a long time and involves two phases - the investment and harvesting phases. The year's financial performance reflects the fact that the telecommunication business area has entered a more mature operating phase.

Lyse Energi AS, the Group's parent company, ended thebusiness year with a profit for the year of NOK 480 million. The Board is proposing that NOK 373 million be allocated for dividends in the parent company, Lyse Energi AS, while NOK 107 million is transferred to other equity. The company's distributable equity before allocations for the dividend for the financial year 2012 amounted to NOK 1 237 million.

In accordance with section 3-3 of Norway's Accounting Act, the Board of Directors confirms that the consolidated financial statements and the financial statements for Lyse Energi AS have been prepared on the basis of going concern assumptions.

operating profit

The operating profit was NOK 1 853 million in 2012.

The emphasis in the following is on commenting on the results from underlying operations up to and including the operating profit. Unrealised changes in value for energy contracts and material non-recurring items in the consolidated financial statements are shown in the table below, but are not included in the further analysis of the operating profit.

NOK million 2012 2011

Consolidated operating profit 1 853 2 231

Unrealised changes in value for energy contracts 130 720

Material non-recurring items -26 -0

Operating profit fromunderlying operations 1 748 1 511

In 2012, the Group achieved a turnover of NOK 6 053 million from underlying operations, compared with NOK 5 296 million in 2011. This represents an increase in turnover of 14.7%. Operating income from hydroelectricity generation rose due to higher generation volumes and the LNG business area is undergoing an escalation phase in which turnover is growing at the same pace as new customers are being phased in. The telecommunication business area is continuing to grow,

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and turnover amounted to NOK 1 796 million. This equates to an increase of 17% or NOK 257 million on the previous year.

Payroll costs increased by 12.6%. The increase was attributable to across ordinary wage inflation, higher pension costs, and more activity within the telecommunication and LNG segments. The year's average pay settlement in the Group was 4.2% and the pension costs increased by NOK 27 million compared with 2011.

Other operating costs amounted to NOK 696 million, which represents a reduction of 2.2%. The Board wants to ensure the Group's long-term competitiveness and has initiated projects within the business areas aimed at promoting cost-efficient operations. Depreciation increased by NOK 60 million. This was mainly attributable to higher investment in the telecommunication and LNG business areas. The power plants in the Jørpeland water system were written down NOK 26 million. This was due to lower energy prices than those upon which the decision to invest was based. Total depreciation and write-downs in 2012 amounted to NOK 841 million.

Property taxes and licence fees of NOK 166 million have increased by NOK 9 million in comparison with the previous year. This increase is a consequence of an increase in the basis used for calculating property tax for power plants.

The operating result before depreciation (EBITDA) from underlying operations has historically been high because operating costs in hydroelectricity generation are low. This is countered to a significant degree by a higher tax rate for hydroelectricity generation through resource rent tax (58%). Growth in the Group's other business areas contributed to EBITDA having fallen as a percentage of turnover in recent years. These business areas are subject to a normal tax rate (28%). The underlying EBITDA was NOK 2 564 million, compared with NOK 2 263 million in 2011. Correspondingly, the underlying operating profit was NOK 1 748 million, which is NOK 237 million better than the previous year.

the energy business area

The Energy business consists of the operation of the wholly- owned companies Lyse Produksjon AS (which administers shareholdings in Sira-Kvina, Ulla Førre and Jørpeland Kraft AS), Lyse Energisalg AS and Lyse Neo AS.

The business area's total turnover amounted to NOK 2 472 million in 2012, an increase of NOK 298 million compared with 2011.

The energy business area's operating profit was NOK 1 554 million before unrealised changes in value and non-recurringitems. The corresponding profit in 2011 was NOK 1 300 million. Energy generation and market prices for energy are crucial to the business area's financial performance. The relatively high generation of 6.4 TWh and the substantial gains from the energy price and currency hedging that partly counteredthe fall in energy prices explain the improvement in the profit for the year.

The energy market in the Nordic region was characterised by strong hydrology for most of the year and weak coal, gas and CO2 markets that resulted in falling energy prices on the continent. This resulted in generally low spot prices, apart from for a couple of short periods that saw large temperature dependent consumption and a strained output balance.

The average spot price in the Nordic region was NOK 0.233/kWh, while south-west Norway (where Lyse sells the energy it generates), saw a price that was NOK 0.015/kWh lower.

The strong generation basis within hydroelectricity during the year resulted in significant exports from Norway. In total, Norwegian net exports for 2012 were 18 TWh; 15 TWh more than in 2011. The net exports provide a good picture of the steadily stronger energy balance in Norway and the need for strong international connections in order to utilise the generation potential in periods of high inflow. The market prices for future energy were also under pressure, mainly because weak international economic trends and raw material prices are expected.

The operating profit from the gas and heating business area was NOK 92 million, compared with NOK 86 million in 2011. Despite the relatively mild weather both gas and district heating deliveries increased compared with 2011. In total, 788 GWh of gas and district heating were supplied, which is 60 GWh higher than in 2011. Prices for gas and heating are largely linked to the customers' alternative energy carriers and will therefore be competitive in relation to the customer's alternatives. Low electricity prices in 2012 therefore caused both gas and, especially, district heating prices to fall compared with 2011. Conducting natural gas to end-users via pipelines is capital intensive and the results must be assessed from a long-term perspective. The gas and heating business in the Lyse Group has now moved into an established operational phase, in which new sales are being implemented to a greater extent than before, along established infrastructure. This provides satisfactory profitability with a low level of invest-ment. New investments are self-financed, and the return on capital employed is acceptable.

The standard retail market product was changed in spring 2012, meaning that the vast majority of customers now parallel market prices directly. This change was well received in the market.

Investments within the energy business area amount to NOK 210 million. The investments within hydroelectricity generation amount to NOK 124 million and are primarily linked to necessary rehabilitation and safety measures at dam facilities. The gas and heating business area invested NOK 86 million.

LNG

The LNG business area saw operating income of NOK 705 million, more than double its operating income in 2011. 137 000 tonnes of LNG were supplied to customers, which

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is equivalent to a volume of energy of around 2 TWh. The plant's annual production capacity is 300 000 tonnes of LNG and capacity utilisation is still too low to make operations profitable.

The business area's operating costs are largely fixed, and the trading result for the year before depreciation (EBITDA of NOK -84 million reflects the low capacity utilisation. Technically the plant functioned well with a high degree of operational stability, apart from one unforeseen interruption that lasted around a month in the spring and was due to a pump failure. LNG was purchased from terminals in Belgium during this period in order to meet delivery obligations with respect to customers.

Despite the strong increase in turnover, the improvement in the result was relatively minor. This was due to the extraordinary costs incurred due to the operating interruption and the associated need to buy LNG from elsewhere. Vessels were also much more expensive to lease in 2012 than they were in 2011.

Access to new contracts in the market was good, and at year-end 2011 long-term contract volumes were entered into that will ensure full capacity utilisation from and including 2014.

In connection with the signing of a long-term deliverycontract with the Preem refinery, construction has started on an unloading terminal for LNG in Lysekil, Sweden. With this terminal and the terminal in Øra in Østfold, Skangass has secured a strategically important market position in large parts of both Norway and Sweden. Skangass starting using the vessel Coral Energy, for which it has a long-term lease contract, just after the end of the year. This will considerably increase transport capacity and helps to provide the basis necessary for significantly expanding the business area. The year's investments in the LNG business area amounted to NOK 249 million and were mainly linked to the Lysekil terminal.

Skangass AS prioritises managing the risk associated with the sales margin between feed gas and produced LNG which is sold on the retail market. A significant proportion of the customer portfolio has the same indexing as the purchase agreement for feed gas to the LNG plant.

Electricity grid and other infrastructure

The Group's electricity grid business had an operating profit of NOK 246 million in 2012, which is NOK 118 million weaker than the previous year. The electricity grid is a monopoly business in which prices are regulated by the Norwegian Water Resources and Energy Directorate (NVE). The company's grid operations have been assessed by NVE as effective compared with the industry average. Costs in conjunction with compensation for non-delivered energy (KILE costs) amounted to NOK 8.7 million, while the average KILE cost for the previous 3 years was NOK 14 million. Non-delivered energy was equivalent to 0.0066% of the total transported energy volumes of 5 598 GWh. The Board is satisfied with the delivery reliability the company has shown in recent years.

Grid operations achieved a total return on assets of 9.2% compared with 13.4% in 2011.

A total of NOK 233 million was invested in the grid business area. Increased capacity to ensure improved supply reliability and new facilities for homes and commercial buildings account for the largest proportion of new investment. NOK 194 million was invested in the distribution network. 65% of this was due to higher customer volumes. The level of investment reflects the strong regional growth in Lyse Elnett's licence area. 3 887 new mains customers were connected in 2012, compared with 3 047 in 2011.

Lyse Infra AS performs development and operational duties for the other companies in the Group. The operating result from development, operations and maintenance was NOK 12 million, compared with NOK 36 million in 2011. Turnover was NOK 772 million, NOK 100 million of which was from sales to external customers. The company's reserve orders are long-term but will be reduced somewhat as a consequence of the company being reorganised into a pure electricity contractor from the beginning of 2013, while the majority of its other work will be transferred to Lyse Elnett AS.

telecommunication business area

The telecommunication business area comprises the wholly owned subsidiaries Altibox AS, Lyse Fiber AS, Lyse Fiber-invest AS, Viken Fibernett AS, Skagerak Fiber AS, Altibox Danmark AS, StayOn AS, NorAlarm AS and Lyse IT. In addition, the business area has significant shareholdings in Hadeland and Ringerike Bredbånd AS (34%) and Dalane Breiband AS (33%).

The business area had a net turnover of NOK 1 796 million in 2012 compared with NOK 1 539 million in 2011. Altibox AS and the partnership delivered 43 400 new fibre customers in 2012, compared with 26 400 in 2011. By the end of 2012, the company had signed around 300 000 contracts for the delivery of fibre-based broadband, 282 000 of which have been delivered. The business areas is enjoying good develop-ment with respect to customers, and for the third year in a row Altibox EPSI won the user survey for the best TV and broadband user experience.

This business area achieved an operating profit before depreciation (EBITDA) of NOK 530 million and an operating profit of NOK 158 million. This result represents an improve-ment of NOK 139 million (36%) and NOK 107 million (214%), respectively, compared with the year before. The business area's result for the year in 2012 was NOK 31 million, compared with a loss of NOK -41 million in 2011 before non-recurringitems. The improvement in the result is mainly attributable to the higher number of customers and reduction in operating costs per customer.

The telecommunication business area has in Lyse's home region surpassed 58 500 customers and customer numbers grew steadily over the year. Lyse Fiber signed a framework contract in 2012 to connect municipal locations for its owner municipalities Stavanger and Sandnes. Customer connections in association with established infrastructure are assigned

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a high priority and result in falling investment costs for new customer connections. In general, the investments are linked to excavation/cable laying work for new fibre-infrastructure.

Investments in Lyse's broadband business area amounted to NOK 485 million in 2012, including the purchase of shares in Skagerak Fibernett AS, compared with NOK 879 million in 2011.

Demand for the business area's products is considered good. A greater focus on fibre from other suppliers means that customers are more actively demanding this technology. At the same time this makes the competition situation tougher. The Board is concerned with ensuring that the telecommunication business area is organised in a manner that guarantees its competitiveness. The work started in 2011 to simplify and streamline the organisation of the business area was intensified in 2012. The effects of this work have been realised to some degree, but the most important effects will first become apparent when the changes are implemented in 2013.

In November 2012, Lyse and Energiselskapet Buskerud agreed to merge their fibre companies in Østfold, Grenland, Buskerud and Oslo into a single company designed for dramatic growth in the Oslo Fjord region. The transaction was completed in January 2013, and the company had 82 000 customers when it started operations. The company was established as a jointly controlled venture in which Lyse owns 71% and Energiselskapet Buskerud 29%.

Its future financial performance will mainly depend on developments in the number of customers, income per customer and cost of establishing the fibre infrastructure.

Financial items

Net financial costs before any write-downs of financial assets amounted to NOK 511 million in 2012, a reduction of NOK 25 million compared with 2011. The market interest rate fell slightly compared with 2011 and the Group's interest-bearing liabilities changed only marginally. Of the Group's collective interest-bearing liabilities of NOK 10 214 million, NOK 5 050 million is interest hedged by means of interest rate swap agreements and fixed-rate loans with a remaining term of between 1 to 10 years. This, together with the inherent interest rate hedges in the network business area and resource rent tax, means that annual results are moderately sensitive to changes in the market rates in the short and medium term. Interest on subordinated loans to the Group's shareholders was NOK 110 million compared with NOK 135 million in 2011.

Lyse owns a 7.9% stake in Noreco ASA. The shareholding was recorded in the balance sheet at its market value of NOK 106 million at year-end 2012. Its market price fell from NOK 4.66 to NOK 3.81 per share in 2012. The year's unrealised losses on investments amounted to NOK 20 million.

Occasionally, the Lyse Group has larger sums lodged with banks, particularly ahead of making large payments such as in the case of the due date for a loan. The other party is

monitored continuously to reduce the risk of loss and limits have been established for exposure to other individual parties.

tax

In accounting terms, the tax cost decreased by NOK 83 million from 2011, and amounted to NOK 692 million. The effective tax rate in 2012 was 52%, compared with 56% in 2011.

Ordinary payable tax increased by around NOK 75 million in comparison with the previous year and amounted to NOK 261 million. The better result for the year and the fact that the Group last year utilised a carried forward tax deficit in Skangass AS after taking over ownership of the company means that the tax payment for the year increased.

Energy generation resulted in resource rent tax of NOK 291 million in 2012, which is equivalent to 42% of the Group's tax cost. The corresponding sums for 2011 were NOK 288 million and 37% of the tax cost.

cash flow and capital situation

Operational activities produced a cash flow of NOK 1 621 million compared with NOK 1 289 million in 2011.

Lyse invested NOK 1 252 million in 2012, an increase of NOK 49 million on the previous year. Investments relating to the Group's telecommunication business area amounted to NOK 485 million. A total of NOK 124 million was invested in the hydroelectricity business area on necessary maintenance. New infrastructure for district heating and gas continues to be built and NOK 86 million was invested in this in 2012. The LNG business area commenced construction of a large LNG reception terminal in Lysekil after signing a contract for significant volumes in the Swedish market. Investment in the business area is primarily linked to this expansion of the value chain.

NOK 233 million was invested in the grid business area, a large proportion of which was due to a significant number of new connections in the region.

A total of NOK 2 678 million was taken up in new interest-bearing liabilities in 2012. Loan repayments amounted to NOK 2 605 million. The Group's interest-bearing liabilities amounted to NOK 10 214 million at year-end 2012, of which subordinate shareholder loans accounted for NOK 2 600 million. The proportion of short-term debt instruments in the loan portfolio was 13%. Interest-bearing liabilities increased by NOK 73 million during the course of the year. The Group has no currency exposure in its loan portfolio. One overall goal of the Group's financial strategy is to main-tain financial flexibility and to ensure an even maturity structure in the loan portfolio in the future. Attempts are made to adapt new borrowing to the maturity profile of the Group's loan portfolio in order to control refinancingrisk. Liquid holdings amounted to NOK 860 million, an increase of 193 million compared with 2011. The Group's liquidity reserve was NOK 1 809 million at year-end 2012.

ANNUAL REPORT2012

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Current assets, apart from liquidity balances, were NOK 1 651 million and current interest-free liabilities were NOK 1 914 million at the end of the year. Energy and financial derivatives constituted NOK 301 million of the current assets and NOK 76 million of current interest-free liabilities.

At year-end 2012, the Lyse Group's book equity amounted to of NOK 4 552 million, which is equivalent to an equity ratio of 22%. Including subordinated loans, the equity ratio is 35%. At year-end 2012, the hydroelectricity business area had a book value of NOK 1.23 per kilowatt hour calculated on the basis of the Group's mean generation. The Board considers the Group's financial resources to be satisfactory.

risk and internal control

The most significant risks the Lyse Group is exposed are associated with market operations, financial management, project activities, operational activities and general conditions. Risk management is important for value creation and an integral part of business operations. Risk management is followed up within the business areas using procedures for monitoring risk in relation to the targets and limits the Board sets. Lyse is exposed to fluctuations in the physical and financial energy markets, the currency market and the interest market. The Board annually reviews important areas of risk within the Group's business areas and sets limits for risk exposure. Internal authorisations and limits have been established for energy trading, currency trading and financial management, which are monitored continuously.

A central investment committee has been established in the parent company, Lyse Energi AS, which evaluates the profitability and risk associated with all major individual investments in the Group.

Lyse is exposed to significant volume and price risks through energy generation and energy trading. In the Nordic energymarket, precipitation levels, demand, market prices for coal and oil, and CO2 quotas all have a big effect on the marketprice for energy. The Group actively manages risk in the energy market by adapting to the current market situation with the aim of achieving the maximum return at an acceptable risk. All physical and financial energy trading in Nord Pool ASA is traded in EUR, which means that a significant share of the Group's income is exposed to foreign currency risk. Future income in EUR is currency-hedged over a set period up to the delivery date such that the hedged proportion increases the nearer one gets to the time of delivery.

A central finance unit coordinates and addresses the risk associated with interest and liquidity, including refinancing and the take-up of new loans. The financial strategy stipulates limits for the Group's refinancing risk and liquidity to ensure that the maturity in the Group's loan portfolio and the capital needed to implement planned operational and investment activities during a defined period in the future are financed. The Group's limits for interest risk are assessed in the light of the risk limits for energy and are intended to stabilise the Group's result for

the year after tax. Interest risk is managed by ensuring the results for the year are not changed beyond fixed risk limits for a subsequent 4 year period if market interest rates change. The exposure associated with interest rates and liquidity is monitored against limits and regularly reported to the executive management team and the Board.

Operational risk is mainly managed by means of procedures, contingency plans and insurance cover. A quality system has been established for recording undesirable events and injuries. This is monitored constantly.

Other risks are primarily associated with unforeseen changes in the general conditions.

External environment

Good environmental management is part of Lyse's corporate responsibility and also helps to ensure the efficient use of resources.

The Lyse Group's energy production is mainly based on hydro-electric power which is good for the environment as far as emissions are concerned. Natural gas and biogas from Lyse's activities take the place of heavier petroleum products and this make a positive contribution to the environment. Reductions of up to 50% for NOx and 20-30% for CO2 can be expected when oil is replaced by gas.

Hydroelectric power developments disturb the natural environ-ment. The external environment is taken into account and protected by measures such as strict regulations on waste management and environmental protection measures in watercourses, including landscaping.

The licensing terms for the oldest of the regulation licences linked to Lysebotn power plant are still under review. After NVE issued its recommendations concerning the matter in spring 2003, the case has been sitting in the Norwegian Ministry of Petroleum and Energy waiting to be considered. There has been no movement in the case since the Ministry's investigation in autumn 2004. A clarification was issued in an equivalent case in 2008, but it remains uncertain when any clarification will be available from the Ministry. The Board hopes that a higher minimum water flow is not demanded as this would result in a substantial generation loss, especially when one is in a situation where developing renewable energy is being stimulated with substantial subsidies.

At the Bærheim combined heating and power plant (CHP), electricity is generated using super-heated steam Lyse purchases from Forus Energigjenvinning KS's waste incineration plant. The plant has been approved as an energy recovery plant.

The pipe network is used to distribute both natural gas and biogas. In 2012, Lyse Neo AS received biogas from IVAR IKS (an intermunicipal water, sewage and waste plant) that Lyse works with. The biogas plant supplies around 20 GWh CO2 neutral gas via the distribution network.

ANNUAL REPORT2012

13


Natural gas is the most eco-friendly of the fossil energy sources. Replacing oil products with natural gas for heating and transport purposes reduces emissions at both global and local levels.

The distribution of LNG makes natural gas available principally to larger industrial customers that are currently established outside existing gas markets. LNG can also have considerable environmental benefits in the transport industry as well, including through shipping. Emissions from the LNG business area were below the limits set in the licences.

International and national provisions can result in new guidance for energy and environmental policies and the requirements that are set concerning impact on the external environment. The consequences of such guidance could turn out to be both positive and negative for Lyse's financial position.

research and development – smart solutions

Most of the Group's research, development and innovation efforts are directed at developing products and services at the intersection between energy and telecommunication. Developing products and services, as well as improving work processes and applications, is prioritised.

Lyse participates in a number of research projects in which both national and international universities are participating and where the projects are entitled to public funding. Lyse works closely with the University of Stavanger, including through participation in the university's CIPSI (Centre for IP-based Service Innovation) and Cense (Centre for Sustainable Energy Solutions). The Board points out that the Stavanger region has a good basis for developing a resource centre for ICT solutions assuming that one can gather and coordinate the resources, and that this would also be a significant contribution to digitising the region.

The welfare project was continued in 2012. The project is based on utilising sensor technology to allow seniors and others with special needs to use technology to stay living in their home for longer, and more safely and securely, as an alternative to moving into an institution. The project is a collaboration between Lyse, Altibox, Stavanger University Hospital, the University of Stavanger and the municipalities of Stavanger and Randaberg.

As part of its work on developing smart solutions, the Group is working on developing a digital platform for useful services that can be commercialised. The plan is to go to market during 2013 with energy saving, comfort and safety products and services.

organisation, health, environment and safety

It is vital in order to achieve the Group's strategic goals for 2020 that Lyse is perceived as an attractive and competitive workplace. In line with this the Board has adopted a new

HR strategy that is intended to facilitate employee and manager training. Competence is the mainstay of the HR strategy.

The Group has undergone a reorganisation process because of the requirements of the competence regulations, mainly within contracting and electricity grid activities.

Sick leave in the Lyse Group developed positively in 2012 and ended up at 3.32% compared with 4.0% in 2011. Two injuries resulted in sick leave of seven days and one day respectively. In 2011, one injury event resulted in sick leave. The H-value (the number of LTAs per million working hours) was 1.3 in 2012.

The Group has a generally good health, safety and environ-ment culture - which is reflected by the both the low sick leave rate and the injury statistics. Nonetheless, the Board wants the company to take an even more proactive approach to HSE and be at the forefront of risk analyses and other measures.

The Group is working to guarantee equal opportunities through fair processes for recruitment, pay and working conditions, development opportunities and protection against bullying. The Group aims to be a workplace in which there is no discrimination on grounds of functional impairment. For employees with diminished functional ability there will be individual preparation of the workplace and duties. At year-end 2012, the Group employed 978 employees, or 963 full time equivalents, in the parent company and wholly-owned subsidiaries. There were 16 apprentices in the energy installation, ICT and sales disciplines.

Turnover in the Group is still relatively low, but has increased somewhat. It was 6% in 2012 compared with 5.7% in 2011. 28% of all employees were women and 72% were men at year-end 2012, compared with 25% women and 75% men in 2011. Two out of the eight members of the executive management team are women, while four of the Group's board members are women and four are men.

ownership and corporate governance

The Board wants to help ensure Lyse addresses its corporate social responsibilities properly such that public ownership is combined with regional development and scope for action. Lyse needs trust and acceptance to carry out its duties, not least in its own region. Therefore, the Board is interested in ensuring good communication with interested parties.

The Lyse Group complies with the Norwegian Code of Practice for Corporate Governance within the limits set by the company's business form and ownership. The deviations concern the share's negotiability, issues and capital increases, as well as principles for conduct in business deals. Four new share-holder-elected representatives were elected at the annual general meeting in spring 2012 to join the other two share-holder-elected representatives on the Board. 11 meetings were held in 2012 and the most important matter discussed was the Group's future strategy up to 2020.

ANNUAL REPORT2012

14


An audit committee consisting of three of board members was appointed. The Audit Committee held four meetings during the year. The Board also has a remuneration committee consisting of three members that has held meetings as needed.

outlook

The Group's board has adopted a strategy for the period up to 2020. This is based on the company continuing to be infrastructure-based and offering products and services within energy and fibre-based broadband.

Five strategic main areas have been defined:

1. renewable energyLyse shall further develop its position as an important national player by realising new profitable and certificate entitled investments within water and wind. Lyse shall further develop its position as an important vendor of electricity in the end-user market.

