Ørsted
Annual report
2019
Contents
Our vision
Let’s create a
world that runs
entirely on
green energy
We’re ranked the most sustainable company in the
world in the Corporate Knights 2020 Global 100 index
Ørsted Annual report 2019
Contents
Management’s review
Financial statements
Consolidated financial statements
Income statement
Statement of comprehensive income
Balance sheet
Statement of changes in equity
Statement of cash flows
Notes
Consolidated ESG statements
(additional information)
Basis of reporting
Environment
Social
Governance
Parent company financial statements
Income statement
Balance sheet
Statement of changes in equity
Notes
Management statement,
auditors’ reports and glossary
Statement by the Executive Board
and the Board of Directors
Independent Auditors’ report
Limited Assurance Report on the consolidated
ESG statements
Glossary
Overview
Chairman’s statement
CEO’s review
Performance highlights
Financial outlook
Financial outlook 2020
Financial estimates and policies
Our business
The green transformation
Our strategic aspiration and growth platform
Our markets and strategy
Our capital allocation and funding
Our strategic enablers
Our business model
Our strategic targets
Our global footprint
Results
Results
Five-year summary
Fourth quarter
Quarterly summary, 2018-2019
Business units
Our business units
Offshore
Onshore
Markets & Bioenergy
Governance
Letter from the Chairman
Board of Directors
Group Executive Management
Corporate governance
Risk and risk management
Shareholder information
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Ørsted Annual report 2019
Overview
5 Chairman’s statement
6 CEO’s review
10 Performance highlights
Contents
Burbo Bank Extension is the
first project in the world to
use MHI-Vestas V164 8.0MW
wind turbines. The number of
wind turbines have been more
than doubled compared to
the original offshore wind farm
Burbo Bank, but the power
output has nearly quadrupled,
now powering over 230,000
UK homes with sustainable
energy each year.
Ørsted Annual report 2019 Overview
Contents
Chairman’s statement
Leading the green
transformation
Climate change is the defining challenge of
our century. By 2030, global greenhouse gas
emissions need to be halved compared to
current levels if we are to stay below a global
temperature increase of 1.5°C above pre-
industrial levels. This is the threshold set by
science to limit the risk of irreversible tipping
points in our global ecosystems. As energy
accounts for 73% of global greenhouse gas
emissions, we clearly need to change the way
we power the world – and shift from fossil
fuel-based to renewable energy.
At Ørsted, our vision is a world that runs
entirely on green energy. Just a decade ago,
our core business was based on fossil fuels,
but we decided to change, and we have
changed to green energy faster than any
other energy company. In January 2020, we
were named the most sustainable company
in the world. We are proud of this recognition,
and it encourages us to further intensify our
efforts to deploy green energy at scale and to
contribute to the profound transformation of
the energy system required to keep the planet
habitable. In continuation of this, we have
decided to become carbon neutral in our own
operations by 2025 and in our total carbon
footprint by 2040.
In 2019, we achieved a global breakthrough
outside Europe by initiating construction of
our first large-scale offshore wind project in
Taiwan, by winning two large scale projects
and expanding our portfolio in the US, and by
taking the decision to fully integrate Lincoln
Clean Energy into Ørsted. Our deployment
of renewable energy now spans markets
on three continents. We bring more than
25 years of experience in renewable energy
and on-time and on-budget delivery of
“In January 2020, we were named the
most sustainable company in the world.
We are proud of this recognition, and it
encourages us to further intensify our
efforts to deploy green energy at scale.
large infrastructure projects as well as new
approaches and innovative solutions that
can help decarbonise societies. Recently, we
have set up a hydrogen team to explore how
to transform renewable power from offshore
wind into hydrogen and other green fuels to
be used in the chemicals industry and as green
fuels in hard-to-abate sectors, such as heavy
transport and logistics.
We also further strengthened our strategic
profile as an upstream renewable energy
company by signing an agreement to divest
our power distribution, residential customer
and city light businesses. Long-term, Ørsted is
not the best owner of these businesses. The
capital released from the divestment will be
deployed in our global renewable energy build-
out plan. Deep and heartfelt thanks go to all of
our skilled colleagues in these businesses who
have provided a good service to our customers
over the years and ensured one of the highest
levels of reliability of supply in the world.
Our talented people are the most important
assets in Ørsted, and we will need a lot of
talent world-wide, as we continue to grow our
business in the years to come.
Safety is equally important for us, and we take
every measure to ensure that Ørsted is a safe
workplace. In May, an employee of one of our
contractors died after a serious accident at the
Avedøre Power Station. We have been – and
still are – deeply affected by this accident.
EBITDA for the year amounted to DKK 17.5
billion and thereby exceeded our expec-
tations and resulted in a ROCE of 10.6%.
Profit for the year amounted to DKK 6.1
billion. The Board of Directors recommends
paying a dividend of DKK 10.5 per share,
corresponding to DKK 4.4 billion.
On behalf of the Board of Directors, I would
like to thank the employees and management
of Ørsted for leading the way towards a world
that runs entirely on green energy. We are
more committed than ever to demonstrating
to all stakeholders that the urgently required
energy transformation is in fact possible, and
that we have the cost-effective solutions to
power the world in a sustainable way.
Thomas Thune Andersen
Chairman
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Ørsted Annual report 2019Management’s review Overview
Contents
CEO’s review
Strong year with continued strategic progress,
global expansion and very satisfactory financials.
Highlights 2019
— Operating profit (EBITDA), excluding
new partnerships, increased by 17% to
DKK 17.5 billion.
— EBITDA from offshore and onshore wind
farms in operation increased by 30% to
DKK 14.8 billion.
— ROCE was 10.6% in line with our target.
— Green share of heat and power generation
increased from 75% to 86%.
— Award of the 1.1GW Ocean Wind project
— Divestment of 50% of selected offshore
activities in New England to our partner
Eversource Energy.
— Decision to construct the onshore wind
farms Sage Draw in Texas and Plum Creek
in Nebraska as well as the combined
solar and storage project Permian Energy
Center in Texas and acquisition of the
construction-ready wind project Willow
Creek in South Dakota.
in New Jersey.
— Lockett Onshore Wind Farm commissioned,
— Award of the 880MW offshore Sunrise
ahead of schedule.
Wind (JV) project in New York.
— Decision to construct our first large-scale
Taiwanese offshore wind project Greater
Changhua 1 & 2a.
— Hornsea 1, the world’s largest offshore
wind farm, was commissioned.
— The newly bioconverted Asnæs Power
Station reached 100% green heat and
power generation in December 2019.
— Agreement signed to divest our power
distribution, B2C and city light businesses
to the Danish energy company SEAS-NVE.
— Signing of a non-binding term sheet with
— Agreement signed to divest our
Polska Grupa Energetyczna (PGE) regarding
two large-scale offshore projects in the
Baltic Sea.
— Exclusive negotiations entered into with
LNG activities.
— Elsam competition case against the
competition authorities closed in favour
of Ørsted.
the Public Service Enterprise Group (PSEG)
regarding a joint venture agreement to
acquire 25% of Ocean Wind.
— Record-high satisfaction and motivation
score of 77 recorded in our employee
satisfaction survey, People Matter.
Financial results
In 2019, we achieved a strong operating profit
(EBITDA) which exceeded our expectations at
the beginning of the year.
EBITDA (excluding new partnerships) increased
by 17% to DKK 17.5 billion.
Earnings from our offshore wind farms in
operation increased by 22%, driven by ramp-
up of green power generation from Borkum
Riffgrund 2, Walney Extension and Hornsea 1.
Curtailments and various operational issues
had a larger than normal adverse impact on
our offshore generation in 2019.
The inclusion of our onshore wind business and
high earnings from our trading activities also
contributed positively to our performance.
These positive effects were partly offset
by higher project development costs in
Offshore, an increase in provisions related
to our LNG activities and a temporarily
negative effect from gas at storage due
to the substantial drop in gas prices during
2019. Further, in 2018, we had a positive
outcome of a gas sourcing arbitration case,
which was not repeated in 2019.
Return on capital employed (ROCE) was
10.6% for 2019.
Offshore
In 2019, we commissioned Hornsea 1, with the
last turbines being installed in early October.
The entire wind farm is now operational.
Hornsea 1 is the world’s largest offshore wind
farm with a capacity of 1,218MW and will
supply more than 1.1 million British homes
with green energy. In November, we passed
another milestone when we inaugurated the
second phase of Taiwan’s first-ever offshore
wind farm Formosa 1.
In April, we took final investment decision on
our 900MW Taiwanese Greater Changhua 1
& 2a project after obtaining establishment
permit, approval of the supply chain plan
and signing of the power purchase agree-
ment with Taipower.
Our three offshore wind farms under
construction are all progressing according
to plan. Borssele 1 & 2 (752MW) in the
Netherlands is expected to be completed
end Q4 2020. In 2022, we expect to complete
Hornsea 2 (1,386MW) in the UK and Greater
Changhua 1 & 2a in Taiwan. Furthermore, the
Virginia Offshore Wind project, which we will
construct for Dominion Energy as an EPC
contractor, is proceeding as planned.
In February, we further strengthened our
strategic partnership with Eversource Energy,
the leading utility in New England, when they
became a 50% partner in selected activities
acquired through Deepwater Wind.
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Ørsted Annual report 2019Management’s review
Overview
Contents
These included the Revolution Wind (704MW)
and South Fork (130MW) development projects
and two undeveloped lease areas off the
coast of New England.
In June, the New Jersey Board of Public Utilities
selected Ørsted’s Ocean Wind project to
negotiate a 20-year offshore wind renewable
energy certificate (OREC) for an offshore wind
farm with a capacity of 1.1GW. The contract
was subsequently signed in December. The
project was developed with support from
the Public Service Enterprise Group (PSEG),
which also has an option to become an
equity investor in the project. In October,
we entered into exclusive negotiations re-
garding a joint venture agreement with PSEG
to acquire 25% of Ocean Wind. Subject to
our final investment decision, the wind farm
is expected to be completed by 2024.
rights which can be developed for future
offshore wind projects in the US.
In July, the New York State Energy Research &
Development Authority (NYSERDA) selected
the Sunrise Wind project to negotiate a
25-year OREC for an offshore wind farm with
a capacity of 880MW. The contract was
subsequently signed in October. Sunrise Wind
is a 50-50 partnership between Ørsted and
Eversource, and subject to a final investment
decision, the wind farm is expected to be
completed by 2024.
With these awards, we have secured a US
offshore wind portfolio with a total capacity
of 2.9GW to be completed towards 2024.
In addition, we have up to 5GW of lease
We have signed contracts with Siemens
Gamesa to supply wind turbines for our
offshore wind projects in Taiwan (Greater
Changhua 1 & 2a) and the North-East cluster
in the US (Sunrise Wind, Revolution Wind and
South Fork). In addition, we have selected
GE as the preferred wind turbine supplier
for our US Mid-Atlantic cluster (Ocean Wind
and Skipjack). These projects will pioneer the
deployment of GE’s Haliade-X 12MW wind
turbine, continuing our track record as a first
mover on new technology.
In Poland, we signed a non-binding term sheet
agreement with Polska Grupa Energetyczna
(PGE) regarding their sale of a 50% stake
in two offshore wind projects in the Baltic
Sea with a total capacity of up to 2.5GW.
The projects are expected to commence
construction by 2026 and 2030, respectively.
In December, we signed the world’s largest
offshore wind CPPA with Covestro. Earlier
in the year, we signed an agreement with
Northumbrian Water to procure power from
Race Bank, the first of its kind in the UK. These
long-term fixed price agreements represent
an important step in building long-term green
partnerships with corporate customers and at
the same time help shape a solid risk-return
profile for projects with merchant risk.
Events in 2019
February
April
May
June
July
August
September
October
November
December
Onshore
Acquisition
of solar and
storage
development
activities of
Coronal Energy,
US
Offshore
50% partner-
ship with
Eversource
Energy in
selected
activities
acquired
through
Deepwater
Wind
Offshore
Greater
Changhua 1 &
2a, Taiwan
FID (900MW)
Expected
COD 2022
Onshore
Sage Draw,
Texas FID
(338MW)
Expected COD
Q1 2020
Offshore
Ocean Wind
project selected
as preferred
bidder in New
Jersey (1.1GW)
Expected COD
2024
Onshore
Acquisition of
Willow Creek,
South Dakota
(103MW)
Expected COD
Q4 2020
Offshore
Sunrise Wind
project selected
as preferred
bidder in New
York (880MW)
Expected
COD 2024
Onshore
Lockett, Texas
COD (184MW)
Onshore
Plum Creek,
Nebraska FID
(230MW)
Expected COD
Q4 2020
Markets
& Bioenergy
Agreement to
divest Danish
power distri-
bution (Radius),
residential
customer
and city light
businesses to
SEAS-NVE
Offshore
Hornsea 1
operational
(1,218MW)
Offshore
Inauguration
of Formosa 1,
Taiwan (128MW)
Onshore
Permian
Energy Center,
Texas FID
(420/40MWac)
Expected COD
mid-2021
Markets
& Bioenergy
All heat
and power
generated from
new unit at
Asnæs, which
runs up to 100%
on sustainable
biomass
Markets
& Bioenergy
Agreement
signed to
divest our LNG
activities
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Ørsted Annual report 2019Management’s review
Overview
Contents
Onshore
Our Onshore business had a strong year
with high yields from our operating assets,
high peak power prices during summer
in Texas, and steady progress of our
construction projects.
We commissioned the onshore wind farm
Lockett in Texas well ahead of schedule. The
184MW wind farm has performed as expected
since commissioning.
In April, we took final investment decision on
the 338MW onshore wind farm Sage Draw in
Texas which is expected to go into commercial
operation in Q1 2020.
In June, we acquired the 103MW construction-
ready wind project Willow Creek in South
Dakota. The wind farm is expected to be
commissioned by Q4 2020, and it will expand
our operations into the Southwest Power Pool
(SPP) market, covering the central US.
In August, we took final investment decision
on the 230MW wind farm Plum Creek in
Nebraska, and we expect the farm to be
completed by Q4 2020. Once operational,
Sage Draw, Willow Creek and Plum Creek will
supply up to 180,000 American homes with
green energy.
In November, we took final investment
decision on the Permian Energy Center in
Texas. The construction of our first combined
solar (420MW) and storage (40MW) project
has commenced and is expected to be
commissioned by mid-2021.
In addition to the decided investments, we
further strengthened our Onshore business in
May through the acquisition of a subsidiary of
US-based Coronal Energy. The subsidiary is a
nationwide solar and storage developer with
a significant pipeline of projects, expanding
our capability platform and exposure to new,
regional markets.
Our total installed and decided onshore
capacity now stands at 2GW. Our ambition is
to have installed 5GW of capacity by 2025.
Finally, we decided to fully integrate Lincoln
Clean Energy into Ørsted and appoint Declan
Flanagan new CEO of our Onshore business
and member of Ørsted’s Group Executive
Management. The integration was marked
with a full name change to Ørsted in
December.
Markets & Bioenergy
In June, we decided to consolidate our
Customer Solutions and Bioenergy busi-
ness units into one business unit, Markets &
Bioenergy. The decision was taken as a natural
consequence of the reduced size of the two
former business units due to, among other
things, the below-mentioned divestments.
In September, we signed an agreement to
divest our Danish power distribution (Radius),
residential customer and city light businesses
to SEAS-NVE, Denmark’s second largest
cooperatively-owned energy company. With
our global expansion in renewable energy,
Ørsted is no longer the best owner of these
businesses. We expect the transaction to be
closed in the first half of 2020. We consider
the transaction to be attractive to our share-
“During summer, we won two auctions
in the US. With these awards, we have
secured a US offshore wind portfolio
with a total capacity of 2.9GW to be
completed towards 2024.
holders and to provide a good future home
for the customers and our highly skilled
employees. The proceeds from the divest-
ment will be used to continue our global
investments in green energy.
To further focus our activities, we entered
into an agreement to divest our LNG activ-
ities to Glencore. Furthermore, we decided
to initiate a process to divest our B2B sales
businesses, except for gas sales to our larger
B2B customers in Denmark and Sweden which
serve as an outlet for our legacy gas position.
As we run our business based on an end-to-
end value chain thinking, we have decided
that all activities and earnings related to
Offshore and Onshore, should be reported in
these segments, even if the daily activities are
performed on behalf of the Group in another
business unit. Thus, earnings from trading
related to hedging of our power exposures
and power portfolio optimisation activities,
previously presented in Markets, are now
included in Offshore and Onshore earnings.
From mid-December 2019, all heat and
power from Asnæs Power Station have been
generated from the new unit, which run up
to 100% on sustainable biomass. We have
now fully converted six of our seven CHP
plants to run on sustainable biomass. For our
last remaining coal-fired CHP plant, Esbjerg
Power Station, we have not been able to find
a joint solution with the heat customer for a
bioconversion project. Consequently, we plan
to close down operations of this plant by the
end of Q1 2023.
Due to recent upgrades to our Renescience
facility in Northwich in the UK, we were
not able to commission the plant in 2019 as
planned. However, it has been confirmed
that the core enzymatic sorting process
works as expected.
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Ørsted Annual report 2019Management’s review
Overview
Contents
“Our aim will be for Ørsted
to reach carbon neutrality
by 2025.
Radius finalised the installation of more than
1 million smart meters in 2019, an achievement
completed in just three years. The smart
meters allow remote reading of the power
meters and give households in the area the
opportunity to consume power in the most
cost-efficient periods of the day.
In 2018, the Danish Western High Court
acquitted Elsam (now Ørsted) from the
competition authorities’ claim that Elsam
had abused a dominant position on the
market for wholesale of physical electricity
in Western Denmark from 1 January 2005 to
30 June 2006. In light of this judgement, the
parties agreed in September on dismissing
the competition authorities’ similar claim
for the period from the second half of 2003
and the whole of 2004. Consequently, the
cases between Elsam and the competition
authorities reached a final conclusion in
favour of Ørsted. Despite this status, the
claimants maintain their claims for damages
and continue their legal action.
many significant milestones during the year.
They deserve tremendous credit for their
tenacity and ability to get things done.
Fatal accident
In May, an employee of one of our contractors
died after a serious accident at the Avedøre
Power Station. We are very saddened by this.
Safety is of utmost importance to us, and we
have initiated several improvement tracks to
ensure that an accident like this will never
happen again.
Employees
The well-being of our employees is of high
importance to us. The 2019 employee satis-
faction survey, People Matter, showed a record
high satisfaction and motivation score of 77.
This global ‘best-in-class’ score places Ørsted
in the top 10% of external benchmarks.
Thanks to Ørsted’s passionate and skilled
employees, we once again managed to reach
Concluding remarks
We are very pleased with our strategic
progress and results in 2019. Ørsted maintains
a leading position in the global high growth
market for green energy. We are well on track
to deliver on our financial targets of 20%
average growth in profits from operating
renewable assets for the period 2017-2023 and
an average Group ROCE of 10% for the period
2019-2025.
We remain as committed as ever before to
our vision of a world running entirely on green
energy. We will continue to work hard to help
limit global warming and its impact on bio-
diversity and global living conditions for current
and future generations. Our aim will be for
Ørsted to reach carbon neutrality by 2025.
Henrik Poulsen
CEO and President
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Ørsted Annual report 2019Management’s review Overview
Contents
Performance highlights
Profits and returns
Operating profit (EBITDA)
DKKbn
New partnerships
30.0
22.5
17.5
17.5
2017
2018
2019
Net profit (continuing operations)
DKKbn
New partnerships
19.5
13.3
Return on capital employed (ROCE)
%
32.1
New partnerships
25.2
6.1
6.1
2017
2018
2019
10.6
10.6
2017
2018
2019
In 2019, we achieved a strong underlying EBITDA which
exceeded our expectations at the beginning of the year.
It was driven by an increase in generation from our off-
shore and onshore wind farms and high earnings from our
trading activities. The decline in total EBITDA was due to
the profit from the 50% farm-down of Hornsea 1 in 2018.
Profit for the year stood strong at DKK 6.1 billion.
Net profit in 2018 and 2017 was significantly impacted
by farm-down gains from new partnerships.
ROCE was 10.6% for the year, which was around
our target of an average ROCE of approx 10%
for the Group in the period 2019-2025. In 2018
and 2017, ROCE was significantly impacted by
farm-downs.
Cash flow and balance sheet
Gross investments
DKKbn
24.5
23.3
17.7
Interest-bearing net debt
DKKbn
17.2
Credit metric (FFO/adjusted net debt1)
%
69
Follow-up on outlook
announced for 2019
EBITDA, excl. new partnerships,
realised vs guidance
DKKbn
1 February
25 September
Realised
15.5-16.5
16-17
17.5
Investments, realised vs guidance
DKKbn
1 February
Realised
21-23
23.3
23.3
2017
2018
2019
17.2
-1.5
-2.2
2017
2018
2019
31
50
31
In the outlook announced in our annual report for
2018, we expected EBITDA without new partner-
ships of DKK 15.5-16.5 billion and gross investments
of DKK 21-23 billion for 2019.
2017
2018
2019
With EBITDA, excluding new partnerships, of
DKK 17.5 billion, our expectations were exceeded.
The gross investment level was high in 2019 due to
a high construction activity in our project portfolio.
We had a net debt of DKK 17.2 billion at the end
of 2019. Our debt primarily increased due to the
high investment level, the addition of lease debt
and the payment of dividends.
The credit metric ‘funds from operations’ (FFO)
relative to adjusted net debt amounted to 31%
in 2019, in line with our target of around 30%.
Gross investments amounted to DKK 23.3 billion.
1
Interest-bearing net debt, including 50% of hybrid capital and securities not available for use (with the exception of repo transactions),
present value of lease obligations (up until 2018), and decommissioning obligations less deferred tax.
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Ørsted Annual report 2019Management’s review Overview
Contents
Performance highlights
Environment
Green share of generation
%
Installed renewable capacity
GW
Avoided emissions from green capacity
Million tonnes, CO2e
Greenhouse gas emissions, scope 1 and 2
Million tonnes, CO2e
86
75
64
86
2017
2018
2019
9.9
9.9
8.3
5.8
2017
2018
2019
11.3
6.7
8.1
11.3 2017
2018
2019
1.9
4.2
3.5
1.9
2017
2018
2019
The green share of our heat and power generation
continued to increase to a new high of 86%, following
continued ramp-up of our offshore wind capacity,
new onshore capacity and lower heat and power
generation based on coal and gas.
