English summary – fiscal year 2019

Salten Kraftsamband AS (SKS) is a private limited company owned by Bodø kommune, Fauske kommune, Nordlandskraft AS, Jämtkraft AB, Bodø Energi AS, and Bodø Kommunale Pensjonskasse. SKS is the largest power producer in Northern Norway with main office in the region. The main office is located at Fauske, and its hydroelectric power production stations is located in the municipalities of Fauske, Gildeskål, Beiarn, Bodø, Rødøy and Hemnes.

SKS mission is to run power related business based on natural resources in the region of Northern Norway. The company aims to build values for owner and customers with long term focus. The SKS group is considered an important employer within the region of Salten, and has through half a century contributed with significant values to the region and continues to do so.

SKS serves its social responsibilities in several ways, for example by supporting non-profit organizations, sport teams, and cultural events, and through environmental focus. SKS also participates in, and contribute to industrial and commercial development and educational projects.

SKS holds the wholly owned subsidiaries SKS Produksjon AS and SKS Handel AS. SKS partly owns the subsidiary Rødøy-Lurøy Kraftverk AS (73 %) and has stocks in Polar Kraft AS (33%). SKS provides the subsidiaries with financial and administrative services such as management, accounting, IT, HR, communication, public relations, strategy, and business development.

SKS Produksjon AS is the largest energy production company in Northern Norway, owning 19 hydroelectric power stations. The annual production of SKS Produksjon is about 2 025 GWh.

SKS Produksjon AS holds 50 percent of the shares in Smisto Kraft AS. Smisto Kraft AS builds new power plants, planned to open in 2020/2021 with an annual production of about 210 GWh. Smisto Kraft AS is building new power plants with a planned annual production of about 210 GWh. SKS Produksjon AS also holds 50 percent of the shares in Vakinn AS, 63,7 percent of shares in Krutåga Kraft AS and 67 percent of the shares in Hattfjelldal Kraft AS. Vakinn AS run an operation center for power production. Krutåga Kraft AS and Hattfjelldal Kraft AS aims to produce power.

SKS Produksjon AS experiences risk exposure through fluctuations in electricity prices. To hedge against such exposure the company engages in forward- and futures contracts and contracts for difference according to a defined risk strategy.

SKS Handel AS engages in the power market, offering a wide range of products and services, including energy trading of both physical and financial contracts, portfolio management, and settlement services.

Well-built systems and employees with years of experience make the company able to efficiently manage, and increase the value of energy resources owned by partners and municipalities.

The department of Portfolio Management is managing energy portfolios for external customers, creating significant value for its clients. It has also become a player in the renewable energy certificate market, providing certificates to buyers both domestically and internationally.

Rødøy-Lurøy Kraftverk AS (RLK) is a power production company with an annual production of about 75 GWh. RLK owns 100 % of the shares in the internet fiber company Rødøy-Lurøy Fiber AS.

Salten Kraftsamband is looking at a year of acceptable results due to favorable power prices and efficient operation. At the same time the rapidly decreasing power prices in 2020 emphasizes how SKSs results is strongly dependent of market-based conditions.

The year started with power prices of over 0.50 NOK per kWh in January, but fell below this from February. Market prices on coal decreased through the year and has not been lower since 2016. The price of natural gas decreased even more than the coal price, but the price of carbon were quite stable at all time high 24-28 EUR/EUS. Low price on natural gas and high CO2 costs led to marginal cost of natural gas being lower than coal from summer 2019.

The total production of electrical power in Norway were 134 TWh in 2019, compared to 146.4 TWh in 2018.

Average spot price of our power plants price area; NO4, was 0.38 NOK per kWh in 2019. This is a reduction of 0.04 NOK per kWh from 2018. The lowest monthly price were seen in June with 0.25 NOK per kWh in NO4.

The Nordic system price was 0.38 NOK per kWh in 2019, compared to 0.42 in 2018. The futures markets were less volatile than in 2019. The average price of 2020 delivery decreased by 0.03 NOK per kWh during 2019, and was 0.36 NOK per kWh by the end of 2019.

Total rain- and snowfall in our production area was at a normal level in 2019, but seasonal variations were unusual. Rain- and snowfall came concentrated at the first 4 months of the year and at the year end. Total production of hydropower in 2019 was 1 934 GWH, compared to 2 171 in 2018. Water reservoirs was 48 percent at year beginning and 55 percent at year end. Normal reservoir level by year-end is 63 percent. Snow reservoirs were calculated to 281 GWh by year end, 58 GWh lower than normal level. The filling of water reservoirs during 2019 was 1 963 GWh, an approximately normal filling.

SKS Produksjon AS had a power production of 1 857 GWh in 2019; 237 GWh lower than in 2018. SKS Produksjon delivered an operating profit of 287.8 MNOK in 2019; 111.3 MNOK lower than 2018. Ordinary result after taxes was 102.8 MNOK; 28.9 MNOK lower than in 2018.

Rødøy-Lurøy Kraftverk AS had a production of 77.3 GWh; 0.2 GWh more than in 2018. Operating profit were 16.3 MNOK in 2019, 2 MNOK lower than 2018. Net profit was 6.5 MNOK, compared to 6.9 MNOK in 2018.

SKS Handel AS had high activity in 2019 due to volatile market prices of power, guaranties of origin and electricity certificates. The operation profit in 2019 were 7.5 MNOK, compared to 71.7 in 2018. 52 MNOK of the 2018 operation profit is due to fusion between end retail sales department of SKS Handel AS and Kraftinor AS. Net profit were 7.4 MNOK in 2019.

The parent company reports its result according to NRS (Norwegian reporting standards) and had a Net Profit of 38.8 MNOK, compared to 91 MNOK in 2018.

The Annual Statement for SKS is compiled according to IFRS.

Gross Operating Income of SKS company group was 690.2 MNOK in 2019, compared to 786 MNOK in 2018. Operating Profit was 331.5 MNOK and Result Before Taxes 235.1 MNOK. Taxes was 173.4 MNOK and Net Profit 61.7 MNOK.

Unrealized change in value of energy- and interest derivates is recognized at real value according to IFRS, where changes in value are to be recognized in other comprehensive income. The changes in value contributed to the Net Profit by 182.5 MNOK. The company groups Net Profit for 2019 was 215.6 MNOK.

Total equity by year-end was 1 754 MNOK, including share capital of 101 MNOK