2. district heating and biogasLyse shall continue to develop diversified and profitableenergy infrastructure in the region by further developing the district heating mains and increasing the introduction of biogas in the gas mains. The increased use of renewable energy sources in the transport sector shall be stimulated by building refuelling stations for electricity and biogas.

3. Electricity gridLyse shall be the most efficient and profitable grid company by revitalising operations and development. Lyse shall main-tain a high degree of supply reliability in the regional and distribution grids, including by utilising new technological opportunities.

4. FibreLyse shall secure a continued dominant challenger role in the fibre market through organic growth and acquisitions and/or consolidation.

5. technologyLyse shall offer an attractive and competitive portfolio of services by further developing Altibox as a leading technology company for new innovative services via the fibre infrastructure. Lyse shall exploit its advantages in the inter-section between infrastructure and technology to develop the services of tomorrow within energy management, energy efficiency and welfare technology.

There is an investment plan that supports the adopted strategy for the period up to 2020. Investment in the new Lysebotn power plant amounting to almost NOK 1.8 billion was approved by the corporate assembly in December 2012, and the plan is to implement it in the period 2014 -2018.

The Board expects the result to develop positively in the period up to 2020 based on the energy and telecommunication business areas. Shareholders have defined fibre as a core activity and it is pleasing that heavy investments in fibre are now showing positive financial development. In the opinion of the Board the strategy of moving the company away from its traditional role of exclusively generating and distributing electricity has been successful, especially now in a period when a significant surplus of energy is expected in the Nordic region with the consequent low energy prices. The Group is seeking a partner within LNG so the business area can fully exploit its strategic market opportunities.

At an overarching level the Board is working to satisfy its owners' wish for a financial return and good supply reliability for all types of infrastructure: the shareholders have separate ownership strategies for their ownership in Lyse, and as far as risk is concerned the owners are interested in the company not weakening the shareholders' expectations of a financial return and satisfactory supply security.

Strategic concentration along the five defined main lines will strengthen and support Lyse's business areas. The Board views these as important measures for continuing and developing the Group's roles within both energy and fibre- based broad-band. The Board believes that a good basis for the satisfactory commercial and financial development of Lyse has been laid.

Stavanger 21.03.13

Ivar Rusdal Reinert Kverneland Cecilie Bjelland Steinar MadsenChair Deputy Chair Board member Board member

Solveig Ege Tengesdal Hilda Bådsvik Høie Gro Vetnes Arne M. SeleBoard member Board member Employee representative Employee representative

Eimund NygaardGroup CEO/Managing Director

ANNUAL REPORT2012

15


Stavanger 21.03.13




We declare that, to the best of our knowledge, the annual financial statements for the period 1 January to 31 December 2012 have been prepared in accordance with current accounting standards and provide a true and fair presentation of the assets, liabilities, financial positions and operating results of the company and the Group in all material aspects. We also declare that the Board's annual report provides a true and fair representation of the performance, operating results and financial positions of the company and Group, together with descriptions of the key factors regarding risk and uncertainty currently facing the company and the Group.

Declaration

ANNUAL REPORT2012

16


Income statement (All amounts in NOK '000s)

NOTE 2012 2011 2010

Sales income 22 6 053 394 5 295 622 5 144 386

Energy purchases and goods 1 845 065 1 469 174 1 367 073

Payroll and other personnel costs 19, 24 781 720 694 114 601 150

Depreciation and write-downs 6, 7 841 113 780 769 651 925

Other losses/gains, net 21 -122 420 -719 567 450 891

Share of the profits from associated companies and joint ventures 8 -7 064 -28 798 -22 030

Licence fees and property tax 166 416 157 859 151 378

Other operating costs 23 695 848 711 300 494 745

operating profit 1 852 716 2 230 771 1 449 254

Financial income 21, 25 67 508 73 244 75 251

Financial costs 25 577 944 558 477 494 497

Write-down of financial fixed assets 25 19 885 368 180 80 982

Profit before tax 1 322 395 1 377 358 949 026

Excess profits tax 18, 26 401 689 488 059 269 122

Resource rent tax 18, 26 290 626 287 600 422 841

tax costs 692 315 775 659 691 963

Profit/loss for the year 630 080 601 699 257 063

Allocated to:

Shareholders 15 648 105 654 116 298 386

Non-controlling interests -18 025 -52 417 -41 323

ANNUAL REPORT2012

17


Balance sheet as of 31.12 (All amounts in NOK '000s)

NOTE 2012 2011 2010

ASSEtS

Fixed assets

Waterfall rights 7 105 113 105 113 92 818

Other intangible assets 7 265 926 262 763 164 088

Deferred tax assets, resource rent 18 259 113 314 898 357 595

Plant and machinery 6 16 507 826 16 088 184 15 041 553

Investments in associated companies and joint ventures 8 163 488 146 236 265 430

Financial assets available for sale 9 117 410 330 139 864 283

Derivatives 3, 10 87 325 103 559 176 060

Other receivables 298 838 242 690 237 885

total fixed assets 17 805 039 17 593 582 17 199 712

current assets

Stock 12 54 489 71 564 13 084

Trade and other receivables 11 1 295 299 1 100 967 1 508 986

Derivatives 3, 10 300 818 297 261 283 772

Bank deposits, cash and cash equivalents 13 860 306 667 537 912 197

total current assets 2 510 912 2 137 329 2 718 039

totAL ASSEtS 20 315 951 19 730 911 19 917 751

ANNUAL REPORT2012

18


Balance sheet as of 31.12 continued (All amounts in NOK '000s)

NOTE 2012 2011 2010

EQuitY ANd LiAbiLitiES

Equity

Subscribed capital 14 1 008 983 1 008 983 1 008 983

Share premium reserve 14 266 609 266 609 266 609

Retained earnings 15 3 265 898 2 974 007 2 715 047

Other unrecognised equity 15 -35 551 50 076 277 983

Equity allocated to the company's shareholders 4 505 939 4 299 674 4 268 622

Non-controlling interests 45 877 64 653 25 227

total equity 4 551 816 4 364 327 4 293 849

Liabilities

Loans 17 8 487 124 7 521 243 7 672 146

Deferred tax 18 1 053 394 945 165 669 749

Deferred tax, resource rent 18 886 707 873 074 860 534

Pension liabilities 19 304 872 295 911 266 253

Derivatives 3, 10 425 027 437 091 584 239

Provisions 20 75 576 75 576 76 667

Other non-current liabilities 20 890 700 863 770 920 866

total non-current liabilities 12 123 400 11 011 829 11 050 454

Loans 17 1 727 167 2 620 401 1 980 000

Trade payables and other current liabilities 16 1 341 137 1 279 361 1 362 632

Tax payables 26 484 267 399 152 586 836

Derivatives 3, 10 75 725 43 402 631 541

Provisions 16 12 439 12 439 12 439

total current liabilities 3 640 735 4 354 755 4 573 449

total liabilities 15 764 135 15 366 584 15 623 903

totAL EQuitY ANd LiAbiLitiES 20 315 951 19 730 911 19 917 751

Stavanger 21.03.13




ANNUAL REPORT2012

19


Statement of comprehensive income (All amounts in NOK '000s)

NOTE 2012 2011 2010

Profit/loss for the year 630 080 601 699 257 063

comprehensive income:

Financial assets available for sale 9, 15 0 -156 073 56 921

Cash flow hedging, currency forward contracts 15, 21 -56 863 -44 213 126 545

Cash flow hedging, interest rate swap contracts 15, 21 -25 375 -26 937 11 514

Currency exchange differences 15 -3 389 -684 444

total comprehensive income after tax -85 627 -227 907 195 424

total profit/loss for the year 544 453 373 792 452 487

Allocated to:

Shareholders 562 478 426 209 493 810

Non-controlling interests -18 025 -52 417 -41 323

total profit/loss for the year 544 453 373 792 452 487

ANNUAL REPORT2012

20


Cash flow statement (All amounts in NOK '000s)

NOTE 2012 2011 2010

Profit before tax 1 322 395 1 377 358 949 026

Adjusted for:

- depreciation and write-downs 6, 7 841 113 780 769 651 925

- profit on sales, plant and machinery -16 056 -2 279 -5 373

- other losses/profits net, classed as operations 21 -122 420 -719 567 450 891

- changes in pension liabilities 19 8 961 29 658 -67 600

- net financial costs 25 530 321 853 413 500 228

- profit/loss from associated companies and joint ventures 8 -7 064 -28 798 -22 030

changes in working capital:

- trade receivables and other current receivables -194 332 263 815 -266 047

- accounts payable and other current liabilities 61 776 -101 753 71 206

- changes in other current assets and other liability items 17 075 -830 -7 715

- changes in other dated items 49 987 -108 380 -214 941

Net cash flow from operational activities 2 491 756 2 343 406 2 039 569

Interest paid 17 -493 629 -467 403 -436 045

Tax paid -377 089 -586 836 -628 399

Net cash flow from operations 1 621 038 1 289 167 975 125

cash flow from investment activities Payment on purchase of plant and machinery 6 -1 261 005 -1 197 960 -1 291 682

Payment on purchase of financial assets 0 -2 746 -65 679

Payment on purchase of intangible assets 7 -11 380 -16 035 -247

Proceeds from sale of plant and machinery 20 234 13 217 7 798

Payment on purchase of subsidiary 30 0 -271 604 -1 000

Payment on buy-out of minority interests -15 320 -26 382 0

Disbursement of loans to associated companies and joint ventures -5 000 -26 671 0Payments on purchases of shares in associated companies and joint ventures 8 -32 431 -3 245 -128 686

Payments on sales of shares in associated companies and joint ventures 8 10 110 0 0

Payments on purchases of shares in investments available for sale 9 -20 924 -12 360 -6 548

Receipts from sale of shares in investments available for sale 9 161 945 57 129 1 369

Net receipts and payments, other financial investments -645 -831 -3 339

Net cash flows used in investment activities -1 154 416 -1 487 488 -1 488 014

cash flow from financing activities Paid-in equity from minority interests 30 11 000 70 000 0

Borrowings 17 2 678 000 2 972 694 3 660 611

Repayment of interest-bearing liabilities 17 -2 605 352 -2 775 609 -2 178 700

Dividends paid to company shareholders -357 500 -340 000 -327 000

Net cash flow from financing activities -273 852 -72 915 1 154 910

change in cash and cash equivalents 192 769 -271 236 642 021

Cash and cash equivalents as of 01.01 667 537 912 197 228 673

Cash on acquisition of subsidiaries 30 0 26 576 41 504

cash and cash equivalents as at 31.12 860 306 667 537 912 197

ANNUAL REPORT2012

21


Statement of changes in consolidated equity (All amounts in NOK '000s)

NOTE

Sharecapital and

premium reserve

Other equity not recognised

Retained earnings

Equity attributable

to the company's

shareholders

Non-controlling ownership

interestsTotal

equity

changes in consolidated equity2010Equity 31.12.09 1 275 592 82 559 2 755 695 4 113 846 22 302 4 136 148

Profit/loss for the year 0 0 298 386 298 386 -41 323 257 063

comprehensive income statementChange in value of financial assets available for sale 15 0 56 921 0 56 921 0 56 921

Cash flow hedging 15 0 138 059 0 138 059 0 138 059

Conversion difference 15 0 444 0 444 0 444

Total comprehensive income after tax 0 195 424 0 195 424 0 195 424

total profit/loss for the year after tax 0 195 424 298 386 493 810 -41 323 452 487

Dividends 0 0 -327 000 -327 000 0 -327 000

Minority interests from business mergers 30 0 0 0 0 37 500 37 500

Other changes entered directly against equity 15 0 0 -12 033 -12 033 6 748 -5 285

Equity 31.12.10 1 275 592 277 983 2 715 047 4 268 622 25 227 4 293 849



comprehensive income statementChange in value of financial assets available for sale 15 0 -156 073 0 -156 073 0 -156 073

Cash flow hedging 15 0 -71 150 0 -71 150 0 -71 150

Conversion difference 15 0 -684 0 -684 0 -684

Total comprehensive income after tax 0 -227 907 0 -227 907 0 -227 907

total profit/loss for the year after tax 0 -227 907 654 116 426 209 -52 417 373 792

Dividends 0 0 -340 000 -340 000 0 -340 000

Capital increases 0 0 0 0 70 000 70 000

Other changes entered directly against equity 15 0 0 -55 157 -55 157 21 843 -33 314

Equity 31.12.11 1 275 592 50 076 2 974 007 4 299 674 64 653 4 364 327



comprehensive income statement

Cash flow hedging 15 0 -82 238 0 -82 238 0 -82 238

Conversion difference 15 0 -3 389 0 -3 389 0 -3 389

Total comprehensive income after tax 0 -85 627 0 -85 627 0 -85 627

total profit/loss for the year after tax 0 -85 627 648 105 562 478 -18 025 544 453

Dividends 0 0 -357 500 -357 500 0 -357 500

Capital increases 0 0 0 0 11 000 11 000Other changes entered directly against equity 15 0 0 1 285 1 285 -11 752 -10 467

Equity 31.12.12 1 275 592 -35 551 3 265 898 4 505 939 45 877 4 551 816

ANNUAL REPORT2012

22


To the general meeting of Lyse Energi AS

AUDITOR’S REPORT

report on the financial statementsWe have audited the annual financial statements of Lyse Energy AS which comprise the financial statements of the parent company and the consolidated financial statements. The financial statements of the parent company comprise the balance sheet as of 31 December 2012, income statement, statement of cash flow for the financial year then ended, and a summary of the significant accounting policies and other explanatory information. The consolidated financial statements comprise the balance sheet as of 31 December 2012, income statement, statement of comprehensive income, changes in equity and statement of cash flow for the financial year then ended, and a summary of the significant accounting policies and other explanatory information.

The Board of Directors and the Managing Director’s Responsibility for the Financial StatementsThe Board of Directors and the Managing Director are responsible for the preparation and fair presentation of these financial statements in accordance with the Norwegian Accounting Act and accounting standards and practices generally accepted in Norway for company financial statements and in accordance with International Financial Reporting Standards as adopted by the EU, for consolidated financial statements, and for such internal control as the Board of Directors and Managing Director determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s duties and obligationsOur duty is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with legislation, regulations and good auditing standards and practices in Norway, including the International Standards on Auditing, Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from any material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the company’s preparation of financial statements that provide a fair picture. The purpose is to formulate auditing procedures that are appropriate to the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal controls. An audit also includes evaluation of the appropri-ateness of the accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion of the company’s financial statements and our opinion of the consolidated financial statements.

ANNUAL REPORT2012

23


Opinion on the parent company’s financial statementsIn our opinion, the financial statements of the parent company are prepared in accordance with the law and regulations and present fairly, in all material respects, the financial position of Lyse Energi AS as of 31 December 2012, and its financial performance and its cash flows for the financial year then ended in accordance with the Norwegian Accounting Act and accounting standards and practices generally accepted in Norway.

Opinion on the consolidated financial statementsIn our opinion, the consolidated financial statements are prepared in accordance with the law and regulations and present fairly, in all material respects, the financial position of the Group Lyse Energi AS as of 31 December 2012, and the Group’s financial performance and its cash flows for the financial year then ended in accordance with International Financial Reporting Standards as adopted by the EU.

report on other legal and regulatory requirements

Opinion on the Board of Directors’ reportBased on our audit of the financial statements as described above, it is our opinion that the information presented in the Board of Directors’ report concerning the financial statements and the going concern assumption, and the proposal for the allocation of the profit is consistent with the financial statements and complies with the law and regulations.

Opinion on registration and documentationBased on our audit of the financial statements described above, and control procedures we have considered necessary in accordance with International Standards on Assurance Engagements (ISAE) 3000, ”Assurance Engagements other than Audits or Reviews of Historical Financial Information”, it is our opinion that management has fulfilled its duty to produce a proper and clearly set out registration and documentation of the company’s accounting information in accordance with the law and bookkeeping standards and practices generally accepted in Norway.

Stavanger, 21 March 2013Deloitte AS

Ommund SkailandChartered accountant

24

2012Annual report and accounts annual report

Note 1 – General information

Note 2 – Summary of the most important accounting policies

Lyse is a Norwegian group of industrial companies active within the fields of energy and telecommunication. The business encompasses the production and sale of energy and telecommunication products, plus the construction, operation and maintenance of infrastructure. Lyse sells energy and telecommunication products in both its regional and national markets. Its principal market is in Sør-Rogaland.

Lyse is owned by 16 municipalities in the Sør-Rogaland region district of Norway. Its headquarters located at Breiflåtveien 18 in Stavanger. The Group's bond and short-term debt instru-ments are listed on the Oslo Stock Exchange.

The consolidated financial statements were approved by the Board of Directors on 21 March 2013.

Below follows a description of the most important accounting policies used in the preparation of the consolidated financial statements. Unless otherwise indicated in the description, these policies have been applied in the same way for all of the periods presented.

2.1 basic policies

The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the EU. The consolidated financial statements have been prepared on the basis of a going concern assumption. The consolidated financial statements are based on the historical cost principle with the following modifications: Financial assets available for sale and financial assets andcommitments (including financial derivatives) are assessed at fair value over profit or loss. Preparing financial statements in accordance with IFRS requires the use of estimates. Moreover, application of the Group's accounting policies requires the management team to exercise its judgement. Areas in which critical judgements and assessments are required, that involve a high degree of complexity, or areas in which judgements and estimates are material to the consolidated financial statements, are described in note 4.

Amendments to the accounting policies and information

a) New and amended standards adopted by the Group No new or amended IFRS standards or IFRIC interpretations came into force for the 2012 accounts that are deemed to have had or are expected to have are assessed as having or being expected to obtain a significant influence for the Group.

b) Standards, amendments and interpretations of existing standards that have not come into effect and which the Group has chosen not to adopt earlyThe Group has chosen not to adopt any new or amended IFRS standards or IFRIC interpretations early.

IAS 19 Employee Benefits was amended in June 2011. The amendment means that all remeasurements must be recognised in comprehensive income immediately as they occur, all costs from previous periods' pension accrual must be recognised immediately, and that interest costs and expected returns must be replaced with a net interest amount calculated using the discount rate on the net pension liability. The Group has not fully completed its assessment of the consequences of the amendments to IAS 19.

Otherwise, no other IFRSs and IFRIC interpretations not yet in force are expected to have a material impact on the financial statements.

2.2 consolidation policies

a) SubsidiariesSubsidiaries are companies over which the Group has the power to formulate the unit's financial and operational guidelines (control), usually by owning more than 50% of voting rights. The effect of potential voting rights which can be exercised or converted on the date of the balance sheet is included when determining whether control applies. Subsidiaries are consolidated from the date on which control is transferred to the Group and are released from consolidation once that control ceases.

Business mergers are recorded in compliance with theacquisition accounting method. The payment made is measured at the fair value of transferred assets and incurred liabilities. Also Included in the payment is the fair value of contingent assets and obligations. Expenses for business mergers are entered as expenditure as they accrue. Identifiable assets and liabilities are recorded in the accounts at fair value on the date of acquisition. Non-controlling interests in the company acquired are either measured at fair value or at their share of the net assets of the acquired company (freedom of choice). If the total of the payment, the amount of non-controlling shareholders recorded on the balance sheet and the fair value on the date of acquisition of previous interests exceed the fair value of identifiable net assets in the acquired company, the difference will be recorded

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on the balance sheet as goodwill, see note 2.6. If the total is lower than the company's net assets, the difference will be recorded in the income statement immediately. Internal group transactions, outstanding and unrealised earnings and losses between group companies will be eliminated. The accounting policies in subsidiaries are revised when necessary to harmonise with the Group'saccounting policies.

b) transactions with non-controlling shareholdersTransactions with non-controlling shareholders are treated as equity transactions. In the case of purchases of shares from non-controlling shareholders, the difference between the payment and the shares' relative proportion of sums recorded in the balance sheet for net assets in the subsidiary is entered against equity for the parent company's share-holders. Profit or loss on sales to non-controlling share-holders will be entered, correspondingly, against equity. When the Group is no longer in control, any remaining interests in ownership will be measured at fair value with changes in value through profit or loss. Thereafter, fair value amounts to the acquisition cost for further accounting, either as investment in an associated company, joint venture or financial asset. Amounts that have previously been recorded in comprehensive income related to this company are treated as if the Group had disposed of underlying assets and liabilities. This could mean that amounts that have previously been recorded in comprehensive income are reclassified as profit.

c) Associated companiesAssociated companies are units in which the Group has a considerable but not a controlling influence. Considerable influence normally applies to investments in which the Group has between 20% and 50% of the voting capital. Investments in associated companies are recorded in the financial state-ments using the equity method. Investments in associated companies are initially recognised at their acquisition cost on the acquisition date. Investments in associated companies include goodwill identified as of the date of acquisition less any subsequent write-downs (see subsection 2.6).

The Group's share of surplus or deficit in associated companies is recognised in the income statement and added to the value of the investments entered on the balance sheet. The Group's share of the comprehensive income in the associated company is recognised in comprehensive income in the Group and is also added to balance sheet amounts for the investments. The Group does not record its share of any loss in the income statement if this means a negative entry on the balance sheet for the value of the investment (including unsecured claims on the unit), unless the Group has assumed commitments or given guarantees for the associated company's commitments.

The Group's share of unrealised profit on transactions between the Group and its associated companies is eliminated. The same applies to unrealised losses unless the transaction indicates a write-down of the transferred asset. Where necessary the accounting policies applied in joint ventures are revised to harmonise with the Group's accounting policies. Any profits and losses connected with diluting assets in associated companies are recognised against equity.

When the Group no longer has significant influence, any remaining interest in ownership is measured at fair value with changes in value through profit or loss. Thereafter, fair value amounts to the acquisition cost for further accounting as a financial asset. Amounts that have previously been recorded in comprehensive income related to this company are dealt with as if the associated company had disposed of underlying assets and liabilities. This could mean that amounts that have previously been recorded in comprehensive income are reclassified as profits. In the event of a reduction of assets in an associated company in which the Group maintains a significant influence, a relative proportion of amounts previously recorded in comprehensive income will also be reclassified as profits.

d) Joint venture business

Part-owned power plantsThe Group's share in part-owned power plants is recorded in the income statement in compliance with the gross method, as stipulated in IAS 31. The Group adds its share of the part- owned power plant's profit or loss items, balance sheet items and cash flow items to equivalent items in the consolidated financial statements. Any profits or losses on the sale of assets from the part-owned power plants are entered in the income statement for the proportion that can be ascribed to other owners (outside the Group) in the part-owned power plants. When buying assets from part-owned power plants, the profit or loss is only recognised in the income statement once the asset has been sold out of the Group. Any loss is recognised immediately in the income statement if the transaction indicates a reduction in net sales value for current assets or an impairment of the value of fixed assets.

Joint venture companiesThe Group's share of joint venture business is recognised in the financial statements in accordance with the equity method. Investments in joint ventures are initially recognised at their acquisition cost on the acquisition date. Investments in joint ventures include goodwill identified as of the date of acquisition less any subsequent write-downs (see point 2.6).

The Group's share of surplus or deficit in joint venture companies is recognised in the income statement and

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added to the balance sheet value of the investments. The Group's share of comprehensive income in joint venture companies is entered in the Group’s comprehensive income and also added to balance sheet amounts for the invest-ments. The Group does not enter in the income statement its share of any deficit, if this means a negative entry on the balance sheet for the value of the investment (including non-hedged claims on the unit), unless the Group has assumed commitments or given guarantees for the associated company's commitments.

The Group's share of unrealised profit on transactions between the Group and its joint venture business is eliminated. The same applies to unrealised losses unless the transaction indicates a write-down of the transferred asset. Where necessary, the accounting policies in joint venture companies are revised to harmonise with the Group's accounting policies. Any profits and losses in connection with diluting assets in joint venture companies are recognised in the income statement. When the Group no longer has any significant influence, any remaining interests will be measured at fair value with changes in value through profit or loss. Thereafter, fair value amounts to the acquisition cost for further accounting as a financial asset. Amounts which have previously been recognised in comprehensive income related to this company will be dealt with as if the joint venture company had disposed of underlying assets and liabilities. This could mean that amounts that have previously been recorded in comprehensive income are reclassified as profits. In the event of any reduction in assets in joint venture companies over which the Group maintains a signi-ficant influence, there will be a reclassification also of a proportionate share of amounts that have previously been recognised in comprehensive income to the income statement.