Installed green capacity increased by 19% to 9.9GW
in 2019 due to the commissioning of the offshore
wind farm Hornsea 1 and the onshore wind farm
Lockett as well as the bioconversion of Asnæs
Power Station.
Avoided emissions from our green heat and power
generation relative to fossil-fueled generation
increased by 39%, mainly due to increased wind-
based power generation.
The scope 1 and 2 greenhouse gas emissions were
reduced by 48% in 2019, mainly driven by a larger
share of heat and power generation based on
sustainable biomass instead of coal and gas.
Greenhouse gas emissions, scope 3
Million tonnes, CO2e
Safety
Total recordable injury rate (TRIR)
Employee satisfaction
Scale 1-100
Social
Governance
Board of Directors and Group
Executive Management
Nationality and gender diversity
36.2
34.6
34.6
2018
2019
Our scope 3 greenhouse gas emissions were reduced
by 4%, mainly due to reduced sales of natural gas.
4.9
6.4
4.7
4.9
2017
2018
2019
77
76
76
77
8
3
9
6
7
4
6
7
11
4
9
4
2017
2018
2019
2017
2018
2019
We continue to have a strong focus on the safety
and well-being of our employees. However, TRIR
increased slightly, driven by an unsatisfactory high
number of injuries in Markets & Bioenergy.
The 2019 employee satisfaction survey, People
Matter, showed a record high satisfaction and
motivation score of 77.
We have focus on increasing diversity at all
management levels.
Danish
International
Female
Male
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Ørsted Annual report 2019Management’s review Ørsted Annual report 2019
Contents
Financial outlook
13 Financial outlook 2020
15 Financial estimates and policies
This is Jason Kao. Jason
is currently managing the
development of our Greater
Changhua offshore wind
farms in Taiwan. With over
10 years’ experience in the
industry, he has a deep
knowledge of the region
and an open dialogue with
local authorities and fisher-
men. Jason plays a key role
in developing the Greater
Changhua portfolio which
will soon deliver green power
to over 2.8 million Taiwanese
households.
Financial outlook 2020
Contents
Financial outlook 2020
Group EBITDA guidance
As in previous years, our guidance only
includes existing Offshore partnership
agreements. We had no new partnership
agreements in 2019, but EBITDA from existing
partnerships amounted to DKK 3.8 billion.
In 2020, EBITDA from existing partnerships
is expected to be very limited.
In 2019, we signed an agreement to divest
our Danish power distribution, residential
customer and city light businesses. We expect
the transaction to close in first half of 2020,
and our EBITDA guidance includes operational
earnings for the first half of 2020.
EBITDA (business performance), excluding
earnings from new partnership agreements,
is expected to be DKK 15-16 billion in 2020.
The outlook is based on the expected
development in the business units compared
to 2019, as described below.
Offshore (excluding new partnership
agreements) – lower
— Earnings from offshore wind farms in
operation are expected to increase from
ramp-up of generation at Hornsea 1 and
Borssele 1 & 2 and as another 400MW
of Hornsea 1 will receive the CfD price
from 31 March. Due to the extraordinarily
high earnings in 2019, we expect lower
earnings from trading related to hedging
of our power exposure.
— As mentioned, earnings from existing
Outlook 2020, DKKbn
2019 realised
2020 guidance
partnerships is expected to go from DKK 3.8
in 2019 to a very limited amount in 2020.
— We expect lower expensed project
development costs than in 2019.
Onshore – higher
— Earnings from onshore wind farms in
operation are expected to increase as a
result of new wind farms coming online,
including Sage Draw, Plum Creek and
Willow Creek, and a full year of operation
from Lockett.
Markets & Bioenergy – lower
— Underlying earnings from our CHP plants
(including ancillary services) are expected
to be at level with 2019. The DKK 0.3 billion
provision reversal from the Elsam competi-
tion case will not be repeated.
— Earnings in ‘Gas Markets & Infrastructure’
are expected to show a net decrease, due
to a temporary shut-down from late 2019
until 2022 of the Tyra gas field owned by
the Danish Underground Consortium (DUC),
which will lower our earnings from both the
gas portfolio and offshore gas pipelines.
However, in contrast, we do not expect a
repetition in 2020 of the negative effects
from revaluating our gas at storage caused
by the declining gas prices in 2019.
— Earnings in ‘LNG’ are expected to break-
even in 2020. In 2019, we provided for the
expected loss from the divestment to
EBITDA (without new partnerships)
Offshore (without new partnerships)
Onshore
Markets & Bioenergy
Gross investments
17.5
15.2
0.8
1.5
23.3
15-16
Lower
Higher
Lower
30-32
Our EBITDA guidance for the Group is the prevailing guidance, whereas the directional earnings
development per business unit serve as a means to support this. Higher/lower indicates the
direction of the business unit’s earnings relative to the results for 2019.
be concluded in 2020 and the expected
operating loss in the period until closing.
— Earnings from power distribution, residen-
tial customer and city light businesses are
only included for half a year.
Gross investments
Gross investments for 2020 are expected to
amount to DKK 30-32 billion. The outlook
reflects a high level of activity in Offshore
(Borssele 1 & 2, Hornsea 2, Greater Changhua
1 & 2a and our US activities) and Onshore
(Permian Energy Center, Plum Creek, Willow
Creek and Sage Draw).
In addition to gross investments, signifi-
cant funds are temporarily tied up in the
construction of transmission assets for off-
shore wind farms in the UK and offshore wind
farms for our partners. These funds are a part
of our operating cash flow.
At the end of 2019, funds tied up in work in
progress totalled DKK 8.8 billion. During 2020,
we expect to divest the Walney Extension
offshore transmission asset, but we still expect
to see a high level of funds tied up in work in
progress in 2020 as a result of the continued
construction of the transmission asset at
Hornsea 2. We expect to divest the Hornsea
1 and Hornsea 2 offshore transmission assets
around year-end 2020 and 2023, respectively.
Uncertainties, prices and hedges
Our offshore wind farms are largely subject
to regulated prices, implying a high degree of
revenue certainty. This means that we know
the price per generated MWh for most wind
13 / 183
Ørsted Annual report 2019Management’s review Hornsea 1 is now
commissioned and
ramp-up generation
will contribute to our
earnings in 2020.
Financial outlook 2020
Contents
“Our offshore wind farms are largely
subject to regulated prices, implying
a high degree of revenue certainty.
Forward-looking statements
The annual report contains forward-looking state-
ments, which include projections of our short- and
long-term financial performance and targets as
well as our financial policies. These statements are
by nature uncertain and associated with risk. Many
factors may cause the actual development to differ
materially from our expectations.
These factors include, but are not limited to, changes
in temperature, wind conditions, wake and blockage
effects, precipitation levels, the development in
power, coal, carbon, gas, oil, currency and interest
rate markets, changes in legislation, regulation or
standards, the renegotiation of contracts, changes
in the competitive environment in our markets and
reliability of supply. Read more about the risks in the
chapter ‘Risk and risk management’ and in note 7.
farms in Denmark and Germany as well as
the CfD wind farms in the UK. For our British
ROC wind farms, we also know the subsidy
per generated MWh which we will receive in
addition to the market price.
The part of our generation from offshore wind
farms and power plants which is exposed
to market prices has to a large extent been
hedged for 2020. The same applies to our
currency risks. The market value of financial
hedging instruments relating to our opera-
tions and divestments of assets deferred for
recognition in business performance EBITDA in
2020 amounted to DKK 0.7 billion at the end
of 2019. This effect is included in the outlook
for 2020 (see note 1.5).
The most significant uncertainty about
the operating profit from existing activities
in 2020 relates to the size of our power
generation, which depends on the wind
conditions, the ramp-up of new wind farms
and asset availability.
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Ørsted Annual report 2019Management’s review Financial outlook 2020
Contents
Financial estimates and policies
power purchase agreements) of 20% annually,
reaching a level of DKK 25-26 billion in 2023.
Financial estimates
Total CAPEX spend
Target
Year
DKK 200bn
2019-2025
Financial estimates
In October, we presented an update of
our long-term financial targets following a
comprehensive project upgrading the models
and processes we use to forecast the energy
production from our offshore wind farms. The
project leveraged our access to extensive
production data from our asset portfolio. It
led us to adjust two of our long-term financial
targets: unlevered life cycle IRR and lifetime
load factor, both for a specific group of
projects. The long-term financial targets and
estimates based on the entire portfolio, rather
than a group of assets, remain unchanged,
including ROCE and profit growth from
operating assets. See further details in our
company announcement: ‘Ørsted presents
update on its long-term financial targets’.
For the period 2019-2025, we expect total
gross investments of approx DKK 200 billion,
of which DKK 23.3 billion was spent in 2019.
Investments in offshore wind farms are
expected to constitute 75-85% of the invest-
ment programme. Onshore investments are
expected to constitute 15-20%, while our
investments in Markets & Bioenergy are ex-
pected to constitute 0-5% of the investment
programme.
From 2017 to 2023, we expect an average
increase in operating profit (EBITDA) from
offshore and onshore wind and solar farms in
operation (including O&M agreements and
The largest share of Ørsted’s operating profit
(EBITDA) will still be generated by long-term
contract-based or regulated activities. We
expect an average of around 90% of EBITDA
in the period 2019-2025 to stem from long-
term contract-based or regulated activities.
Our target is an average return on capital
employed (ROCE) of approx 10% for the Group
in the 2019-2025 period.
Financial policies
The Board of Directors recommends to the
annual general meeting that a dividend of
DKK 10.5 per share be paid for 2019, equating
an increase of 8% and a total of DKK 4.4
billion.
Supported by the expected increase in cash
flows from future offshore and onshore wind
farms, we still intend to increase annual
dividends by a high single-digit percentage
compared to the previous years’ dividends,
covering the period up until 2025.
Our dividend policy and other expected
capital allocations are subject to our
commitment to our BBB+/Baa1 rating profile.
Average return on capital employed (ROCE)
~10%
2019-2025
Average share of EBITDA from long-term
regulated and contracted activities
Average yearly increase in EBITDA from offshore
and onshore wind farms and solar farms in
operation
~90%
2019-2025
~20%
2017-2023
Read more about our
key metrics, financial
targets and policies in
the presentation from
our Capital Markets Day
in November 2018 at
orsted.com/en/ capital-
markets-day and our
update in October 2019
on our long-term targets.
Financial policies
Rating
Capital structure
Dividend policy
Min. Baa1/BBB+/BBB+ (Moody’s/S&P/Fitch)
~30% (FFO/adjusted net debt)
Our current rating
is in accordance
with the policy.
Ambition to increase the dividend paid by
a high single-digit rate compared to the
dividends for the previous year up until 2025
Formosa 1 is Taiwan’s
first commercial scale
offshore wind project.
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Ørsted Annual report 2019Management’s review Ørsted Annual report 2019
Contents
Our business
17
19
The green transformation
Our strategic aspiration and
growth platform
20 Our markets and strategy
24 Our capital allocation and funding
25 Our strategic enablers
26 Our business model
27 Our strategic targets
29 Our global footprint
2019 saw us significantly
expand our geographic
footprint in the US. Amazon
Onshore Wind Farm in Texas
was the largest onshore
wind farm in the portfolio
when we acquired LCE in
2018 – a project supporting
hundreds of jobs and adding
more than 1,000,000MWh
of clean energy to the grid
each year.
Our business
Contents
The green transformation
The world is facing a climate
emergency. Climate change
is happening fast and is
threatening to destabilise
our global ecosystems.
With the 17 UN Sustainable Development
Goals (SDGs), the world’s countries have
agreed on the most pressing economic, social
and environmental challenges that we face
globally towards 2030. Climate action is a
central goal, as it affects the realisation of
many other SDGs where overall progress has
proven to be slow or even reversed.
Science has clearly demonstrated the
need to limit global warming to 1.5°C to
avoid uncontrollable effects of climate
change, including more floods, wildfires and
droughts, decrease in biodiversity, and many
other severe consequences. With the Paris
Agreement, a vast majority of the world’s
countries agree to take global action to keep
the increase in global average temperature
well below 2°C and to pursue efforts to
limit the increase to 1.5°C compared to
pre- industrial levels. Meanwhile, the global
average temperature has already increased
by more than 1.1°C and is still on the rise.
With current policies, temperatures are
expected to reach a 1.5ºC increase as soon as
2030 and 3-4ºC by 2100. To turn the current
development around and keep the world
below a 1.5ºC temperature increase, global
emissions need to be halved in just ten years
and reach net-zero by 2050.
Modern society was built on fossil fuels.
The burning of coal, oil and gas still account
for more than 80% of global energy con-
sumption. Decoupling economic growth
and carbon emissions require expanding the
green energy transformation significantly
and at a global scale.
However, the share of renewables meeting
global energy demand has only increased
around 0.25 percentage points annually over
the past decade and is expected to reach just
12% in 2023. This development falls substan-
tially short of being in line with the 1.5°C
trajectory which necessitates profound near-
term decarbonisation of the energy supply.
The world’s countries must rapidly transform
global energy systems away from fossil fuels
to becoming entirely based on renewable
energy. It is an enormous endeavour which is
necessary and, fortunately, also possible.
Through industrialisation, economies of scale
and innovation across the value chain, the cost
of renewable energy has dropped significantly
over the past decade. Thus, the cost of offshore
wind has dropped by more than 60% since
2014, and it is now cheaper to build offshore
wind farms than coal- or gas-fired power
plants. The same applies to solar photovoltaic
(PV) and onshore wind that have followed
similar developments. Renewables becoming
the economic choice has been a breakthrough
for the green transformation. It demonstrates
that ambitious government targets to deploy
green technologies help to effectively bring
down the cost of green energy.
Ørsted wants to contribute to a 1.5°C future
At Ørsted, our vision is a world that runs
entirely on green energy. We have become
the global leader in deploying offshore wind
and have activities within onshore wind, solar,
storage and bioenergy. Our solutions tackle
the climate challenge and help speed up the
global transition from fossil-based energy
to renewables, which represents our largest
societal impact and contribution to the SDGs.
Over the past decade, we have undergone a
major transformation. From being a traditional
fossil-based energy company ten years
ago, we are today ranked #1 in Corporate
Knights’ 2020 Global 100 most sustainable
corporations in the world. We have demon-
strated that a rapid transformation from fossil
to renewable energy is both possible and
profitable. From a green energy share of 17%
in 2006, we are today at 86% and will reach
99% by 2025. Through this transformation,
we have reduced our carbon intensity by
86% compared to 2006. We will continue to
drive out fossil-based energy generation by
phasing out coal by 2023 and expanding our
renewable energy capacity across the world.
We have installed 7.8GW offshore and onshore
wind – enough to power more than 15 million
Our contribution
to the SDGs
The 17 Sustainable Development Goals
(SDGs) address the key economic, social and
environmental challenges that the world
faces towards 2030 as a global framework
for how to achieve a more sustainable
future. The goals are interconnected, and
the climate challenge influences almost all
the other goals.
The core business of Ørsted contributes most
directly to SDG 7 on ‘Clean and affordable
energy’ and SDG 13 on ‘Climate action’. Be-
sides these, we contribute indirectly to several
other SDGs. We seek to strengthen the posi-
tive impacts and mitigate and avoid potential
negative impacts that derive from our core
business and a global green transition.
See the full overview of our SDG contri-
butions and impacts in our sustainability
report orsted.com/sustainability2019
and ESG performance report
orsted.com/ESGperformance2019.
people – and our ambition is to install more
than 30GW of renewable capacity by 2030,
which will be enough to power more than
55 million people.
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Ørsted Annual report 2019Management’s review Our business
Contents
For our energy generation and operations
(scope 1 and 2 emissions), our target is to
become carbon neutral by 2025. To achieve
this, we will reduce our carbon intensity to
less than 10g CO2e/kWh, which represents at
least a 98% reduction compared to 2006. This
target includes both generating green energy
and sourcing green energy for our own energy
use. We continuously work to reduce the
remaining 2% of our carbon emissions and will
offset any residual emissions from 2025.
As we embark on the next phase in our
decarbonisation journey, we have also set a
target to reach net-zero emissions in our total
carbon footprint (scope 1-3) by 2040, a decade
faster than required by science. To help
achieve this, we target a 50% reduction of the
emissions in our energy trading and supply
chain (scope 3) by 2032, compared to 2018.
We will reach this target by engaging with
our suppliers to reduce emissions in our supply
chain and by gradually phasing out gas sales.
We have defined our carbon-reduction targets
to align our full carbon footprint with what
science requires from the energy sector to
limit global warming to 1.5°C. The non-profit
Science Based Targets initiative (SBTi) has
preliminarily concluded that our new targets
align with what the 1.5°C pathway requires
from energy companies. The SBTi organisation
will officially announce this target classifica-
tion during 2020, once it has released the 1.5°C
reduction pathway for energy companies. A
visual showing all greenhouse gas emissions
Carbon neutral by 2025
Energy generation and operations (scope 1-2)
g CO2e/kWh
500
450
400
350
300
250
200
150
100
50
0
2006
2010
2013
2016
2019
2025
Ørsted scope 1 and 2 emissions
By 2025, we want to
be carbon neutral. This
target covers all direct
emissions from our
activities and indirect
emissions from our
energy consumption
(scope 1-2).
We will eliminate
the remaining emissions
beyond a 98% reduction
(g CO2e/kWh) which
could include offset
by investing in certified
carbon-removal
projects.
in our company and value chain, along with
our complete action plan on how to address
them, is available in our sustainability report
at orsted.com/sustainability2019.
executive remuneration. We also conducted
a climate scenario analysis in 2019, and its
overall results are disclosed in the risk section
of this report.
Ørsted has set the course for a carbon neutral
future. Just like we have transformed, we
want to help transform the world’s energy
systems away from fossil fuels towards green
energy to limit average global temperature
rise to 1.5°C. Reaching such a future requires a
bold vision and decisive action by individuals,
corporations and governments.
Climate-related financial disclosures
Companies and investors also need to look at
how the climate may impact their business.
This includes physical factors, such as sea
level rising or storms that can affect assets,
and transitional factors, such as carbon prices
or technology shifts that can affect business
strategies. To address such risks and oppor-
tunities, it is key to adopt a science-based
carbon reduction target and analyse the
business’ financial risks and opportunities
related to climate change as recommended
by the Task Force on Climate-related Financial
Disclosures (TCFD).
Our sustainability reporting
Read more about our decarbonisation strategy as
well as our full range of sustainability programmes in
our sustainability report orsted.com/sustainability2019.
The report constitutes our annual Communication on
Progress to the UN Global Compact and highlights
our positive and negative impacts on the Sustainable
Development Goals (SDGs).
A full ESG data overview with accounting policies
is available in our ESG performance report
orsted.com/ESGperformance2019.
With the Sustainability and the ESG reports, we
comply with the requirements for corporate social
responsibility reporting set out in section 99a of the
Danish Financial Statements Act as well as section
99b on the gender distribution at management
levels, respectively.
See and download the reports here: https://orsted.
com/en/Sustainability/Our-reporting#0
Greenhouse gas emissions
Greenhouse gas emissions related to a company
is typically divided into three categories according
to the Greenhouse Gas GHG) Protocol:
At Ørsted, we are aware of the actual and
potential impacts of climate change on the
resilience of our business. By endorsing and
aligning our practices and reporting with the
TCFD recommendations over the past two
years, we have further crystallised our under-
standing and disclosure of climate-related
risks and opportunities. This includes improved
reporting on the integration of climate-related
issues into our governance mechanisms, such
as the Board of Directors’ competences and
— Direct emissions (scope 1), which cover all direct
emissions from the company’s operations, e.g.
from the burning of coal and gas at heat and
power plants.
— Indirect emissions (scope 2), which include the
emissions from the generation of electricity,
heat and steam purchased and consumed by
a company, e.g. for heating of buildings.
— Indirect emissions (scope 3), which include the
upstream emissions in the company’s supply chain
from production and transportation of the goods
and services purchased as well as from down-
stream emissions in relation to the end-user’s con-
sumption of the company’s products or services.
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Ørsted Annual report 2019Management’s review Our business
Contents
Our strategic aspiration and growth platform
The need to transform the world’s
energy systems from fossil fuel-
based to renewable energy and
our leadership position in offshore
wind give us a strong platform to
realise our aspiration of becoming
a global, green energy major
in a rapidly expanding global
renewable energy market.
By 2030, global installed renewable capacity is
expected to be four times higher than it is today,
fuelled by the cost competitiveness of green
technologies and by increasingly ambitious gov-
ernment plans to decarbonise energy systems in
the fight against climate change.
Ørsted’s renewable energy portfolio includes
offshore wind, onshore wind, solar PV and
storage. In offshore wind, we are the market
leader, both globally and across our four
regional markets: UK, Continental Europe,
North America and Asia-Pacific. In onshore
renewables, i.e. onshore wind, solar PV and
storage, a market we entered in 2018, we have
a growing position in North America that will
soon span seven US states.
Our global leadership position in offshore
wind and growing regional position in onshore
renewables create a strong foundation for
reaching our strategic ambition of more than
30GW of installed renewable capacity by 2030.
Our growth
platform
Continental Europe
and UK
North
America
Asia-Pacific
Offshore
wind
Onshore wind,
solar PV and
storage
Maintain leadership in offshore wind
Build strong North American
position in onshore wind,
solar PV and storage
However, volume is not an objective in itself.
We only invest in projects that provide returns
above our cost of capital.
Markets & Bioenergy plays an important
role in supporting our growth platform by
providing services that help offtake the
Group’s energy generation and manage
our risk exposure. The business unit is also
responsible for our portfolio of combined
heat and power (CHP) plants which provide
green heat, power and ancillary services to
Denmark’s energy system, making a significant
contribution to the decarbonisation agenda.
To sharpen the focus of Markets & Bioenergy,
we initiated several divestment processes for
non-core activities over the past year, and we
have already concluded some of these.
Global renewable energy capacity by technology1
GW installed
CAGR
17% Offshore wind
13% Small-scale PV
12% Large-scale PV
10% Onshore wind
2% Biomass
1
Excludes solar thermal, geothermal, marine, tidal
and others, which combined account for less than
1% of capacity.