2.3 Segment information

The segments are reported in accordance with the same structure as in the Group's internal reports to management. A business segment is a part of the business that supplies products or services which are subject to risk and return that are different from other business areas.

2.4 conversion of foreign currency

a) Functional currency and presentation currencyThe financial statements of the individual group units are measured in the currency used in the unit in which the entity generally operates (functional currency). The consolidated financial statements are presented in Norwegian Kroner (NOK), which is both the functional and presentation currency of the parent company.

b) transactions and balance-sheet itemsTransactions in foreign currencies are converted to the functional currency by employing the transaction exchange rate. Any gains or losses on currency arising from the payment of such transactions and from the conversion of monetary items (assets and liabilities) in foreign currency at the exchange rate current on the date of the balance sheet, will be recognised in the income statement. If the currency position is regarded as cash-flow hedging, profits and losses will be recognised as part of comprehensive income. Currency profit or loss related to borrowings, cash and cash equivalents are presented in the income statement as financial income or financial costs. All other currency profits and losses are entered on the line of other losses/profits - net.

Foreign currency effects on non-monetary items (both assets and commitments) are included as part of the gain or loss for the purposes of assessing fair value. Foreign currency effects on non-monetary items, such as shares at fair value over profit or loss, will be recognised in the income state-ment as part of the gain or loss when assessing actual value. Foreign currency effects on non-monetary items, such as shares classified as available for sale, are included in the change in value recorded against comprehensive income.

2.5 Plant and machinery

Plant and machinery are recorded in the income statement at acquisition cost, minus depreciation. The acquisition cost includes any costs directly linked to the acquisition of the asset. Borrowing costs accrued during the manufacture of plant and machinery are entered into the balance sheet until the asset is ready for its intended use. Acquisition cost may also include any profits or losses transferred from equity, which are due to cash flow hedging in foreign currency when plant and machinery are purchased.

Subsequent expenses are added to the asset's balance sheet value or are recorded on the balance sheet separately, when it is probable that future financial advantages associated with the expense will accrue to the Group and the expenditure can be measured reliably. Amounts that are recognised and associated with replaced parts are recorded in the income statement. Other repair and maintenance costs are carried over to the income statement for the period in which the expenses are incurred. Real estate sites are not depreciated. Other plant and machinery are depreciated according to the straight-line method so that the acquisition cost of fixed assets

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is depreciated at the remaining value over the anticipated useful life of the asset:

Systems - energy 3 - 75 years

Systems - broadband 3 - 25 years

Systems - grid 10 - 50 years

Other buildings 33 - 50 years

Machinery and equipment 3 - 12 years

The useful life of the plant and machinery, together with their residual value, are assessed on each balance sheet date and amended as necessary. When the balance sheet value of an item of plant or machinery is greater than the estimated recoverable amount, the value is written down to the recoverable amount (note 2.7). Any profit or loss when disposing of plant and machinery is recognised in the income statement and constitutes the difference between the sales price and the balance sheet value.

2.6 intangible assets

Research costs are recorded as expenditure when they accrue. Development costs are recorded on the balance sheet in so far as a future financial benefit can be identified in connection with the development of an identifiable intangible asset. Other development costs are recognised in the income statement as they accrue. Development costs previously entered as expenditure will be off the balance sheet in subsequent periods. Balance sheet development costs are depreciated on a straight-line basis from the date of commercialisation over the period in which they are expected to provide financial benefits. Balance sheet development costs are tested annually for any impair-ment in accordance with IAS 36.

a) waterfall rightsWaterfall rights are recorded on the balance sheet at their historic acquisition cost. There is no right of reversion and the waterfall rights are therefore assessed as being an asset that is unlimited in time, and are not depreciated.

b) GoodwillGoodwill is the difference between the acquisition cost of a business and the fair value of the Group's share of net identifiable assets in the business at the date of acquisition. Goodwill in connection with the purchase of subsidiaries is classified as an intangible asset. Goodwill when purchasing shares in associated companies is included in associated company investments, and is tested for writing down as part of the balance sheet investment value. Goodwill is tested annually for any impairment in value and is entered on the balance sheet at the acquisition cost minus any

write-downs. Write-downs of goodwill are not reversed. Any profit or loss on the sale of a business includes the value of goodwill associated with the sold business entered on the balance sheet. For subsequent testing of the need for write-downs of good-will, this is allocated to relevant cash flow generating units. Allocation is made to the cash generating units or groups of cash generating units expected to benefit from the acquisition.

c) brand namesBrand names are tested annually for any impairment in value and are entered on the balance sheet at acquisition cost minus deductions for write-downs.

d) customer portfoliosCustomer portfolios are recorded on the balance sheet at their historic acquisition cost less deductions for depreciation. Customer portfolios have a limited useful life and are depreciated on a straight-line basis over their expected useful lifetime.

e) operating rightsAny operating entitlements purchased are recorded at historic acquisition cost less deductions for depreciation. Operating entitlements have a limited useful life and are depreciated on a straight-line basis over their expected useful lifetime.

2.7 impairment in value of non-financial assets

Goodwill plus intangible assets with an undefined useful lifetime are not depreciated, but are assessed for any impair-ment in value on an annual basis. Plant and machinery and intangible assets that are depreciated are assessed for any impairment in value when there are indications that future earnings cannot justify the assets' balance sheet value. Any depreciation is recorded in the income statement as the difference between the balance sheet value and the recoverable amount. The recoverable amount is the fair value minus sales costs, or utility value, whichever is higher. When assessing impairment in value, the plant and machinery are grouped at the lowest level at which it is possible to differentiate independent cash flows (cash generating units). On each reporting date, the possibilities of reversing previous write-downs of non-financial assets (except good-will) are evaluated.

2.8 Financial assets

The Group classifies financial assets into the following categories: a) at fair value over profit or loss, b) hedginginstruments, c) loans and receivables, and d) financialassets available for sale. The classification depends on

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the purpose of the assets and is undertaken upon acquisition. a) Financial assets at fair value over profit or lossFinancial assets at fair value over profit or loss are financial assets held for trading purposes. A financial asset is classified in this category, if it has been acquired primarily with the purpose of yielding a profit from short-term price fluctuations. Derivatives are classified as being held for trading purposes, unless they are part of an accountinghedge (see the category below). Assets within this category are classified as current assets.

b) hedging instrumentsA derivative which is designated as a hedging instrument and which qualifies for hedge accounting is classified in this category. Hedging instruments are entered on the balance sheet at fair value as at the date of entering into the hedge contract, and then at the current actual value as at each balance sheet date. The subsequent accounting of profits or losses depends on whether the derivative is included as a hedging instrument in a cash flow hedge or in a fair value hedge (see note 2.9).

c) Loans and receivablesLoans and receivables are non-derivative financial assets with fixed payments that are not converted in an active market. They are classed as current assets unless they mature more than 12 months after the balance sheet date. In that case, they are classified as fixed assets. Loans and receivables are classified as trade receivables and other receivables, as well as cash and cash equivalents on the balance sheet (see notes 2.11 and 2.12).

d) Financial assets available for saleFinancial assets available for sale are non-derivative financial assets which have been chosen to be placed in this category, or which have not been classed in any other category. They are classed as fixed assets unless the investment matures or unless management intends to sell the investment within 12 months of the balance sheet date.

Accounting and measurementOrdinary buying and selling of investments are recorded as at the transaction date, which is the date on which the Group agrees to buy or sell the asset. All financial assets not recorded at fair value over the result in the income statement, are initially recorded on the balance sheet at fair value plus transaction costs. Financial assets entered at fair value over profit or loss are recorded in the income statement at fair value at the time of acquisition, and the transaction costs are recognised in the income statement. Investments are removed from the balance sheet when the right to receive cash flows from the investment ceases or when the right has been transferred and the Group has transferred substantially all the risks and rewards incidental to ownership of the asset. Financial assets available for sale

and financial assets recognised at fair value through profit or loss are valued at fair value following initial recognition. Loans and receivables are recorded at amortised cost based on the effective interest method. Gains or losses from changes in the fair value of assets classed as financial assets at fair value over profit or loss, including interest income and dividend, are included in the income statement under other losses/gains – as net sums in the period in which they arise.

When securities, classed as available for sale, are sold or written down, the collective value adjustment recordedagainst comprehensive income is entered over profit or loss as gain or loss from investments in securities.

The effective interest on interest-bearing instruments is recorded in the income statement under financial items. Share dividends classed as available for sale are recorded over profit or loss as financial income once the Group's entitlement to dividend has been decided.

impairment in value of financial assets

a) balance sheet value of assets at amortised costOn each balance sheet date, the Group checks whether there are any objective indications that a financial asset, or a group of financial assets, has dropped in value. Impairment losses for a financial asset or a group of financial assets are only recognised if there are objective indications of impairment as a result of one or more events that have occurred and if this affects future estimated cash flows in a manner that can be measured reliably. The size of the loss is measured as the difference between the asset's balance sheet value and the current value of the estimated future cash flows discounted by the financial asset's original effective interest. The asset's balance sheet value is reduced and the loss included in the income statement. If the impairment is later reduced, and the reduction can be linked objectively to an event that occurs after the impair-ment has been included in the accounts, the earlier loss should be reversed in the income statement.

b) Assets classed as available for saleOn each balance sheet date, the Group assesses whether there are any objective indications of a financial asset or group of financial assets having dropped in value. For equity instruments classed as available for sale, a considerable or long-term impairment in fair value of below acquisition cost will be an indication that the value of the share is subject to impairment. If such indications exist, and the reduction in value has previously been entered against comprehensive income, the cumulative loss included in the comprehensive income should be re-classified as profit in the income statement. The amount is measured as the difference between the acquisition cost and the current fair value, minus any losses in the event

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of impairment which has previously been recorded in the income statement. Impairment losses recognised in the income statement for an investment in an equity instrument shall not be reversed through the income statement.

2.9 derivatives and hedging

Derivatives are entered into the balance sheet at fair value on the date on which the derivative contract is signed, and then on an ongoing basis at fair value on each balance sheet date. The entry into the accounts of associated gains or losses depends on whether the derivative has been designated a hedging instrument and, possibly, the type of hedge. The Group classes derivatives that are included in hedge accounting as: a) hedge of variability in cash flows linked to a highly probable future transaction (cash flow hedge) b) hedge of the fair value of a balance sheet asset or commitment (fair value hedging)

On entering into the hedge transaction, the Group documents the connection between the hedging instruments and the hedge objects, the purpose of the risk management and the strategy behind the various hedge transactions. The Group also documents whether the derivatives used are effective in offsetting the changes in fair value or cash flow linked to the hedge objects. Such assessments are documented both on entering into the hedge and on an ongoing basis during the hedge period. Fair value of the derivatives used in hedge relationships is shown in Note 10. Any change in equity linked to derivatives that are used in hedge accounting are shown in Note 15. The fair value of the derivatives is classed as a fixed asset or long-term liability, if the remaining term exceeds 12 months and as a current asset or short-term liability if the remaining term of the hedge object is less than 12 months. Derivatives held for trading purposes are classified as current assets or short-term liabilities.

a) cash flow hedgingThe effective portion of a change in the fair value of derivatives entered into, and which qualify as hedging instruments within cash flow hedging, is recognised directly in compre-hensive income. Any losses and gains on the ineffective portion are recognised in the income statement as other losses/gains– at net as regards currency hedging instruments, and under finance as regards hedging instruments involving interest.

Hedging gains or losses that are entered over comprehensive income in equity are reclassified to the income statement in the period when the hedge object influences the income statement (for example when the planned hedged sale

takes place). Gains or losses linked to the effective part of interest swap agreements that hedge variable rate loans recognised in the income statement under financial costs. The profit or loss linked to the ineffective part is entered into the income statement as other losses/gains - net. When the planned transaction that is hedged leads to the balance sheet entry of a non-financial asset (for example, plant and machinery), the profit or loss previously recorded in comprehensive income will be reclassified as an adjustment of acquisition cost of the asset. When a hedging instrument expires or is sold, or when a hedge no longer satisfies the criteria for hedge accounting, the combined gain or loss which was recognised in compre-hensive income remains and is reclassified for the income statement at the same time as the planned transaction isrecognised. If a hedged transaction is no longer expected to be implemented, the book amount in equity will be reversed immediately to the income statement as other losses/gains - net.

b) Fair value hedgingChanges in the fair value of derivatives, that are entered into and qualify for real value hedging, and which are effective, are transferred to the income statement together with the change in fair value associated with the hedged risk on the associated hedged asset or commitment. Any gain or loss associated with the ineffective part is entered on the income statement as other losses/gains – net. If the hedge no longer fulfils the criteria for hedge accounting, the recorded hedging effect for hedge objects entered as amortised cost, will be amortised over the period up to the instrument's due date.

c) derivatives that do not qualify for hedge accountingChanges in the fair value of derivatives, that do not qualify for hedge accounting, are recognised as other losses/gains – net. This will also be relevant to all of the Group's agree-ments for purchases and sales of non-financial objects that are settled financially. The fair value of the derivatives is classed as a fixed asset or long-term liability, if the remaining term exceeds 12 months, and as a current asset or short-term liability if the remaining term is less than 12 months.

2.10 Stock

Goods/stock are assessed at acquisition cost or net realisation value, whichever is lower.

2.11 trade receivables

Trade receivables are measured at their fair value when first entered into the balance sheet. During subsequent measure-ments, trade receivables are assessed at amortised cost established by applying the effective interest method, less

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any provision for incurred losses. Provisions for losses are recorded when there are objective indicators that the Group will not receive a settlement in conformity with the original terms. The provision constitutes the difference between the nominal and recoverable sums, which is the current value of expected cash flows, discounted by effective interest.

2.12 cash and cash equivalents

Cash and cash equivalents include cash and bank deposits, other short-term, highly liquid investments with original maturities of 3 months or less and bank overdrafts. On the balance sheet, bank overdraft, including loans, is included under current liabilities.

2.13 Share capital and share premium reserve

Ordinary shares are classified as equity.

2.14 Accounts payable

Accounts payable are measured at fair value when first entered into the balance sheet. At subsequent measurements the accounts payable are assessed at amortised cost set by employing the effective interest method.

2.15 borrowings

Borrowings are entered at fair value when they are paid out, minus transaction costs. In subsequent periods, borrowings are stated at amortised cost calculated by using the effective interest method. The difference between the borrowings paid out (minus transaction costs) and the redemption value is recognised in the income statement over the term of the borrowing. Borrowings are classified as current liabilities unless there is an unconditional right to defer payment of the debt for more than 12 months from the date of the balance sheet.

2.16 Payable tax and deferred tax

The tax cost comprises payable tax and deferred tax. Tax is recognised in the income statement except when related to items that are posted into the income statement against comprehensive income or directly against equity. In these cases, the tax will also be recognised in the income state-ment directly against comprehensive income or directly against equity. Deferred tax has been calculated on all temporary differences between the tax-related, consolidated book value of assets

and liabilities when using the liabilities method. If the Group participates in a transaction concerning the purchase of an asset or liability which does not form part of a companyintegration, deferred tax is not recognised on the date of the transaction. Deferred tax is established by using tax rates and tax legislation which have been adopted or have essentially been adopted as at the date of the balance sheet, and which, it is assumed, should be used when the deferred tax benefit is realised, or when the deferred tax is posted. A deferred tax benefit is entered on the balance sheet if it is probable that future taxable income will occur, and that the temporary differences can be deducted from this income. Deferred tax is calculated on temporary differences from investments in subsidiary and associated companies, except when the Group controls the date for reversing the temporary differences, and when it is probable that they will not be reversed in the foreseeable future.

Energy generation taxIn addition to general corporation tax, energy generationis subject to property tax, natural resource tax and resource rent tax.

resource rent taxResource rent tax constitutes 30% of net resource rent income for each power plant. Resource rent income is calculated on the basis of each power plant's generation, hour by hour, multiplied by the spot price for the corresponding hour. For supplies of licensed energy and energy on long-term contracts over seven years, actual contract price is used. To arrive at net resource rent income, the calculated income is reduced by the actual operating costs, depreciation and an uplift. The uplift is set annually, based on the taxable value of the plant and machinery in the power plant multiplied by an interest rate norm.

A negative resource rent income occurring in a power plant can, as of 2007, be balanced by a positive resource rent income in other power plants. Negative resource rent in previous years can be carried forward with interest against a later positive resource rent income in the same power plant. Deferred tax benefit, linked to deficits liable to be carried forward and deferred tax linked to other temporary differences, is entered on each power plant's balance sheet. The deferred tax benefit is entered on the balance sheet if it is probable that it will be used during the course of a 15-year period.

Natural resource taxNatural resource tax is a tax that is independent of the sur-plus, and calculated on the basis of each power plant'saverage generation over the past seven years. The tax rate has been set at NOK 0.013/kWh. The excess profits tax can be settled against the natural resource tax payable. The proportion of natural resource tax that exceeds the excess profits tax, can be carried forward with interest to later years, and is entered on the balance sheet as a pre-paid tax (receivable).

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Property taxProperty tax for power plants is calculated on the basis of actual power generation, minus the actual operating costs and resource rent tax paid at the individual power plants. The income side of the property tax is calculated on the same basis as the resource rent tax. The property tax basis is arrived at by discounting the previous five years of net operating income at the power plant at a set interest rate for all time, minus the current value of the power plant's estimated costs for replacing plant and machinery. Of the property tax basis, property tax from 0.2 % up to 0.7 % is calculated as being for the specific municipality where the plant is located. Property tax is presented as an operating cost.

2.17 Pension liabilities

The Group has defined benefit pension plans and defined contribution plans.

defined benefit planA defined benefit plan is a pension scheme defining the pension that an employee will be paid on retiring, and which is financed by contributions paid to insurance companies or pension funds. The pension payments are normally related to one or more factors such as age, number of years with the company and salary. The liability entered on the balancesheet linked to defined benefit plans is the current value of the defined benefits on the date of the balance sheet, minus the fair value of the pension funds, adjusted for deviations in estimates that are not recognised in the income statement, and costs linked with pension earnings during previous periods that are not recognised in the income state-ment. The pension liabilities are calculated annually by an independent actuary using a straight line accrual method. The current value of the defined benefits is determined by discounting estimated future payments by a discount rate based on the interest on Norwegian government bonds with a 10-year term.

Deviation estimates due to new information/data or changes in the actuarial assumptions exceeding 10 per cent of the value of the pension funds or 10 per cent of pension liabilities, whichever is higher, are entered on the income statement over a period of time that corresponds to the employee's expected average remaining length of service with the company. Changes in the pension plan benefits are entered, on an ongoing basis, as expenditure or income in the income statement, unless the entitlements according to the new pension plan are conditional on the employee remaining in the service of the company for a specified period of time (accrual period). In such case, the cost linked to the change in the benefit is amortised on a straight-line basis over the accrual period.

defined contribution planA defined contribution plan is a pension scheme in which

the Group pays a fixed contribution to a separate legal entity. The Group has no legal or other commitment to pay further contributions if the legal entity does not have sufficient funds to pay all the benefits due employees linked to accruals in current and previous periods. In the case of defined contribution plans, the Group pays a contribution to publicly or privately managed insurance company pension plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recorded in the accounts as a payroll cost when they become due. Pre-paid contri-butions are recorded as an asset if the contribution can be refunded or can reduce future payments.

2.18 Provisions

The Group recognises provisions for environmental improve-ments, restructuring and legal requirements when: a) there is a legal or self-imposed obligation resulting from past events, b) it is highly probable that the obligation will have to be settled in the form of a transfer of financial resources and c) the scale of the obligation can be estimated with a sufficient degree of certainty. No provisions are made for operating losses.

In cases in which there are several obligations of the same nature, the probability has been established that the obligation will be settled by evaluating the Group as one. Provisions in the consolidated financial statements are recognised even though there may be low probabilityof settlement linked to the Group’s individual elements.

Provisions are measured at the current value of anticipated payments to redeem the obligation. A discount rate before tax is applied, reflecting the present market situation and the specific risk concerning the obligation. The increase in the liability as a result of a change in value over time is entered as a financial cost.

2.19 Posting income

Income from the sale of goods and services is assessed at the fair value of the payment, net after deducting VAT, returned items, discounts and reductions. Intragroup sales are eliminated. Sales are entered into the income statement once income can be measured reliably, once it is probable that the financial benefits linked to the transaction will come to the Group, and once special criteria linked to the forms of sale have been fulfilled. Sales are not assessed as being reliably measurable until all conditions linked to the sale have been fulfilled. The Group bases estimates for its financial statements on history, an assessment of the type of customer and transaction, and any special conditions linked to the specific transaction.

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a) Sale of goodsSales from the business areas of energy, telecommunications, development, operations, maintenance and marketing is recorded in the income statement when a unit within the Group has supplied the product to the customer, and there are no unfulfilled obligations in connection with the goods. Grid rent from the transmission business area is entered as income as at the date of invoice. Sums recorded in an indi-vidual year equate to the period's supplied volume settled at the currently specified tariff. Income surplus/deficit is defined according to the IFRS as a regulatory liability/asset that does not quality for balance sheet entry. This is because no contract with a particular customer has been entered into, and the receivable is conditional, in theory, on a future delivery. The income during a given year can therefore deviate relative to the income ceiling allowed by the Norwegian regulating authority. The tariffs are managed on the basis of the aim of annual income corresponding to the permitted level of income.

b) Sale of servicesThe sale of services is entered into the income statement in the period in which the service is performed.

c) dividend incomeIncome from dividends is entered into the income statement once entitlement to dividend arises.

2.20 Leases

Leases where a substantial portion of the risk and return associated with ownership still remains with the Lessor, are classified as operational leases. Lease payments in the case of operational agreements are entered as expenditure on a straight-line basis over the period of the lease.

2.21 dividend

Dividend payments to shareholders in the parent company are classed as liabilities as from the date on which the dividend is confirmed by the general meeting.

2.22 Licensed energy, licence feesand compensation

Licensed energy is posted as income on delivery in compliance with a set licensed energy price. As of 31 December 2012, the Group had no licensed energy agreements that are settled financially.

Annual licence fees are paid to the State and municipalities for the increase in generation capacity gained through

regulation and water transmission. Licence fees are posted as expenditure when they accrue.

The Group pays compensation to landowners for usagerights for waterfalls and land. In addition, compensation is paid to other parties for any damage to forestry, land etc. The compensation payments can be either one-off payments or ongoing payments or obligations to deliver compensatory energy/free electricity. The current values of obligations linked to annual compensation payments and compensatory energy/free electricity are classed as provisions (see note 20). Annual payments are posted as Other Operating Costs, whereas one-off settlements are entered against the liability.

2.23 construction contracts

Income from construction contracts is recognised immediately in line with project progress (current settlement method). As a rule, the degree of completion is calculated as accrued costs on the date of the balance sheet as a percentage of the estimated total cost. If it is not possible to estimate reliably the outcome of a construction contract, the contractual income is set as equal to the contractual cost if it is probable that the costs can be recovered. For construction contracts that are expected to make a loss, provision is made for the net cost during the remainder of contractual generation.

2.24 Public grants

Public grants are included at net value in the income state-ment and balance sheet. Where the grant is associated with activities included directly in the income statement, the grant is treated as a reduction in costs linked to the activity that the grant is intended to cover. If the grant is linked to projects included in the balance sheet, the grant is treated as a reduction of the amount included in the balance sheet.

2.25 Leasing

The company's leases for means of transport are considered financial leasing. The present value of future lease payments are capitalised as a fixed asset and depreciated over the period of the lease. Corresponding amounts are booked as non-current liabilities. These are written-down in line with lease payments and calculated interest.

33


Note 3 - Financial risk management

Financial risk factors

The activities of the Lyse group involve different types of financial risk: financial risk, market risk (including price risk, currency risk and interest risk), credit risk and liquidity risk. Risk management is based on targets and ceilings set by the Board. Energy price and foreign currency risk for individual group companies is managed by Lyse Produksjon AS. Lyse Energi AS manages interest rate and liquidity risk. The Group has limited credit risk. Any credit risk linked to the customer portfolio is managed by Lyse AS, whereas any other identified credit risk is largely managed by the individual companies themselves.

(a) market risk

(i) Price riskThe Lyse Group is exposed to risk linked to the price of raw materials, as the Group's future income from energy generation is largely influenced by the development of the electricity price. To mitigate this price risk, the Board has adopted a strategy in which financial energy contracts are entered into. The financial energy contracts are defined in a hedging portfolio. The hedging portfolio has a rolling time horizon of 3 years beyond the current year. The strategy involves ensuring a minimum income level from energy generation, where price-dependent taxes and costs are taken into consideration. Net generation income shall be greater than a defined minimum level given a worst-case price. The board of Lyse Produksjon AS decides when to put into effect the framework for net generation income for a specific year.

In addition financial contracts are entered into that are by definition in the trading portfolio. The trading portfolio has a framework for overall risk exposure (result + risk of ongoing exposure) and a framework for future price risk. The frame-work for future price risk is measured in terms of VaR (value at risk) and limits the permitted exposure at any time. Operating result and future price risk are monitored and continuously measured against the frameworks. The trading framework is set by the Board of Lyse Produksjon AS. The overall risk framework is currently EUR 3.0 million and the future price risk framework is also EUR 1.5 million.

In the portfolios, both classed in the balance sheet as derivatives at fair value over profit or loss, financial price derivatives are dealt with principally as futures, forwards, options and EUAs (CO2 emissions quotas). The portfolio value of any financial energy contracts entered into varies according to current forward prices on the Nordic energy market.

The Group also has other financial energy contracts that are subject to a considerable price risk. This applies to energy entitlement commitments with financial settlement and pre-paid energy sales contracts. These contracts are classed as long-term derivatives at fair value with changes in value over profit or loss.

The analysis below illustrates the impact of an increase/decrease of forward rates in the coming years on the consolidated result after tax. For changes in the energy price, the analysis is based on all forward prices for energy fluctuating by 30% in each direction. All other variables are kept constant.

31.12.12

impact on profit/loss of a change in the energy price Fair value +30% -30%

Financial instruments, energy contracts, hedging portfolios/purposes 173 177 -102 680 102 680

Financial instruments, energy contracts, trading portfolios 1 524 1 370 -1370

Energy entitlement commitments with financial settlement -27 574 -2 831 2 831

Other financial energy contracts/commitments -254 312 -136 398 136 398

total -107 185 -240 539 240 539

(All amounts in NOK '000s)

34


Note 3 continues

31.12.11


Financial instruments, energy contracts, hedging portfolios/purposes 61 635 -301 801 302 128

Financial instruments, energy contracts, trading portfolios 10 341 0 0



total -253 069 -521 178 521 585

31.12.10


Financial instruments, energy contracts, hedging portfolios/purposes -537 134 -432 701 398 892

Financial instruments, energy contracts, trading portfolios -18 246 3 426 -3 426



total -1 025 420 -683 926 650 117

All the items in the table are entered on the balance sheet at fair value with changes in value through profit or loss.

(ii) currency riskBecause of its business activities, the Lyse Group is exposed to foreign currency risk in several currencies. This risk is particularly relevant in relation to the EUR through participation in the Nordic energy market. The foreign currency risk arises from future trade transactions and balance sheet value of assets and liabilities. According to the Group's financial strategy, Lyse's foreign currency risk should be low.

As all trade of physical and financial energy on the Nordic energy exchange is listed and traded in EUR, the Lyse Group is exposed to currency risk. The currency risk linked to sales of physical energy generation is significant, but relatively limited compared to the risk linked to the energy price, since energy prices normally fluctuate more than currency exchange rates. To mitigate the foreign currency risk in the Group's energy generation, the Board has adopted a strategy of hedging future foreign currency cash flows. Forward contracts are used mainly to hedge future currency exchange rates. Forward contracts are entered into for the current year and the next two calendar years within more specifically defined shares for hedging probable foreign currency exposure. The level of hedging is greatest for the most immediate cash flow. At year-end, a minimum of 70% and a maximum of 100% of net estimated foreign currency exposure linked to financial and physical sales of energy for the next year will be hedged.

The sale of currency futures is in a dedicated portfolio. For trades entered into in this portfolio, the documentationrequirements and efficiency measurement requirements have been fulfilled for hedge accounting in accordance with IAS 39. In the financial statements, this portfolio of foreign currency derivatives is classified as being held for hedging purposes with changes in value against equity. In 2012, NOK 77 million were included in equity (NOK 134 million in 2011 and NOK 178 million in 2010).

In addition to the sale of currency this strategy also opens up the opportunity for buying back currency within the specified limits for minimum and maximum levels of hedged future cash flows. The buy-back activity is in a specific trading portfolio, which is classed, in accordance with IFRS, as derivatives at fair value with changes in value over profit or loss. This means that the market value of the contracts is included as of the balance sheet date. The change in value for the period is recognised over profit or loss.

The principal in a EUR 41 million loan, which was redeemed when it fell due in October 2012, was hedged using a rolling FX swap every 6 months. This is classified in the financial statements as being held for hedging purposes with changes in value over profit or loss. The hedge was 100% effective. In 2012, NOK +1 million was included in the result (NOK +9 million in 2011 and NOK -9 million in 2010).


35


Note 3 continues

The Lyse Group's bank deposits, receivables and liabilities in foreign currency are exposed to exchange rate fluctuations. The same applies to the aforementioned other financial energy contracts, as a consequence of the energy price being quoted in EUR. If the exchange rate for NOK in relation to other currencies was 10% weaker/stronger, and if all other variables were constant, this would lead to the following changes in profit/loss after tax and in equity in relation to the tables below. The change is due to currency gains/losses in connection with conversion of the above-mentioned items.

31.12.12

impact on profit/loss of a change in foreign currency Fair value +10% -10%

Financial instruments, currency derivatives 26 886 -12 520 12 851

Financial instruments, energy contracts, hedging portfolios/purposes 173 177 12 469 -12 469

Financial instruments, energy contracts, trading portfolios 1 524 110 -110

Energy entitlement commitments with financial settlement -27 574 -943 943

Other financial instruments/commitments -254 312 -25 492 25 492

Bank deposits/withdrawals in foreign currency 143 929 10 363 -10 363

Trade receivables in foreign currency 108 372 7 803 -7 803

Accounts payable in foreign currency -81 898 -5 897 5 897

total 90 104 -14 108 14 439

31.12.11


Financial instruments, currency derivatives 9 766 -4 516 5 671

Financial instruments, energy contracts, hedging portfolios/purposes 61 635 4 438 -4 438


Energy entitlement commitments with financial settlement -27 624 -743 743


Bank deposits/withdrawals in foreign currency 118 001 8 496 -8 496


Non-current liabilities in foreign currency -320 401 -412 412


total -439 808 -66 214 67 369

31.12.10


Financial instruments, currency derivatives 1 527 6 625 -6 641

Financial instruments, energy contracts, hedging portfolios/purposes -537 134 -38 674 38 674

Financial instruments, energy contracts, trading portfolios -18 246 -1 314 1 314



Bank deposits in foreign currency -202 -15 15


Non-current liabilities in foreign currency -322 475 -504 504


total -1 399 361 -116 613 116 597

Receivables, liabilities and bank deposits are recorded at amortised cost. Other items are recorded on the balance sheet at fair value with changes in value over profit or loss.


36


Note 3 continues

impact on equity of a change in foreign currency 31.12.12 31.12.11 31.12.10

Financial instruments, currency derivatives – cash flow hedging

Fair value 107 281 186 258 247 665

+ 10% -102 240 -135 167 -169 315

- 10% 102 240 135 167 169 315

The financial instruments in the table are recorded on the balance sheet at fair value with changes in value over equity since they are designated as effective hedge instruments.

The table below specifies outstanding foreign currency contracts on the balance sheet date:

Average hedge rate 31.12.12 31.12.11 31.12.10

2011 8.61

2012 9.06 9.11

2013 8.13 8.47 8.53

2014 7.93 8.18

2015 8.20 8.25

total 8.09 8.72 8.79

hedged amount Eur 31.12.12 31.12.11 31.12.10

2011 135 000

2012 125 000 120 993

2013 100 000 60 000 55 000

2014 55 000 25 000

2015 40 000 30 000

total 195 000 240 000 310 993

Fair value in Nok 31.12.12 31.12.11 31.12.10

2011 98 458

2012 138 882 126 522

2013 70 280 46 373 22 685

2014 19 885 1 289

2015 17 116 -286

total 107 281 186 258 247 665

Maturity summary of short-term derivatives

current assets 31.12.12 31.12.11 31.12.10

< 12 months 184 673 207 358 191 472

> 12 months 116 145 89 903 92 300

total 300 818 297 261 283 772

current liabilities 31.12.12 31.12.11 31.12.10

< 12 months 32 765 22 370 481 474

> 12 months 42 960 21 032 150 067

total 75 725 43 402 631 541


37


Note 3 continues

(iii) Variable rate and fixed rate riskThe Group's interest risk is largely linked to non-current liabilities and short-term debt instruments. Variable rate loans involve a risk of increased financial costs in the income statement.

Fixed rate loans are recorded at amortised cost so that changes in fair value are not recognised. Exceptions to this are loans that are hedge objects in fair value hedging. This applies to bond loans that are "swapped" from a fixed to a variable rate.

Lyse employs interest rate swap agreements to manage the variable rate risk. The duration can be changed via agreements of this type. Lyse's expectations concerning the future interest level are the most important assessment factor when the duration is to be fixed.

Interest swap agreements (variable to fixed rates) are recorded at fair value with a changes in value recognised against equity, since they are designated effective hedge instruments. In 2012, NOK -115 million was included in equity (NOK -90 million in 2011 and NOK -63 million in 2010). For information about amounts and interest terms related to swap agreements, please refer to note 10.

Interest swap agreements (fixed to variable rates) and associated hedge objects are recorded at fair value and any change to fair value is entered into the income statement. There is no posting to profit or loss/equity since interest swap and hedging objects have the same change in value, with the plus/minus signs reversed.

Lyse's interest risk, expressed as a weighted average duration, shall be between 1 and 5 years according to the financial strategy approved by the Board. The items included in the calculation of duration are aggregate surplus liquidity, interest- bearing liabilities and agreements that have in-built interest exposure or interest hedging elements. When assessing interest risk, the operation's inherent hedge linked to the grid business and resource rent tax is taken into consideration.

In addition, Lyse has long-term financial energy obligations which are influenced by changes in interest. Any change in the fair value of these commitments is recognised at fair value over profit or loss.

The Board's financial strategy frameworks are followed up in the form of monthly financial meetings and quarterly financial reporting.

key figures from the financial strategy

targets 31.12.12 target attainment

Liquidity reserve * (which can be mobilised in 5 working days)

Sufficient to cover next 6

months' capital requirements

NOK 1 809 million

164% (within target)

Average duration of fixed rate financing (duration) Between 1 to 5 years 2.0 years

Within target

* The liquidity reserve consists of liquid assets and unused drawing rights.

31.12.12

impact on the profit/loss of change in interest rates Fair value +50 bp -50 bp

Financial instruments, energy contracts, hedging portfolios/purposes 173 177 -804 804


Energy entitlement commitments with financial settlement -27 574 4 220 -6 188

Other financial instruments/commitments -254 312 4 177 -4 298

Non-current liabilities with variable rate taking interest swaps into consideration -4 227 000 -15 217 15 217

total -4 334 185 -7 622 5 533


38


Note 3 continues

31.12.11


Financial instruments, currency derivatives 9 766 768 -768

Financial instruments, energy contracts, hedging portfolios/purposes 61 635 -534 528

Financial instruments, energy contracts, trading portfolios 10 341 -25 25




total -5 005 704 -9 931 8 429

31.12.10


Financial instruments, currency derivatives 1 527 405 -414

Financial instruments, energy contracts, hedging portfolios/purposes -537 134 1 610 -1 584

Financial instruments, energy contracts, trading portfolios -18 246 26 -26




total -5 094 866 -3 174 1 877

impact on equity of change in interest rates 2012 2011 2010

Financial instruments currency and interest derivatives - cash flow hedging

Fair value -53 048 61 172 159 991

+ 50 bp 13 621 17 373 9 732

- 50 bp -14 451 -17 355 -5 916

The financial instruments in the table are recorded on the balance sheet at fair value with changes in value over equity since they are designated as effective hedge instruments.

For cash flow hedging, the following sums have been transferred from equity and included in profit/loss: 2012 2011 2010

Energy sales, transmission income and other operating income 138 882 98 458 16 899

Net financial items -14 554 -35 602 -56 831

total 124 328 62 856 -39 932


39


Note 3 continues

(b) credit riskCredit risk arises in connection with selling to customers, trade in derivatives and deposits in banks and financial institutions. Overall, the Group's credit risk is regarded as moderate. Historically, no items other than trade receivables have suffered losses.

customersThe Group's sales to retail and corporate customers are spread over a diversified customer portfolio, consisting of numerous and small customers. As a consequence, the Group has no significant concentration of customer credit risk. Lyse has proce-dures for which products/customers credit checks are performed for before any sale. Payment generally takes place in arrears on receipt of bill. Historically, the customers' capacity and willingness to pay has been good. A separate department continuously follows up trade receivables. Actions taken include the use of payment reminders, setting up instalment plans for customers experiencing difficulty paying, the use of debt collection firms and possibly switching off supply.

With certain exceptions, Lyse employs standard customer contracts, which the Norwegian Electricity Industry Association and the Consumer Ombudsman have agreed. The customer terms and conditions contain provisions about billing and pay-ment deadlines. The volume of trade receivables follows normal trends in the size of turnover. The Group has no mortgages as security. As of 31 December 2012, NOK 17.3 million has been allocated to cover losses (2011: NOK 23.5 million, 2010: NOK 23.2 million). This constitutes around 1.8% of trade receivables (2011: 2.4%, 2010: 1.8%). Please also refer to Note 11 concerning trade receivables.

counterparty risk - financial energy contractsOf the financial energy contracts entered into in 2012 almost all were cleared with Nasdaq OMX. When trades are cleared on the Nasdaq OMX exchange, that company steps in as legal counterparty and guarantees settlement, thus minimising counterparty risk. Nasdaq OMX has a clearing licence from the Financial Supervisory Authority of Norway. For contracts settled on a bilateral basis, the counterparty comprises major, well-known Norwegian/Nordic companies, or companies of which Lyse has thorough knowledge.

credit risk - other financial instrumentsLyse assumes a credit risk by investing surplus liquidity and, as a consequence of counterparty risk, by utilising hedginginstruments such as interest-swap agreements, currency futures etc. The credit risk is limited because counterparties are exclusively first class banks and companies.

receivablesThe items included here are other current liabilities, receivables, receivables related to close associates and other non- current receivables. The credit risk is considered low since major items are with sound counterparties and the other items have been distributed among many counterparties. The Group has no mortgages as security. The difference between book value and credit risk is due to some accounting items, such as prepaid costs, not being defined as a credit risk in relation to IFRS 7; for example, prepaid costs.

The table below shows a summary of items exposed to credit risk.

31.12.12 31.12.11 31.12.10

maximum credit risk exposureBook value

Creditrisk

Book value

Creditrisk

Book value

Creditrisk

Fixed assets

Derivatives 87 325 87 325 103 559 76 619 176 060 150 399

Other receivables 298 838 211 285 242 690 115 670 237 885 98 688

current assets

Trade and other receivables 1 295 299 1 261 835 1 100 967 1 068 471 1 508 986 1 472 052

Derivatives 300 818 309 018 297 261 297 261 283 772 283 772

Bank deposits, cash and cash equivalents 860 306 860 306 667 537 667 537 912 197 912 197

total 2 842 586 2 729 769 2 412 014 2 225 558 3 118 900 2 917 108

Apart from financial energy contracts being cleared to Nasdaq OMX, no other security is pledged in the Group.


40


Note 3 continues

(c) Liquidity riskOne of the main duties of the Lyse Group's central finance department is to ensure that Lyse is financed so that there are liquid funds, at all times, to meet ongoing payment commitments. The finance department monitors the Group's liquidity by means of rolling forecasts based on the anticipated cash flow.

In line with the group’s financial strategy Lyse maintains a considerable contingency purse, which can be made available in the course 5 working days. The liquidity reserve consists of liquid assets and unused drawing rights. It is a requirement that the liquidity reserve be large enough to cover payments due and estimated new loans within a 6 month rolling period. Furthermore borrowing must have a diversified maturity structure. The aforementioned circumstances, together with Lyse's high credit rating, mean that the Group's liquidity risk is regarded as low.

The tables below specify the maturity of financial commitments. The amounts in the tables are non-discounted cash flows.In the maturity analysis, future interest and instalments are included. Spot rates are used for estimated interest rates.

maturity analysis of financial liabilitiesremaining term as of 31.12.12

1st half-year

2013

2nd half-year

2013 20142015

- 2017 Later Total

derivatives:

Financial instruments, currency derivatives – cash flow hedging*) -383 032 -353 568 -405 130 -294 640 0 -1 436 370

Financial instruments, interest derivatives – cash flow hedging -35 724 -19 346 -38 620 -65 033 -1 293 -160 016

Financial instruments energy contracts - held for trading purposes -1 022 -1 022 -1 990 -1 992 0 -6 026

Energy entitlement commitments with financial settlement -364 -364 -736 -2 263 -69 022 -72 749

Other financial instruments/commitments -21 488 -21 488 -40 930 -110 464 -99 355 -293 725

other financial liabilities:

Non-current liabilities and short-term debt instruments -1 076 263 -848 502 -902 733 -4 482 943 -4 680 850 -11 991 291

Trade payables and other current liabilities -1 341 137 0 0 0 0 -1 341 137

total -2 859 030 -1 244 290 -1 390 139 -4 957 335 -4 850 520 -15 301 314

Financial derivatives settled gross (inflows) 417 748 394 963 436 088 327 968 0 1 576 767

*) Financial derivatives settled gross (outflows) at spot price


41


Note 3 continues

maturity analysis of financial liabilities remaining term as of 31.12.11

1st half-year

2012

2nd half-year

2012 20132014

- 2016 Later Total

derivatives:


Financial instruments, interest derivatives – cash flow hedging -18 538 -19 976 -32 410 -46 468 -6 691 -124 083

Financial instruments, currency derivatives - fair value hedging -1 275 0 0 0 0 -1 275

Energy entitlement commitments with financial settlement -447 -448 -946 -2 949 -85 328 -90 118


other financial liabilities:

Non-current liabilities and short-term debt instruments -1 731 075 -1 054 315 -783 559 -3 576 239 -5 784 979 -12 930 167


total -3 562 683 -1 552 448 -1 321 425 -4 162 301 -5 984 529 -16 583 385

Financial derivatives settled gross (inflows) 596 509 535 053 511 827 451 814 0 2 095 203


maturity analysis of financial liabilitiesremaining term as of 31.12.10

1st half-year

2011

2nd half-year

2011 20122013

- 2015 Later Total

derivatives:


Financial instruments, interest derivatives – cash flow hedging -17 583 -41 930 -36 475 -18 231 10 849 -103 370

Financial instruments, currency derivatives - fair value hedging -14 964 0 0 0 0 -14 964

Financial instruments, energy contracts, hedging portfolios/purposes -193 412 -193 412 -129 935 -32 319 0 -549 078

Financial instruments energy contracts trading portfolio -11 200 -11 200 4 076 - - -18 324

Energy entitlement commitments with financial settlement -595 -590 -1 082 -3 181 -85 194 -90 642


other financial liabilities:Non-current liabilities and short-term debt instruments -1 600 516 -739 606 -1 484 953 -3 112 036 -6 267 918 -13 205 030


total -3 815 799 -1 484 448 -2 649 473 -3 739 312 -6 523 245 -18 212 278

Financial derivatives settled gross (inflows) 646 818 513 830 1 101 095 471 993 0 2 733 736



42


Note 3 continues

risk associated with capital managementThe principal goal of capital management is to safeguard continued operations to ensure a return for the owners. In addition, the Group shall maintain an appropriate capital structure that balances the considerations linked to minimising capital costs and the Group's need to have significant financial freedom of action.

Lyse's shareholders have a long-term, industrial perspective for the development of the Group. As a consequence of this objective, the Group does not have any financial investments under management since it is seeking to minimise the Group's interest-bearing liabilities.

As a financial platform for the Group's financing activities a subordinated loan has been established, where the debtors are the shareholders in Lyse Energi AS. The loan agreement guarantees the Group long-term, predictable financing and reduces the Group's refinancing risk and interest risk. The instalment structure has been adapted to the Group's long-term industrial objectives.

Any further financing is provided by the capital market, where the group seeks to cover its financing needs by paying the lowest possible capital costs, taking into consideration that the adopted risk ceiling set out in the Group's financing strategy is to be adhered to. To guarantee the Group's financial freedom of action, emphasis is placed on maintaining credit lines which ensure the availability of capital in the short term.

For any financing in addition to the subordinated loan the Lyse Group has placed a negative pledge and there are capitalrequirements from lenders, stipulating that the market value of the Group's equity is not to be lower than a set minimum. In addition, agreements have been signed stating that security declarations or guarantees for all of the Group's commit-ments shall not constitute more than 15% of total book assets. The limitation does not apply to ordinary guarantees entered into in conjunction with trade in securities and financial instruments, and ordinary sales pledges in the case of supplies of goods and services on credit. The capital requirements are monitored on an ongoing basis and the Lyse Group satisfies these.

The Lyse Group's dividend policy is set out in a shareholders' agreement entered into at the same time as the agreement on the subordinated loan capital was established. The reduced dividend policy is balanced against the terms of the loan agreement for subordinated loan capital, to ensure that the Group is assured of a responsible level of equity in a long-term industrial perspective. The shareholders in the Lyse Group consider a stable, predictable dividend policy to be important.

Assessment of fair value:Lyse has implemented IFRS 7 concerning financial instruments measured at fair value on the balance sheet date. IFRS 7 requires fair value measurements to be presented on a level with the following subdivision into levels for measuring fair value:

Level 1: Quoted price in an active market for an identical asset or liability.Level 2: Valuation based on observable factors - either direct (price) or indirect (derived from prices) - other than quoted price (used in level 1) for the asset or liability. Level 3: Valuation based on factors that are not taken from observable markets (non-observable assumptions).

43


Note 3 continues

carrying amount as of 31.12.10 Financial shares and options available for sale Level 1 Level 2 Level 3 Total

Quoted shares Norway 105 543 0 0 105 543

Non-quoted shares Norway 0 0 11 867 11 867

total 105 543 0 11 867 117 410

carrying amount as of 31.12.12 - derivatives assets Level 1 Level 2 Level 3 Total

Financial energy contracts - fair value, customers' positions 0 23 033 0 23 033

Financial energy contracts - held for trading purposes 0 180 619 0 180 619

Forward exchange contracts - cash flow hedge 0 107 281 0 107 281

Currency derivatives - held for trading purposes 0 26 886 0 26 886

Interest swap agreements - fair value hedging 0 42 124 0 42 124

Other financial instruments 0 0 8 200 8 200

total derivatives fixed assets and current assets 0 379 943 8 200 388 143

carrying amount as of 31.12.12 - derivatives liabilities Level 1 Level 2 Level 3 Total



Interest swap agreements - cash flow hedge 0 160 329 0 160 329

Financial energy contracts - non-current liabilities 0 0 287 288 287 288

total derivatives non-current and current receivables 0 213 464 287 288 500 752

carrying amount as of 31.12.11 - Financial shares and options available for sale Level 1 Level 2 Level 3 Total


Non-quoted shares Norway 0 214 000 5 942 219 942

total 110 197 214 000 5 942 330 139







Call option shares purchased 0 0 26 940 26 940




Forward currency contracts - fair value hedging 0 1 275 0 1 275


Financial energy contracts - other 0 5 410 0 5 410


total derivatives non-current and current receivables 0 153 934 326 559 480 493

44


Note 3 continues

carrying amount as of 31.12.10 - Financial shares and options available for sale Level 1 Level 2 Level 3 Total



total 435 113 0 429 170 864 283





Forward currency contracts - fair value, customers' positions 0 4 134 0 4 134



Call option shares purchased 0 0 25 661 25 661





Forward currency contracts - fair value hedging 0 14 964 0 14 964

Currency derivatives - held for trading purposes 0 559 0 559



total derivatives non-current and current receivables 0 719 215 496 565 1 215 780

Level 1: The fair value of financial instruments traded on active markets is based on market price on the date of the balance sheet. A market is regarded as being active if the market rates are easily and regularly available from a stock market, trader, broker, industry group, pricing service or regulatory authority, and these prices represent actual and regularly occurring "arm's length" market transactions. The market price used for financial assets is the current purchase rate; for financial commitments, the current sales rate is used. These instruments are included in level 1. Instruments included in level 1 primarily encompass the Oslo Stock Exchange equity instruments classed as held for trading purposes or available for sale.