Source: Bloomberg New Energy Finance (BNEF)
New Energy Outlook 2019 for all technologies
except offshore wind. Offshore wind figures from
BNEF H1 2019 Offshore Wind Market Outlook.
160
177
922
1,518
1,604
+11% / year
4,381
1,406
131
31
234
423
587
2019
2030
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Ørsted Annual report 2019Management’s review
Our business
Contents
Our markets and strategy
Offshore wind
The global offshore wind market
In 2019, global installed offshore wind capacity
excluding mainland China totalled 23GW.
Bloomberg New Energy Finance estimates
that the global offshore wind market will
see the installation of approx 7GW per year
between 2020 and 2025, and that annual
additions will double to an average of 14GW
per year by the mid to late 2020s. This repre-
sents a significant increase in comparison to
the 3GW annual build-out rate in recent years.
In the long term, the International Energy
Agency predicts that offshore wind will be-
come a mainstay of the world’s power supply,
with the technical potential to cover 1.5
Offshore wind capacity excl. mainland China
GW installed
North America
Asia-Pacific
Continental Europe
and UK
+14GW / year
+7GW / year
133
+3GW/year
11
23
25
1
11
23
24
15
34
84
63
6
14
43
2015
2019
2020
2025
2030
Source: BNEF H1 2019 Offshore Wind Market Outlook.
times the world’s current electricity demand,
according to a report published in 2019.
Selected offshore wind targets
Europe including the UK is by far the largest
and most mature market for offshore wind.
We expect to see significant growth in this
region in the years to come, not least due
to the ambition of the European Union to
reach net-zero carbon emissions by 2050.
The UK is currently the world’s largest market
for offshore wind. In 2019, the conservative
government pledged to build 40GW by 2030,
and the Crown Estate launched its first major
auction for new offshore lease areas with a
combined potential of up to 7GW of capacity.
In mainland Europe, there has also been an
increase in government build-out targets
driven by the falling cost of offshore wind,
decreasing availability of sites for onshore
projects and an increasing sense of urgency
about the decarbonisation of Europe’s energy
system. In 2019, France, Belgium and Poland
raised their targets, while Ireland introduced
a target for offshore wind for the first time,
promising a strong line-up of tenders over the
coming years.
North America and Asia-Pacific are new
and relatively immature offshore markets
in comparison to Europe. However, strong
government commitments are propelling
growth in these regions. In North America,
the driving force of offshore wind expansion is
state-level policies, which have been effective
in establishing a rapid and significant build-
Region
Target
Continental Europe and UK1
The UK
Germany
40GW by 2030
20GW by 2030
The Netherlands
11.5GW by 2030
Poland
France
Denmark
Belgium
Ireland
Italy
9.6GW by 2030
11GW by 2028
5.3GW by 2030
4GW by 2030
3.5GW by 2030
0.9GW by 2030
North America2
New York
9GW by 2035
New Jersey3
7.5GW by 2035
Massachusetts
3.2GW by 2030
Virginia
2.5GW by 2026
Connecticut
2GW by 2030
Maryland
1.6GW by 2030
Rhode Island4
1GW by 2020**
Asia-Pacific
Taiwan5
15GW by 2035
South Korea1
12GW by 2030
Japan6
10GW by 2030***
Current
capacity
(GW)†
20.2
10.8
4.5
0.0
3.5
2.7
2.3
<0.1
<0.1
1.8
1.1
1.6
0.0
1.1
0.4
0.4
5.7
0.1
<0.1
out potential across the Eastern seaboard. In
Asia-Pacific, Taiwan has been the first mover in
encouraging the development of offshore wind
IEA Offshore Wind Outlook 2019
Sources
1
2 AWEA Offshore Wind Fact Sheet October 2019
3 Greentech Media
4 State of Rhode Island Office of Energy Resources
5 Offshore WIND
6 Linklaters
Notes
* Target not legally binding.
** Clean energy target, technology not specified.
*** Combined offshore and onshore target.
† Total capacity includes installed, under
construction and awarded capacity end of 2019.
projects, and we now see Japan and South
Korea following suit as next-in-line markets.
The growing volume of offshore wind projects
and the expected long-term market growth
have attracted new players and increased
competition in the industry. Most notably,
oil majors have entered the market with
ambitious build-out targets, which has made
auctions and tenders more competitive,
putting pressure on margins.
Our offshore ambition
Ørsted is the world leader in offshore wind,
with approx 30% of the global offshore wind
capacity installed and under construction
outside mainland China. We have played
a key role in maturing the industry, and we
have built more offshore wind farms world-
wide than any other company. By the end
of 2019, we had 6.8GW of installed capacity,
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Ørsted Annual report 2019Management’s review Our business
Contents
3.0GW under construction and a further
5.0GW awarded.
Offshore capacity build-out towards 2025
MW
Ørsted’s strategic ambition within offshore
wind is to maintain our market leadership
position and to reach 15GW of installed
capacity by 2025. With our US East Coast
awards of 2.9GW in 2019, we are already very
close to reaching this goal, provided we take
FID on all awarded projects.
Exponential growth and increasing competi-
tion in the underlying market in combination
with our focus on financial discipline imply
a lower win rate in competitive auctions
and tenders going forward in comparison to
our historical win rate of one third. Recent
processes in the US (Massachusetts and
Connecticut), the Netherlands and France
illustrate this, where we were not awarded
any capacity. However, given the rapidly
expanding market, we expect to reach our
build-out ambition with a lower win rate.
Our offshore strategic priorities
Several overall strategic priorities guide our
offshore activities across regions. To deliver on
our growth ambition, we will:
— drive operational excellence to secure
best-in-class availability on operating assets,
continue to deliver construction projects
on time and on budget, and ensure value-
creating FIDs on our awarded portfolio
— maintain leading market positions and
expand our presence in the UK, Continental
Europe, North America and Asia-Pacific
— continue to push for LCoE reductions
through new technology adoption, supply
chain development and systematic cost-out
Awarded capacity
Capacity under construction
Capacity installed
6,820
752
1,386
900
9,858
1,714
1,220
1,142
920
14,854
15,000
2019
installed
capacity
Borssele
1 & 2
Hornsea 2
Greater
Changhua
1 & 2a
Capacity
installed
and under
construction
US
North-East
cluster1
US Mid-
Atlantic
cluster2
German
Development
Portfolio3
Greater
Changhua
2b & 4
Capacity
installed, under
construction
and awarded
2025
ambition
1 South Fork (130MW), Revolution Wind (704MW) and Sunrise Wind (880MW).
2 Skipjack (120MW) and Ocean Wind (1,100MW).
3 Gode Wind 3 (242MW) and Borkum Riffgrund 3 (900MW).
— closely monitor market for new compli-
mentary technologies and identify attrac-
tive opportunities for bundling offshore
wind with storage and electro fuels
— maintain agility and reduce overhead
through digitalisation and simplification
of operations to free up funding for invest-
ment in market development initiatives.
Our offshore regions
Our offshore wind business is organised in
four regions: the UK, Continental Europe,
North America and Asia-Pacific. As our
footprint expands, we recognise the need for
a differentiated approach to our markets.
Therefore, in addition to our overall strategic
priorities, we have strategic focus areas in
each region.
UK
We have been active in the UK since 2004,
when we became a joint owner of the
Barrow offshore wind farm. Today, the UK is
our largest market, and we have 15 offshore
wind farms in operation in British waters
with a total capacity of 4.6GW, of which we
own 2.3GW. In addition, we are constructing
Hornsea 2, the world’s largest wind farm at
1.4GW, and we have 4-5GW of seabed leases
under development for the remaining part of
the Hornsea zone (Hornsea projects 3 and 4).
We continue to see the UK as a key market for
Ørsted, with opportunities to secure value-
creating wins in auctions. Given the maturity
of the market players and our operations in
this region, our strategic focus is to continue to
drive innovation and to leverage our market-
leading EPC and O&M platforms.
Continental Europe
We have been present in Continental Europe
since 1991, when we constructed the world’s
first offshore wind farm in Danish waters.
Today, we have nine wind farms in operation
and a total installed capacity of 2.4GW
across Germany and Denmark. In addition,
we have 0.8GW under construction in the
Netherlands, and we have 1.1GW of awarded
capacity in Germany.
Continental Europe is another very important
market for Ørsted. We are focused on maturing
our German development portfolio for FID, and
we are exploring new markets, such as Poland,
France and Belgium. We are also expanding our
offtake platform through corporate power pur-
chase agreements (CPPAs) to reduce merchant
risk exposure and strengthen the risk-return
profile of projects. Lastly, we are investigating
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Ørsted Annual report 2019Management’s review Our business
Contents
opportunities in adjacent technologies, such as
renewable hydrogen, which have the potential
to decarbonise hard-to-abate sectors, such as
heavy industry and transportation.
North America
We established a foothold in North America
in 2016 when we secured the right to develop
the Bay State Wind site off the coast of
Massachusetts. In 2018, we acquired Deep-
water Wind, creating the largest US offshore
wind developer in terms of project pipeline.
We currently operate the US’ only offshore
wind farm, the 30MW Block Island Wind
Farm off the Rhode Island coast. We are also
EPC responsible for the pilot Coastal Virginia
Offshore Wind project, the first fully permit-
ted offshore wind project in federal waters. In
2019, we won two major US auctions in New
Jersey and New York. Our strong performance
in recent US solicitations has resulted in a to-
tal awarded capacity of 2.9GW, and we have
up to 4.5GW of seabed leases under develop-
ment which we can utilise for auctions and
tenders in 8 different states.
Asia-Pacific
We entered the Taiwanese market in 2017,
marking our first operations in Asia- Pacific.
We are the co-owner of Taiwan’s first
commercial-scale offshore wind farm, Formosa
1, whose second phase was inaugurated
in November 2019. We have obtained site
exclusivity for four offshore wind sites off the
coast of Changhua County. Of these four sites,
900MW is under construction, 920MW has
been awarded, with approx 600MW remaining
for possible future auction rounds.
We have a strong foothold in Asia-Pacific, and
our strategic focus in this region is to continue
to build our organisation and capabilities to
ramp up project development and execution.
We will continue to work on strengthening
local partner ships and supporting the build-out
of local supply chains in Taiwan. We are also
expanding our footprint into new markets. In
Japan, we are firming up our partnership with
TEPCO with a focus on the Choshi zone off the
coast of Tokyo, and, we are exploring the poten-
tial for value-creating projects in South Korea.
In the US, our success was enabled by an
early and strong commitment to the market,
a willingness to invest in local communities
and the ability to deliver competitive projects
in partnership with knowledgeable and
experienced local players. Thus, our strategic
focus is to continue building the market, while
strengthening our local capabilities. We are
developing our North-East and Mid-Atlantic
projects with emphasis on harvesting cluster
synergies, delivering projects on time and on
budget, meeting local content commitments,
and expanding local partnerships.
Onshore renewables
The onshore renewables market
The global renewable energy mix is
dominated by onshore wind and large-scale
solar PV, which accounted for over 72% of
installed capacity worldwide in 2019. The
same is true in North America, which is the
third-largest market in the world for onshore
wind with approx one fifth of global installed
capacity in 2019. Installed large-scale solar
PV capacity in North America reached 51GW
in 2019 and is forecast to grow by 10% per
year towards 2030. New build-out ahead of
the upcoming phase-out of tax credits and an
increase in state-level clean energy targets
are the main causes of an increase in expected
capacity towards 2025.
Our onshore ambition
Through the acquisition of Lincoln Clean En-
ergy (LCE) in 2018 and subsequent expansions,
we have established a significant presence
in North American onshore renewables,
including onshore wind, large-scale solar PV
and energy storage. In 2019, we completed
the integration of LCE and changed the LCE
name to Ørsted, thereby applying the Ørsted
brand to the full spectrum of onshore and off-
shore renewable technologies. Our combined
installed and under construction capacity
makes us approx the 20th largest onshore
wind and solar PV company in the US.
Our strategic ambition in North America
is to build a leadership position in onshore
North American renewable capacity by technology1
GW installed
Biomass
Offshore wind
Small-scale PV
Large-scale PV
Onshore wind
+7% / year
455
16
15
93
151
179
342
17
6
68
103
148
122
17
13
17
76
207
17
29
51
111
234
17
34
61
122
2015
2019
2020
2025
2030
1
Excludes solar thermal, geothermal, marine, tidal
and others, which combined account for less than
1% of capacity.
Source: Bloomberg New Energy Finance (BNEF)
New Energy Outlook 2019 for all technologies
except offshore wind. Offshore wind figures from
BNEF H1 2019 Offshore Wind Market Outlook.
Onshore capacity build-out towards 2025
MW
Capacity under construction
Capacity installed
~5,000
997
338
103
230
420
2,088
2019
installed
capacity
Sage Draw
Willow
Creek
Plum
Creek
Permian
Energy
Center
Capacity
installed
and under
construction
2025
ambition
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Ørsted Annual report 2019Management’s review
Our business
Contents
renewables. In 2019, we had 2.1GW of onshore
renewables installed and under construction
in North America – 1.7GW of onshore wind,
430MW of solar PV and 40MWac of storage
capacity. Since entering the US onshore market,
we have doubled our operating portfolio, and it
will more than double again by 2021. We have
set a target of 5GW of installed capacity by
2025. While our portfolio will remain largely
onshore wind dominated, we look to grow our
solar PV operational capacity to approx 20-30%,
enabling us to broaden our growth platform
and capture the benefits of diversification.
Our onshore strategic priorities
The strategic priorities which guide our
onshore activities are operational excellence,
reducing LCoE and maintaining a pioneering
spirit and growth mindset. We took FID on
four projects in 2019 and currently have over
1GW under construction across the electricity
markets ERCOT and SPP. We will continue
to focus on securing attractive long-term
PPAs that facilitate solid economics after the
phase-out of the production tax credit and the
investment tax credit for wind and solar PV
projects, respectively.
Markets & Bioenergy
Our Markets & Bioenergy business has five
core functions. Firstly, it provides an efficient
route-to-market for Ørsted and third-parties by
offering services such as power balancing and
green certificates trading. Its second function is
to manage market risk for our energy portfolio
through commodity trading and other risk
management activities. Markets & Bioenergy
also manages the operations of our CHP
plants. Fourthly, it is responsible for optimising
our natural gas portfolio. Finally, Markets &
Bioenergy is responsible for our waste recycling
technology, Renescience.
As the share of renewable energy in the
grid increases, there is an increasing need to
balance forecasted and actual generation.
Markets & Bioenergy continues to provide
an efficient route-to-market for Ørsted’s and
third-parties’ power generation through power
origination, physical balancing and portfolio
optimisation services.
Intensifying competition and new regulatory
models in some markets mean that a larger
share of project revenues will be exposed to
market risk going forward. Markets & Bioen-
ergy will continue to manage our exposure to
merchant power prices through market trading
and risk management.
Our portfolio of bioconverted CHP plants
remains a key component in the green transi-
tion of the heat and power sector in Denmark
and supports the power grid during times of
low renewable generation. We continue to
optimise the performance of our CHP plants,
and in 2019, we completed the last planned
bioconversion of our CHP plants. From mid-
December, all heat and power generated
at Asnæs Power Station were produced from
sustainable biomass, leaving Esbjerg Power
Station our last coal-fired plant, which we
plan to close in early 2023.
Gas is a fossil fuel that should eventually be
phased out of the energy system. However,
during the transition period leading up to
a 100% green energy system, gas ensures
reliability of supply. We focus on optimising
the value of our legacy natural gas portfolio
through trading, portfolio optimisation and
contract negotiations.
Our Amazon Wind
Farm comprises 110
wind turbines, each
over 90 meters tall,
and has a capacity
of 253MW.
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Ørsted Annual report 2019Management’s review Our business
Contents
Our capital allocation and funding
To realise our strategic aspiration,
substantial investments and
funding are required.
We incurred capital expenditures of DKK 23.3
billion in 2019, primarily driven by construction
activities in Offshore (DKK 15.1 billion). Our
plan is to invest an estimated DKK 200 billion
in the period from 2019 through 2025, with
more than 95% earmarked for offshore wind
and onshore renewables and 0-5% dedicated
to reinvestment in our Markets & Bioenergy
activities. Our capital will be allocated to
projects with the best risk-return profile, and
we will only invest in projects which generate
returns above our cost of capital.
The strategic plan is subject to our four capital
allocation priorities. Firstly, we maintain our
strong commitment to our credit ratings
(BBB+/Baa1). Secondly, we intend to increase
our annual dividends by a high single-digit
percentage. Thirdly, we will invest in value-
creating growth. Finally, potential excess
capital will be returned to our shareholders in
the form of additional dividends and/or share
buy-backs.
Going forward, our investments will be
fully funded by green capital, either through
operating cash flow from our renewable
energy projects or through new debt issued in
accordance with our green finance framework.
This framework was developed in 2019 in
alignment with ICMA’s Green Bond Principles
2018 and LMA/APLMA/LSTA’s Green Loan
Principles 2018 and replaces our previous
Green Bonds Framework from 2017. In the 2019
framework, we have broadened our green
financing instruments to include green bonds,
green loans and other debt instruments to
finance eligible green projects.
2019 saw several funding highlights. In May,
we issued GBP 900 million (DKK ~7.8 billion) of
green senior bonds in one inflation-linked (CPI)
tranche and two nominal tranches, making
Ørsted the first corporate issuer of CPI-linked
green bonds in the UK. In June, we established
a five-year NTD 25 billion (DKK ~5.5 billion)
green revolving credit facility in partnership
with a group of 15 banks, the majority of which
were local Taiwanese banks. In November,
Ørsted was the first foreign corporate entity
to issue NTD denominated green bonds in
Taiwan, with the issuance of NTD 12 billion
(DKK ~2.7 billion). In December, we issued
green hybrid capital securities of EUR 600
million (DKK ~4.5 billion) and redeemed
EUR 524 million (DKK ~3.9 billion) of existing
hybrid capital securities callable in 2020.
With this year’s transactions, our total out-
standing debt, excluding hybrids, amounted to
DKK 37.2 billion, with more than 50% of this
issued in a green format.
Oak solar farm in
New Jersey, US is
comprised of 53,200
fixed solar panels and
has a capacity of 10MW.
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Contents
Our strategic enablers
Achieving our ambition of becoming a global green
energy major requires continuously strengthening our
organisation across several dimensions. Therefore,
we continue to evolve our global operating model
and invest in digitalisation, talent and innovation.
Global operating model
Effective from 2020, we introduced a new
global operating model in Offshore to support
our international growth ambitions. The aim of
the new model is to balance global scale ad-
vantages and local market proximity as well
as to create a more transparent and scalable
platform for our global expansion plans.
Digitalisation
Ørsted’s digitalisation strategy is focused on
the deployment of advanced analytics and
artificial intelligence, as these capabilities rep-
resent the greatest value creation potential.
We currently have six agile release trains
(ART) running across the organisation.
The ART in Offshore Operations is our most
advanced and is focused on maintenance
optimisation and yield uplift of older wind
turbines. The ART in Markets & Bioenergy
and Risk facilitated the development and
deployment of our US trading unit and focuses
on developing automated and algorithmic
trading capabilities. The ART in Offshore EPC
was ramped up in late spring to help optimise
the CAPEX baseline in bid processes. The
remaining three ARTs are running in Offshore
EPC, Markets & Bioenergy and Ørsted Group
Support and focus on the automation and
optimisation of business processes.
Talent
To reach our ambition of becoming a global
green energy major, we have strengthened our
talent strategy to address all stages of the em-
ployee life cycle and to meet the needs of our
local markets. We are investing in our employer
brand and are strengthening our talent acquisi-
tion efforts in all markets. Improved onboarding
programmes aim at ensuring new colleagues
develop faster and more effectively. We provide
our employees with a healthy working environ-
ment to enhance well-being and performance
and to differentiate us as an employer.
career model will make career opportunities
more visible and accessible to support the
development and retention of talent at Ørsted.
Innovation
A strong entrepreneurial drive and willingness
to challenge industry notions of what is possi-
ble has been at the heart of Ørsted’s successful
transformation. Innovation is in our DNA, and
we will continue to push frontiers to remain a
leader in a dynamic and unpredictable market.
This includes exploring new technologies and
solutions. For example, we are investigating
the potential of renewable hydrogen for direct
application and conversion to renewable fuels.
We have established a separate hydrogen
team, anchored in our Offshore business unit,
which has established a project pipeline and
kicked off initial phases of several pilot projects.
As our global footprint expands, our workforce
also becomes more diverse. We are building
an inclusive culture to leverage diversity
and strengthen our company. We are also
increasing our efforts to promote career devel-
opment and internal mobility. A new simplified
We continue to be innovative in deploying
our market trading capabilities to manage
risk better and more economically. Further-
more, we continue to develop our corporate
PPA (CPPA) business, which we expect will
play a key role in addressing merchant risk.
As a frontrunner in the
global green energy
transition, we’re investing
heavily in digititalisation
and innovation.
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Contents
Our business model
Inhouse activities
Partly outsourced
activities
Key Resources
Core activities
Develop
Build
Operate
Own
Market
Value created
Financial capital
We finance our investments
through cash flows from
operations, debt and divest-
ment of ownership interests.
Offshore
Capital
employed
74%
Energy assets
We invest in scalable,
innovative green tech-
nologies and solutions.
Natural resources
We rely on natural re-
sources, such as construc-
tion materials, biomass,
as well as locations with
attractive wind speeds and
seabed and land conditions.
Human resources
We rely on a highly skilled
workforce to operate our
business.
Innovative culture
We continuously innovate
our energy solutions to drive
competitiveness.
Stakeholder engagement
We depend on constructive
relations with our key stake-
holders to ensure supportive
framework conditions for
our business.