Level 2: If all essential data required for setting the fair value of an instrument is observable data, the instrument is included in level 2. Products in the energy market are based on bid and ask prices. Fair value of forward currency contracts entered into are calculated on the basis of the spot rate for the currency concerned as at close of business on the balance sheet date (the Norges Bank rate). Fair value of interest swap agreements is calculated on the basis of future interest rate term structure. The fair value of financial instruments not traded on an active market is determined by using valuation methods. These valuation methods maximise the use of observable data when available, and rely as little as possible on the Group's own estimates.

Level 3: If one or more pieces of essential data are based on observable market data, the instrument is included in level 3. In agreements where there is a need for prices beyond observable market data, the market data are adjusted by an anticipated yearly growth rate of 2 per cent. Please see also note 10 for further information.


45


Note 4 - Important accounting estimates and discretionary assessments

Estimates and discretionary assessments are subject to ongoing evaluation and are based on factors such as historical experience and anticipated future events. As a result, the account estimates used may differ from the final outcome. Estimates and assumptions used for substantial asset and liability items entered into the balance sheet are shown below.

Fair value of derivatives and other financial instruments, including sharesThe fair value of financial instruments that are not traded in an active market (e.g. unlisted derivatives and energy contracts settled financially) are stipulated by using valuation techniques. The Group assesses and selects methods and assumptions that are based, as far as possible, on market conditions on the date of the balance sheet. Please refer to note 3 for a more detailed description of estimates used and sensitivity calculations. For many of the financial assets available for sale (such as shares not being sold on an active market) the Group applies valuation techniques to estimate fair value. Please refer to note 2.8.d for a more detailed description of the principles used for this. Pension liabilities The current value of pension liabilities depends on several factors that have to be established by using a number of estimated assumptions.. The assumptions applied in the calculation of pension costs include the discount rate, expected return on pension funds, plus adjustments to salaries and the Norwegian national insurance basic amount. All changes to these assumptions influence the pension liabilities amount entered on the balance sheet. Please refer to Note 19 for a more detailed description of applied estimates. deferred tax, resource rentThe balance sheet entry of deferred tax benefit on negative resource rent income to be carried forward is based on a fore-cast of future resource rent income per power plant liable to tax. A negative resource rent income that can probably be applied over a 15-year period is entered on the balance sheet. Among other things, the forecast is based on estimates of future generation volumes, energy prices, generation-related costs and interest levels. Any change in these assumptions may be of significance for the proportion of the negative resource rent income that is to be carried forward which can be recognised on the balance sheet. In addition, any future changes to power plant taxation may involve significant changes to the deferred tax benefit entered on the balance sheet. Plant and machineryPlant and machinery are depreciated over anticipated useful life. This forms the basis for annual depreciation in the income statement. The expected useful life is estimated on the basis of experience, history and discretionary assessment linked to future use. If there is any change to these estimates, the depreciation plans will be amended. Estimated impairmentThe Group has made considerable investments in plant and machinery, intangible assets and financial assets. Impairment tests are carried out for these assets when any indications of possible impairment exist. Such indications might include changes in market prices, agreement structures, negative events or other operational circumstances. In addition, certain intangible assets are tested annually for impairment (see Note 7). Write-downs are implemented as long as the book value exceeds the sum recoverable (see Note 2.7). The sum recoverable from cash-generating units is either net sales value or utility value, whichever is higher. In calculating the sum recoverable, numerous estimates are carried out concerning future cash flows in which sales price, sales volume, operating margins and return requirements are the most important factors.

46


Note 5 - Business areas

Segment information is reported in accordance with IFRS 8. The Group reports operating segments in line with the way in which the Group management team makes, follows up and evaluates its decisions. The operating segments are identified on the basis of the internal management information that is periodically reviewed by the management team and which is used for resource allocation and assessment of earnings.

EnergyThe energy business area operates within energy generation, energy trading, energy sales to end-users, as well as natural gas, district heating and cooling. This business area owns power plants, gas plants, and district heating and cooling plants.

key figures, Energy 2012 2011 2010

Mean generation GWh 5 743 5 743 5 668

Generation hydroelectricity GWh 6 437 4 210 5 271

System price Nord Pool øre/kWh 21.83 35.98 40.71

Book value of hydroelectricity per KWh NOK/kWh 1.23 1.28 1.17

Power supply, end-user GWh 2 881 2 910 3 146

Supplied volume, Natural gas GWh 599 552 674

Supplied volume, District heating GWh 110 105 114

LNGThe LNG business area operates within the fields of processing, sales and distribution of LNG (liquefied natural gas). The business area owns production facilities, reception terminals and customer terminals.

key figures, LNG 2012 2011 2010

Production capacity Tonnes 300 000 300 000 0

No. of customers 28 14 0

Supplied volume Tonnes 137 429 71 100 0

Supplied volume GWh 2 085 1 079 0

Book value LNG system and reception terminals MNOK 2 099 1 894 0

transmissionThe transmission business area operates within the field of energy distribution and is regulated by the Norwegian Water Resources and Energy Directorate (NVE). This business area owns infrastructure associated with the distribution of hydroelectricity.

key figures, transmission 2012 2011 2010

No. of mains customers 132 590 130 000 127 000

Supplied energy GWh 5 632 5 286 5 514

Net capital (NVE capital) used as basis in income framework MNOK 2 138 1 866 1 782

Measured efficiency (NVE efficiency) % 1.12 1.10 1.13

KILE cost MNOK 8.70 9.02 11.69

47


telecommunicationThe telecommunication business area offers products and services within broadband, telephony, alarms and IT, and owns the fibre optic infrastructure within the Group.

key figures, telecommunications 2012 2011 2010

Capital employed 2 889 2 874 2 342

EBITDA 530 391 258

EBITDA margin % 27% 23% 19%

Book value telecommunications infrastructure MNOK 2 694 2 602 1 805

No. of kilometres, fibre network Km 17 255 13 326 7 143

No. of active fibre customers in Altibox partnership 281 923 238 535 212 931

No. of active fibre customers owned by Lyse 117 453 104 298 75 961

No. of fibre contracts sold 300 009 265 855 233 518

development, operation and maintenanceThe development, operation and maintenance business area supplies services within the fields of infrastructure develop-ment, operations and maintenance. The services are supplied mainly to the transmission, energy and telecommunication business areas.

other functions The other function item includes Lyse AS and Lyse Energi AS. Lyse AS primarily provides marketing and customer services to internal business areas. Lyse Energi AS is the Group's parent company and provides corporate services within finance, personnel and other common services. Lyse Energi AS owns the office building.

The Group's business operations are primarily in Rogaland. However, the telecommunication business area has partnership agreements with companies located elsewhere in Norway. Transactions and transfers between group business areas are carried out on ordinary business terms and conditions. No individual external customer contributes any more than 10% of the enterprise's operating income.

Note 5 continues

48


Note 5 continues

results

NOK million Energy LNGTrans-

missionTelecom-

munication

Develop-ment,

operationand main-

tenance

Other and

elimi-nations Group

2012

Gross operating income 2 636 716 943 1 963 772 -895 6 134

Inter-segment sales -164 -11 -8 -167 -671 940 -81

Sales income 2 472 705 935 1 796 100 44 6 053

EBITDA *) 1 757 -84 394 530 20 -54 2 564

Depreciation and write-downs 232 76 148 373 9 5 841

Share of profit/loss in associated companies and joint ventures -3 0 0 -2 0 -2 -7

Other losses/gains, net -130 5 0 2 0 0 -122

Operating profit 1 658 -165 246 158 12 -56 1 853

Financial costs -227 -97 -35 -111 -3 -125 -598

Financial income 58 5 4 10 2 -12 68

Profit/loss before tax 1 490 -257 216 56 12 -193 1 323

Tax costs -733 72 -61 -25 -3 56 -693

Profit/loss for the year 757 -185 155 31 8 -137 630

Of which:

Unrealised changes in value (after tax) 94 0 0 0 0 0 94

Returned result effect more/less income (after tax) 0 0 46 0 0 0 46

Total 94 0 46 0 0 0 140

Depreciation and write-downs, fixed assets 232 75 148 352 9 6 821

Depreciation, intangible assets 0 1 0 20 0 0 20


*) EBITDA is defined as: operating result + depreciation and write-downs + share of profit associated companies/joint ventures + other losses/gains net.

49


Note 5 continues


missionTelecom-

munication

Develop-ment,

operationand main-

tenance

Other and

elimi-nations Group

2011

Gross operating income 2 403 336 1 147 1 681 861 -1 034 5 395

Inter-segment sales -229 -12 -16 -142 -769 1 069 -99

Sales income 2 174 325 1 131 1 539 92 36 5 296

EBITDA *) 1 497 -109 508 391 44 -69 2 263

Depreciation and write-downs 200 63 143 361 8 5 781

Share of profit/loss in associated companies and joint ventures -2 0 0 -19 0 -8 -29

Other losses/gains, net -718 0 0 -1 0 0 -720

Operating profit 2 018 -172 364 50 36 -66 2 231

Financial costs -281 -154 -38 -269 -6 -180 -927


Profit/loss before tax 1 871 -322 330 -202 37 -336 1 377

Tax costs -816 90 -93 7 -10 46 -776

Profit/loss for the year 1 055 -231.9 237 -195 26 -290 602

Of which:

Unrealised changes in value (after tax) 539 0 0 0 0 0 539


Total 539 0 98 0 0 0 637





2010

Gross operating income 2 778 0 1 231 1 356 918 -906 5 377

Inter-segment sales -212 0 -24 -123 -821 947 -233

Sales income 2 566 0 1 207 1 233 97 41 5 145

EBITDA *) 1 797 -39 444 258 99 -29 2 530

Depreciation and write-downs 229 -33 139 264 9 45 652

Share of profit/loss in associated companies and joint ventures -37 0 0 15 0 0 -22

Other losses/gains, net 418 33 0 1 0 0 451

Operating profit 1 188 -39 305 -21 90 -74 1 449

Financial costs -259 -48 -40 -91 -5 -132 -575


Profit/loss before tax 1 037 -86 267 -104 87 -252 949

Tax costs -712 26 -69 18 -24 69 -692

Profit/loss for the year 325 -60 198 -86 63 -183 258

50


Note 5 continues


missionTelecom-

munication

Develop-ment,

operationand main-

tenance

Other and

elimi-nations Group

Of which:

Unrealised changes in value (after tax) -311 0 0 0 0 0 -311


Total -311 0 49 0 0 0 -262





business area's assets and liabilities


missionTelecom-

munication

Develop-ment,

operationand main-

tenance

Other and

elimi-nations Group

2012

Deferred tax benefit 259 0 0 0 2 -2 259

Other intangible assets 105 0 0 264 0 2 371

Plant and machinery 8 587 2 038 2 612 3 002 44 225 16 508

Investments in associated companies and joint ventures 82 0 0 81 0 0 163

Investments in equities and units 9 0 0 2 0 106 117

Other financial fixed assets 1 000 66 6 139 1 -826 386

Current assets 864 241 92 398 225 691 2 511

Total assets 10 907 2 345 2 710 3 886 272 196 20 316

Equity 2 290 522 882 1 001 94 -236 4 552

Deferred tax 1 693 112 100 123 0 -88 1 940

Long-term loans 3 863 1 459 1 201 2 105 0 -141 8 487

Other non-current liabilities 1 274 29 33 85 91 185 1 696

Short-term loans 2 0 0 0 0 1 725 1 727

Other current liabilities 1 786 222 493 572 88 -1 247 1 913

Total equity + liabilities 10 907 2 345 2 710 3 886 272 197 20 316

Investments in plant and machinery 210 249 233 452 17 99 1 261

Investments in equities and units 0 0 0 33 0 21 54

51


Note 5 continues


missionTelecom-

munication

Develop-ment,

operationand main-

tenance

Other and

elimi-nations Group

2011

Deferred tax benefit 315 0 0 0 0 0 315Other intangible assets 105 0 0 254 0 9 368Plant and machinery 8 639 1 831 2 506 2 966 38 109 16 088Investments in associated companies and joint ventures 76 0 0 54 0 17 146Investments in equities and units 6 0 0 214 0 110 330Other financial fixed assets 1 811 91 6 136 5 -1 703 347Current assets 733 1 167 235 237 405 -640 2 137Total assets 11 684 3 089 2 747 3 861 449 -2 099 19 731

Equity 2 333 582 826 866 84 -328 4 364Deferred tax 1 701 155 78 137 0 -253 1 818Long-term loans 4 405 2 219 1 235 2 267 140 -2 744 7 522Other non-current liabilities 1 302 0 38 73 99 160 1 672Short-term loans 0 0 0 0 0 2 620 2 620Current liabilities 1 943 132 570 518 126 -1 555 1 734Total equity + liabilities 11 684 3 089 2 747 3 861 449 -2 099 19 731

Investments in plant and machinery 209 237 234 455 15 149 1 299Investments in equities and units 14 0 0 2 0 0 16

2010

Deferred tax benefit 365 46 0 0 2 -56 357Other intangible assets 93 0 0 137 0 27 257Plant and machinery 8 597 1 749 2 379 2 136 31 150 15 042Investments in associated companies and joint ventures 83 0 0 173 0 9 265Investments in equities and units 50 0 0 378 0 437 864Other financial fixed assets 496 66 6 140 2 -296 414Current assets 1 067 81 339 208 454 570 2 718Total assets 10 752 1 941 2 724 3 171 489 842 19 918

Equity 2 027 125 774 869 83 415 4 294Deferred tax 1 541 0 59 52 0 -123 1 530Long-term loans 3 440 879 1 257 1 889 150 57 7 672Other non-current liabilities 1 475 60 37 42 90 144 1 848Short-term loans 0 0 0 0 0 1 980 1 980Current liabilities 2 268 877 597 318 166 -1 632 2 594Total equity + liabilities 10 752 1 941 2 724 3 171 489 842 19 918

Investments in plant and machinery 412 154 278 429 6 13 1 292Investments in equities and units 65 0 0 70 0 0 135

Financial information for each segment is drawn up, as far as possible, in line with the Group's policies for preparing consolidated financial statements. Each segment may consist of several companies. Transactions and items outstanding between companies within a segment are eliminated. Eliminations in the consolidated financial statements are distributed to the various segments in line with underlying operations. Transactions and items outstanding between the segments are eliminated at a group level and are shown in a specific column in the segment notes.

52


Note 6 – Plant and machinery

Systems Energy

SystemsLNG

Systems broad-

bandSystems

GridOther

Buildings

Machinery and

FittingsPlots

of land

Systems under con-

struction Total

Financial year 2010Carrying amount as of 01.01.10 7 919 085 0 1 733 853 1 865 484 248 084 253 656 43 574 776 823 12 840 559

Additions on acquisition of subsidiaries (note 30) 0 1 548 816 0 0 0 5 203 0 0 1 554 019

Additions 141 967 188 191 415 628 172 533 2 844 22 658 863 346 998 1 291 682

Transferred from systems under construction 57 747 0 2 639 226 477 341 6 861 0 -294 065 0

Disposals 321 0 1 447 0 0 847 0 0 2 615

Year's depreciation 183 877 0 218 539 131 872 11 931 51 837 0 2 500 600 556

Year's write-downs 41 536 0 0 0 0 0 0 0 41 536

carrying amount as of 31.12.10 7 893 065 1 737 007 1 932 134 2 132 622 239 338 235 694 44 437 827 256 15 041 553

balance as of 31.12.10

Acquisition cost 10 547 559 1 737 007 2 741 676 4 402 483 342 876 664 216 44 437 829 756 21 310 010

Accumulated depreciation and write-downs 2 654 494 0 809 541 2 269 861 103 538 428 522 0 2 500 6 268 456


Financial year 2011Carrying amount as of 1.1.11 7 893 065 1 737 007 1 932 134 2 132 622 239 338 235 694 44 437 827 256 15 041 553

Additions on acquisition of subsidiaries (note 30) 0 0 526 530 0 0 96 559 0 0 623 089

Additions 184 205 92 322 452 564 184 119 413 85 091 3 031 297 727 1 299 472

Transferred from systems under construction 521 012 0 7 318 60 851 0 6 481 0 -697 173 -101 511

Disposals 6 853 0 4 024 0 0 3 315 0 331 14 523

Year's depreciation 195 395 61 142 265 568 137 840 9 674 80 600 0 2 744 752 963

Year's write-downs 574 0 0 0 0 6 358 0 0 6 932



Acquisition cost 11 245 923 1 829 329 3 724 064 4 647 453 343 289 849 032 47 468 429 978 23 116 535

Accumulated depreciation and write-downs 2 850 463 61 142 1 075 109 2 407 701 113 212 515 480 0 5 245 7 028 352



53


Systems Energy

SystemsLNG

Systems broad-

bandSystems

GridOther

Buildings

Machinery and

FittingsPlots

of land

Leased means of transport

Systems under con-

struction Total

Financial year 2012Carrying amount as of 1.1.12 8 395 460 1 768 187 2 648 954 2 239 752 230 077 333 552 47 468 0 424 733 16 088 184

Additions on acquisition of subsidiaries (note 30) 0 0 0 0 0 0 0 0 0 0

Additions 104 701 238 903 383 023 159 660 208 114 190 839 33 069 226 412 1 261 005

Transferred from systems under construction 27 222 48 729 2 045 82 846 0 7 562 0 0 -168 404 0

Disposals 0 0 297 0 1 412 19 207 0 0 -682 20 234

Year's depreciation 199 171 66 317 294 268 154 659 10 056 59 359 0 4 006 3 508 791 344

Year's write-downs 29 786 0 0 0 0 0 0 0 0 29 786

carrying amount as of 31.12.12 8 298 426 1 989 502 2 739 458 2 327 599 218 817 376 738 48 307 29 063 479 915 16 507 826


Acquisition cost 11 377 846 2 116 961 4 108 835 4 889 959 342 085 951 577 48 307 33 069 488 668 24 357 307

Accumulated depreciation and write-downs 3 079 420 127 459 1 369 377 2 562 360 123 268 574 839 0 4 006 8 753 7 849 482

carrying amount as of 31.12.12 8 298 426 1 989 502 2 739 458 2 327 599 218 817 376 738 48 307 29 063 479 915 16 507 826

Lifetime3-75 years

10-30 years

3-25 years

10-50 years

33-50 years

3-12 years

Depreciation methodStraight-

lineStraight-

lineStraight-

lineStraight-

lineStraight-

lineStraight-

line

write-downs A valuation has been carried out of the Jørpeland watercourse which resulted in a write-down of the book value. This system falls under systems energy and the Group's write-down for 2012 amounted to NOK 30 million. A number of things have happened after the investment of significance to the power plant's profitability. Estimated investment costs have increased since the decision to invest was made. At the same time the long-term price forecasts have fallen significantly. The impairment test was based on an estimation of the utility value via calculating the present value of the future cash flows. The discount rate used was 5.77% after tax.

Expensed leases: 2012 2011 2010

Machinery and equipment 3 691 5 300 4 800

Properties and plots of land 40 314 28 300 11 400

Expensed r&d 2 661 2 400 3 300

Additions concerning the capitalisation of interest on building loans amount to NOK 13.9 million. The interest rate applied is 4.38%.

Plant and machinery belonging to subsidiaries within the energy business area are written down to their recoverable amount.

Note 6 continues (All amounts in NOK '000s)

54


Note 7 – Intangible assets

Financial year 2010Waterfall

rights Goodwill

Other intangible

assets Total

Carrying amount as of 01.01.10 92 721 108 571 79 939 281 231

Negative goodwill from acquisition of subsidiaries, note 30 0 -69 803 0 -69 803

Recognition of negative goodwill, booked against other losses/gains, net, note 21 0 69 803 0 69 803

Additions 97 0 150 247

Reclassification goodwill/intangible assets 0 8 706 -8 706 0

Reclassification, other balance sheet items 0 0 -14 736 -14 736

Year's depreciation and write-downs 0 0 9 833 9 833

carrying amount as of 31.12.10 92 818 117 275 46 813 256 909


Acquisition cost 92 818 118 040 71 397 282 255

Accumulated depreciation 0 763 24 583 25 346


Financial year 2011


Negative goodwill from acquisition of subsidiaries, note 30 0 33 041 79 851 112 892

Recognition of negative goodwill, booked against other losses/gains, net, note 21 0 0 0 0

Additions 12 295 0 3 740 16 035

Reclassification goodwill/intangible assets 0 -10 124 10 124 0

Reclassification, other balance sheet items 0 0 2 917 2 917







Financial year 2012


Negative goodwill from acquisition of subsidiaries, note 30 0 0 0 0

Recognition of negative goodwill, booked against other losses/gains, net, note 21 0 0 0 0

Additions 0 0 11 380 11 380

Reclassification goodwill/intangible assets 0 0 0 0

Reclassification, other balance sheet items 0 15 065 (3 303) 11 762







Lifetime 0-15 years

Straight-line


55


Goodwill and other intangible assets have mainly been allocated to the Group's telecommunication business area. Waterfall rights entered on the balance sheet are booked against the energy business area. Waterfall rights have unlimited life and are classified as intangible assets. An annual impairment test is carried out to confirm that the book value can be justified. When testing for impairment, the waterfall rights are grouped with their associated power plants, which together constitute the cash flow generating units. The impairment test is carried out based on a fair value assessment. Fair value is determined based on the average production of cash flow generating units multiplied by an industry norm for sales value.

Goodwill and parts of brand names (NOK 4.2 million - classified under Other Intangible Assets) are not depreciated but are subject to an annual impairment test. In the main, these intangible assets have occurred because of business acquisitions. Goodwill and brand names have generally been allocated to the telecommunication business area. A recoverable sum of a cash generating unit is calculated on the basis of the value which the asset would produce for the business and is calculated on the basis of the value of future cash flows. Future cash flows are based on business plans, and are calculated for periods between 10 and 15 years plus terminal value. It has been confirmed, in connection with a transaction in 2013, see note 34, that no write-downs are needed in relation to booked goodwill or brand names.

Other intangible assets are linked mainly to added value associated with branded goods, customer portfolios and purchased operating rights. These intangible assets are depreciated over 3, 13-15 and 6-8 years, respectively.