Onshore
Capital
employed
11%
Markets &
Bioenergy
Capital
employed
15%
Develop offshore
wind farms
Construct offshore
wind farms
Operate and maintain
offshore wind farms
3 offshore wind farms
under construction
Operator of 24
offshore wind farms
Projects under
development in the UK,
US, Germany and Taiwan
Exploring opportunities
in Japan, Poland and
South Korea
Develop onshore wind,
solar PV and storage
projects and ensure tax
equity
Select best-in-class
contractors to construct
our onshore assets
Management of extended
service agreements to
operate and maintain our
onshore assets
Onshore wind, solar PV
and storage projects
under development in
the ERCOT, MISO, PJM and
SPP electricity markets
3 onshore wind farms,
1 solar PV farm and 1
storage facility under
construction
Operator of 4
onshore wind farms,
1 solar PV farm and 1
storage facility
Raise capital through
partnerships and
farm-downs
Manage profitability
over asset lifetime
Full owner or partly
owner of 29 offshore
wind farms
Raise capital through
tax equity partnerships
Manage profitability
over asset lifetime
Owner of 7 onshore
wind farms, 2 solar
PV farms and 2
storage facilities
Activities related
to offtaking our
power generation
and hedging our
risk exposure are
performed by Markets
& Bioenergy, but
earnings from these
activities are allocated
to the business unit
they impact
Examples include
route-to-market
services and trading
activities
Operate and maintain
CHP plants
Manage profitability
over asset lifetime
Operator of 6 bio-
converted CHP plants,
3 heat and ancillary
service plants and 1
coal-fired CHP plant
Owner of 6 bio-
converted CHP plants,
3 heat and ancillary
service plants and 1
coal-fired CHP plant
Provide route-to-market
services for our own and
third-parties’ electricity,
power certificates and gas
Manage Ørsted’s energy
portfolio risks
Society
We address profound
societal challenges by
developing green, independ-
ent and economically viable
energy systems that reduce
greenhouse gas emissions
and stimulate local growth
and job creation.
Customers
We fulfil our customers’
energy needs through green,
innovative and efficient
energy solutions.
Employees
We are committed to a
sustainable working life and
keep a constant focus on
being a great and safe place
to work with motivated and
satisfied employees.
Shareholder return
We create value for
our shareholders in the form
of competitive total returns.
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Contents
Our strategic targets
Target
1. EBITDA from operating offshore and onshore sites, %
3. Installed green capacity, GW
We have set a target to increase EBITDA from our wind and solar farms in operation by
an average of 20% per year from 2017 to 2023. From 2017 to 2019, we averaged an annual
growth rate of 32% in line with our objective.
CAGR +20%
~25-26bn
CAGR +32%
14.8bn
11.4bn
8.5bn
In 2018, we set an ambition to have installed more than 30GW of green capacity by 2030.
In addition, our ambition is to have installed 15GW of offshore wind and 5GW of onshore wind
and solar PV capacity by 2025. We are making good progress on our ambitions with 9.9GW of
green capacity installed, 4.1GW under construction and 5.0GW awarded at the end of 2019.
Total installed green capacity
Onshore wind and solar PV
Offshore wind
Biomass
+30
8.3
9.9
5.8
+20
5
15
2017
2018
2019
2023
2017
2018
2019
2025
2030
2. ROCE, %
4. Green share of generation, %
We target an average return on capital employed (ROCE) of approx 10% from 2019 to 2025.
In 2017 and 2018, ROCE was positively impacted by substantial profits from new partnership
agreements, particularly divestment gains.
In 2019, we increased the green share of generation to 86%, up 11 percentage points
compared to last year. We are on track to meet our objective of exceeding 95% by
2023 and reaching 99% by 2025.
Approximate ROCE excl. earnings from new partnership agreements
32.1%
25.2%
95
99
86
75
64
10.6%
Target
2019-2025 average
ROCE ~10%
17
2017
2018
2019
2006
2017
2017
2019
2023
2025
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Ørsted Annual report 2019Management’s review Our business
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5. Greenhouse gas emission intensity (scope 1 and 2), g CO2e/kWh
7. Employee satisfaction, scale 1-100
Target
We are well on track to meet our scope 1 and 2 greenhouse gas (GHG) emission intensity target
of less than 10g CO2e/kWh in 20251. Scope 1 refers to the direct GHG emissions from our energy
generation and operations, and scope 2 refers to the indirect GHG emissions from the energy we
source for our operations. Lower generation based on coal and gas together with our continued
build-out of renewables contributed to a reduction in our GHG intensity to 65g CO2e/kWh in 2019.
We believe that employee satisfaction and positive results go hand in hand. Therefore, we
are continuously working to improve the well-being of our employees. In 2019, we reached a
record high score and met our 2020 target for employee satisfaction. This score places Ørsted
among the top 10% of our external benchmark group, similar to 2017 and 2018. We are proud
of this and aim to stay in the top 10%.
-98%
-86%
462
151
131
65
20
10
Ørsted
Ennova benchmark top 10%
Ennova benchmark
76
76
76
76
67
77
76
72
70
2020-2025
target
top 10%
2006
2017
2018
2019
2023
2025
2017
2018
2019
¹
In addition to the emission reduction targets, we have set a new target of being carbon
neutral in 2025. We will neutralise the last 0-10 gCO2/kWh with carbon offsets.
6. Greenhouse gas emissions (scope 3), million tonnes CO2e
8. Safety, TRIR
In 2019, we introduced a target for our scope 3 GHG emissions. We aim to reduce our scope 3
emissions by 50% between 2018 and 2032. The primary sources of our scope 3 emissions are indirect
emissions related to the trading of natural gas and fossil-based power in our Markets business as
well as to the goods and services we source for the construction of our wind and solar farms.
Safety is high on our agenda, and we do our utmost to prevent accidents and injuries.
Our target is to reduce the total recordable injury rate (TRIR) to 2.9 by 2025, which is
a sharpening of our previous target of 3.3. In 2020, we target a TRIR of 4.2 or lower.
36
-50%
34.6
~18
6.4
4.7
4.9
2.9
2018
2019
2032
2017
2018
2019
2025
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Contents
Our global
footprint
United Kingdom
In operation: 4,940MW
Under construction: 1,386MW
Under development: 4,000-5,000MW
Under construction:
Renescience Northwich
In operation: 20MW
Sales of energy
United States
of America
In operation: 30MW
Awarded: 2,934MW
Under development: up to 4,500MW
In operation: 987MW
Under construction: 671MW
In operation: 10 MW
Under construction: 420MW
Under construction: 40MW
Activities
Status
Offshore wind
Onshore wind
Solar
In operation
Under construction (FID)
Awarded
Biomass-fired power plant
Under development
Fossil-fuelled power plant
Bio plant
Storage
Sales of energy
MW: Total gross capacity (even if Ørsted
share is < 100%). The MW for the wind farms in
operation illustrates the operational capacity.
The map shows selected Ørsted assets.
Sweden
Sales of energy
Denmark
In operation: 950MW
In operation: our CHP plants,
2,865MW power and 3,560MW heat
Sales of energy
Germany
In operation: 1,384MW
Awarded: 1,142MW
Sales of energy
The Netherlands
Under construction: 752MW
Taiwan
In operation: (Formosa 1) 128MW
Under construction: (Greater
Changhua 1 & 2a) 900MW
Awarded: (Greater Changhua
2b &4) 920MW
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Ørsted Annual report 2019Management’s review Our business
Our footprint in
Northern Europe
Contents
Sweden
Sales of energy
Denmark
Sales of energy
Anholt (400MW)
Herning
Studstrup
Skærbæk
Esbjerg
Kyndby
Asnæs
Svanemøllen
H.C. Ørsted
Avedøre 1 & 2
Horns Rev 1 (158MW)
Horns Rev 2 (209MW)
Walney Extension (659MW)
Walney 1 & 2 (367MW)
West of Duddon Sands (389MW)
Westermost Rough (210MW)
Barrow (90MW)
Burbo Bank Extension (259MW)
Burbo Bank (90MW)
Renescience Northwich
Carnegie Road (20MW)
Hornsea 1 (1,218MW)
Hornsea 2 (1,386MW)
Hornsea 3
Hornsea 4
Combined
(4,000-5,000MW)
Lincs (270MW)
Race Bank (573MW)
Nysted (166MW)
Gode Wind 1 (345MW)
Gode Wind 2 (263MW)
Gode Wind 3 (242MW)
Borkum Riffgrund 3 (900MW)
Borkum Riffgrund 1 (312MW)
Borkum Riffgrund 2 (465MW)
The Netherlands
Borssele 1 & 2 (752MW)
Germany
Sales of energy
Gunfleet Sands 1 & 2 (173MW)
London Array 1 (630MW)
United Kingdom
Sales of energy
Activities
Status
Offshore wind
Onshore wind
Solar
In operation
Under construction (FID)
Awarded
Biomass-fired power plant
Under development
Fossil-fuelled power plant
Bio plant
Storage
Sales of energy
MW: Total gross capacity (even if Ørsted
share is < 100%). The MW for the wind farms in
operation illustrates the operational capacity.
The map shows selected Ørsted assets.
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Ørsted Annual report 2019Management’s review Our business
Contents
Our footprint
in North America
Willow Creek (103MW)
South Dakota
Nebraska
Plum Creek (230MW)
United States of America
Texas
Sage Draw (338MW)
Tahoka (300MW)
Lockett (184MW)
Willow Springs (250MW)
Amazon (253MW)
Permian Energy Center (420/40MW)
Massachusetts
Connecticut
Rhode Island
New Jersey
New York
Bay State Wind (~2,000MW)
Revolution Wind (704MW)
Block Island Wind Farm (30MW)
South Fork (130MW)
Sunrise Wind (880MW)
Oak Solar (10MW)
Virginia
Ocean Wind
Ocean Wind (1,100MW)
Garden State Wind
Skipjack Wind (120MW)
Coastal Virginia Offshore Wind
(12MW) (EPC contract)
Maryland
Delaware
Mid-Atlantic cluster
development capacity
in total (~2,500MW)
Activities
Status
Offshore wind
In operation
Onshore wind
Under construction (FID)
Solar
Storage
Awarded
Under development
MW: Total gross capacity (even if Ørsted share is
< 100%). The MW for the wind farms in operation
illustrates the operational capacity. The map shows
selected Ørsted assets.
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Ørsted Annual report 2019Management’s review Results
33 Results
37 Five-year summary
38 Fourth quarter
40 Quarterly summary, 2018-2019
Contents
Julie’s home is powered by
green energy from one of
Ørsted’s five Danish offshore
wind farms. In 2019, 47% of
Danish power came from
renewable energy solutions.
She made the switch to
green energy this year to
help protect the future of our
planet for her children and
the generations to come.
Ørsted Annual report 2019 Results
Contents
Results
Reporting
In June, we decided to consolidate the
business units Customer Solutions and
Bioenergy into a new business unit, named
Markets & Bioenergy. In addition, as we run
the business on an end-to-end value chain
thinking, we decided that all activities and
earnings that relate to Offshore and Onshore,
will be reported in these segments, even if the
daily activities are performed on behalf of
the group in Markets & Bioenergy. Therefore,
earnings from trading related to hedging of
our power exposures and power portfolio opti-
misation activities in relation to Offshore and
Onshore are now presented in these business
units. In 2019, EBITDA of DKK 725 million and
DKK -18 million were transferred to Offshore
and Onshore, respectively, and DKK 237
million was transferred to Offshore in 2018.
8.3TWh, down 31% and 6%, respectively,
compared to 2018. The decreases were
mainly due to warmer weather than in
2018 and less favourable market conditions
for power generation. We also generated
heat without combined power generation
at Asnæs Power Station most of the year.
Offshore and onshore wind accounted for
77% of our total power generation, while the
renewable energy share of our total heat and
power generation accounted for 86% in 2019
compared to 75% in 2018.
Revenue amounted to DKK 67.8 billion. The
decrease of 12% relative to 2018 was primarily
due to significantly lower gas prices, lower
revenue from construction of transmission
assets, lower gas sales and lower thermal heat
and power generation as mentioned above.
Financial results
Revenue
Power generation from offshore and onshore
wind increased by 46% and totalled 15.5TWh in
2019, mainly due to the ramp-up of generation
from Hornsea 1, Borkum Riffgrund 2 and
Walney Extension and the addition of our
Onshore business unit, which we acquired in
Q4 2018. Curtailments and various operational
issues had a larger than normal adverse impact
on our offshore generation in 2019.
Thermal power generation amounted to
4.6TWh, and heat generation amounted to
EBITDA
Operating profit (EBITDA) totalled DKK
17.5 billion compared to DKK 30.0 billion in
2018. The decrease was mainly due to the
50% farm-down of Hornsea 1 in 2018 which
contributed positively with DKK 15.1 billion.
Adjusted for new partnerships, EBITDA
increased by 17%. This was driven by a 30%
increase in earnings from offshore and onshore
wind farms in operation, which was due to
a full year with Onshore and ramp-up at
Hornsea 1, Borkum Riffgrund 2 and Walney
Extension as well as good performance
from trading related to hedging of our UK
Business performance vs. IFRS
Ørsted uses business performance as an alternative to the results prepared in
accordance with IFRS. Business performance represents the underlying financial
performance of the Group in the reporting period, as results are adjusted for
temporary fluctuations in the market value of contracts (including hedging
transactions) relating to other periods. The difference between the two principles
will be eliminated as the contracts expire. Apart from this, there is no difference
between business performance and the IFRS results.
EBITDA calculated in accordance with IFRS amounted to DKK 19.0 billion in 2019
against DKK 28.5 billion in 2018. Calculated in accordance with the business
performance principle, EBITDA was DKK 17.5 billion and DKK 30.0 billion, respec-
tively. The difference between the two principles was DKK 1.5 billion both years,
but with opposite signs.
In the presentation of the results according to IFRS, Ørsted does not apply the
provisions on hedge accounting of commodities and related currency exposures.
The market value adjustments of these are continuously recognised in the income
statement, which means that the IFRS results for the individual years are not
comparable. IFRS results do not reflect the commercial risk hedging, according to
which the business units and the Group are managed and evaluated.
In the management’s review, comments are based on the business performance
principles only, unless otherwise specified. Reference is also made to note 1.5.
Business performance vs. IFRS, DKKm
EBITDA – business performance
2019
2018
17,484
30,029
Market value adjustments for the year of financial and
physical hedging contracts relating to a future period
141
(1,734)
Reversal of deferred gains (losses) relating to
hedging contracts from previous periods, where the
hedged production or trade is recognised in business
performance EBITDA in this period
EBITDA – IFRS
1,395
196
19,020
28,491
33 / 183
Ørsted Annual report 2019Management’s review
Results
Contents
energy exposures. The reversal of a provision
related to the Elsam competition case also
contributed positively to the higher earnings.
Earnings from our gas activities were neg-
atively affected by the steep decline in gas
prices which had a temporary adverse effect
on our earnings in 2019 due to a decrease in
the accounting value of our gas inventories,
whereas we saw an opposite effect in 2018
due to increasing gas prices. In addition, we
had a positive outcome of an arbitration
case in 2018 which was not repeated in 2019.
Furthermore, the agreement to divest our LNG
activities had a net negative impact of DKK
0.8 billion on earnings in 2019 as the agree-
ment entails a larger payment to the buyer
than what we had provided for.
Earnings from construction agreements for
partners were at a level with 2018 (excluding
new partnerships). The construction agree-
ments in 2019 primarily concerned high
construction activity at Hornsea 1, whereas
2018 had high construction activity at Walney
Extension and Borkum Riffgrund 2.
EBITDA in 2019 was positively affected by
DKK 0.6 billion from the implementation
of the new IFRS 16 accounting standard
regarding leasing, compared to a continued
expensing of operational lease costs. Roughly
half of the impact was in Offshore.
Please see note 1.3 for further information on the
implementation of IFRS 16 ‘Leases’ and the im-
pact on our consolidated financial statements.
Financial results, DKKm
Revenue
EBITDA
Depreciation
2019
2018
67,842
76,946
17,484
30,029
(6,864)
(5,978)
Impairment reversals (losses)
(568)
603
Operating profit (loss) (EBIT)
10,052
24,654
Gain (loss) on divestment of enterprises
Profit (loss) from associates and JVs
Net financial income and expenses
Tax
Tax rate
Profit for the year from continuing
operations
Profit for the year from discontinued
operations
Profit (loss) for the year
(63)
2
(1,135)
(2,756)
31%
127
1
(1,278)
(4,018)
17%
6,100
19,486
(69%)
(56)
10
6,044
19,496
n.a.
(69%)
%
(12%)
(42%)
15%
n.a.
(59%)
n.a.
100%
(11%)
(31%)
14%p
In 2019, regulated and
quasi-regulated activ-
ities and contracted
activities accounted
for 66% and 31% of our
EBITDA, respectively,
whereas market
exposed activities
accounted for 3%.
Read more about
profit for the year from
discontinued operations
in note 3.7.
EBIT
EBIT decreased by DKK 14.6 billion to DKK
10.1 billion in 2019, primarily as a result of the
lower EBITDA and higher depreciation and
impairment losses.
EBITDA
Offshore
Onshore
Markets & Bioenergy
The increase in depreciation was driven by
more wind farms in operation as well as the
implementation of IFRS 16. In accordance
with IFRS 16, our operating leases have
been recognised in the balance sheet as
of 1 January 2019 and are now depreciated
instead of being expensed.
The increase in depreciation was partially
offset by our Danish power distribution
and residential customer businesses being
classified as assets held for sale by the end
of 2018 and thus not depreciated in 2019.
Impairment losses amounted to DKK 0.6
billion and related to a write-down of our
20MW battery storage Carnegie Road in
the UK, mainly due to changed pricing and
cost estimates, and of our Renescience
plant in the UK, mainly due to delayed
commissioning, increased CAPEX and
changed cost and price estimates. The
reversal of an impairment in 2018 related
to our power distribution activities.
Financial income and expenses
Net financial income and expenses amounted
to DKK 1.1 billion compared to DKK 1.3 billion
in 2018. The decrease in net expenses was
mainly due to positive effects from exchange
rate adjustments. This was partly offset by
interests related to tax and an increase in
contractual returns to tax equity partners in
9%
4%
DKK 17.5bn
87%
EBITDA, DKKbn
EBITDA, excl. new partnerships
EBITDA, new partnerships
30.0
15.1
15.0
17.5
2018
2019
EBITDA, excluding new partnerships
increased by 17%.
34 / 183
Ørsted Annual report 2019Management’s review Results
Contents
to Hornsea 1 and the divestment of the Race
Bank transmission assets. This was partly offset
by funds tied up related to the construction
of Hornsea 1 for partners and the offshore
transmission assets at Hornsea 1 and 2.
Cash flows and net debt, DKKm
Cash flows from operating activities
EBITDA
Change in derivatives
Change in provisions
Onshore, due to a full year of consolidation
and new wind farms.
Tax and tax rate
Tax on profit for the period amounted to
DKK 2.8 billion, which was DKK 1.3 billion
lower than in 2018. The effective tax rate
was 31% and was among other things
affected by the recognition of deferred taxes
related to tax equity at Lockett and tax
expenses related to the partial farm-down
in Deepwater Wind.
Profit for the year from
continuing operations
Profit for the year from continuing operations
totalled DKK 6.1 billion, DKK 13.4 billion lower
than in 2018. The decrease was primarily due
to the lower EBIT. Profit for the year increased
by DKK 0.5 billion, adjusted for the divestment
of Hornsea 1 in 2018.
Cash flows and net debt
Cash flows from operating activities
Cash flows from operating activities totalled
DKK 13.1 billion in 2019 compared to DKK 10.3
billion in 2018. The increase of DKK 2.7 billion
was mainly due to a higher release of funds
tied up in work in progress on construction
agreements and higher EBITDA (excluding
gains from divestments which are not recog-
nised in cash flows from operating activities).
This was partly offset by higher paid tax in 2019
and lower contribution from tax equity funding
of our onshore wind farms than in 2018.
In 2019, we had a net cash inflow from work
in progress of DKK 1.4 billion, mainly due to
the receipt of milestone payments related
Investments and divestments
Gross investments amounted to DKK 23.3
billion against DKK 24.5 billion in 2018.
The main investments in 2019 were:
— offshore wind farms (DKK 15.1 billion),
including Hornsea 1 and Hornsea 2 in the
UK, Greater Changhua 1 & 2a in Taiwan
and Borssele 1 & 2 in the Netherlands
— onshore wind and solar farms (DKK 6.2
billion), including Sage Draw, Plum Creek,
Lockett, Willow Creek and Permian Energy
Center in the US
— Markets & Bioenergy (DKK 1.9 billion),
mainly the biomass conversion of Asnæs
Power Station and the installation of
smart meters in Radius.
Cash flow from divestments in 2019 primarily
related to the receipt of deferred proceeds
from the farm-down of 50% of Hornsea 1 in
2018 (DKK 1.7 billion) and to the strengthening
of our strategic partnership with Eversource as
they became a 50% partner in our activities
in the New England area in the US in February
(DKK 1.4 billion).
Interest-bearing net debt
Interest-bearing net debt totalled DKK 17.2
billion at the end of 2019 against net cash of
DKK 2.2 billion at the end of 2018. The DKK
19.4 billion increase was mainly due to negative
free cash flow of DKK 6.9 billion, total dividend
payments and interests on hybrid capital of
DKK 5.0 billion, and inclusion of operational
Gain (loss) on sale of
assets is part of EBITDA,
but is presented as part
of the ’divestment’ cash
flow. The EBITDA effect
is thus reversed in the
specification of cash
flows from operating
activities.
2019
13,079
17,484
(1,040)
727
101
86
(1,049)
(4,800)
1,417
630
(477)
2018
10,343
30,029
369
(278)
(14,995)
203
(700)
(3,367)
(2,326)
1,835
(427)
(23,305)
(24,481)
3,329
(6,897)
(2,219)
19,950
5,812
(1,517)
%
26%
(42%)
n.a.
n.a.
n.a.
(58%)
50%
43%
n.a.
(66%)
12%
(5%)
(83%)
n.a.
46%
6,897
(5,812)
n.a.
(174)
(209)
(17%)
Reversal of gain (loss) on divestment
of assets
Other items
Interest paid and similar items, net
Paid tax
Change in work in progress
Change in tax equity liabilities
Change in other working capital
Gross investments
Divestments
Free cash flow
Net debt at 1 January
Free cash flow from continuing
operations
Free cash flow from discontinued
operations
Interest-bearing receivables re Oil & Gas
divestment
Dividends and hybrid coupons paid
Addition of leasing obligations
Exchange rate adjustments, etc.