56


Note 8 – Investments in associated and joint ventures

2012 2011 2010

the following items are recorded net in the income statement and balance sheet

Value of investments in associated companies entered on balance sheet 133 975 146 236 144 427

Value of investments in joint ventures entered on balance sheet 29 513 0 121 002

total investment value in associated companies and joint ventures entered on balance sheet 163 488 146 236 265 430

Share of profit from investments in associated companies -6 527 -9 884 16 488

Write-down of book value of associated companies 0 0 0

Share of profit from joint ventures 202 0 12 149

Gains from disposals of associated companies and joint ventures -739 -18 914 -50 667

total share of profit from associated companies and joint ventures -7 064 -28 798 -22 030

Shares in associated companies

Shares in associated companies are recognised according to the equity method

Value of investments in associated companies entered on balance sheet 2012 2011 2010

carrying amount as of 01.01 146 236 144 427 111 058

Additions 2 100 3 245 61 171

Additions carried forward from financial assets available for sale, note 9 0 0 0

Disposals, sale of shares -10 110 -705 -18 297

Disposals on transition to subsidiary 0 0 0

Disposals on transition to joint venture 0 0 0

Disposals carried forward to financial assets available for sale, note 9 0 0 -21 938

Share of profit/loss 6 527 9 884 -16 488

Gain from disposals of associated companies 739 0 29 853

Entered directly against other retained earnings -11 516 -10 614 -933


Year's recognition of shortfall in market value 321 321 321

Shortfall in market value as of 31.12 324 645 966


57


the Group's share of profit/loss, assets and liabilities in the most important associated companies, (none of which are listed) was as follows:

Acquisition date

Registeredhead office

Book value Assets Liabilities Income

Year'sresult

Stake in %

Financial year 2012

Forus Energigjenvinning KS 1.5.01 Stavanger 27 757 35 819 7 085 20 781 1 684 44.44%

Hadeland og Ringerike Bredbånd AS 1.7.09 Jaren 29 186 45 020 19 950 22 989 798 34.00%

Forus Energigjenvinning II AS 18.12.08 Stavanger 41 218 192 864 150 658 13 297 2 542 43.00%

Total investments in other associated companies 35 815

carrying amount of investments in associated companies 133 976

Financial year 2011

Energiparken AS 13.11.01 Stavanger 16 853 21 156 1 488 1 348 7 961 33.33%

Risavika Gas Centre DA 31.3.06 Stavanger 0 3 816 3 828 1 345 -2 316 25.00%


Hadeland og Ringerike Bredbånd AS 1.7.09 Jaren 28 442 39 674 15 401 19 592 -687 34.00%

Forus Energigjenvinning II AS 18.12.08 Stavanger 38 676 142 724 104 048 0 163 43.00%

Jæren Fjernvarme AS 31.12.04 Nærbø 3 131 14 038 10 911 2 087 -27 49.00%



Financial year 2010

Energiparken AS 13.11.01 Stavanger 8 892 25 598 16 586 1 718 -28 33.33%

Risavika Gas Centre DA 31.3.06 Stavanger 7 200 10 149 1 956 1 520 -4 323 25.00%


Hadeland og Ringerike Bredbånd AS 1.7.09 Jaren 29 129 31 847 6 840 16 374 -98 34.00%




58


Note 8 continues

Shares in joint venturesShares in joint ventures included according to the equity method.

carrying amount of investments in joint ventures 2012 2011 2010

carrying amount as of 01.01 0 121 002 128 404

Additions 30 331 0 68 000

Additions carried forward from investments in associated companies 0 0 0

Disposals transition to DS 0 -139 916 -75 000

Disposals 0 0 -7 691

Share of profit/loss -202 0 -12 149

Gains from disposals of joint ventures 0 18 914 20 814

Entered directly against other retained earnings -616 0 -1 376

carrying amount as of 31.12 29 513 0 121 002

Year's depreciation of excess values -3 311 0 -991

Excess values as of 31.12 16 877 0 13 557

Investments in joint ventures as of 31 December 2012 include goodwill of NOK 20.2 million (2011: NOK 0 million, 2010: NOK 13.4 million).

the group’s share of the profit/loss, assets and liabilities in the principal joint ventures (none of which are listed) are as follows:

Acquisition date



Year'sresult

Stake in %

Financial year 2012

BOF AS 8.3.12 Sætre 29 513 15 588 6 264 10165 -202 50.00%

carrying amount of investments in joint ventures 29 513

Acquisition date



Year'sresult

Stake in %

Financial year 2010

Skagerak Fibernett AS* 17.12.07 Porsgrunn 121 002 227 349 122 291 40 166 -10 778 34.00%

carrying amount of investments in joint ventures 121 002

* Profit/loss for the year in accordance with IFRS


59


Note 8 continues

Shares in part-owned power plantsLyse Produksjon AS owns a 41.1% stake in Sira-Kvina Kraftselskap DA. In addition, Lyse Produksjon has co-ownership rights to 18.0% of the Ulla-Førre plants, of which 7.8% is compensation for waived waterfall rights, and 10.2% accounts for 80% of Rogaland County Council's rights acquired by Lyse Produksjon AS. The development of the share transferred from Rogaland County Council has been carried out and financed by Lyse Produksjon AS. The participation in the Ulla-Førre plants is based on an agreement with Statkraft SF on a "right of co-ownership". Statkraft SF is the licensee and holds the title to the properties. The shares provide entitlement to off-takes of 41.1% and 18.0%, respectively, from the energy generation of the company concerned. No compensation is paid for the energy off-take, but Lyse Produksjon AS covers a proportionate share of the costs. The off-take of physical energy from part-owned power plants forms part of ordinary energy sales and is dealt with along the same lines as energy generated in the company's own plants. An exception is the imposed sale of licensed energy and operating income distributed among the owners on a current offset basis. Below is a summary of the main groups in the income statement, which states the profit or loss items as recognised using the gross method.

2012 2011 2010

Sira-kvina ulla-Førre Sira-kvina ulla-Førre Sira-kvina ulla-Førre

Share of operating income -42 012 -5 221 -53 733 -8 399 -58 681 -10 580

Share of transmission costs 20 869 8 962 30 955 4 982 55 900 13 753

Share of payroll costs 32 991 1 903 33 079 1 930 30 193 1 796

Share of fees 24 018 8 199 23 812 9 776 24 205 8 175

Share of ordinary depreciation 40 860 26 244 40 194 26 067 39 557 26 013

Share of property tax and other operating costs 78 840 25 370 74 087 22 756 78 466 24 007

Share of net financial profit/loss -165 0 -483 0 -1 253 0

Share of profit/loss in part-owned power plants (before tax) 155 401 65 457 147 911 57 112 168 387 63 164

the ulla-Førre plantsThe share in the Ulla-Førre plants of 18.0% is capitalised as plant and machinery on Lyse Produksjon AS's balance sheet. No entries have therefore been made on the balance sheet for the share in the Ulla-Førre plants. At the end of the financial year, the book value of plant and machinery in the Ulla-Førre plants was NOK 949 million, and the book value of waterfall rights was NOK 6.4 million.

Sira-kvina kraftselskap dAThe share of 41.1 % in Sira-Kvina Kraftselskap DA's balance sheet is consolidated according to the gross method. Lyse's share of assets and liabilities is posted line by line on the balance sheet. For further details see the specification below.

2012 2011 2010

Waterfall rights 29 747 29 747 21 711

Plant and machinery 1 492 480 1 500 133 1 501 214

Receivables and current assets 7 727 3 903 5 311

Bank deposits, cash and cash equivalents 21 628 20 284 12 859

Pension liabilities -2 951 -2 370 -966

Trade payables 8 747 6 458 13 961

Other current liabilities 21 059 12 870 37 434

There are no contingent liabilities linked to the Group's share in the part-owned power plants, and no contingent liabilities in the part-owned power plants themselves.


60


Note 9 – Financial assets available for sale

Financial assets available for sale are non-derivative financial assets earmarked as available for sale that are not classified as lending, receivables, investments available until maturity or financial assets at fair value through profit and loss. They are classified as fixed assets assuming management does not intend selling the investment within 12 months of the date of the balance sheet. Ordinary purchases and sales of investments are recorded as at the transaction date. The transaction date is the date on which the Group agrees to purchase or sell the asset. All financial assets that are not entered into the accounts at fair value through profit or loss are first entered on the balance sheet at fair value plus transaction costs. Investments are removed from the balance sheet when the right to receive cash flows from the investment ceases or when the right has been transferred and the Group has transferred substantially all the risks and rewards incidental to ownership of the asset. Financial assets available for sale are assessed at fair value according to the initial balance sheet entry. A change in fair value is included in the Group's equity. The fair value of assets in companies classified at available for sale is assessed on the basis of adjusted shareholders' equity. For other stock exchange quoted companies, the stock market price on the date of the balance sheet is used.

NOTE 2012 2011 2010

investments classified as available for sale and which are to be assessed at fair value:

Carrying amount of shares and options available for sale as of 01.01 330 139 864 283 830 285

Additions 20 924 12 360 6 548

Additions, carried forward from associated companies 8 0 0 21 938

Disposals -214 000 -43 589 -20

Disposals, transferred to associated companies 8 0 0 0

Write-down to fair value 25 -19 654 -346 842 -51 387

Profit on fair value booked directly against equity 15.21 0 0 63 210

Profit on fair value booked directly against equity 15.21 0 -156 073 -6 290

carrying amount of shares and options available for sale as of 31.12 117 410 330 139 864 283

Of which, classed as fixed assets 117 410 330 139 864 283

Financial assets classified as available for sale consist of:



carrying amount of shares and options available for sale as of 31.12 117 410 330 139 864 283

The write-down to fair value mainly involves write-downs in Norwegian Energy Company AS. Lyse Energi AS has committed capital for NOK 15 million to Såkorn Invest II AS. As of 31 December 2012, NOK 8.8 million of this has been paid in and the remaining committed capital amounts to NOK 6.2 million. Lyse Produksjon AS has committed capital to Bjerkreim Vindpark, Skinansfjellet wind farm and North Connect amounting to NOK 3 million, NOK 3 million, and NOK 5 million as of 31 December 2012.

Financial assets classed as available for sale are noted in the accounts in NOK.


61


Note 10 - Derivatives

carrying amount as of 31.12.12Fixed

assetsNon-current

liabilitiesCurrent assets

Current liabilities




Forward currency contracts - fair value hedging 0 0 0 0

Currency derivatives - held for trading purposes 0 0 26 886 0


Interest swap agreements - fair value hedging 42 124 0 0 0

Other financial instruments 8 200 0 0 0

Financial energy contracts - other 0 287 288 0 0

total derivatives entered on the balance sheet 87 325 425 027 300 818 75 725

carrying amount as of 31.12.11




Forward currency contracts - fair value hedging 0 0 0 1 275




Call option shares purchased 26 940 0 0 0

Financial energy contracts - other 0 326 559 0 0


carrying amount as of 31.12.10

Financial energy contracts - held for trading purposes 0 0 0 555 380



Forward currency contracts - fair value hedging 0 0 0 14 964

Forward currency contracts - fair value, customers' positions 0 0 4 134 0


Interest swap agreements - cash flow hedge 0 87 674 0 0


Call option shares purchased 25 661 0 0 0

Financial energy contracts - other 0 496 565 26 525 0


Derivatives held for trading are classified as current assets or current liabilities. Derivatives for the purpose of cash flowhedging and fair value hedging are classed as fixed assets or long-term liabilities, if the remaining term of the hedged object is longer than 12 months, and as current assets or short-term liabilities if the remaining term of the hedged object is less than 12 months. Long-term financial energy obligations are classed as non-current liabilities. In measurements carried out, there has been no inefficiency in derivatives for hedging purposes.

For information about maximum credit risk exposure at the reporting date, see note 3.


62


Financial energy contracts:Of the financial energy contracts held for trading purposes, contracts designated for hedging of future energy sales account for NOK 173 million net (NOK 58 million at year-end 2011, NOK -537 million at year-end 2010), whereas contracts designated for trading purposes account for NOK 1.5 million net (NOK 10 million at year-end 2011, NOK -18 million at year-end 2010). However, contracts for hedging purposes do not fulfil the hedge booking requirements in accordance with the IFRS. All energy contracts are therefore classed as held for trading. The contracts are posted on the balance sheet at fair value. The change in value, taking tax into consideration, is recognised through profit or loss. Financial energy contracts - fair value customers' positions - are market value of financial contracts on the Nord Pool ASA energy exchange. This is related to management contracts entered into on behalf of customers. The cross entry for the market value of the contracts is trade receivables and accounts payable.

Long-term financial energy liabilities do not meet the hedge booking requirements according to the IFRS. The items are posted on the balance sheet at fair value. The change in value, taking tax into consideration, is recognised through profit or loss.

Forward exchange contracts (cash flow hedging):The nominal amount of outstanding forward exchange contracts related to cash flow hedging was NOK 1 577 million at year- end 2012 (NOK 2 095 million at year-end 2011, NOK 2 738 million at year-end 2010). The hedged highly probable EUR cash flows are expected to occur during the months of January to June and September to December in each of the next three years. Gains and losses consolidated in equity related to forward exchange contracts as of 31 December 2012 will be recognised in the same periods as the hedged cash flows impact on the profit and loss account.

interest swap agreements (cash flow hedging):The nominal amount of outstanding interest swap agreements was NOK 3 200 million at year-end 2012 (NOK 3 250 million at year-end 2011, NOK 2 700 million at year-end 2010). The fixed interest rate that Lyse must pay varies from 2.64% to 5.29%. The variable rate that Lyse is to receive is 3 month NIBOR + any agreed margin. The interest swap agreements are recorded on the balance sheet at fair value. The hedge booking requirements according to IFRS have been met. Unrealised changes in value are entered into the accounts directly against equity, having taken tax into consideration.

interest swap agreements (fair value hedging):The nominal amount of outstanding interest swap agreements was NOK 1 050 million at year-end 2012 (NOK 1 050 million at year-end 2011, NOK 1 050 million at year-end 2010). The fixed interest rate that Lyse is to receive varies from 3.15% to 5.15%. The variable rate that Lyse is to pay is six months' NIBOR + an agreed margin. The hedge booking requirements according to IFRS have been met. Fair value of the swaps is posted in the financial statements under derivatives. The corresponding value is added to the bond loans with the plus/minus sign reversed. There is no posting for change in fair value since the value change on swaps and associated loans produces a net value equal to zero.


63


Note 10 continues

Financial energy contracts, other:

carrying amount as of 31.12.12Energy

liabilitiesPrepaid sale

of energy Total

01 January 2012 32 587 293 972 326 559

Year's value adjustment 389 3 145 3 534

Utilised during the year/new provisions 0 -42 805 -42 805

31 december 2012 32 976 254 312 287 288



of energy Total

01 January 2011 31 431 465 134 496 565

Year's value adjustment 1 156 -131 970 -130 814


31 december 2011 32 587 293 972 326 559



of energy Total

01 January 2010 24 458 562 300 586 758

Year's value adjustment 6 973 -61 514 -54 541


31 december 2010 31 431 465 134 496 565

Energy liabilities:The energy liabilities consist of free-electricity liabilities as of 31 December 2012. The free energy liabilities are assessed at fair value. The valuation method employed is the free cash flow method. The cash flows are calculated on the basis of annual volumes of electricity entitlement multiplied by future market prices for energy (Nasdaq OMX). The discount rate used is calculated on the basis of EUR state interest rates (German state interest rates), taking into account a mark-up for market risk and a mark-up for company-specific credit.

Prepaid sale of energy:This item contains prepayment related to energy sale agreements. The agreement has no time limit and is posted financially, it shall therefore be assessed at fair value. The valuation method employed is the free cash flow method. The cash flows are calculated on the basis of future market prices according to parameters defined in the contract multiplied by annual volumes. The discount rate used is calculated on the basis of Norwegian state interest rates, taking into account a mark-up for market risk and a mark-up for company-specific credit.


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Note 11 – Trade receivables and other receivables

NOTE 2012 2011 2010

trade and other receivables

Trade receivables 921 632 958 171 1 142 014

Receivables from close associates 32 26 687 23 880 149 958

Write-downs to cover loss -17 304 -23 466 -23 185

Net trade receivables 931 014 958 585 1 268 787

Other current receivables 364 285 142 382 240 199

total trade receivables and other receivables 1 295 299 1 100 967 1 508 986

Fair value of trade and other receivables is:

Trade receivables 904 327 934 705 1 118 829

Receivables from close associates 32 26 687 23 880 149 958

Other current receivables 364 285 142 382 240 199

total fair value of trade and other receivables 1 295 299 1 100 967 1 508 986

As of 31 December 2012, trade receivables had been written down by NOK 17.3 million (2011: NOK 23.5 million, 2010: NOK 23.2 million). These written-down receivables are considered bad debts. Age distribution is as follows:

2012 2011 2010

3 - 6 months 14 685 3 095 3 250

Over 6 months 2 619 20 371 19 935

total write-down of trade receivables 17 304 23 466 23 185

As of 31 December 2012, trade receivables amounted to NOK 60.4 million (2011: NOK 57.2 million, 2010: NOK 151.2 million) had passed the due date but had not been written down. These relate to receivables for which collection, from past experience, has not been problematic.

2012 2011 2010

1 - 2 months 60 432 57 191 151 153

total receivables past the due date, not written down 60 432 57 191 151 153

Movement in provisions for write-downs of trade receivables is as follows:

2012 2011 2010

As of 01.01 23 466 23 185 14 723

Provision for write-down of receivables (change in provision) 6 162 281 8 462

Actual loss during the year (posted directly into sales ledger) 10 247 5 685 12 149

Reversing of unutilised sums (posted directly into sales ledger) -2 260 -1 762 -2 307

Sales ledger bad debts are eliminated -20 310 -3 923 -9 842

As at 31.12 17 304 23 466 23 185

Write-downs and reversals of write-downs of trade receivables are included in Other Operating Costs. Write-downs to cover losses have been carried out when no further cash is expected to be collected. Other receivables do not include written down assets.


65


The maximum exposure related to credit risk at the reporting date is the fair value of trade receivables shown above. The Group has no mortgages as security. Trade receivables are a financial instrument and trade receivables are measured at amortised cost with write-downs to cover loss. Amortised cost is equal to book value.

Note 12 – Stock

Stock in hand 2012 2011 2010

Stock 54 489 71 564 13 084

total stock 54 489 71 564 13 084

Stock consists of LNG, decoders, home control centres, technical equipment and gas stock. Stock is assessed at acquisition cost or net realisable value, whichever is lower. In the broadband business, the acquisition cost is calculated as a weighted average. There are no security pledges on stock.

water stock in own and joint venture power plants 2012 2011 2010

Water stock in GWh 4 024 3 978 1 473

Reservoir levels as % 79 79 29

Generation for the year referred to generator minus energy for pumping in GWh 6 437 4 210 5 271

Annual mean generation in the period 2003 - 2012 was 5 698 GWh.

Note 13 – Cash and cash equivalents

cash and cash equivalents 2012 2011 2010

Cash and bank deposits 860 306 667 537 912 197

total cash and cash equivalents 860 306 667 537 912 197

Of bank deposits of NOK 860 million (2011: NOK 668 million, 2010: NOK 912 million) restricted funds constitute NOK 51 million (2011: NOK 43 million, 2010: NOK 414 million). The Group has a corporate account system with Sparebank 1 SR-bank. A corporate account system involves joint and several liability from participating companies. Only Lyse Energi AS has outstanding accounts with the bank, whereas deposits and withdrawals on the subsidiary companies' accounts constitute intragroup balances with Lyse Energi AS. Interest is credited/ charged between Lyse Energi AS and the subsidiary companies in relation to balances/withdrawals in each individual company's sub-accounts at interest rates set out in the agreements between Lyse Energi AS and Sparebank 1 SR-Bank.

unutilised drawing rights: 2012 2011 2010

Drawing rights SEB 700 000 700 000 700 000

Overdraft facility SpareBank 1 SR-Bank 300 000 300 000 300 000

total unutilised drawing rights 1 000 000 1 000 000 1 000 000


66


Note 11 continues

Liquidity reserve 2012 2011 2010

Cash and bank deposits 860 306 700 000 700 000

Less restricted funds -51 000 -43 000 -414 000

Unused drawing rights: 1 000 000 300 000 300 000

Liquidity reserve 1 809 306 957 000 586 000

Note 14 – Share capital and share premium reserve

No. of shares

Ordinary shares

Share premium reserve TOTAL

As of 01.01.12 1 008 983 1 008 983 266 609 1 275 592

Changes in share capital and premium during the period 0 0 0 0

As of 31.12.12 1 008 983 1 008 983 266 609 1 275 592

Face value of shares is NOK 1 000. Only municipalities can be shareholders. Share acquisition is subject to approval by the Board. In the event of a sale or other disposal of shares, the other shareholders have preferential purchasing rights. At the general meeting, each share carries one vote. Any amendment to the articles of association requires support from at least two-thirds of represented share capital and the support of at least five shareholders.

StakesNo. ofshares

Stake in %

Voting rights

Shareholding municipalities:

Municipality of Stavanger 440 684 43.68% 43.68%

Municipality of Sandnes 197 064 19.53% 19.53%

Municipality of Sola 88 195 8.74% 8.74%

Municipality of Time 58 844 5.83% 5.83%

Municipality of Klepp 42 670 4.23% 4.23%

Municipality of Hå 38 190 3.78% 3.78%

Municipality of Randaberg 33 085 3.28% 3.28%

Municipality of Eigersund 29 775 2.95% 2.95%

Municipality of Strand 25 547 2.53% 2.53%

Municipality of Rennesøy 11 603 1.15% 1.15%

Municipality of Hjelmeland 10 029 0.99% 0.99%

Municipality of Gjesdal 9 414 0.93% 0.93%

Municipality of Finnøy 9 172 0.91% 0.91%

Municipality of Lund 7 194 0.71% 0.71%

Municipality of Bjerkreim 5 166 0.51% 0.51%

Municipality of Kvitsøy 2 351 0.23% 0.23%

total no. of shares 1 008 983 100.00% 100.00%


67


Note 15 – Equity

other unrecognised equity NOTETranslation differences

Investments available for sale Hedging TOTAL

balance as of 01.01.10 987 104 439 -22 865 82 560

Revaluation 9, 21 0 56 921 0 56 921

Reclassification to other earned equity 0 0 0 0

Cash flow hedging 10, 21 0 0 191 749 191 749

Tax on cash flow hedging 18, 21 0 0 -53 690 -53 690

Currency exchange differences 444 0 0 444

balance as of 31.12.10 1 431 161 360 115 195 277 983

balance as of 01.01.11 1 431 161 360 115 195 277 983

Revaluation 9, 21 0 -156 073 0 -156 073


Cash flow hedging 10, 21 0 0 -98 819 -98 819

Tax on cash flow hedging 18, 21 0 0 27 669 27 669

Currency exchange differences -684 0 0 -684

balance as of 31.12.11 747 5 287 44 046 50 076

balance as of 01.01.12 747 5 287 44 046 50 076

Revaluation 9, 21 0 0 0 0


Cash flow hedging 10, 21 0 0 -114 219 -114 219

Tax on cash flow hedging 18, 21 0 0 31 981 31 981

Currency exchange differences -3 389 0 0 -3 389

balance as of 31.12.12 -2 642 5 287 -38 192 -35 552

changes in other earned equity 2012 2011 2010

balance as of 01.01 2 974 007 2 715 047 2 755 693

Profit/loss for the year allocated to the company's shareholders 648 105 654 116 298 386

Dividend distributed -357 500 -340 000 -327 000

Purchase of shares in subsidiaries 39 -26 144 -7 364

Policy changes 0 2 208 0

Investments in associated companies and joint ventures -1 353 -7 703 -2 309

Other effects on equity 2 600 -23 518 -2 360

balance as of 31.12 3 265 898 2 974 007 2 715 047


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Note 16 - Trade payables, other current liabilities and provisions

Trade payables and other current liabilities NOTE 2012 2011 2010

Trade payables 348 206 391 318 431 502

Trade payables from close associates 32 2 581 2 814 16 736

Other current liabilities 552 757 496 467 503 032

Public taxes owed 437 593 388 761 411 363

total accounts payable and other current liabilities 1 341 137 1 279 361 1 362 632

Provisions 2012 2011 2010

Removal commitments 10 000 10 000 10 000

Other provisions 2 439 2 439 2 439

total provisions 12 439 12 439 12 439

Trade payables are a financial instrument. Trade payables are measured at amortised cost with further testing for impairment. Amortised cost is equal to book value.