340
5,016
5,873
1,497
292
4,700
-
327
Net debt at 31 December
17,230
(2,219)
Key ratios, DKKm, %
ROCE
Adjusted net debt
FFO/adjusted net debt
2019
10.6%
30,575
31.0%
2018
32.1%
15,516
69.0%
16%
7%
n.a.
358%
n.a.
%
(22%p)
97%
(38%p)
ROCE and FFO/adjusted
net debt is specified in
notes 2.1 and 6.1.
35 / 183
Ørsted Annual report 2019Management’s review Results
Contents
lease obligations of DKK 5.9 billion in
accordance with IFRS 16.
Equity and capital employed
Equity
Equity was DKK 89.6 billion at the end of the
year against DKK 85.1 billion at the end of 2018.
Capital employed
Capital employed was DKK 106.8 billion at 31
December 2019 against DKK 82.9 billion at the
end of 2018. The increase was mainly due to
investments and the addition of operational
lease assets. Approximately half of the capital
employed in Markets & Bioenergy (DKK 8.2bn)
relates to assets and liabilities to be divested.
Financial ratios
Return on capital employed (ROCE)
Return on capital employed was 10.6% in 2019.
The decrease compared to 2018 was mainly
attributable to the lower EBIT, which was
significantly impacted by the farm-down of
Hornsea 1 in 2018.
Credit metric (FFO/adjusted net debt)
The funds from operations (FFO)/adjusted net
debt credit metric was 31% at the end of 2019
against 69% in 2018.
Non-financial results
Green share of heat and power generation
The green share of heat and power generation
amounted to 86% in 2019, up 11 percentage
points year on year. The increase was due to
the addition of generation from onshore wind
farms, higher generation from offshore wind
farms and lower heat and power generation
based on coal and gas. The latter was due
to the warmer weather, generation of heat
without combined power generation at
Asnæs Power Station most of the year, and
the divestment of the Dutch Enecogen power
plant in 2018.
Greenhouse gas emissions
Greenhouse gas emissions (primarily
carbon emissions) from our heat and power
generation and other operating activities
covered by scope 1 and 2 emissions in the
Greenhouse Gas Protocol, decreased to 65g
CO2e/kWh in 2019 against 131g CO2e/kWh in
2018. The emissions per kWh decreased for
the same reasons as mentioned above.
Greenhouse gas emissions from our sup-
ply chain (scope 3) decreased by 4% to
34.6 million tonnes in 2019, driven by a 5%
reduction in gas sales.
Safety
In 2019, we have had 106 total recordable
injuries (TRIs), divided between 71 contractor
injuries and 35 own employee injuries. This
was an increase of 8 injuries in total compared
to 2018 and led to an increase in the total
recordable injury rate (TRIR) from 4.7 in 2018
to 4.9 in 2019.
Fatalities
An employee of one of our contractors
tragically died after a serious accident at
Avedøre Power Station in May.
Capital employed, %
Offshore
Onshore
Markets & Bioenergy
15%
11%
DKK 106.8bn
74%
Since mid-December
100% of Asnæs Power
Station’s heat and
power has been gene-
rated from sustainable
biomass.
36 / 183
Ørsted Annual report 2019Management’s review Results
Contents
Five-year summary
Income statement (business performance), DKKm
Revenue
EBITDA
Offshore
Sites, O&M and PPAs
Construction agreements and other
Onshore
Markets & Bioenergy
Other activities
Depreciation and amortisation
Impairment losses
Operating profit (loss) (EBIT)
Gain (loss) on divestment of enterprises
Net financial income and expenses
Profit (loss) before tax
Tax
Profit (loss) for the year from continuing operations
Profit (loss) for the year
Balance sheet
Assets
Total equity
Shareholders in Ørsted A/S
Non-controlling interests
Hybrid capital
Interest-bearing net debt
Capital employed
Additions to property, plant and equipment
Cash flows
Cash flows from operating activities
Gross investments
Divestments
Free cash flow
Financial ratios
Return on capital employed (ROCE)1, %
FFO/adjusted net debt2, %
Number of outstanding shares, 31 December, '000
Share price, 31 December, DKK
Market capitalisation, 31 December, DKKbn
Earnings per share (EPS) (BP), DKK
Dividend yield, %
Income statement (IFRS)
Revenue
EBITDA
Profit (loss) for the year from continuing operations
2019
67,842
17,484
15,161
13,750
1,411
786
1,495
42
(6,864)
(568)
10,052
(63)
(1,135)
8,856
(2,756)
6,100
6,044
192,860
89,562
73,082
3,248
13,232
17,230
106,792
22,440
13,079
(23,305)
3,329
(6,897)
10.6
31.0
419,985
689.0
289.6
12.7
1.5
2018
76,946
30,029
28,046
11,279
16,767
44
2,100
(161)
(5,978)
603
24,654
127
(1,278)
23,504
(4,018)
19,486
19,496
174,575
85,115
68,488
3,388
13,239
(2,219)
82,896
14,436
10,343
(24,481)
19,950
5,812
32.1
69.0
420,045
435.7
183.0
45.3
2.2
2017
59,504
22,519
20,595
8,529
12,066
-
2,234
(310)
(5,739)
(545)
16,235
(139)
(1,042)
15,044
(1,765)
13,279
20,199
146,521
71,837
54,791
3,807
13,239
(1,517)
70,320
20,022
1,023
(17,744)
16,982
261
25.2
50.3
420,155
338.7
142.3
46.4
2.7
2016
61,201
19,109
11,867
5,869
5,998
-
7,208
34
(5,232)
-
13,877
1,250
(767)
14,352
(2,191)
12,161
13,213
136,489
57,500
39,106
5,146
13,248
3,461
60,961
17,750
11,272
(14,960)
9,055
5,367
24.4
64.2
420,155
267.6
112.5
30.6
2.2
65,444
8,730
6,151
5,965
186
-
2,456
123
(5,673)
(1,184)
1,873
56
(1,409)
512
455
967
(12,084)
147,457
51,736
32,090
6,398
13,248
9,193
60,930
19,843
7,521
(12,709)
1,982
(3,206)
3.6
28.8
417,726
-
-
(30.7)
-
70,398
19,020
7,291
75,520
28,491
18,266
59,709
22,574
13,321
57,393
16,939
10,467
66,708
9,888
1,854
2015
Business drivers
2019
2018
2017
2016
2015
Offshore
Decided (FID) and installed capacity3, offshore wind, GW
Installed capacity, offshore wind3, GW
Generation capacity, offshore wind3, GW
Wind speed3, m/s
Load factor3, %
Availability3, %
Power generation, TWh
Power sales, TWh
Onshore
Decided (FID) and installed capacity3, onshore, GW
Installed capacity, GW
Wind speed, m/s
Load factor, %
Availability3, %
Power generation, TWh
Markets & Bioenergy
Degree days3, number
Heat generation, TWh
Power generation, TWh
Power sales, TWh
Gas sales, TWh
People and environment
Employees (FTE), end of year, number
Total recordable injury rate (TRIR)
Fatalities, number
Green share of heat and power generation, %
Carbon emissions, g CO2e/kWh
Business performance vs. IFRS
Business performance represents the underlying financial
performance of the Group in the reporting period, as results
are adjusted for temporary fluctuations in the market value
of contracts (including hedging transactions) relating to
other periods. Apart from this, there is no difference between
business performance and IFRS results. Read more in note 1.5.
The EBITDA split between business units in the
comparative years 2015-2017 has not been updated
to reflect that earnings from trading related to hedging
of our power exposures and power portfolio optimisation
activities in relation to Offshore are presented in this
business unit from 2018 (previously Markets & Bioenergy).
3
4
9.9
6.8
3.6
9.2
42
93
12.0
27.6
2.1
1.0
7.3
45
98
3.5
2,399
8.3
4.6
14.7
127.1
6,526
4.9
1
86
65
9.0
5.6
3.0
9.1
42
93
10.0
27.4
1.0
0.8
7.3
41
98
0.6
2,526
8.8
6.7
15.3
134.1
6,080
4.7
0
75
131
8.9
3.9
2.5
9.3
44
93
8.5
-
-
-
-
-
-
-
2,705
9.0
8.2
31.7
136.1
5,638
6.4
0
64
151
7.4
3.6
2.0
8.9
41
92
6.0
-
-
-
-
-
-
-
2,715
9.2
8.4
32.9
150.4
5,775
6.8
0
50
224
5.1
3.0
1.7
9.7
45
93
5.8
-
-
-
-
-
-
-
2,621
9.3
7.1
31.9
159.1
5,947
9.7
0
49
220
However, the power sales volumes presented under
Markets & Bioenergy have been restated to exclude
internally sourced volumes from Offshore.
1 EBIT/average capital employed.
2
Net debt, including 50% of hybrid capital, cash and
securities not available for use (with the exception of
repo transactions), present value of lease obligations
(2015-1018), and decommissioning obligations less
deferred tax.
See definition on page 182 and in the ESG statements.
The figures indicate values from the latest regulatory
financial statements (updated in June).
37 / 183
Ørsted Annual report 2019Management’s review
Results
Contents
Fourth quarter
Profit from continuing operations
Profit from continuing operations decreased
by DKK 14.2 billion to DKK 0.9 billion. The
decrease was mainly due to the lower EBITDA.
Adjusted for the new partnership earnings in
2018 related to Hornsea 1, net profit was
DKK 0.4 billion lower than in Q4 2018.
Cash flows from operating activities
Cash flows from operating activities totalled
DKK 4.8 billion in Q4 2019 compared to
DKK 7.6 billion in Q4 2018. The decrease of
DKK 2.8 billion was mainly due to receipt of
tax equity contributions related to Tahoka
in Q4 2018 and more funds tied up in other
working capital due to higher receivables at
the end of 2019 as compared to 2018.
Gross investments
Gross investments amounted to DKK 8.8
billion in Q4 2019, of which 94% related to
investments in Offshore and Onshore. The main
investments related to Hornsea 2, Greater
Changhua 1 & 2a, Borssele 1 & 2, Sage Draw,
Plum Creek and Permian Energy Center.
Financial performance
– Group
Revenue
Revenue in Q4 2019 decreased by 21% relative
to Q4 2018 and amounted to DKK 18.7 billion.
The lower revenue was mainly driven by
construction agreements, which decreased by
DKK 3.1 billion due to the partial divestment
of the Hornsea 1 transmission assets as part of
the 50% farm-down of Hornsea 1 in Q4 2018. In
addition, revenue decreased due to lower gas
and power prices. This was only partly offset
by higher generation from offshore wind farms.
EBITDA
Operating profit (EBITDA) totalled DKK 4.6
billion compared to DKK 19.2 billion in Q4 2018.
The decrease was driven by the 50% farm-
down of Hornsea 1 in Q4 2018, which contri-
buted DKK 15.1 billion to EBITDA. Adjusted for
earnings from the new Hornsea 1 partnership
in 2018, EBITDA was DKK 0.5 billion higher
than in Q4 2018. The increase was driven by
the above-mentioned higher generation from
offshore wind farms and a positive effect from
the accounting value of our gas at storages
opposite to the effect for the full year, due
to increasing prices in Q4 2019, whereas we
saw a decrease in the accounting value of our
storages due to declining prices in Q4 2018.
This was partly offset by a net negative
impact of DKK 0.8 billion related to the
agree-ment to divest our LNG activities.
Financial performance, DKKm
Q4 2019
Q4 2018
Revenue
EBITDA
EBIT
Profit (loss) before tax
Tax
Profit (loss) for the period from continuing operations
Profit (loss) for the period from discontinued operations
Profit (loss) for the period
Cash flows and net debt, DKKm
Cash flows from operating activites
EBITDA
Change in derivatives
Change in provisions
Reversal of gain (loss) on divestment of assets
Other items
Interest expenses, net
Paid tax
Change in work in progress
Change in tax equity liabilities
Change in other working capital
Gross investments
Divestments
Free cash flow
Net debt, beginning of period
Free cash flow from continuing operations
Free cash flow from discontinued operations
Interest-bearing receivables re Oil & Gas divestment
Dividends and hybrid coupon paid
Addition to lease obligations
Exchange rate adjustments, etc.
Net debt, end of period
18,679
4,613
2,169
1,515
(590)
925
(29)
896
Q4 2019
4,816
4,613
(352)
934
416
(10)
(262)
57
236
(197)
(619)
(8,816)
402
(3,598)
12,082
3,598
28
13
283
145
1,081
17,230
23,527
19,206
18,112
18,038
(2,878)
15,160
34
15,194
Q4 2018
7,565
19,206
(658)
(122)
(15,085)
209
244
(264)
723
1,835
1,477
(14,916)
18,749
11,398
8,957
(11,398)
(337)
316
238
-
5
(2,219)
%
(21%)
(76%)
(88%)
(92%)
(79%)
(94%)
n.a.
(94%)
%
(36%)
(76%)
(47%)
n.a.
n.a.
n.a.
n.a.
n.a.
(67%)
n.a.
n.a.
(41%)
(98%)
n.a.
35%
n.a.
n.a.
(96%)
19%
n.a.
n.a.
n.a.
38 / 183
Ørsted Annual report 2019Management’s review Results
Contents
For more details on
quarterly figures for our
business units, please
go to orsted.com/
financial-reports
Financial performance
– business units
Revenue from wind farms in operation increased
by 54% due to the above-mentioned factors.
Offshore
Power generation increased by 21% relative
to Q4 2018. The increase was primarily due
to ramp-up of generation from Hornsea 1 and
Borkum Riffgrund 2 (in total 0.6TWh).
Revenue from offshore wind farms in
operation increased by 23% due to the above-
mentioned ramp-up from new offshore wind
farms. Revenue from power sales decreased
by 23% due to lower power prices.
Revenue from construction agreements
decreased by DKK 4.3 billion, mainly due to
the partial divestment of the Hornsea 1 trans-
mission assets as part of the 50% farm-down
of Hornsea 1 in Q4 2018. In Q4 2019, revenue
from construction agreements primarily
related to the divestment of the transmission
assets at Race Bank.
EBITDA decreased by DKK 14.8 billion to
DKK 4.0 billion in Q4 2019, mainly due to the
50% farm-down of Hornsea 1 in Q4 2018.
EBITDA from sites, O&M and PPAs amounted
to DKK 4.6 billion, up DKK 0.5 billion com-
pared to Q4 2018. Higher generation and
good performance from trading related to
hedging of our UK energy exposures contrib-
uted positively to the higher earnings.
Onshore
Power generation increased by 81% relative
to Q4 2018. The increase was primarily
due to new wind farms (Tahoka and Lockett)
in operation.
EBITDA increased by DKK 0.1 billion and
amounted to DKK 0.2 billion. The increase was
primarily due to more wind farms in operation.
Markets & Bioenergy
Revenue was down 6% and amounted to DKK
9.6 billion in Q4 2019. The decrease was driven
by a decrease in gas prices relative to Q4 2018,
partly offset by higher sold gas volumes.
EBITDA totalled DKK 0.5 billion in Q4 2019, which
was DKK 0.2 billion higher than in Q4 2018.
EBITDA from CHP plants was in line with last
year and amounted to DKK 0.4 billion.
EBITDA from Gas Markets & Infrastructure
increased by DKK 0.7 billion and amounted
to DKK 0.6 billion. The higher earnings were
related to an increase in the accounting value
of our gas storages in Q4 2019 (increasing
gas prices in Q4 2019), whereas there was a
decrease in the accounting value of our gas
storages in Q4 2018 (decreasing gas prices
in Q4 2018). In addition, good performance
from trading of our financial gas exposures
contributed positively to the result.
EBITDA from LNG was lower due to the before-
mentioned impact of DKK -0.8 billion related to
the divestment of our LNG activities. This was
partly offset by good performance related to
optimisation of LNG deliveries and reversal of
negative timing effects from previous periods.
EBITDA from our distribution, B2C and city light
businesses was at the same level as Q4 2018.
Offshore’s results, DKKm
Q4 2019
Q4 2018
Revenue
10,913
15,134
Sites, O&M and PPAs
Power sales
Construction agreements
Other
EBITDA
Sites, O&M and PPAs
Construction agreements and
divestment gains
Other, incl. project development
Cash flows from operating
activities
Free cash flow
5,437
3,397
2,012
67
4,048
4,626
51
(629)
3,545
(1,697)
Onshore’s results, DKKm
Q4 2019
Q4 2018
4,415
4,417
6,271
31
18,847
4,109
15,413
(100%)
(675)
(7%)
4,830
(27%)
16,511
%
(28%)
23%
(23%)
(68%)
116%
(79%)
13%
n.a.
%
54%
275%
83%
136%
35%
Revenue
EBITDA
Sites
Production tax credits and tax
attributes
Other, incl. project development
Cash flows from operating
activities
Free cash flow
Markets & Bioenergy’s results,
DKKm
Revenue
EBITDA
CHP plants
Gas Markets & Infrastructure
LNG
Distribution, B2C and city light
Other, incl. project development
Cash flows from operating
activities
Free cash flow
123
165
73
201
(109)
80
44
40
85
(81)
(160)
(2,822)
1,868
n.a.
(4,910)
(43%)
Q4 2019
Q4 2018
9,569
10,199
490
354
620
(691)
257
(50)
(280)
(739)
303
365
(36)
(139)
250
(137)
469
(533)
%
(6%)
62%
(3%)
n.a.
397%
3%
(64%)
n.a.
39%
39 / 183
Ørsted Annual report 2019Management’s review Results
Contents
Quarterly summary, 2018-2019
Income statement
(business performance), DKKm
Revenue
EBITDA
Offshore
Sites, O&M and PPAs
Construction agreements and other
Onshore
Markets & Bioenergy
Other activities
Depreciation and amortisation
Impairment losses
Operating profit (loss) (EBIT)
Gain (loss) on divestment of enterprises
Net financial income and expenses
Profit (loss) before tax
Tax
Profit (loss) for the period from
continuing operations
Profit (loss) for the period
Balance sheet
Assets
Total equity
Shareholders in Ørsted A/S
Non-controlling interests
Hybrid capital
Interest-bearing net debt
Capital employed
Additions to property, plant and
equipment
Cash flows
Cash flows from operating activities
Gross investments
Divestments
Free cash flow
Financial ratios
Return on capital employed (ROCE)1,5, %
FFO/Adjusted net debt2,5, %
Number of outstanding shares, end of
period, ’000
Share price, end of period, DKK
Market capitalisation, end of period,
DKKbn
Earnings per share (EPS) (BP), DKK
Income statement (IFRS)
Revenue
EBITDA
Profit (loss) for the period from continuing
operations
Q4 2019 Q3 2019 Q2 2019 Q1 2019 Q4 2018 Q3 2018 Q2 2018 Q1 2018
Business drivers
Q4 2019 Q3 2019 Q2 2019 Q1 2019 Q4 2018 Q3 2018 Q2 2018 Q1 2018
18,679
4,613
4,048
4,626
(578)
165
490
(90)
(1,876)
(568)
2,169
(13)
(644)
1,515
(590)
15,481
4,116
3,223
2,612
611
308
436
149
(1,681)
-
2,435
(15)
(47)
2,368
(925)
16,443
3,625
3,572
2,871
701
162
(115)
6
(1,689)
-
1,936
(18)
(545)
1,376
(283)
17,239
5,130
4,318
3,641
677
151
684
(23)
(1,618)
-
3,512
(17)
101
3,597
(958)
23,527
19,206
18,847
4,109
14,738
44
303
12
(1,697)
603
18,112
(28)
(43)
18,038
(2,878)
15,018
2,225
1,987
2,008
(21)
-
259
(21)
(1,437)
-
788
181
(436)
535
(117)
18,593
3,079
3,159
1,933
1,226
-
(18)
(62)
(1,462)
-
1,617
(16)
(504)
1,101
(225)
19,808
5,519
4,053
3,233
820
-
1,556
(90)
(1,382)
-
4,137
(10)
(295)
3,830
(798)
925
896
1,443
1,477
1,093
1,075
2,639
2,596
15,160
15,194
418
405
876
857
3,032
3,040
192,860 194,521 185,949 182,783 174,575 150,909 149,149 147,739
70,823
53,861
3,723
13,239
4,331
75,154
89,562
73,082
3,248
13,232
17,230
106,792
87,369
70,977
3,153
13,239
12,082
99,451
86,446
69,960
3,247
13,239
4,980
91,426
69,744
52,884
3,621
13,239
4,603
74,347
85,115
68,488
3,388
13,239
(2,219)
82,896
68,701
52,029
3,433
13,239
8,957
77,658
85,843
69,193
3,411
13,239
9,111
94,954
6,560
8,449
3,755
3,676
4,575
2,942
3,137
3,782
4,816
(8,816)
402
(3,598)
871
(7,222)
260
(6,091)
7,510
(3,368)
(11)
4,131
(118)
(3,899)
2,678
(1,339)
7,565
(14,916)
18,749
11,398
(117)
(4,385)
380
(4,122)
3,293
(3,109)
(14)
170
(398)
(2,071)
835
(1,634)
10.6
31.0
29.3
47.4
29.3
57.5
28.2
46.2
32.1
69.0
23.0
41.7
23.5
44.3
26.7
45.6
419,985 419,985 419,985 420,045 420,045 420,155 420,155 420,155
392.0
636.6
689.0
532.8
504.4
435.7
436.3
386.0
289.6
1.1
267.4
3.5
223.8
1.9
211.7
6.2
183.0
35.6
183.3
1.1
162.3
1.4
164.7
7.2
19,815
5,260
14,543
3,328
17,277
4,425
18,763
6,007
26,165
20,914
12,798
567
16,859
1,725
19,698
5,285
1,429
822
1,718
3,322
16,472
(875)
(180)
2,849
Offshore
Decided (FID) and installed capacity3, GW
Installed capacity3, GW
Generation capacity3, GW
Wind speed3, m/s
Load factor3, %
Availability3, %
Power generation, TWh
Power sales, TWh
Onshore
Decided (FID) and installed capacity3, GW
Installed capacity, onshore wind, GW
Wind speed3, m/s
Load factor3, %
Availability3, %
Power generation, TWh
Markets & Bioenergy
Degree days3, number
Heat generation, TWh
Power generation, TWh
Power sales, TWh
Gas sales, TWh
People and environment
Employees, end of period, number
Total recordable injury rate (TRIR)5
Fatalities, number
Green share of heat and power
generation, %
Carbon emissions, g CO2e/kWh
9.9
6.8
3.6
10.0
50
93
3.9
7.7
2.1
1.0
7.3
46
98
1.0
882
3.0
1.6
4.1
37.0
6,526
4.9
0
90
44
9.9
5.6
3.6
8.5
37
93
2.8
7.0
1.7
1.0
6.6
39
98
0.9
108
0.5
0.4
3.3
31.5
6,454
4.5
0
87
62
9.9
5.6
3.3
8.0
31
87
2.2
5.7
1.4
0.8
7.7
47
97
0.8
269
1.1
0.7
3.3
32.1
6,312
4.1
1
85
71
9.0
5.6
3.0
10.4
51
96
3.1
7.2
1.0
0.8
7.8
47
97
0.8
1,140
3.7
1.9
4.0
26.5
6,176
4.3
0
80
85
9.0
5.6
3.0
10.3
53
93
3.3
7.7
1.0
0.8
7.3
41
98
0.6
884
2.8
1.8
4.2
26.0
6,080
4.7
0
83
87
8.9
5.1
2.9
7.7
32
92
1.9
5.0
-
-
-
-
-
76
0.3
0.7
3.5
31.5
5,882
5.0
0
71
212
8.9
5.1
2.8
7.9
31
93
1.8
5.4
-
-
-
-
-
149
0.9
0.9
3.5
34.1
5,741
6.2
0
80
123
8.9
4.4
2.7
10.3
55
94
3.0
9.2
-
-
-
-
-
1,417
4.8
3.3
4.1
42.5
5,662
6.7
0
68
147
Business performance vs. IFRS
Business performance represents the underlying financial
performance of the Group in the reporting period, as
results are adjusted for temporary fluctuations in the
market value of contracts (including hedging trans-
actions) relating to other periods. Apart from this, there
is no difference between business performance and IFRS
results. Read more in note 1.5.
ROCE is calculated for continuing operations.
1
2
3
4
5
EBIT/average capital employed.
Net debt, including 50% of hybrid capital, cash and
securities not available for use (with the exception
of repo transactions), present value of lease obliga-
tions (2018), and decommissioning obligations less
deferred tax.
See definition on page 182 and in the ESG statements.
The figures indicate values from the latest regulatory
financial statements (updated in June).
Last 12 months.
40 / 183
Ørsted Annual report 2019Management’s review Business units
42 Our business units
43 Offshore
47 Onshore
49 Markets & Bioenergy
Contents
As part of our green
transformation, we
have committed to the
Sustainable Biomass
Programme. 96% of the
wooden biomass came
from certified sustainable
sources in 2019. By 2020,
it will be 100%.
Ørsted Annual report 2019Management’s review Business units
Contents
Our business units
Ørsted
Offshore
Onshore
Markets
& Bioenergy
EBITDA 2018-20191
EBITDA 2018-20191
EBITDA 2018-20191
EBITDA 2018-20191
2018
2019
DKK
30.0bn
2018
2019
DKK
28.0bn
DKK 17.5bn
DKK 15.2bn
2018
DKK 0.0bn
2019
DKK 0.8bn
2018
DKK 2.1bn
2019
DKK 1.5bn
New partnerships
New partnerships
Key figures 2019
Revenue
Gross investments
Capital employed
TRIR
Number of employees
ROCE
DKK 67.8bn
DKK 23.3bn
DKK 106.8bn
4.9
6,526
10.6%
Key figures 2019
Revenue
Gross investments
Capital employed
TRIR
Number of employees
DKK 40.2bn
DKK 15.1bn
DKK 79.4bn
2.7
2,777
Key figures 2019
Revenue
Gross investments
Capital employed
TRIR
Number of employees
DKK 0.7bn
DKK 6.2bn
DKK 11.7bn
5.9
95
Key figures 2019
Revenue
Gross investments
Capital employed
TRIR
Number of employees
DKK 32.8bn
DKK 1.9bn
DKK 15.8bn
10.4
1,828
Financial target
ROCE
10% (avg. 2019-2025)
1 The sum of the business units’ key figures for 2019 does not equal the consolidated key figures due to other activities and eliminations. Read more in note 2.1.
42 / 183
Ørsted Annual report 2019Management’s review Business units
Contents
Offshore
Highlights 2019
Financial performance
— We took FID on the offshore wind farm
Greater Changhua 1 & 2a in Taiwan – our
first large-scale offshore wind investment
outside Europe.
— We were awarded the 1,100MW Ocean
Wind project in New Jersey.
— We were awarded the 880MW Sunrise
Wind project in New York together with
our partner Eversource Energy.
— We divested 50% of the South Fork and
Revolution Wind projects and two New
England offshore wind lease areas to our
partner Eversource Energy.
— We signed a non-binding term sheet with
Polska Grupa Energetyczna (PGE) regarding
two large-scale projects.
— Exclusive negotiations entred into with
the Public Service Enterprise Group (PSEG)
regarding a joint venture agreement to
acquire 25% of Ocean Wind.
— We commissioned Hornsea 1.
— We commissioned phase 2 of Formosa 1.
— We divested the transmission assets of our
offshore wind farm Race Bank.
— We selected GE Renewable Energy as the
preferred wind turbine supplier for our
Mid-Atlantic cluster in the US and secured
a wind turbine volume of 1.7GW from
Siemens Gamesa for our North-East cluster.
— We entered into one long-term CPPA in the
UK and one CPPA in Germany.
Power generation increased by 20% relative
to 2018, primarily due to ramp-up of genera-
tion from Hornsea 1, Borkum Riffgrund 2 and
Walney Extension (in total 1.8TWh). Curtail-
ments and various operational issues had a
larger adverse impact on generation than in
a normal year.
Wind speeds were slightly above last year
and amounted to a portfolio average of
9.2m/s, which was in line with a normal wind
year. Availability ended at 93%, which was in
line with 2018.
Revenue decreased by 7% to DKK 40.2 billion.
Revenue from offshore wind farms in opera-
tion increased by 19% to DKK 16.6 billion due
to the above-mentioned ramp-up of Hornsea
1, Borkum Riffgrund 2 and Walney Extension.
Revenue from power sales decreased by DKK
1.5 billion, primarily due to lower power prices.
Revenue from construction agreements
decreased by DKK 4.2 billion, primarily due to
the partial divestment of the Hornsea 1 trans-
mission assets and the Burbo Bank Extension
transmission assets in 2018. In 2019, revenue
from construction agreements primarily
related to Hornsea 1 and the divestment of
the Race Bank transmission assets.
— We introduced a new operating model to
support our international growth ambitions.
EBITDA decreased by 46% relative to 2018
and amounted to DKK 15.2 billion. Adjusted for
Adjusted for
partnerships, EBITDA
increased by 17%.
Performance highlights
Business drivers
Decided (FID) and installed capacity
Installed capacity
Generation capacity
Wind speed
Load factor
Availability
Power generation
Denmark
United Kingdom
Germany
Other
Power sales
Power price, LEBA UK
British pounds
Financial performance
Revenue
Sites, O&M and PPAs
Power sales
Construction agreements
Other
EBITDA
Sites, O&M and PPA
Construction agreements and
divestment gains
2019
2018
%
GW
GW
GW
m/s
%
%
9.9
6.8
3.6
9.2
42
93
9.0
5.6
3.0
9.1
42
93
TWh
12.0
10.0
2.2
7.4
2.2
0.2
27.6
43.6
8.5
2.2
6.1
1.7
0.0
27.4
57.9
8.4
TWh
GBP/MWh
DKK/GBP
DKKm 40,216
43,110
16,602
13,918
11,037
12,544
12,386
16,560
191
88
DKKm 15,161
28,046
13,750
11,279
10%
21%
20%
1%
0%p
0%p
20%
1%
21%
30%
n.a.
1%
(25%)
1%
(7%)
19%
(12%)
(25%)
118%
(46%)
22%
3,765
18,765
(80%)
Other, incl. project development
(2,354)
(1,998)
Depreciation
EBIT
Cash flows from operating activities
Gross investments
Divestments
Free cash flow
Capital employed
DKKm (5,494)
(4,456)
DKKm
DKKm
9,667
23,590
(59%)
9,283
6,710
DKKm (15,121)
(15,081)
18%
23%
38%
0%
DKKm
3,052
19,676
(84%)
DKKm (2,786)
11,305
DKKm 79,447
65,474
n.a.
21%
43 / 183
Ørsted Annual report 2019Management’s review Business units
Contents
new partnerships in 2018 (Hornsea 1), EBITDA
increased by 17% compared to last year.
EBITDA from Sites, O&M and PPAs amounted
to DKK 13.8 billion in 2019, of which approx
DKK 0.3 billion was due to the implemen-
tation of IFRS 16. The 22% increase was
primarily due to the factors mentioned above.
In addition, good performance from trading
related to hedging of our UK energy exposures
contributed positively to the increase. Exclud-
ing earnings previously reported as part of
Markets & Bioenergy, EBITDA from Sites, O&M
and PPAs increased by 18%.
EBITDA from partnerships decreased by
DKK 15.0 billion and amounted to DKK 3.8
billion. The decrease was mainly due to the
gain and subsequent construction work
related to the farm-down of Hornsea 1 in
2018 (DKK 15.1 billion). In 2019, construction
agreements primarily concerned Hornsea
1 and positive effects from the ongoing
divestments of offshore transmission assets
at Walney Extension and Race Bank.
EBITDA from other activities, including project
development, amounted to DKK -2.4 billion.
The increased spend relative to 2018 was
mainly due to higher project development
activities in the US.
Depreciation increased 23% and amounted
to DKK 5.5 billion. The increase was mainly
due to commissioning of new offshore wind
farms in the UK and Germany as well as the
implementation of IFRS 16.
Cash flow from operating activities amounted
to DKK 9.3 billion, which was DKK 2.6 billion
higher than in 2018. The increase was primarily
due to higher EBITDA (excluding gains from
divestments which are not recognised in
cash flows from operating activities), less
capital being tied up in work in progress due
to received partner milestone payments and
lower receivables. This was partly offset by
higher tax payments in 2019.
Gross investments amounted to DKK 15.1
billion and mainly related to the construction
of Hornsea 1 and 2, Greater Changhua 1 & 2a
and Borssele 1 & 2.
Cash flow from divestments in 2019 related
to the receipt of deferred proceeds from
the 50% farm-down of Hornsea 1 in 2018
(DKK 1.7 billion) and to the strengthening
of our strategic partnership with Eversource
as they became a 50% partner in our activi-
ties in the New England area in February
(DKK 1.4 billion).
Borkum Riffgrund 2,
the North Sea, Germany,
during construction
in 2018.
Introduction to Offshore
— We are active in all parts of the value chain
and develop, construct, own and operate
offshore wind farms in the UK, Germany,
Denmark, the Netherlands, the US and Taiwan.
— We have been pioneers in the industry since
we built the world’s first offshore wind farm
in 1991, and we are the market leader within
global offshore wind power generation with
25+ years of experience and 24 offshore wind
farms in operation.
— Worldwide, we have constructed more
offshore wind farms than any other company,
with a capacity of 6.8GW. They supply
carbon-free power to more than 14 million
people annually.
— Our integrated EPC organisation has a strong
track record of delivering projects on time and
on budget and manages multiple large-scale
offshore construction projects in parallel
across the globe.
The wind speed
indicates how many
metres per second the
wind has blown in the
areas where we have
offshore wind farms. The
weighting is based on
our generation capacity.
Quarterly and annual wind speed for our offshore wind farms, m/s
2016
2017
2018
2019
Normal wind year
10.3
10.4
10.3
10.0
7.9
8.0
8.5
7.7
8.9
9.3
9.1
9.2
Q1
Q2
Q3
Q4
FY
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Ørsted Annual report 2019Management’s review Business units
Contents
Strategic and operational
performance
2019 was an eventful year with two major
awards in the US, FID on Greater Changhua 1
& 2a in Taiwan and commissioning of
Hornsea 1 in the UK.
UK
In 2019, we commissioned the offshore wind
farm Hornsea 1 in the UK on time and within
budget. Hornsea 1 is currently the world’s
largest offshore wind farm and contributes
1.2GW to our installed capacity.
In addition to our operational offshore wind
farms, construction of the offshore wind farm
Hornsea 2 is progressing according to plan. We
are currently installing export cables along the
onshore route, and we expect commissioning
in the first half of 2022.
The application for Hornsea 3 is currently
being processed, with a consent decision
expected in the first half of 2020.
In February, we entered into a long-term
CPPA with Northumbrian Water for our
offshore wind farm Race Bank which was the
first of its kind in the UK.
In October, we completed the divestment of
the Race Bank transmission assets to Diamond
Transmission Partners. The transmission assets
were sold for GBP 472.5 million (DKK 4.2 billion)
on a 100% basis and include the onshore
substation, the export cables and the offshore
substation. In 2020, we expect to divest the
transmission assets related to Walney Exten-
sion and potentially Hornsea 1.
Continental Europe
In Continental Europe, we are currently
constructing the wind farm Borssele 1 & 2
in the Netherlands, which is moving forward
as planned. We are currently installing found-
ations and array cables, and we expect
commissioning end Q4 2020.
In October, we announced that we had
commenced discussions with Polska Grupa
Energetyczna S.A. regarding the purchase of
a 50% ownership share in two projects in the
Baltic Sea with a total capacity of up to 2.5GW.
The projects are expected to commence con-
struction by 2026 and 2030, respectively.
In early December 2019, we signed a 10-year
fixed price CPPA with Covestro to offtake
output from 100MW of our offshore wind
farm Borkum Riffgrund 3 in Germany – the
largest offshore CPPA in the world to date.
This agreement, in combination with the
deal signed with Northumbrian Water in the
UK, represents an important step in building
long-term green partnerships with corporate
customers that can support the risk-return
profile of merchant offshore wind projects.
North America
The post-merger integration of Deepwater
Wind was successfully completed in the
second half of 2019. Deepwater Wind has
added an attractive and geographically
diverse set of projects to our portfolio.
In February, we divested 50% of the South
Fork and Revolution Wind projects as well as
two New England offshore wind lease areas to
Eversource Energy. The divestment extended
our strategic partnership with Eversource
in the north-east and will enable the joint
venture to harvest synergies across the
different New England projects.
In February, we received approval from Rhode
Island’s regulators for the 400MW long-term
PPA for Revolution Wind.
In June, the results of the first offshore wind
auction in New Jersey were announced,
and we were awarded the right to build the
1,100MW Ocean Wind offshore wind project at
a price of USD 86.4 per MWh (2017 levelised)
for a 20-year period. Following the award,
we have entered into exclusive negotiations
with Public Service Enterprise Group (PSEG)
to potentially become an equity investor in
the project and acquire 25% of Ocean Wind.
Subject to FID, the Ocean Wind project is
expected to be commissioned in 2024.
In July, the results of the first offshore wind
auction in New York were announced, and
together with our joint venture partner
Eversource Energy, we were awarded the right
to build the 880MW Sunrise Wind project. In
October, Sunrise Wind signed a 25-year PPA
with the New York State Energy Research
& Development Authority at a price of USD
79.6 per MWh (2017 levelised). Subject to FID,
the Sunrise Wind project is expected to be
commissioned in 2024.
We have secured a wind turbine volume
of 1.7GW from Siemens Gamesa for Sunrise
Wind, Revolution Wind and South Fork, which
constitute our north-east cluster. The agree-
ment is the largest US offshore wind turbine
contract to date and will allow the projects to
realise economies of scale.
In September, we selected GE Renewable
Energy as the preferred wind turbine supplier
for our Skipjack and Ocean Wind offshore
wind farms, which constitute our Mid-Atlantic
cluster, marking the world’s first commercial
deployment of GE’s Haliade-X 12MW offshore
wind turbine.
In December, we entered into an export cable
framework agreement with Nexans to procure
up to 1,000km for our US portfolio.
In the US, we are constructing the 12MW
Coastal Virginia demonstration project on
behalf of our partner Dominion Energy. All
components are being fabricated, and the
project remains on track to begin construction
in Q2 2020.
Asia-Pacific
In January 2019, our Greater Changhua 1 &
2a project obtained its establishment permit,
and we signed a power purchase agreement
with Taipower for a tiered feed-in tariff of NTD
6,279.5 (approx EUR 187) per MWh for the first
10 years and TWD 4,142.2 (approx EUR 123)
per MWh for the subsequent 10 years. In April,
Taiwan’s Ministry of Economic Affairs approved
our local supply chain plan, and we took FID
soon after. All key supply and installation con-
tracts have been signed, and we are on track
to deliver a 2022 COD. We also initiated a
structured farm-down process for 50% of the
Greater Changhua 1 site, which is progressing
according to plan.
In November, we commissioned phase 2 of the
Formosa 1 project in Taiwan according to plan
and within budget. Formosa 1 has a capacity
of 128MW, of which we own 35%, and is the
45 / 183
Ørsted Annual report 2019Management’s review
first commercial-scale offshore wind farm
in Taiwan.
Cross-regional events
In October, we reduced production forecasts
across our offshore wind portfolio as a result
of new findings demonstrating the negative
impact of blockage and wake effects on
power generation at our offshore wind farms.
New wind simulation models suggest that we
have historically underestimated the impact
of blockage effects. Furthermore, a newly-
developed tool that benchmarks production
models against actual wind turbine operat-
ing data shows that previous assumptions
underestimate wake effect losses. As global
offshore wind build-out accelerates, the whole
industry will see higher wake effects between
neighbouring wind farms.
Effective from 2020, we launched a new
global operating model to support our
international growth ambitions in Offshore.
The new model organises our business
into four regions: UK, Continental Europe,
North America and Asia-Pacific. The aim of
the new model is to optimise the balance
between global scale advantages and local
market proximity as well as to create a more
transparent and scalable platform for our
global expansion.
We have a strong focus on safety and are
continuously working on lowering our total
recordable injury rate. An example of our
Business units
Contents
approach to improve safety during offshore
wind operations and maintenance is the
innovative ‘Get Up Safe’ system. This is a
motion-compensated hoist solution that
enables technicians to move safely between
moving vessels and offshore wind turbines.
Technicians will no longer have to step from
a moving boat onto a ladder and then climb
to reach the base of the wind turbine.
Expected offshore wind auctions and tenders in 2020 and 20211
H2 2020
Japanese tender
Round 1
Capacity TBA
H1 2021
Holland Coast
West
1,520MW
H2 2021
Connecticut 4th
offshore wind
RFP 800MW
H1 2020
Maryland 2nd
+400MW
H2 2020
New York 2nd
+1,000MW
H1 2021
4th CfD round
2,000-4,000MW
2021
German tender
~900MW
H1 2020
Holland
Coast North 1
760MW
H2 2020
New Jersey 2nd
1,200MW
H1 2021
Maryland 3rd
+400MW
H2 2021
Danish tender
800-1,000MW
2020
Taiwan auction
Capacity TBA
H1 2021
French tender
Round 4
1,000MW
H2 2021
Massachusetts
3rd offshore wind
RFP 800MW
2021
Belgian tender
~700MW
1
Excludes offshore lease auctions. There are two confirmed lease auctions in 2020, ScotWind and UK Lease
Round 4. The Bureau of Ocean Energy Management (BOEM) New York lease auction, originally scheduled
for 2020, has been delayed with no new timeframe set.
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Ørsted Annual report 2019Management’s review Business units
Contents
Onshore
Highlights 2019
Financial performance
— We commissioned the onshore wind farm
Lockett (184MW) within budget and ahead
of schedule.
— We took FID on the Sage Draw (338MW),
Willow Creek (103MW) and Plum Creek
(230MW) wind farms as well as on the
Permian Energy Center (420/40MW)
combined solar and storage project.
— We secured tax equity funding for Lockett
and tax equity commitments for Sage Draw,
Plum Creek and Willow Creek.
— We acquired Coronal Energy’s solar and
storage development platform.
— In December, Lincoln Clean energy was
rebranded as Ørsted.
As we acquired Lincoln Clean Energy and
established the Onshore business unit on
1 October 2018, comparison figures for
2018 only include Q4.
Power generation amounted to 3.5TWh
in 2019. Approximately half of the 2.9TWh
increase was due to consolidation of a
full year of generation from Amazon and
Willow Springs. The other half was ramp-
up of generation from Tahoka and Lockett
that came online in December 2018 and
August 2019, respectively.
Revenue amounted to DKK 0.7 billion and
related to the generation from our operating
wind farms.
Introduction to Onshore
— We entered into the North American onshore
— We develop projects across four North
renewables market in 2018 with the acquisition
of Lincoln Clean Energy (LCE) and currently
own and operate four wind farms in Texas with
a capacity of 1.0GW as well as a small solar
farm in New Jersey.
American electricity markets, ERCOT, MISO,
SPP and PJM, and deliver wind, solar PV and
storage solutions, which ensures flexibility,
to meet the dynamic needs of the diverse
North American customer base.
— We develop onshore wind, solar PV and stor-
age projects, through an established execution
model, managing key interfaces with top tier
suppliers and contractors.
As we established the
Onshore business unit
on 1 October 2018,
comparison figures for
2018 only include Q4.
Performance highlights
Business drivers
Decided (FID) and installed
capacity, onshore wind and solar
Installed capacity, onshore wind
and solar
Wind speed
Load factor, onshore wind
Availability, onshore wind
Power generation
Net realised price
US dollars
Financial performance
Revenue
EBITDA
Sites
Production tax credits and tax
attributes
Other, including project
development
Depreciation
Impairment losses
EBIT
Cash flows from operating
activities
Gross investments
Divestments
Free cash flow
Capital employed
2019
2018
%
MW
2,088
997
109%
MW
m/s
%
%
TWh
USD/MWh
DKK/USD
DKKm
DKKm
DKKm
DKKm
DKKm
997
813
7.3
45
98
3.5
17.3
6.7
670
786
466
628
(308)
(351)
(68)
367
7.3
41
98
0.6
17.4
6.5
80
44
40
85
(81)
(51)
-
(7)
23%
0%
4%p
0%p
483%
(1%)
3%
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
DKKm
1,007
1,868
(46%)
DKKm
(6,158)
(6,779)
DKKm
255
1
DKKm
(4,896)
(4,910)
9%
n.a.
0%
DKKm
11,734
4,779
146%.
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Ørsted Annual report 2019Management’s review Business units
Contents
EBITDA amounted to DKK 0.8 billion in total.