Note 17 – Loans

Long-term loans: NOTE 2012 2011 2010

Bond loans 3 942 124 3 079 243 3 401 192

Subordinated loans 2 500 000 2 600 000 2 700 000

Hedged EUR loan, long-term loans (due 2012) 21 0 0 322 475

Other loans 2 045 000 1 842 000 1 248 479

total long-term loans 8 487 124 7 521 243 7 672 146

Short-term loans: 2012 2011 2010

Short-term debt instruments 1 325 000 1 500 000 1 480 000

Hedged EUR loan, long-term loans due in 2012 21 0 320 401 0

First year's instalment on subordinate loans reclassified from long-term loan 100 000 100 000 100 000

First year's instalment on bond loans reclassified from long-term loan 300 000 700 000 400 000

Total short-term loans 2 167 0 0

total short-term loans 1 727 167 2 620 401 1 980 000

Net interest-bearing loans 2012 2011 2010

Total long-term and short-term loans 10 214 291 10 141 644 9 652 146

Cash and cash equivalents, note 13 -860 306 -667 537 -912 197

Net interest-bearing loans 9 353 985 9 474 107 8 739 949


69


development of net interest-bearing loans 2012 2011 2010

OB net interest-bearing loans 9 474 107 8 739 949 7 217 028

Change in cash holdings -192 769 244 660 -683 524

Take-up of new long-term loans 1 353 000 950 000 2 180 000

Paid instalments long-term loans -800 000 -506 469 -780 000

Redemption of loans -300 028 0 0

Take-up of new short-term loans 1 325 000 2 020 000 1 480 000

Redemption of short-term loans -1 505 324 -2 000 000 -1 400 000

Net cost recognised interest 495 363 501 083 410 315

Interest paid -493 629 -467 403 -436 045

Business integration 30 0 0 765 732

Other items -1 735 -7 713 -13 557

cb net interest-bearing loans 9 353 985 9 474 107 8 739 949

bond loans:Bond loans are a financial obligation measured at amortised cost.

Summary bond loans 31.12.12 Sums Interest Associated interest swap Comments

Years 2009-2019 466 310 Fixed rate 6.25% Swap at variable rate **) Swap concerns NOK 200 million of the loan

Years 2009-2014 254 100 Fixed rate 5.41% Swap at variable rate **)

Years 2009-2014 200 000 3 month NIBOR + 1.45% Swap at fixed rate *)

Years 2009-2013 300 000 3 month NIBOR + 1.35%

Years 2010-2015 621 714 Fixed rate 4.75% Swap at variable rate **)

Years 2010-2015 150 000 3 month NIBOR + 1.10% Swap at fixed rate *)

Years 2010-2015 400 000 Fixed rate 4.55%

Years 2010-2017 350 000 Fixed rate 4.96%

Years 2011-2021 350 000 Fixed rate 6.04%

Years 2012-2017 400 000 3 month NIBOR + 1.50% Swap at fixed rate *) Swap concerns NOK 300 million of the loan

Years 2012-2022 250 000 Fixed rate 5.40%

Years 2012-2022 500 000 Fixed rate 4.8%

total 4 242 124

1st year's instalment -300 000

total 3 942 124

*) cash flow hedge: The hedging documentation has been drawn up and fulfils the hedge bookkeeping requirements. Fair value of the hedge is booked against equity, see notes 10 and 15. The cross entry is posted under derivatives. **) Fair value hedging Fair value of the swaps is posted in the financial statements under derivatives. The cross entry is posted under bond loans.


70


Note 17 continues

Subordinated loans:In connection with the formation of Lyse Energi AS NOK 3 billion was converted from equity to a subordinated loan from the owners. No instalments were payable on the loan up to and including 2008, after which it is repayable over 30 years, in equal instalments. The interest rate is 3 month NIBOR + 2%. No security has been pledged for the loan. Subordinated loan capital is a financial obligation, measured at amortised cost. Fair value is equal to book value.

As of 31 December 2012, the Lyse Group has NOK 2 550 million in future interest-swaps to hedge the payment of interest on the subordinate loans. The hedging documentation has been drawn up and fulfils the hedge posting requirements and the fair value of this hedge is booked against equity, see notes 10 and 15.

Short-term debt instruments (short-term loan):Short-term debt instruments are revolving facilities normally with a term of 1 year (3 to 12 months). The loans are classed as current liabilities. The interest is paid in arrears on a fixed sum for the period and is paid when due. Short-term debt instruments are a financial obligation measured at amortised cost. The difference between nominal and amortised cost is regarded as non-essential and is not entered into the income statement. Carrying amount of the loans as of 31 December 2011 is NOK 1 325 million, corresponding to the fair value.

instalment-profile interest-bearing liabilities:

Year 2013 2014 2015 2016 2017 then total

Sums 1 759 167 586 100 1 303 714 1 476 500 1 001 666 4 087 144 10 214 291

unutilised drawing rights: 2012 2011 2010

Drawing rights SEB 700 000 700 000 700 000

Overdraft facility SpareBank 1 SR-Bank 300 000 300 000 300 000

total unutilised drawing rights 1 000 000 1 000 000 1 000 000


71


Note 18 – Deferred tax

Deferred tax is netted when the Group has a legal right to offset deferred tax benefit against deferred tax on the balance sheet and if the deferred tax is paid to the same tax authority. The following sums have been booked at net value:

NOTE 2012 2011 2010

items that are entered into the balance sheet at net value

Deferred tax benefit, excess profits tax: 238 779 294 594 464 720

Deferred tax, excess profits tax 1 292 174 1 239 761 1 134 469

Net deferred excess profits tax 1 053 395 945 165 669 749

Specification of change in balance sheet deferred tax, excess profits tax


Acquisitions of subsidiaries 30 0 1 207 7 929

Recognised through profit or loss in the period 26 143 428 301 880 18 504

Tax entered directly against equity -35 198 -27 668 52 365

carrying amount as of 31.12 1 053 394 945 165 669 749

Specification of change in balance sheet deferred tax, resource rent tax


Recognised through profit or loss in the period 26 69 418 55 237 72 347


Specification of deferred tax entered directly against equity during the year

Cash flow hedging 15 -31 981 -27 668 53 690

Deficit amount reserved in previous years -3 218 0 -1 325

deferred tax entered directly against equity -35 198 -27 668 52 365

deferred taxIntangible

assetsPlant and

machineryCurrent assets

Investments in partici-

pant like companies Other TOTAL

01 January 2010 10 165 996 294 0 3 489 0 1 009 947

Recognised through profit or loss in the period -1 465 109 339 0 2 156 0 110 029

Entered against Other Equity 0 -678 0 -647 0 -1 326

Acquisition of subsidiary companies 0 15 819 0 0 0 15 819

31 december 2010 8 700 1 120 772 0 4 997 0 1 134 469

Recognised through profit or loss in the period 10 000 63 517 0 -6 127 0 67 390

Acquisition of subsidiary companies 0 37 901 0 0 0 37 901

31 december 2011 18 700 1 222 190 0 -1 130 0 1 239 759

Recognised through profit or loss in the period -2 425 59 794 0 -1 737 0 55 632

Entered against Other Equity 0 -3 216 0 0 0 -3 218

31 december 2012 16 274 1 278 768 0 -2 868 0 1 292 174


72


deferred tax benefitLoans and liabilities Pensions Derivatives

Deficitcarried

forwardCurrent assets

Deferred tax benefit not entered on

balance sheet TOTAL

1 January 2010 47 937 68 203 241 006 36 425 28 048 -2 627 418 994

Recognised through profit or loss in the period 2 824 -18 140 2 856 113 087 -9 103 0 91 524

Entered against comprehensive income statement 0 0 -53 690 0 0 0 -53 690

Acquisition of subsidiary companies -29 006 0 0 36 897 0 0 7 892

31 december 2010 21 756 50 063 190 172 186 410 18 945 -2 627 464 720

Recognised through profit or loss in the period 65 035 7 503 -148 495 -159 940 -68 1 476 -234 489

Entered against comprehensive income statement 0 0 27 669 0 0 0 27 669

Acquisition of subsidiary companies 0 73 0 36 614 8 0 36 695

31 december 2011 86 791 57 639 69 346 63 084 18 885 -1 151 294 594

Recognised through profit or loss in the period -62 251 -24 953 32 231 11 283 -15 951 -28 154 -87 796

Entered against comprehensive income statement 0 0 31 981 0 0 0 31 981

31 december 2012 24 540 32 686 133 557 74 367 2 935 -29 305 238 779

deferred tax, resource rent tax DerivativesPlant and

machinery Pensions

Gains and losses

account

Resourcerent tax for

carrying forward TOTAL

1 January 2010 -7 815 872 505 -2 424 -319 -6 757 855 190

Recognised through profit or loss in the period -521 5 004 1 163 -3 003 2 701 5 344

31 december 2010 -8 336 877 509 -1 261 -3 322 -4 056 860 534

Recognised through profit or loss in the period 6 847 560 11 3 120 2 003 12 541

31 december 2011 -1 489 878 069 -1 250 -202 -2 053 873 075

Recognised through profit or loss in the period 1 489 25 963 575 73 -14 467 13 633

31 december 2012 0 904 032 -675 -129 -16 520 886 707

deferred tax benefit, resource rent tax Derivatives

Plant and machinery Pensions

Gains and losses

account

Resourcerent tax for

carrying forward

Otheritems

Deferred tax benefit not entered on

balance sheet TOTAL

01 January 2010 0 -30 456 1 448 4 815 461 119 0 -12 329 424 598

Recognised through profit or loss in the period 0 -2 685 -913 -967 -74 767 0 12 329 -67 003

31 december 2010 0 -33 141 535 3 848 386 352 0 0 357 595

Recognised through profit or loss in the period 8 287 -7 581 1 1 775 -36 503 0 -8 675 -42 695

31 december 2011 8 287 -40 722 536 5 623 349 849 0 -8 675 314 899

Recognised through profit or loss in the period -15 16 788 -316 -1 092 -61 545 66 -9 671 -55 785

31 december 2012 8 272 -23 934 220 4 531 288 304 66 -18 346 259 113


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Note 19 – Pensions

Lyse is obliged to have an occupational pension scheme in compliance with Norway's Act relating to Compulsory Occupational Pensions. The Group's pension schemes satisfy the requirements of this Act. defined contribution schemeThe company's defined contribution scheme covers a total of 475 people as of 31 December 2012. Employees who are covered by the defined contribution pension scheme are covered by the new LO-NHO scheme for agreement-based pensions (AFP). As of 31 December 2012, no pension liabilities have been included in the calculations for the LO-NHO scheme since there is insufficient information for entering the obligation on the balance sheet. defined benefit scheme Lyse has a defined benefit pension scheme in line with the collective pay agreement for municipal employees. Within this pension scheme, the Act relating to Compulsory Occupational Pensions applies to the extent it is appropriate. The Group's defined benefit pension scheme covers a total of 967 people, of whom 574 are active and 393 are pensioners. The pension funds are valued at fair value at year-end. Pensions liabilities (net current value of pension benefits as at the date of the balance sheet adjusted for future pay increases) are valued according to best estimates based on assumptions on the date of the balance sheet. The actuarial calculations of pension liabilities have been performed by independent actuaries. The assumptions for salary increases, adjustments to pension and the Norwegian national insurance basic amount are compared to historic observations, collective pay agreements entered into and the relationship between individual assumptions. Employees who have a defined benefit pension scheme are covered by the public AFP scheme. Employees who leave before retirement age remain in the pension scheme and receive a so-called established rights. Lyse is financially obliged to adjust the established rights in line with the National Insurance Scheme's basic amount up to retirement age, and the National Insurance Scheme's basic amount less 0.75 percentage points when the pension is being paid. Accounting-wise liabilities for these benefits are made as if they have been fully earned, but liquidity-wise, the adjustment premium runs in line with the above description.

31.12.12 31.12.11 31.12.10

obligations entered on to the balance sheet are established as follows:

Current value of accrued pension liabilities for defined benefit plans in fund-based schemes 1 034 404 1 265 664 992 193

Fair value of pension funds -783 199 -727 215 -679 633

Actual net pension liabilities for defined benefit plans in fund-based schemes 251 205 538 449 312 560

Current value of liabilities for non-fund-based schemes 138 192 145 304 122 566

Deviation from estimate not entered into income statement -84 525 -387 843 -168 873

Net pension liabilities in the balance sheet (after employers' National insurance contribution) 304 872 295 911 266 253

* Employer contribution included in net pension liabilities and pension funds.


74


31.12.12 31.12.11 31.12.10

changes in the defined benefit pension obligation fund-based schemes during the course of the year:

Pension liabilities 1 January (excl. employers' National insurance contribution) 1 265 663 992 192 1 000 916

Current value of pension accruals for the year 57 947 47 763 53 015

Interest cost 31 378 39 043 44 361

Plan amendment 0 -2 180 -91 548

Changes to estimate -283 915 198 565 13 732

Employers' National Insurance contribution on contributions -9 440 -5 599 -2 372

Benefits paid -27 230 -26 522 -25 911

Liabilities acquired through business mergers (note 30) 0 22 401 0

Pension liabilities as of 31.12 (after employers' National insurance contribution) 1 034 403 1 265 663 992 192

change in pension fund's fair value:

Fair value of pension funds as of 01.01 727 215 679 633 638 395

Anticipated yield on pension funds 25 114 32 987 33 172

Changes to estimate -17 743 -19 987 -3 073

Plan amendment 0 289 1 702

Total contribution 75 843 52 511 35 349

Total payments from fund -27 230 -26 522 -25 911

Business merger (note 30) 0 8 304 0

Fair value of pension funds as of 31.12 783 199 727 215 679 633

changes in the defined benefit pension liabilities non-fund-based schemes during the course of the year:

Pension liabilities 1 January (excl. employers' National insurance contribution) 145 305 122 567 36 759


Interest cost 3 610 4 832 1 509

Implementation impact 0 0 0

Transition to new LO-NHO scheme 0 338 -802

Plan amendment -3 067

Changes to estimate -22 939 8 270 86 541

Benefits paid -3 569 -3 383 -3 712

Pension liabilities as of 31.12 (after employers' National insurance contribution) 138 193 145 305 122 567

Following financial assumptions used as a starting point: 2012 2011 2010

Discount rate 3.90% 2.65% 4.00%

Anticipated yield on pension funds 3.90% 4.15% 5.40%

Salary adjustment 3.50% 3.50% 4.00%

Pension adjustments 2.50% 2.48% 2.97%

National insurance basic amount adjustment 3.25% 3.25% 3.75%

Voluntary departure 2% up to age 45 2% up to age 45 2% up to age 45

0% up to age 45 0% up to age 45 0% up to age 45

Normally applied assumptions are used as a starting point within insurance as actuarial assumptions for demographic factors and retirements. Assumptions for mortality are based on published statistics.


75


2012 2011 2010

the collective pension costs included in the income statement:


Interest cost 34 982 43 875 45 870

Anticipated yield on pension funds (25 114) -32 987 -33 172

Transition to new LO-NHO scheme 0 -949 -94 137

Plan amendment 0 -893 -1 500

Amortisation of loss/gains on estimates 15 661 7 837 1 340

Provision for liquidation premium old LO-NHO scheme 0 -510 5 303

Pension costs, defined benefit plans (note 24) 99 263 76 817 -17 941

Pension costs, defined contribution scheme

Employer's contribution (note 24) 13 511 8 512 6 770

total pension costs 112 774 85 329 -11 171

Pension funds comprise:

Equity capital instruments 142 542 152 715 156 995

Interest-bearing instruments 610 895 552 683 285 446

Other 29 762 21 816 237 192

Fair value, pension funds 783 199 727 214 679 633

Actual yield on pension funds 6 229 10 238 27 336

Summary of pension liabilities and fair value of pension assets

2012 2011 2010 2009 2008

Current value defined payment liabilities 1 034 404 1 265 664 992 193 1 000 916 938 631

Fair value, pension funds 783 199 727 215 679 633 638 395 567 531

deficit/(surplus) 251 205 538 449 312 560 362 521 371 100


76


Note 20 – Provisions and other non-current liabilities

2012 2011 2010

Monetary compensation 31 536 31 536 32 627

Physical energy entitlement 13 460 13 460 13 460

Compensatory energy 30 580 30 580 30 580

total provisions 75 576 75 576 76 667

Free energy liabilities 861 060 861 060 861 060

Other non-current liabilities 29 639 2 710 59 806

total other non-current liabilities 890 700 863 770 920 866

monetary compensationMonetary compensation related to agreements to pay annual compensation over an unlimited period. The compensation is equal to purchases and is a financial liability to be measured and consolidated at amortised cost.

Physical free electricity and compensatory energyAs part of the compensation to the landowners Lyse has, in certain instances, entered into agreements to surrender a certain quantity of energy to the landowners (free electricity/compensatory energy). These are agreements to deliver energy and the agreement is assessed along the same lines as other energy contracts. The exception to normal purchases and sales in IAS 39.5 is used as a basis for this. There are no built-in derivatives, since this is only a matter of a quantity of electricity multiplied by market prices.

Free energy liabilitiesThe Lyse Group has entered into agreements on the supply of 81.1 GWh of free energy. The contracts set requirements for physical supply of the free energy. The contracts are classified as contracts covering the sale of non-financial items. The main rule is that such contracts are not covered by the scope of IAS 39. The manner of settlement in the contracts was changed from financial to physical settlement as from 1 January 2008. The fair value of the contracts at the time of altering the manner of settlement was set as the new cost price of the liabilities associated with the future delivery of energy entitlements. An annual income posting and an annual interest cost of NOK 40.4 million are calculated. This is based on the fair value of the obligation at the time of changing the manner of settlement for the contracts.


77


Note 21 – Net losses/(gains)

Net losses/(gains) included in the annual result NOTE 2012 2011 2010

Options 2 193 -1 279 611

Financial energy contracts - held for trading purposes -110 588 -580 186 483 009

Currency derivatives - held for trading purposes -17 120 -8 239 -12 967

Long-term financial energy contracts 3 095 -129 863 -54 541

Reclassification added value acquisition of subsidiaries 0 0 104 582

Reclassification negative goodwill acquisition of subsidiaries, note 7 0 0 -69 803

other losses/(gains), classified as operations, net -122 420 -719 567 450 891

Forward exchange contracts at fair value over profit or loss (hedging currency loan) 25 1 022 -732 1 515

Currency loan measured at amortised cost 25 -2 562 324 -5 774

other net losses/(gains) classified as finance -1 540 -408 -4 259

Net losses/(gains) included in the annual result -123 960 -719 975 446 632

Net losses/(gains) included in comprehensive income NOTE 2012 2011 2010

Financial assets available for sale 9.15 0 156 073 -56 921

Cash flow hedging, currency forward contracts 15 56 863 44 213 -126 545

Cash flow hedging, interest rate swap contracts 15 25 375 26 937 -11 514

Net losses/(gains) included in comprehensive income 82 238 227 223 -194 980

Net losses/(gains) included in total comprehensive income NOTE 2012 2011 2010

Net losses/(gains) on assets and liabilities at fair value, booked over profit or loss -121 398 -720 299 452 406

Net losses/(gains) on liabilities measured at amortised cost, booked over profit or loss 25 -2 562 324 -5 774

Net loss/(gains) on financial assets available for sale, booked against equity 15 0 156 073 -56 921

Net loss/(gains) on derivatives included in hedge accounting, booked against equity 15 82 238 71 150 -138 059

Net losses/(gains) included in total comprehensive income -41 722 -492 752 251 652


78


carrying amount per benchmark category: NOTE 2012 2011 2010

Financial assets available for sale 9 117 410 330 139 864 283

total carrying amount of financial assets available for sale 117 410 330 139 864 283

Financial energy contracts - held for trading purposes 10 174 701 68 526 -555 380

Financial energy contracts - fair value, customers' positions 10 -24 184 52 514 91 931

Currency derivatives - held for trading purposes 10 26 886 9 766 1 527

Forward currency contracts - fair value, customers' positions 10 0 0 4 134

Financial energy contracts: 10 -287 288 -326 559 -470 040

Other financial instruments 10 8 200 26 940 25 661

Put option shares purchased 10 0 0 0

total carrying amount assets and liabilities at fair value over profit or loss -101 685 -168 813 -902 167

Currency loan measured at amortised cost 17 0 -320 401 -322 475

Monetary compensation, energy 20 -31 536 -31 536 -32 627

total carrying amount of loans and liabilities at amortised cost -31 536 -351 937 -355 102

Forward currency contracts - fair value hedging 10 0 -1 275 -14 964

Interest swap agreements (fair value hedging) 10 42 124 29 243 1 192

Forward exchange contracts (cash flow hedging) 10 107 281 186 258 247 665

Interest swap agreements (cash flow hedging) 10 -160 329 -125 086 -87 674

total carrying amount of derivatives included in hedge accounting -10 924 89 140 146 219

Note 22 – Income

2012 2011 2010

Sales income

Energy sales 2 471 777 2 174 251 2 566 595

LNG 705 129 324 503 0

Transmission income 935 096 1 130 791 1 206 903

Income, telecommunication 1 796 548 1 538 913 1 233 097

Other income 144 844 127 164 137 793

total sales income 6 053 394 5 295 622 5 144 386


79


Note 23 - Other operating costs

2012 2011 2010

other operating costs

External services 213 235 234 291 129 551

Office costs 44 680 42 897 27 621

Other operating costs, part-owned plants 48 497 45 626 43 463

Repair and maintenance 81 827 70 695 79 394

Property, machine hire, equipment and other hire costs 135 811 121 368 56 142

Sales and advertising costs 75 846 77 458 23 586

Other operating costs 95 952 118 965 134 987

total other operating costs 695 848 711 300 494 745

Deloitte AS is the auditor for the Lyse Group and will audit all subsidiaries that need to be audited.

Total fees (excl. VAT) for the Group's auditor for auditing and other services were as follows:

2012 2011 2010

of which auditing fees:

Statutory audit 2 191 2 096 2 045

Other certification costs 643 117 134

Tax advice 0 0 6

Other services* 80 285 1 785

total auditing fees 2 914 2 498 3 970

* Ernst & Young were auditors for Skangass up to 2011. Essentially, other services in 2010 are fees to Ernst & Young within the LNG business area.


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Note 24 – Payroll, payments to executive personnel and the Board of Directors

NOTE 2012 2011 2010

Payroll and other personnel costs

Salaries 502 112 461 534 430 758

Employers' National Insurance contribution 93 322 83 549 71 903

Pension costs - defined benefit plans 19 99 263 76 817 -17 941

Pension costs - defined contribution plans 19 13 511 8 512 6 770

Other HR costs 73 511 63 702 109 660

total payroll and other hr costs 781 720 694 114 601 150

No. of full time equivalents 963 963 902

Payments to executive personnel

Name PositionSalary/

remuneration

Benefits in kindand other

taxableremuneration

Pensioncosts

Totalremuneration

Eimund Nygaard Group CEO 1 811 124 758 2 693

Ole Gabrielsen Executive Vice President, Energy 1 420 124 647 2 191

Toril Nag Executive Vice President, Telecommunication 1 457 180 132 1 769

Torbjørn Johnsen Executive Vice President, Infrastructure 1 040 103 602 1 745

Grethe Høiland Executive Vice President, Marketing 1 314 123 951 2 388

Ove Otterbech Jølbo Executive Vice President, Organisation 1 286 131 549 1 966

Leiv Ingve Ørke Executive Vice President, Economy and Finance 1 379 106 525 2 010

Eirik Gundegjerde Executive Vice President, Smart Utility and Business Development

1 416 99 427 1 942

Ivar Rusdal Chair 210 0 0 210

Reinert Kverneland* Deputy Chair 87 0 0 87

Arne M. Sele* Employee representative 60 0 0 60

Hilda Båsvik Høie* Board member 60 0 0 60

Steinar Madsen* Board member 60 0 0 60

Solveig Ege Tengesdal Board member 90 0 0 90

Cecilie Bjelland* Board member 60 0 0 60

Gro Vetnes Employee representative 90 0 0 90

Ingerid Pegg** Employee representative 20 0 0 20

Leif Sigbjørn Rage** Employee representative 4 0 0 4

Odd Kristian Reme** Board member 30 0 0 30

Eli Laland** Board member 30 0 0 30

Kristin Reitan Husebø** Deputy Chair 43 0 0 43

Håkon Anders Rege** Board member 30 0 0 30

* Joined the Board in June 2012** Stepped down from the Board in June 2012

Pension costs for the executive management team and officers are included in the Lyse Group's general collective pension scheme. No one in the executive management team or Group's Board is entitled to salary/remuneration after the end of the employment relationship/office. A remuneration committee prepares recommendation for the Board's consideration of the salary of the Group CEO and establishes guidelines for bonuses for executive personnel.