EBITDA from sites were DKK 0.5 billion, and
production tax credits (PTCs) contributed
with an additional DKK 0.6 billion. Project
development and other costs amounted to
DKK -0.3 billion.
development. The commissioning of the
Lockett onshore wind farm in July brought our
operating portfolio to a total of 1GW. Further-
more, we took FID on four projects during
the year, resulting in 1.1GW of wind and solar
capacity currently under construction.
Impairment losses amounted to DKK 0.1 billion
and related to a write-down of our 20MW
battery storage project Carnegie Road in the
UK, mainly due to changed price and OPEX
estimates.
Over the past year, areas of the business have
been systematically integrated into Ørsted to
ensure an effective operating model, capitalis-
ing on the capabilities of both companies. We
rebranded LCE as Ørsted in December, further
strengthening our platform in North America.
Cash flows from operating activities
amounted to DKK 1.0 billion, which primarily
comprised tax equity contribution from our
partner at Lockett less funds tied up in net
working capital. In 2018, it primarily comprised
a tax equity contribution related to Tahoka.
Gross investments amounted to DKK 6.2
billion in 2019 and related to the construction
of Sage Draw, Plum Creek, Lockett, Willow
Creek, Permian Energy Center and minor
acquisitions. The majority of investments
in 2018 was the purchase price for the
acquisition of Lincoln Clean Energy.
Divestments primarily comprised a sale and
lease-back arrangement for land related to
Permian Energy Center.
Strategic and operational
performance
We have made significant progress over the
past year, building our position as a multi-state
developer with a strong portfolio of projects
in operation, under construction and under
In onshore wind, we increased our presence
in the ERCOT electricity market in April by
taking FID on the Sage Draw wind farm.
We also expanded into the SPP electricity
market through the acquisition and FID of
the construction-ready wind farm Willow
Creek in South Dakota in June and the FID
on the wind farm Plum Creek in Nebraska
in August. All three wind farms are expected
to be commissioned in 2020 and are thus
expected to be eligible for the full value of
the production tax credits (PTCs).
In addition, we secured tax equity financing
commitments for Sage Draw, Plum Creek and
Willow Creek from leading tax equity investors.
During 2019, we made a strategic investment
in solar PV through the acquisition of Coronal
Energy’s solar and storage development
platform and pipeline, thereby deepening our
presence in the solar market and expanding
our solar and storage asset portfolio.
In November, we took FID on our inaugural
large-scale solar PV and storage project,
Selected US power markets
Willow Creek
Plum Creek
Oak Solar
Sage Draw
Tahoka
Permian Energy Center
Lockett
Willow Springs
Amazon
Southwest Power Pool (SPP)
Electric Reliability Council of Texas (ERCOT)
PJM Interconnection
Permian Energy Center in West Texas, which we
expect to commission in 2021. This adds 420MW
of solar PV and 40MWac storage capacity to
our portfolio and supports Ørsted’s strategy
of delivering clean and competitive energy
solutions to the dynamic US energy market.
We currently have a strong pipeline of over 1.1GW
of onshore wind and solar projects in develop-
ment, which we are maturing in 2020. We have
a target of 5GW of installed capacity by 2025.
The overall US power market is complex and
fragmented. Approximately two thirds of
the nation’s load is supplied by one of seven
wholesale power markets, managed by
either independent system operators (ISOs) or
a regional transmission organisations (RTOs).
The remaining load is supplied via traditional
vertically integrated utility systems. These are
mainly located in the south-east and west
(excluding California) of the country.
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Ørsted Annual report 2019Management’s review Business units
Contents
Markets & Bioenergy
Highlights 2019
Financial performance
Performance highlights
2019
2018
%
— We reached 100% green heat and
power generation at the newly bio-
converted Asnæs Power Station in
mid-December 2019.
— We signed an agreement to divest
our Danish power distribution (Radius),
residential customer and city light
businesses to SEAS-NVE.
— We generated 68% of our total heat and
power from sustainable biomass. 96% of the
wooden biomass we sourced was certified
sustainable. By 2020, it will be 100%.
— We established a commodity trading
unit in the US.
— We concluded a 15-year agreement with
the Dutch power grid company Alliander
to purchase green certificates from the
offshore wind farm Borssele 1.
— We commissioned the new flue gas con-
densation unit at Herning Power Station.
The unit uses the residual heat in the flue,
reducing the fuel consumption by 20%.
— We sold our stakes in the Kalundborg
Bioenergi plant and two upgrading plants
in Fredericia and Horsens.
— Radius finalised the installation of more
than 1 million smart meters in 2019.
— We signed an agreement to divest the
Stignæs Transit Harbour.
— We entered into an agreement to divest
our liquified natural gas (LNG) activities.
— We reached a settlement
in the Elsam competition case.
Revenue decreased by 18% compared to
2018 and amounted to DKK 32.8 billion. The
decrease was mainly driven by an average
decrease of 41% in gas prices relative to 2018.
In addition, lower gas and power sales, heat
and power generation and power prices
contributed to the lower revenue.
Power generation was 31% lower than in 2018,
driven by warmer weather and less favourable
market conditions for power generation, and
generation of heat without combined power
generation at Asnæs Power Station most of
the year. Heat generation decreased by 6% in
2019 due to warmer weather.
EBITDA amounted to DKK 1.5 billion compared
to DKK 2.1 billion in 2018.
EBITDA from CHP plants increased by DKK
0.4 billion and totalled DKK 1.2 billion in 2019.
The increase was primarily due to a reversal
of a provision of DKK 0.3 billion following the
acquittal in the Elsam competition case.
EBITDA from Gas Markets & Infrastructure
decreased by 45% and amounted to DKK 0.4
billion. The decrease mainly related to our
gas contracts where we received a one-off
compensation following the completion of
an arbitration case relating to a gas purchase
contract in Q1 2018. In addition, earnings were
negatively affected by the substantial drop
Business drivers
Degree days
Heat generation
Power generation
Gas sales
Power sales
Gas price, TTF
Power price, DK
Power price, LEBA UK
Green dark spread, DK
Green spark spread, DK
Financial results
Revenue
EBITDA
CHP plants
Gas Markets & Infrastructure
LNG
Distribution, B2C and city light
Other, incl. project development
Depreciation
Impairment losses
EBIT
number
2,399
2,526
TWh
TWh
TWh
TWh
EUR/MWh
EUR/MWh
GBP/MWh
EUR/MWh
EUR/MWh
8.3
4.6
8.8
6.7
127.1
134.1
14.7
13.5
39.2
43.6
(2.6)
2.0
15.3
22.8
45.1
57.9
2.5
(6.3)
DKKm 32,816
39,836
DKKm
1,495
2,100
1,152
390
(957)
715
705
(43)
1,280
1,135
(370)
(412)
DKKm
(798)
(1,430)
DKKm
(500)
603
(5%)
(6%)
(31%)
(5%)
(4%)
(41%)
(13%)
(25%)
n.a.
n.a.
(18%)
(29%)
61%
(45%)
n.a.
13%
(10%)
(44%)
n.a.
DKKm
197
1,273
(85%)
Cash flows from operating
activities
DKKm
1,218
2,874
Gross investments
DKKm
(1,898)
(2,522)
Divestments
Free cash flow
DKKm
25
DKKm
(655)
320
672
Capital employed
DKKm 15,789
13,014
(58%)
(25%)
(92%)
n.a.
21%
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Ørsted Annual report 2019Management’s review
Business units
Contents
in gas prices during the year, which led to a
decrease in the accounting value of our gas
inventories, whereas increasing gas prices led
to a temporary positive effect in 2018. The
negative effect in 2019 will be partly offset if
the gas prices increase again, or when we sell
the gas, expectedly in 2020.
EBITDA from LNG decreased by DKK 0.9 bil-
lion to DKK -1.0 billion in 2019. The agreement
to divest our LNG activities had a net negative
impact of DKK 0.8 billion on EBITDA in 2019, as
the agreement entails a larger payment than
what we had provided for. In addition, earnings
in 2019 were adversely impacted by time-lag
on oil-indexed LNG purchase agreements.
EBITDA from Distribution, B2C and city light
increased by DKK 0.1 billion to DKK 1.3 billion.
The increase was mainly due to lower costs.
Depreciation decreased by 44% and amount-
ed to DKK 0.8 billion. The decrease was
mainly due to the distribution, B2C and city
light businesses not being depreciated in 2019,
as they are classified as assets held for sale.
Impairment losses amounted to DKK 0.5
billion in 2019 and related to a write-down of
our Renescience plant in the UK, mainly due
to delayed commissioning, increased CAPEX
and changed cost and price estimates. In 2018,
previous impairment losses of DKK 0.6 billion
Introduction to Markets & Bioenergy
— We serve as an efficient route-to-market
for both Ørsted and external partners, by
providing balancing services for renewable
generation portfolios and by selling green
certificates to the market. In doing so, we
manage large volumes of power contracts
that we optimise by leveraging the size of our
combined portfolio and our origination and
trading capabilities.
— We actively manage merchant risk arising
from our generation assets and contracts
by trading commodities.
— We provide around one quarter of Denmark’s
district heating and around one third of Den-
mark’s thermal power through our CHP plants,
making our CHP business a leading provider of
heat, power and ancillary services in Denmark.
— We ensure efficient operations and maximise
the commercial value of our legacy gas
portfolio.
— We are developing proof-of-concept for
innovative waste recycling solutions through
Renescience, our patented enzyme technology.
— Until completion of the signed and planned
divestments, we operate Denmark’s largest
power distribution grid and power and gas
customer business.
regarding the power distribution grid were
reversed in connection with the classification
as assets held for sale at the end of the year.
Cash flow from operating activities amounted
to DKK 1.2 billion in 2019. The decrease of
DKK 1.7 billion was mainly due to higher paid
tax and higher receivables at the end of 2019
compared to 2018.
Gross investments amounted to DKK 1.9 billion
in 2019 and mainly related to the instalment
of new smart meters, the bioconversion of
Asnæs Power Station and maintenance of the
power distribution grid.
Strategic and operational
performance
2019 was a year of change where we initiated
and concluded a number of divestments and
merged two business units. However, we also
made good progress within our core activities.
Provide route-to-market for
our energy generation
During 2019, our power portfolio under man-
agement grew by 1.2GW to more than 5.5GW,
as we added a long-term contract for the
Hornsea 1 Offshore Wind Farm.
We also concluded a 15-year agreement
with the Dutch power grid company, Alliander,
who will purchase green certificates from
the Borssele 1 Offshore Wind Farm in order
to reduce its carbon emissions.
Furthermore, we started optimising the dis-
patch of Ørsted’s first stand-alone, large-scale
battery (20MW) in the UK ancillary services
market, further diversifying and adding flex-
ibility to our power portfolio.
Manage market risks
Within our market trading activities, we bene-
fitted from trading of our energy exposures.
In particular, we benefitted from hedging
a part of our North-Western European
longer-dated power exposure by rolling short-
er-dated power-hedges (time spread), as well
as by hedging part of our UK power exposure
in the long end of the curve with gas hedges
instead of power hedges (spark spread). Both
of these trading strategies are commonly
used to hedge our exposures due to higher
liquidity and lower costs. However, in 2019,
we experienced an unusual long period where
the price development in the short and long
end of the power curve and between the gas
and power curves developed in our favour.
In October, we established a commodity
trading unit in the US to reduce risk and
improve the prices we receive for our power
generation as well as to gain deeper insights
into the market, which can be used when
developing new wind and solar projects.
Operate and optimise our CHP plants
The focus of our CHP business is to operate
and optimise our heat and power stations in
a way that is green, safe and efficient.
In 2019, all of our biomass came from sustain-
able sources, mostly in the form of residues
from timber production, such as sawdust,
branches and thinnings, with 96% certified
by third parties. We expect that 100% of our
wooden biomass will be third-party certified
in 2020.
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Ørsted Annual report 2019Management’s review Business units
Contents
We have converted six of our seven core CHP
plants, and we continue to reduce the carbon
emissions from these. From 2018 to 2019, we
increased the share of biomass from 49% to
64% and reduced our carbon emissions by 47%.
Since mid-December, 100% of Asnæs Power
Station’s heat and power have been generated
from sustainable biomass, completing our
CHP bioconversion project. Asnæs will provide
green process steam to Novo Nordisk’s and
Novozymes’ production facilities as well as
green heat to the city of Kalundborg and green
power to the electricity grid.
For our last remaining coal-fired plant, Esbjerg
Power Station, we have not been able to
agree on a joint solution for a bioconversion
project with our heat customers. Thus, we plan
to close down operations of this plant in early
2023, to completely phase out coal by 2023.
To operate our green CHP plants even more
efficiently, we are rolling out a comprehen-
sive digitalisation programme at our power
stations, allowing us to further optimise
generation and reduce costs.
Share of fuels in the thermal heat
and power generation, %
Coal
Biomass
Oil
Natural gas
Waste
3%
7%
18%
6%
66%
42%
49%
27%
1%
30%
12%
1%
38%
64%
12%
1%
24%
2006
2017
2018
2019
The biomass conversion of Asnæs Power Station
will support a continued reduction in the usage
of coal in 2020.
In May 2019, an employee of one of our
contractors died after a serious accident
at Avedøre Power Station. We are deeply
affected by this incident and have been in
close contact with the contractor, our employ-
ees and the relatives of the deceased to offer
support and assistance. Several improvement
tracks have been initiated to ensure that an
accident like this will never happen again. For
example, we have strengthened the permit-
to-work system and tools for conducting risk
assessments. Furthermore, we have expanded
the dialogue between contractors and Ørsted
staff to ensure alignment on procedures and
improve safety measures.
Optimise our gas portfolio
In 2019, we benefitted from larger wholesale
activity in the Danish and Swedish markets,
successful management of flexible gas
contracts and increased origination activity.
In September, the production facility on the
Tyra platforms in the North Sea owned by the
Danish Underground Consortium (DUC) was
closed as part of a redevelopment project of
Tyra. For Ørsted, this entailed a shutdown and
depressurisation of our Tyra-Nybro gas pipe-
line. The platform and pipeline are expected to
be recommissioned in July 2022. In the mean-
time, the Danish and Swedish gas markets will
rely on imports from Germany.
The past year saw increased utilisation of
our capacity at the Dutch LNG Gate terminal
on the back of larger LNG volumes arriv-
ing in Europe. This was the result of active
management and trading of LNG cargoes
globally. Furthermore, we concluded a long-
term sourcing contract, thereby securing
future supply for the LNG terminal capacity.
In December, we entered into an agreement
to divest our LNG activities.
Commercialise Renescience
Due to recent upgrades to our Renescience
facility in Northwich in the UK, we were not
able to commission the plant in 2019 as
planned. However, it has been confirmed that
the core enzymatic sorting process works as
expected. In addition, the mechanical sorting
components have been improved and redun-
dancy added to resolve the challenges arising
from the sorting of non-organic solid fractions.
Divest non-core assets and activities
To sharpen our focus on our renewable
growth platform, we initiated and concluded
agreements on several divestments in 2019.
In May, we entered into an agreement to
divest the Stignæs Transit Harbour. Since the
power station was closed in 2012, the site has
primarily been used as a coal terminal. In June,
we sold our stakes in the Kalundborg Bioener-
gi plant and two upgrading plants in Fredericia
and Horsens. In September, we entered into an
agreement to divest Radius, our Danish power
distribution business, and our residential
customer and city light businesses to SEAS-
NVE. Finally, we entered into an agreement
in December to divest our LNG activities to
Glencore as a step to reduce our long-term
engagement within the gas supply chain, and
because further financial improvements would
require additional contractual commitments.
In addition to the concluded agreements, we
initiated a divestment process for our energy
consulting business, our small and medium-
sized enterprise (SME) business, and part of
our enterprise customer portfolio. We will
continue offering gas commodity contracts for
our larger customers in Denmark and Sweden
as an outlet for our legacy gas position, as
well as external portfolio management (EPM)
services for selected customers in the UK,
Denmark, Sweden and Germany.
We are proud to hand over a portfolio of
healthy businesses to the new Radius owners
at SEAS-NVE. Together with Kamstrup,
Radius finalised the installation of more
than one million smart meters in 2019. The
smart meters give the households in our
distribution areas an overview of their power
consumption and allow them to plan their
electricity usage around the most cost-ef-
ficient periods of the day. Furthermore, we
are pleased that the customers had a good
reliability of supply with only 0.42 power
outages on average in 2019.
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Ørsted Annual report 2019Management’s review Governance
53 Letter from the Chairman
54 Board of Directors
56 Group Executive Management
57 Corporate governance
60 Risk and risk management
64 Shareholder information
Contents
Ocean Wind will be New
Jersey’s first offshore wind
farm. Not only will it help
New Jersey achieve its
ambitious sustainability
goals, but it will take us
one step closer to creating
a world that runs entirely
on green energy.
Ørsted Annual report 2019 Governance
Contents
Letter from the Chairman
The Board believes that good corporate
governance is fundamental in meeting
Ørsted’s strategic objectives and maintaining
the highest standards of integrity.
Our corporate governance model has its
offspring in our Danish roots, which builds
on a strong tradition for integrity and
transparency. As a consequence, we have
incorporated and follow all the recommen-
dations prepared by the Danish Committee
on Corporate Governance. You can find our
statutory corporate governance report on
orsted.com/statutory-reports.
Climate change is fundamental to our
business strategy, and climate-related issues
are an integral part of our board agendas.
In the Board, we monitor and oversee
progress related to Ørsted’s strategic
ambitions, including our ambitious targets
for addressing climate-related issues. We
seek to integrate considerations for climate
protection when setting our strategic direc-
tion, reviewing sustainability risks, setting
performance objectives, deciding on our
capital allocation, and when approving and
overseeing major investments, acquisitions
and divestments.
In 2019, the Board of Directors discussed and
took a number of key business decisions to
take further action against climate change
and to strengthen our ambition of becoming
a global green energy major. The decisions
covered, among other things, investments
in new offshore and onshore wind and
solar projects and an agreement to divest
our Danish power distribution, residential
customer and city light businesses as well
as our LNG business.
The Board decided to update our targets for
greenhouse gas emission reductions from our
energy generation and other in-house opera-
tional activities (scope 1 and 2 emissions) and
decided to set an ambitious target for reduc-
ing the emissions related to our value chain
(scope 3 emissions). Both of these decisions
will help us in becoming carbon neutral.
Furthermore, we decided to merge two of
our business units, made an adjustment to
our long-term financial targets and have
prepared an updated remuneration policy
and report according to the Shareholder
Rights Directive II, which we will present at
the annual general meeting in March this
year. Finally, we conducted an audit tender,
leading to a proposal at the general meeting
to re-elect PwC as auditor from 2020.
To facilitate a more dynamic and focused
dialogue at our board meetings, we have
reduced the number of members from
twelve to nine over the past couple of years.
In 2019, we updated the split of responsi-
bilities between the Board of Directors and
the Executive Board to reflect the company’s
transformation in recent years and ensure
that we spend our time on the right things in
the Board. This included, among other things,
an increase in the monetary thresholds,
stating when to seek Board approval of,
for example, investments and M&A projects.
In the Board, we appreciate the opportunity
to meet the company’s employees and key
stakeholders. During the year, we visited
Siemens Gamesa Renewable Energy’s Danish
blade and nacelle factories and the Østerild
test centre for large wind turbines. We held
board meetings at our offices in Gentofte,
Skærbæk and Boston and also met with
some of our key stakeholders during the
trip to the US.
I look forward to continuing serving the
Board in the coming year.
Thomas Thune Andersen
Chairman
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Ørsted Annual report 2019Management’s review Governance
Contents
Board of Directors
Thomas Thune Andersen
Lene Skole
Hanne Sten Andersen
Lynda Armstrong
Poul Dreyer
Chairman since 2014.
Born 1955.
Independent.
Joined/re-elected: 2014/2019.
Term of office expires: 2020.
Deputy Chairman since 2015.
Born 1959.
Independent.
Joined/re-elected: 2015/2019.
Term of office expires: 2020.
Employee representative.
Born 1960.
Not independent.
Joined/re-elected: 2007/2018.
Term of office expires: 2022.
Hanne Sten Andersen has worked
in Ørsted as an HR partner in
Markets & Bioenergy since 2003.
Position
Lead HR Business Partner,
Markets & Bioenergy.
Extensive global managerial
experience from leading positions
in A.P. Møller-Mærsk and non-
executive directorships in listed
and privately held companies
within the energy and other
sectors.
Other positions1
Chairman: Lloyds Register Group
and Foundation
Deputy chairman: VKR Holding
A/S
Member: Arcon-Sunmark A/S,
BW Group ltd, IMI plc., the
Danish Committee on Corporate
Governance.
Highly experienced in managing
listed companies from her
previous position as CFO of
Coloplast and current position
as CEO of Lundbeckfonden where
she serves as a non-executive
director of the portfolio
companies of Lundbeckfonden.
Other positions2
CEO: Lundbeckfonden, Lundbeck-
fond Invest A/S
Chairman: LFI Equity A/S
Deputy chairman: ALK-Abelló A/S,
H. Lundbeck A/S, Falck A/S.
Member: Tryg A/S, Tryg
Forsikring A/S.
Employee representative.
Born 1964.
Not independent.
Joined/re-elected: 2014/2018.
Term of office expires: 2022.
Poul Dreyer has worked in Ørsted
as a technician in Markets &
Bioenergy since 1987.
Position
Technician,
Markets & Bioenergy.
Born 1950.
Independent.
Joined/re-elected: 2015/2019.
Term of office expires: 2020.
Strong global managerial
experience from more than
30 years in leading positions in
Shell, including as Vice President
in Shell International, and from
non-executive directorships in
international companies and
large organisations.
Other positions3
Chairman: The Engineering
Construction Industry Training
Board (ECITB)
Non-Executive Director:
KAZ Minerals plc.
1
2
3
Board committees: Remuneration Committee of Lloyds Register Group, Nomination Committee of Lloyds Register Foundation, Nomination Committee and
Remuneration Committee of IMI plc, Nomination Committee of VKR Holding A/S.
Member of the Audit, Nomination & Scientific Committee of ALK-Abelló A/S, member of the Remuneration & Scientific Committee of H. Lundbeck A/S,
member of the Audit & Risk Committee of Tryg A/S, member of the Remuneration Committee of Falck A/S.