Executive personnel are not covered by any share-based reward agreement. There are no options/entitlements providing employees or officers with the right of subscription, purchase or sale of shares.


81


Note 25 – Financial income/costs

NOTE 2012 2011 2010

Net financial cost

Subordinated loans 110 327 134 863 130 672

Subordinated loan hedging 52 524 40 958 77 549

Bond loans 167 862 165 836 132 862

Interest costs, energy sale agreements and free power 59 518 62 765 62 406

Other interest costs 139 549 129 587 43 250

total interest costs 529 780 534 010 446 739

Losses on currency differences 23 592 4 989 18 733

Write-downs, financial assets available for sale 9 19 654 346 842 51 387

Write-downs, loans to associated companies 231 21 338 29 595

Currency loan measured at amortised cost 21 0 324 0

Forward exchange contracts at fair value over profit or loss 21 21 582 15 733 27 065

Other financial costs 2 990 3 422 1 960

Financial costs 597 829 926 657 575 479

Other interest income 34 417 32 927 36 424

Gains upon the realisation of securities 0 10 725 0

Dividends 581 3 465 421

Gains on exchange differences 4 960 7 042 4 822

Currency loan measured at amortised cost 21 2 562 0 5 774

Forward exchange contracts at fair value over profit or loss 21 20 560 16 465 25 550

Other financial income 4 429 2 619 2 260

Financial income 67 508 73 244 75 251

Net financial cost 530 321 853 413 500 228


82


Note 26 – Tax cost

NOTE 2012 2011 2010

Specification of tax cost

Tax payables 261 257 186 102 247 312

Change in deferred tax 18 143 428 301 880 18 504

Payable tax on resource rent 223 010 221 784 339 524

Change in deferred tax resource rent 18 69 418 55 237 72 347

Excess/shortfall reserved in previous years, resource rent -1 802 10 579 10 971

Excess/shortfall allocated in previous years -2 631 228 1 875

Other items -365 -151 1 430

total tax cost 692 315 775 659 691 963

NOTE 2012 2011 2010

Specification of payable tax on balance sheet

Payable excess profits tax 186 842 103 730 172 920

Payable natural resource tax 74 415 73 638 74 392

Payable resource rent tax 223 010 221 784 339 524

total payable tax on balance sheet 484 267 399 152 586 836

reconciliation from nominal to actual tax rate

Ordinary profit/loss before tax 1 322 395 1 377 358 949 026

Anticipated income tax at a nominal tax rate (28%) 370 271 385 660 265 727

tax effect of the following items:

Non-deductible costs 16 952 105 621 6 240

Non-taxable income 8 843 -12 829 -5 147

Effect of dividend 0 -237 0

Natural resource tax 74 415 73 638 74 392

Assessed natural resource tax -74 415 -73 638 -74 392

Resource rent tax (30%) 290 626 287 600 422 842

Excess/shortfall reserved in previous years -2 631 228 1 875

Other items 8 254 9 616 426

tax cost on ordinary profit 692 315 775 659 691 963

Effective tax rate 52% 56% 73%


83


Note 27 – Security and guarantees, etc.

For any financing in addition to the subordinated loan the Lyse Group has placed a negative pledge and there are capitalrequirements from lenders, stipulating that the market value of the Group's equity is not to be lower than a set minimum. In addition, agreements have been signed in which security declarations or guarantees for all of the Group's commitments shall not constitute more that 15% of total book assets. The limitation does not apply to ordinary guarantees entered into in conjunction with trade in securities and financial instruments, and ordinary sales pledges in the case of supplies of goods and services on credit and security in conjunction with statutory requirements for security. The capital requirements are monitored on an ongoing basis. The Lyse Group satisfies these requirements. Skangass AS financed the Risavika LNG factory via Handelsbanken. The remaining liability as of 31 December 2012 was NOK 760 million. Skangass AS is wholly-owned by Lyse Neo AS. Handelsbanken has security in the LNG factory. The total carrying amount of the factory sheet is NOK 1 531 million as of 31 December 2012.

In conjunction with the power plant developments, Jørpeland Kraft AS has taken out a bond loan of NOK 350 million. Lyse Produksjon AS owns 66.7% of Jørpeland Kraft AS. The power station has been pledged as security. The total carrying amount of assets pledged as security sheet is NOK 489 million as of 31 December 2012.

The Lyse Group has the following guarantees and deposits not entered in the balance sheet as at 31 December 2012:

Amounts in NOK million

Guarantees to Nasdaq OMX 750

Guarantee, financial energy exchange agreement 656

Guarantee for construction of LNG tank ship 96

Guarantee to Eksportfinans export credit institution 600

Other 190

total 2 291

Note 28 – Financial leasing

(Amounts in NOK '000s) 2012

Assets subject to financial leases are as follows

Means of transport 33 069

Accumulated depreciation 4 006

Net carrying amount 29 063

Overview of future minimum rent:

< 1 year 4 939

2 - 5 years 19 756

> 5 years 9 265

Future minimum rent 33 960

Average interest rate 4.14%

Present value of minimum rent 29 629

Skangass AS signed a leasing agreement concerning a new LNG vessel in 2011. This vessel was completed at the end of 2012 and taken over in 2013. The annual rent is EUR 7.17 million. The agreement is considered financial leasing and was incorporated into the financial statements in 2013. The agreement runs for 25 years.


84


Note 29 – Contingencies

The municipality of Stavanger and Lyse Produksjon AS have signed an agreement which entitles the municipality of Stavanger to take over certain fixed assets at the old Flørli power station. Under this agreement the company will pay the municipality of Stavanger an amount corresponding to the costs of dismantling and clearing the site or an amount agreed in more detail, if the municipality of Stavanger should choose to exercise its right to take over the facilities.

Lyse Produksjon AS has received instructions from the Norwegian Water Resources and Energy Directorate (NVE) authorised by the Regulation related to Safety and Supervision concerning Water Courses Facilities. The total cost of the instructions received is estimated to be NOK 150 million in a 5-year perspective. The instructions will be capitalised as an added plant cost as the initiatives are carried out. Jørpeland Kraft AS has upgraded its watercourse facilities. Sira-Kvina Kraftselskap DA has appealed a decision by the NVE concerning the price of licensed energy. The appeal has not been finally decided. The outcome may impact on the settled price of licensed energy and may also have a retroactive impact. However, the energy company is of the opinion that it is fairly unlikely that any decision would be retroactive. If the energy company loses its appeal, it will consider taking legal action. Lyse Produksjon AS owns 41.1% of Sira-Kvina Kraftselskap DA. A collaborative agreement has been entered into with a local bus company about future cooperation regarding gas-powered buses. In this agreement, Lyse Neo AS has committed itself to buy back gas-powered buses at a minimum price if the other party does not wish to take over the buses.

Note 30 – Business integrations

Purchase of remaining shares in østfold Fibernett ASAs of 31 December 2011, Viken Fibernett AS owned a 83.1% stake in Østfold Fibernett. Viken Fibernett AS acquired the remaining 16.9% of the shares in i Østfold Fibernett AS in April 2012. This acquisition is treated as a buyout of non-controlling share-holder interests in the financial statements. The acquisition does not involve any new calculation of goodwill, nor does it have any impact on the result on the date of acquisition. In November 2012, Østfold Fibernett AS was merged into Viken Fibernett AS. capital increase in Jørpeland kraft AS In May 2012, a capital increase of NOK 33 million was implemented in Jørpeland Kraft AS. Lyse Produksjon AS participated in increasing the capital in relation to its share in ownership of 66.67%.

Note 31 – Off balance sheet liabilities

2012 2011 2010

contracts entered into for investments not included in the annual financial statements:

Plant and machinery 539 933 199 138 233 712

Financial investments (note 9) 17 192 10 700 164 300

totAL 557 125 209 838 398 012


85


Note 32 – Close associates

All subsidiaries and associated companies as indicated in note 33 are close associates of Lyse. Outstanding items and transactions between consolidated companies are eliminated in the consolidated financial statements and not shown in this note. The municipality of Stavanger, which owns a 43.68% stake is defined as a close associate according to current regulations. The other shareholders each have a shareholding of less than 20% and are not regarded as close associates according to current policies. See notes 14 and 33 for information concerning owners and companies that are included in the consolidation.

The Group has been involved in transactions with the following close associates:

Purchases from and sales to close associates 2012 2011 2010

Sale of goods and services

Associated companies 59 063 51 050 44 314

Joint ventures 248 0 65 833

Municipality of Stavanger 85 442 63 903 71 675

total sale of goods and services 144 753 114 953 181 822

Purchases of goods and services


Joint ventures 7 409 4 536 6 469


total purchases of goods and services 19 912 16 782 17 359

balance sheet items relating to close associatesReceivables from close associates parties mainly involve loans, sales of goods and services, and expenditure on joint ventures. Loans are interest-bearing, while other receivables are not. Current liabilities to close associates mainly concern the purchase of goods and services and fall due one month after the date of purchase. Such liabilities are not interest-bearing.

Non-current receivables from close associates 2012 2011 2010

Loans to associated companies 36 986 31 196 4 825

Loans to joint ventures 0 0 0

total non-current receivables from close associates 36 986 31 196 4 825

trade receivables and other receivables from close associates 2012 2011 2010


Joint ventures 237 0 122 807


total trade receivables and other receivables from close associates, note 11 26 687 23 880 149 958

Accounts payable to close associates 2012 2011 2010

Associated companies 955 992 1 561

Joint ventures 1 622 1 780 14 126

Municipality of Stavanger 4 42 1 049

total accounts payable to close associates 2 581 2 814 16 736


86


Subordinated loans to owners 2012 2011 2010

Municipality of Stavanger carrying amount as of 01.01 1 179 252 1 222 928 1 266 604

Year's loan repayments -43 676 -43 676 -43 676

Interest costs 48 187 58 903 57 072

Interest paid -48 187 -58 903 -57 072

carrying amount as of 31.12 1 135 576 1 179 252 1 222 928

Note 33 – Companies included in the consolidation

Company name Business office Stakes

Lyse Elnett AS Stavanger 100.00%

Lyse Sentralnett AS Stavanger 100.00%

Lyse AS Stavanger 100.00%

Lyse IT AS Stavanger 100.00%

Lyse Energisalg AS Stavanger 100.00%

Lyse Produksjon AS Stavanger 100.00%

Forus Energigjenvinning AS Stavanger 100.00%

Lyse Neo AS Stavanger 100.00%

Skangass AS Stavanger 100.00%

Skangass AB Gothenburg, Sweden 100.00%

Altibox AS Stavanger 100.00%

Altibox Danmark A/S Skanderborg, Denmark 100.00%

Lyse Kraft AS Stavanger 100.00%

Smart Lyse AS Stavanger 100.00%

Stayon AS Ålesund 100.00%

Telekom Holding AS Stavanger 100.00%

NorAlarm AS Stavanger 100.00%

Lyse Infra AS Stavanger 100.00%

Lyse Fiberinvest AS Stavanger 100.00%

Lyse Fiber AS Stavanger 100.00%

Viken Fibernett AS Oslo 100.00%

Skagerak Fiber AS Porsgrunn 100.00%

Jørpeland Kraft AS Stavanger 66.67%


87


Note 34 – Events after the balance sheet date

consolidation of the fibre activities of Lyse and Energiselskapet buskerud in Eastern Norway Lyse and Energiselskapet Buskerud (EB) have signed an agreement to coordinate their companies' fibre activities in Eastern Norway.

The transaction was implemented on 17 January 2013 through the establishment of Viken EB Skagerak Fibernett AS. Lyse transferred its shares in the wholly owned subsidiaries Viken Fibernett AS and Skagerak Fiber AS, and a 50% stake in BOF AS, in exchange for shares in Viken EB Skagerak Fibernett AS.

Viken EB Skagerak Fibernett AS will construct and operate fibre networks and provide broadband services. The company's customers will receive the same content services they get today. The new group continued the agreement with the product house Altibox. A business plan has been developed for the newly established fibre company that sets out the framework for the company's future operations. According to the signed shareholder agreement the business will be treated as a joint venture. Lyse owns a 71% stake in the company, while EB owns 29%. The company will be recognised in the consolidated financial statements using the equity method from 2013.

Accounting treatment of the transaction:The remuneration for Lyse's share of the transaction amounts to NOK 1 714 million and was settled in shares and receivables in the newly established company. disposal of subsidiaries:Following the transaction, Lyse no longer has control over the subsidiaries Viken Fibernett AS and Skagerak Fiber AS and the investment changes the control category. Lyse must thus exclude the subsidiaries' assets and liabilities at their carrying amount at the time control was lost and recognise the fair value of the remuneration received for the transaction. The difference between the book value of the net assets and liabilities on the transaction date and the remuneration will be recognised through profit or loss in 2013. investments in joint ventures:The investment in Viken EB Skagerak Fibernett AS will be treated as a business acquisition and will initially be recognised at its acquisition cost. The fair value of the paid net assets constitutes the acquisition cost of the investment. This includes the value adjusted equity of Viken Fibernett AS, Skagerak Fiber AS and BOF AS. On the date the annual financial statements were presented there was no allocation of the acquisition cost for the acquisition of business in Viken EB Skagerak Fibernett AS.

The disposed of business is presented in relation to the table below in Lyse Energi's consolidated financial statements as of 31 December 2012. The calculation of the result of the transaction must also take into account events in the period 1 January to 17 January 2013.

NOK million

Assets and liabilities

subsidiaries

Group outstanding

accounts


in the Group

Net assets and liabilities included in the transaction as of 31.12.12

Intangible assets 198 0 198

Plant and machinery 1 550 0 1 550

Other fixed assets 0 0 0

Current assets 307 -242 65

Total assets 2 055 -242 1 813

88


NOK million


subsidiaries

Group outstanding

accounts


in the Group

Net assets and liabilities included in the transaction as of 31.12.12

Deferred tax 110 0 110

Pension liabilities 8 0 8

Long-term loans 844 -844 0

Current liabilities 303 -237 66

Total liabilities 1 265 -1 082 184

Net assets and liabilities fully consolidated - subsidiaries* 790 839 1 629

Carrying amount BOF AS in the consolidated financial statements - joint ventures (note 8) 30 0 30

Net assets and liabilities 819 839 1 659

* Net assets and liabilities are assets and liabilities in the subsidiaries Viken Fibernett AS and Skagerak Fiber AS after eliminations.

NOK million

Business area telecommunication

before the transaction

Adjustment for business covered

by the transactionEliminations

intragroup

Business area telecommunication

adjusted before the transaction

results

Gross operating income 1 963 -499 212 1 677

Inter-segment sales -167 0 0 -167

Sales income 1 796 -499 212 1 510

EBITDA *) 530 -118 -212 200

Depreciation and write-downs 373 -140 0 233

Share of profit/loss in associated companies and joint ventures -2 0 0 -2

Other losses/gains, net 2 -2 0 0

Operating profit 158 24 0 181

Financial costs -111 41 -40 -111

Financial income 10 -1 40 48

Profit/loss before tax 56 63 0 119

Tax cost -25 -17 0 -42

Profit/loss for the year continued business 31 46 0 77

Profit/loss for the year after tax from business covered by the transaction 0 -46 0 -46

Profit/loss for the year 31 0 0 31

*EBITDA is defined as: operating result + depreciation and write-downs + share of profit associated companies/joint ventures + other losses/gains net.

Leasing The Group has signed a leasing agreement for an LNG vessel. This vessel was completed and delivered to the Group in 2013. This leasing agreement is treated as financial leasing and recognised in the financial statements when the vessel started being used in February 2013. The acquisition of the vessel considerably increases capacity. The increase in costs in the LNG business area will be small in relation to the increase in capacity since the vessel will replace previously leased vessel capacity. See note 28 for further details.

Note 34 continues

89

2012Annual report and accounts board of directors and management

Governing bodies 2012

General meetingThe company's general meeting comprises the mayors of the shareholder municipalitieswho vote according to the number of shares each owner holds. corporate assemblyThe corporate assembly was elected for 4 years on 1 March 2012.Lars A. Myhre, ChairAne Mari Braut Nese, Deputy Chair

EmPLoYEE-ELEctEd rEPrESENtAtiVES

Åse Linda Hillestad Bjørn KristiansenGulay Øzturk Tron BjerkreimKaren OmmundsenMerete RosendahlJohnny Fredvik Lisbeth SjursenHåvard HålandRoald RolfsenJanne HengOddvar VågeTerje SætreFanny MadsenYngve GarpestadArild OmmundsenLars Olav RønnevikGustav AuklandArne NygaardGeir W. AgaHilde HoffWouter Weerstra

dEPutY rEPrESENtAtiVES

Gulale Samiei StavangerLevard Olsen Hagen StavangerSigne S. Thorsen StavangerAllan Dreyer StavangerKnut Morten Redalen StavangerMargrethe B. Rosbach StavangerPer Olav Hansen StavangerHelge Gabrielsen StavangerGrethe Eriksen StavangerMorten Asbjørnsen StavangerSissel Stenberg StavangerAtle Simonsen StavangerRoar Houen StavangerLine Christiansen StavangerErik Hammer StavangerGuri Tysse StavangerKarl W. Sandvig StavangerGunnulv Løge StavangerJostein Solvang StavangerKarl Anders Nilsen StavangerRune Jonassen SandnesAnne Whyte SandnesJan Refsnes SandnesArvid Erga SandnesJeanette Løvik SandnesJostein Asheim SandnesJorunn Lura Haaland SandnesAnaida Ajanic SandnesSveinung Skjørestad SandnesGuttorm Skretting SandnesBjørn Kolnes SolaTor Jan Reke SolaNora Nilsen SolaStaale Grude Haaland TimeAnne Brit Ree TimeTorunn A. Rasmussen KleppAsbjørn Aanestad KleppSveinung Lode HåPaul Skretting HåTone Tvedt Nybø RandabergÅshild Bakken EigersundAlf Henning Heggheim StrandIvar Finnesand RennesøyTrine L. Danielsen HjelmelandFrode Fjeldsbø GjesdalHenrik Halleland FinnøyRagnhild Kjørmo LundTorbjørn Ognedal BjerkreimRoy Steffensen Kvitsøy

rEPrESENtAtiVES

Kari N. Nordtun StavangerKarianne Rettedal StavangerKatrine Bugel StavangerLars Anders Myhre StavangerStåle Johan Knutsen StavangerTerje Rønnevik StavangerAnne R Ekeli StavangerDag T K Solvang StavangerLillian Michaelsen StavangerSigurd Vik StavangerLeif Arne Moi Nilsen StavangerTore B Kallevig StavangerKolbein H Lunde StavangerAnnamaria Gutierrez StavangerGaute Juveth StavangerNordal Torstensen StavangerKate Elin Norland StavangerAnnelin Tangen SandnesHenny Mauritzen SandnesHeidi Bjerga SandnesJan G. Iversen SandnesMorten Malmin SandnesRagnvald Nilsen SandnesHåkon Block Vagle SandnesOddny Helen Turøy SandnesJess Milter SolaBjørn Inge Sanne SolaArnfinn Clementsen SolaReinert Kverneland TimePetter L. Stabel TimeAne Mari Braut Nese KleppSigmund Rolfsen KleppMons Skrettingland HåMindor Jelsa HåBjørn Kahrs RandabergHarald Oddsen Havsø EigersundBjørn Ove Hersdal StrandØrjan E. Omdal RennesøyTor Soppeland HjelmelandOlaug V. Bollestad GjesdalJon Olav Runestad FinnøyPål Ravndal LundMarthon Skårland BjerkreimMirjam Ydstebø Kvitsøy

90


Eimund NygaardGroup CEO

Eimund Nygaard is the managing director of the parent company Lyse Energi AS and the Group CEO of the Lyse Group. Eimund Nygaard, born in 1959, graduated in finance/administrative studies from Rogaland Regional College. Besides numerous board duties within the Lyse Group, Nygaard is Chair of the Board of Sandnes Sparebank, Deputy Chair of the Board of Enova SF, a member of the board of the University Fund, and a board member of Renovasjonen IKS and Noreco ASA.

Group executive management team

ole GabrielsenExecutive Vice President, Energy

Ole Gabrielsen, born in 1957, is the executive vice president of Lyse's energy business area. He graduated with a Masters in Business Administration from the Norwegian School of Economics and Business Administration (NHH) in Bergen.

toril NagExecutive Vice President, Telecommunication

Toril Nag, born in 1964, is the executive vice president of Lyse's telecommunication business area. She graduated with a Masters in Computer Science/Communications from the University of Strathclyde in Scotland.

torbjørn JohnsenExecutive Vice President, Infrastructure

Torbjørn Johnsen, born in 1954, is the Group's executive vice president for development and infrastructure operations and the manag-ing director of Lyse Elnett AS. He graduated with a Master's in Electric Power Engineering from the Norwegian Institute of Technology (NTH) in Trondheim.

Grethe høilandExecutive Vice President, Marketing

Grethe Høiland, born in 1956, is responsible for marketing in the Group. She graduated with a Master's in Electrical Power Engineering from NTH in Trondheim and as a business economist from BI Norwegian School of Management.

ove JølboExecutive Vice President, Organisation

Ove Jølbo, born in 1957, is responsible for HR, communication, legal, property, purchasing and group-related HSE/preparedness. He trained as a lawyer at the University of Oslo.

Leiv ingve ørkeCFO/Executive Vice President, Economy and Finance

Leiv Ingve Ørke, born in 1962, is responsible for economy and finance. He qualified as a chartered accountant at the Norwegian School of Economics and Business Administration (NHH) in Bergen.

Eirik GundegjerdeExecutive Vice President, Smart Utility and Business Development

Eirik Gundegjerde, born in 1961, is responsible for business development. He also bears overall responsibility for IT within the Group. Gundegjerde graduated from Rogaland College Centre as an engineer within the field of automation, and then took a Master's in Informatics.

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Group board of directorsIvar RusdalReinert KvernelandCecilie BjellandSteinar MadsenHilda Bådsvik HøieSolveig Ege TengesdalGro Ragnhild VetnesArne Sele

Composition of subsidiaries' boards:

Lyse Elnett ASAsbjørn HøivikBetuel FrøylandArild SyvertsenØyvind EdiassenSolveig Gjerde HjelleIngrid Nordbø

Lyse Fiber ASToril NagGrethe HøilandTerje KnagEirik GundegjerdeGeir Arve VikaFrank Strømfjord

Lyse Fiberinvest ASToril NagEirik GundegjerdeLeiv Ingve Ørke

Lyse Neo ASOle GabrielsenAsbjørn HøivikTorbjørn JohnsenGrethe Høiland Johnny Fredvik

Lyse Energisalg ASOle GabrielsenGrethe HøilandKari Solheim Larsen

Lyse it ASToril NagEirik GundegjerdeGrethe HøilandTorbjørn JohnsenGulay Øzturk

Altibox ASToril NagEirik GundegjerdeTrond UrsinHilde Fagerland FarragIngeborg ÅdnanesGrethe Høiland

NorAlarm ASToril NagEirik GundegjerdeAsbjørn HøivikGrethe HøilandStian RøislandRonny Hjørnevik

Skangass ASOle GabrielsenTollak MelbergLeiv Ingve ØrkeBernt Stilluf Karlsen

Lyse Produksjon ASOle GabrielsenJone HeggheimToril NagGrethe HøilandLeiv Ingve ØrkeLeif NesseJanne Gunn HelleRobert Ediassen

Lyse ASGrethe HøilandToril NagGeir Arve VikaKaren OmmundsenPål Terje Løhre

Lyse infra ASTorbjørn JohnsenCamilla AmundsenHelga Hovstad SteinslandKnut SædbergRoald Rolfsen

Lyse Smart ASEimund NygaardToril NagNils Arne BakkeGrethe Høiland

Documents

Annual Report 2012 - lysekonsern.no · 22. Income 78 23. Other operating costs 79 24. Salaries 80 25. Financial income / expenditure 81 26. Tax costs 82 27. Securities and guarantees