Chairman of the Remuneration Committee, member of the HSE Committee and member of the Project Assurance Committee of KAZ Minerals plc.
54 / 183
Ørsted Annual report 2019Management’s review Governance
Contents
Board of Directors
Benny Gøbel
Jørgen Kildahl
Peter Korsholm
Dieter Wemmer
Employee representative.
Born 1967.
Not independent.
Joined/re-elected: 2011/2018.
Term of office expires: 2022.
Benny Gøbel has worked in
Ørsted as an engineer in Markets
& Bioenergy since 2005.
Position
Engineer, Markets & Bioenergy.
Born 1963.
Independent.
Joined/re-elected: 2018/2019.
Term of office expires: 2020.
Born 1971.
Independent.
Joined/re-elected: 2017/2019.
Term of office expires: 2020.
Born 1957.
Independent.
Joined/re-elected: 2018/2019.
Term of office expires: 2020.
Strong international background
in renewable energy and a
profound knowledge of how the
energy ecosystems work from po-
sitions as Executive Vice President
of Statkraft and member of the
board of management of E.ON.
Extensive M&A experience from
his time as Partner and Head of
EQT Partners Denmark and from
private investments. Also experi-
ence with financial reporting, risk
management and capital markets
from CFO position at AAK AB.
Highly experienced in capital
markets, investments and risk
management from leading
positions within the finance
sector. Before focusing solely on
non-executive directorships, he
was the CFO of Allianz.
1
2
3
Member of the Audit & Risk Committee, and the
Sustainability & Compliance Committee of
Telenor ASA and member of the Audit
Committee of Höegh LNG Holdings Ltd.
Chairman of the Investment Committee of
Zoscales Partners and Chairman of the Board
of Directors of four wholly-owned subsidiaries
of Lion Danmark I ApS (Lomax Group). He is also
a member of the Board of Directors of three
wholly-owned subsidiaries of A/S United Shipping
and Trading Company, three wholly-owned
subsidiaries of DANX Holding I ApS, and four
wholly-owned subsidiaries of DSVM Invest A/S.
Member of the Audit Committee and the
Compensation Committee of UBS Group AG.
Other positions3
Member: UBS Group AG, UBS AG.
Other positions1
Chairman: Nysäter Wind AB.
Deputy chairman: Telenor ASA.
Member: Höegh LNG Holdings Ltd
and Alpiq AG.
Other: Senior Advisor, Credit
Suisse Energy Infrastructure
Partners.
Other positions2
CEO: DSVM Invest A/S, DSV Miljø
Group A/S, Day et Invest ApS,
Togu ApS, Totalleveranser Sverige
AB and Ejendomsselskabet
Nordre Fasanvej ApS.
Chairman: Nymølle Stenindustrier
A/S, GDL Transport Holding AB,
Lion Danmark I ApS and Totallev-
eranser Sverige AB.
Member: DSVM Invest A/S, A/S
United Shipping and Trading
Company, DANX Holding I ApS.
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Ørsted Annual report 2019Management’s review Governance
Contents
Group Executive Management
Henrik Poulsen
Marianne Wiinholt
Registered as CEO.
Chief Executive Officer (CEO) and President
since August 2012.
Education: MSc in Finance and Accounting,
Aarhus School of Business 1994.
Registered as CFO.
Chief Financial Officer (CFO) since October 2013
Education: MSc in Business Administration &
Auditing, Copenhagen Business School 1990,
State-Authorised Public Accountant 1992.
Born 1967.
Career
2012-
2008-2012
2006-2008
1999-2006
1996-1999
1995-1996
1994-1995
Ørsted A/S, CEO and President.
TDC A/S, CEO and President.
Capstone/KKR, Operating Executive.
LEGO, EVP, Markets & Products (2005-
2006), Regional Managing Director
Europe and Asia (2004-2005), SVP,
Global Innovation and Marketing
(2002-2003), SVP, Global Segment
8+ (2000-2002) and VP, Business
Development (1999-2000).
McKinsey & Co., Senior Engagement
Manager.
Aarsø Nielsen & Partners, Senior
Consultant.
Novo Nordisk A/S, Controller.
Other positions:
Kinnevik AB:
ISS A/S:
Deputy Chairman and member
of the Audit Committee.
Member of the Board of Directors
and Chairman of the Audit
Committee.
EQT Partners: Senior Advisor.
Born 1965.
Career
2004-
1997-2003
1987-1997
Ørsted A/S, EVP, Chief Financial
Officer (CFO) 2013-, SVP, CFO
Customers & Markets (2013), SVP,
Group Finance (2005-2013), and VP,
Group Finance and Accounting
& Tax (2004-2005).
Borealis A/S, Head of Group Finance
& Auditing (2001-2003), Head of
Group Accounting & Tax (1997-2001).
Arthur Andersen, Auditor.
Other positions:
Hempel A/S:
Member of the Board of Directors
and Chairman of the Audit Committee.
Norsk
Hydro ASA:
Member of the Board of Directors
and Audit Committee.
Group Executive Management consists of seven members.
Anders Lindberg (Offshore), Marianne Wiinholt (CFO), Henrik Poulsen (CEO and President),
Morten Hultberg Buchgreitz (Markets & Bioenergy), Martin Neubert (Offshore),
Henriette Fenger Ellekrog (CHRO) and Declan Flanagan (Onshore).
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Ørsted Annual report 2019Management’s review
Governance
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Corporate governance
Our overall and strategic
management of the company
is anchored in a board of non-
executive directors appointed
by the shareholders.
The Board of Directors has appointed an
Executive Board to handle the day-to-day
management. None of our executives are
members of the Board of Directors.
Our governance model is illustrated in the
figure and explained below.
Our governance model
Shareholders and general meeting
Board of Directors
NRC1
ARC1
Group Executive Management
1
NRC stands for Nomintion & Remuneration
Committee and ARC stands for Audit & Risk
Committee.
Shareholders and general meeting
Important tasks managed by the Board of Directors in 2019
Our shareholders exercise their rights at
the general meeting. The general meeting
adopts decisions, such as the appointment
of the Board of Directors and the auditor, in
accordance with the standard Danish rules.
Due to our majority ownership by the Danish
state, we have a bespoke quorum require-
ment, as proposals to amend the Articles of
Association or dissolve the company require
that the Danish state participates in the gen-
eral meeting and supports the proposals.
Board of Directors
Each year at the annual general meeting,
the shareholders elect six to eight board
members. In addition, our employees may
elect members corresponding to half of
the board members elected by the general
meeting pursuant to Danish mandatory rules.
Employee elections are held every four years.
For the time being, our Board of Directors
comprises nine members, six members elected
by the general meeting and three members
elected by the employees.
The Board of Directors conducted its annual
board evaluation in November 2019. The
basis for the evaluation was a questionnaire
that the individual members of the Board of
Directors and Group Executive Management
had been asked to complete. The evaluation
Investments, acquisitions and divestments
— Build out our offshore wind project portfolio after
2020, including taking final investment decision
on the Greater Changhua 1 & 2a offshore wind
project in Taiwan, bids into auctions and tenders
and entry into revenue contracts related to the
awarded Ocean Wind and Sunrise Wind offshore
projects in the US.
— Select GE as new wind turbine supplier for certain
offshore wind projects.
— Divest 50% of certain US offshore wind projects
to Eversource and take first steps to potentially
divest 25% of Ocean Wind to PSEG.
— Build out our onshore wind portfolio, including
final investment decisions on the Sage Draw,
Willow Creek and Plum Creek projects.
— Take final investment decision on Permian Energy
Center, our inaugural large-scale solar and stor-
age project in the US, and acquire the solar and
storage developer unit of Coronal Energy.
— Enter into agreement to divest our Danish power
distribution, residential customer and city light
businesses to SEAS-NVE.
— Enter into agreement to divest our LNG activities.
Other tasks
— Update our long-term financial targets based on
a downwards adjustment of our offshore wind
production forecasts and certain key positive and
negative developments since the Capital Markets
Day in 2018.
— Update our decarbonisation strategy, including a
revised target for scope 1 and 2 carbon emissions,
setting a new target for reducing our supply
chain emissions (scope 3) and to become carbon
neutral.
— Issue green senior bonds in Europe and Taiwan to
finance our green growth ambition towards 2025
and refinance hybrid capital securities.
— Start up trading activities in the US.
— Merge Bioenergy and Customer Solutions
following downscaling of activities in each of the
business units.
— Oversee investigation and actions taken following
the fatal accident at Avedøre Power Station and
in general enforce focus on HSE activities.
— Update our internal authorisation rules to reflect
the company’s transformation in recent years.
— Divest our biogas activities and enter into
according to the Shareholder Rights Directive II.
— Prepare the remuneration policy and report
agreement to divest Stigsnæs Power Station
and Harbour.
— Decide to divest majority of B2B activities.
— Oversee the court case concerning the usage of
the Ørsted name.
— Perform an audit tender and re-elect PwC as
auditor from 2020.
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Ørsted Annual report 2019Management’s review
Governance
Contents
Competences
Member of the board
Thomas Thune Andersen
Lene Skole
Lynda Armstrong
Pia Gjellerup2
Jørgen Kildahl
Peter Korsholm
Benny D. Loft2
Dieter Wemmer
Hanne Sten Andersen1
Poul Dreyer1
Benny Gøbel1
Energy
sector
General
manage-
ment
Safety
manage-
ment
Financial
manage-
ment
Risk
manage-
ment
Project
manage-
ment
Stake-
holder
manag-
ement
Human
resources
manage-
ment
IT,
technology
and
digitalisation
Investor and
capital markets
relationships
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
ESG
✓
✓
✓
✓
✓
✓
1 Employee representative
2
Resigned in March 2019. Competences not included in above overview.
was a follow-up on the assessment carried
out in 2018 with external assistance which
focused on board structure, board govern-
ance and team and people dynamics in the
board. The evaluation showed a high degree
of satisfaction among the members of the
Board of Directors and Group Executive
Management. During 2020, the Board of
Directors will, among other things, continue
its focus on organisational development,
succession and diversity.
the list of required competences. The list
of required competences can be found at
orsted.com/competences-overview.
A description of the individual board mem-
bers, including their other executive positions
and independence, can be found on page
54-55. Above, you can see how the individual
board members contribute to the required
competences and their meeting attendance
during 2019.
major investments and divestments, the
capital base, key policies, control and audit
matters, risk management and significant
operational issues. You can see the most
important tasks in 2019 on the previous page.
The Board of Directors has appointed two
committees from among its members: an
Audit & Risk Committee and a Nomination
& Remuneration Committee, which assist the
Board of Directors within selected areas.
The Board of Directors has prepared an
overview of the competences required
on the board. In 2019, we added environ-
mental, social and governance (ESG), to
The Board of Directors is responsible for the
overall management of the company. The
Board of Directors lays down the company’s
strategy and makes decisions concerning
Each year, the general meeting approves
the remuneration for the members of the
Board of Directors for the coming year. In the
separate remuneration report available on
Meeting attendance
Board of
Directors
Audit
& Risk
Committee
Nomination
&
Remuneration
Committee
3/0
3/0
1/0
2/0
5/0
6/0
1/0
6/0
7/0
7/0
7/0
1/0
7/0
7/0
1/0
7/0
7/0
7/0
7/0
6/0
5/1
6/0
2/0
6/0
5/1
2/0
6/0
6/0
5/1
5/1
Ordinary
Extraordinary
The numbers indicate how many meetings in
2019 the members have attended or not attended,
respectively, during the year.
orsted.com/remuneration2019, you can read
more about the remuneration of the Board of
Directors.
Audit & Risk Commitee
Dieter Wemmer (Chairman), Jørgen Kildahl
and Peter Korsholm are the members of the
Audit & Risk Committee.
The committee assists the Board of Directors
in overseeing the financial and ESG reporting
process (including key accounting estimates
and judgements), the liquidity and capital
structure development, financial and business-
related risks, compliance with statutory and
other requirements from public authorities,
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Ørsted Annual report 2019Management’s review
Governance
Contents
internal controls as well as IT security in
operational and administrative areas as well
as cybersecurity.
Moreover, the committee approves the frame-
work for the work of the company’s external
and internal auditors (including voluntary
limits for non-audit services), evaluates the
external auditors’ independence and quali-
fications as well as monitors the company’s
whistleblower scheme.
In 2019, the committee performed an audit
tender and presented its proposal to re-elect
PwC as auditor from 2020 to the Board,
which approved it and will present it at the
general meeting in March. It also reviewed
the implementation of IFRS 16 ‘Leases’, the
new reporting on scope 3 greenhouse gas
emissions, changes to the reportable segments
and discussed the risk framework and the
implementation of a US trading floor. Further-
more, it reviewed the progress within IT security
and met with the Danish Business Authority
in connection with the ordinary supervision of
compliance in Danish audit committees.
Our Internal Audit function reports to the
Audit & Risk Committee and is independent
of our administrative management structures.
Internal Audit enhances and protects the
organisational value by providing risk-based
and objective assurance, advice and insight.
The main focus for Internal Audit is auditing
and advising on our core processes, gover-
nance, risk management, control processes
and IT security.
scheme. Internal Audit receives and han-
dles reports submitted. Our employees
and other associates may report serious
offences, such as cases of bribery, fraud and
other inappropriate or illegal conduct, to our
whistleblower scheme or through our man-
agement system. In 2019, three substantiated
cases of inappropriate or unlawful behaviour
were reported through our whistleblower
scheme. Two cases concerned violation of
good business conduct policies, and one
case concerned conflict of interest between
a third-party representative and Ørsted. The
cases had consequences for the individuals
involved. None of the reported cases were
critical to our business or impacted our finan-
cial results. Whistleblower cases are taken
very seriously, and we continuously enhance
the awareness of good business conduct,
e.g. through education as well as awareness
campaigns, to minimise future similar cases.
You can read more about the Audit & Risk
Committee and the terms of reference for the
committee at orsted.com/audit-risk-committee.
Nomination & Remuneration Committee
Thomas Thune Andersen (Chairman),
Lene Skole and Lynda Armstrong are the
members of the Nomination & Remuneration
Committee.
The committee assists the Board of Directors
in matters regarding the composition, remu-
neration and performance of the Board of
Directors and Group Executive Management.
The Chairman of the Audit & Risk Committee
is responsible for managing our whistleblower
In 2019, the committee discussed, among
other matters, the implementation of the EU
Shareholder Rights Directive II into Danish
legislation. In this context, the remuneration
policy for the Board of Directors and the
Executive Board was reviewed together with
the remuneration report and the terms of
reference for the committee. The committee
decided to pre-implement the requirement
to publish the remuneration report sepa-
rately from the annual report already for the
2019 report.
Additionally, the committee discussed gender
pay gap reporting which is disclosed in the
ESG performance report based on countries
with more than 250 employees.
Finally, the committee discussed the appoint-
ment of Declan Flanagan as Executive Vice
President (EVP) for Onshore (previously CEO of
the subsidiary Lincoln Clean Energy) and the
appointment of Morten H. Buchgreitz as EVP
for the merged business unit, Markets & Bio-
energy (previously EVP for Customer Solutions).
You can read more about the Nomination &
Remuneration Committee and the terms of
reference for the committee at orsted.com/
nomination-remuneration-committee.
Executive Board and
Group Executive Management
Henrik Poulsen (CEO) and Marianne Wiinholt
(CFO) are members of the Executive Board
of Ørsted A/S.
The Executive Board undertakes the day-to-
day management through the Group Executive
Management, which consists of seven members.
In addition to Henrik Poulsen and Marianne
Wiinholt, Group Executive Management
comprises the EVPs of our three business units:
Martin Neubert (Offshore), Declan Flanagan
(Onshore), Morten H. Buchgreitz (Markets &
Bioenergy) together with the EVPs Henriette
Fenger Ellekrog (Chief Human Resources
Officer (CHRO)) and Anders Lindberg (Offshore
EPC and QHSE).
The Board of Directors has laid down guide-
lines for the work of the Executive Board,
including the division of work between the
Board of Directors and the Executive Board
and the Executive Board’s powers to enter into
agreements on behalf of the company.
The Board of Directors regularly discusses the
CEO’s performance, for example by following
up on developments seen in relation to our
strategy and objectives.
The Chairman of the Board of Directors and
the CEO also regularly discuss the coopera-
tion between the Board of Directors and the
Executive Board.
We describe the remuneration of the Executive
Board in the separate remuneration report
available at orsted.com/remuneration2019.
You can also find information about the
members of the Executive Board on page 56.
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Ørsted Annual report 2019Management’s review
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Contents
Risk and risk management
Risks are a natural and integral
part of our business activities, and
risk diversification is an important
part of Ørsted’s strategy. Our risk
profile changes continuously. Our
aim is to mitigate our risks and
reduce them to an acceptable
level trough risk management.
We are exposed to several risks in connection
with our business activities. In addition to
operational, business and environmental risks,
we are exposed to fluctuations in exchange
rates, interest rates, inflation and commodity
prices, as well as credit and insurance risks.
The purpose of our risk management is to
identify and quantify our risks and decide
how best to manage and mitigate them.
We assess the extent to which individual risks
are acceptable or perhaps even desirable,
as well as the extent to which these risks can
be reduced to ensure an optimum balance
between risk and return.
Therefore, we assess the impact of a given
decision on the portfolio upfront.
We work systematically with risks. All business
units and selected staff functions identify and
prioritise business risks. An assessment is made
of the potential financial impact of individual
risks, and whether they are of a short-term
(0-2 years), medium-term (2-5 years), long-term
(5+ years) or of recurring nature. All our risks
are then consolidated and evaluated at Group
level. The ultimate responsibility for all the
individual risks rests with a member of the
Group Executive Management. As for business
risks, similar processes are in place for identify-
ing and prioritising risks related to sustain-
ability, cybersecurity and legal compliance.
The top five business risks identified during
2019 are shown to the right where they are
illustrated based on their potential impact
(post-risk mitigation) on our value and credit
metrics over the next years. You can read
more about these risks on the following pages.
A large part of our earnings is generated
from offshore wind, with Denmark and the
UK being the key contributors. However, our
future earnings will be spread across more
geographical regions and technologies.
Therefore, political and other macroeconomic
factors play an important role in our risk
management. When we invest in new assets
and activities or divest assets, the consolidated
risks associated with our portfolio changes.
Brexit is not in itself part of our top five business
risks, but is embedded in several of our risks. We
do not believe the decision in the UK to leave
the EU on 31 January will result in fundamental
changes to the UK’s energy policy. Announce-
ments by the UK government show that the
UK is committed to a clean, green energy
future, and offshore wind is the backbone of
this green vision. Trade and customs facilities
will still function during the transition period
which runs until the end of 2020, so our most
significant risk regarding Brexit is a situation
where no agreements are made, and the tran-
sition period is not extended. Such a scenario
could result in a depreciation of the GBP on
a short- to medium-term horizon and poten-
tially long-term. This is part of the first risk in
our top 5 business risks. Furthermore, such a
scenario could result in lower UK power prices
than currently observed, but the government-
introduced carbon price floor (CPF) will prevent
a dramatic decline. This is addressed in our
second risk in the top 5 business risks.
The risks related to sustainability, cyber-
security and legal compliance are assessed
using different parameters. Hence, we do
not show a consolidated picture of our
combined risks.
A description of the most significant sustain-
ability risks can be found in our sustainability
report. This year, we also concluded a climate
scenario analysis where we assessed the
resilience of our offshore business in two
potential scenarios of climate change. Read
more about this in the info box on page 63.
Risks related to cybersecurity and legal
compliance can be found on the same page.
We are also exposed to risks which have a
very small probability of occurring, but which
could potentially impact our finances and/or
reputation substantially. These risks include,
but are not limited to:
Top 5 business risks
Effect on our value and credit metric
High
e
u
l
a
v
n
o
t
c
a
p
m
I
Low
High
Impact on FFO/adjusted net debt
Quantification of risks is based on a scenario where
the risk occurs with 10% probability (P90). Our Internal
Audit function has examined the process for identify-
ing and measuring the accompanying portfolio risks.
(#1 2018)
Currencies, inflation
and interest rates
(#2 2018)
Commodity prices
(part of #3 in 2018)
US Offshore
portfolio
(part of #3 in 2018)
Construction risks
(New in top 5)
Future competitive-
ness in Offshore
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Ørsted Annual report 2019Management’s review
Governance
Contents
— 1,000-year storms, hurricanes, typhoons or
earthquakes in especially Taiwan, which
may lead to the loss of offshore and
onshore wind farms
— broken pipes at the Nybro Gas Treatment
Plant in Denmark, which may lead to
personal injury and damage to the
environment
— breakdowns at power stations that may
lead to personal injury and loss of assets.
After risk-reducing measures are
implemented, Group Executive Management
assess whether the level of each risk is
appropriate or slightly or significantly higher
than the desired level. If the risk level is still
too high, further risk-reducing measures are
initiated to the extent possible.
Climate-related risks
We address climate-related risks and opportu-
nities as an integral part of our daily business,
and we report as recommended by the Task
Force on Climate-related Financial Disclosures
(TCFD). These risks and opportunities are directly
linked to our green vision and strategy. We seek
to exploit climate-related opportunities through
our development and construction of renewable
generation capacity and adjacent sustainable
activities. At the same time, we seek to reduce
both our transitional and physical climate-
related risks in the short, medium and long term.
We do that by, among other things:
— influencing regulators and other public
authorities towards ambitious targets for
the build-out of renewable capacity and
regulatory frameworks which support this
— continuously working to improve the future
competitiveness of green technologies,
i.e. lowering the levelised cost of electricity
(LCoE)
— assessing acute and chronic weather
development; especially wind speeds and
patterns, but also the temperature and
precipitation levels in general
— taking extreme weather conditions and
other relevant factors into account when
we design and construct our assets.
In that way, we seek to avoid ending up with
stranded assets or assets and activities with
a significantly lower value than originally
expected.
When we prepare business cases for invest-
ments in new assets or activities, we take
climate-related risks and opportunities into
account by assessing the expected changes
in the green technology mix. On this basis,
we assess the expected derived impact on
input and output prices of energy, including
the price development of components and
services to be used for the construction of
these assets as part of our LCoE analysis.
At this year’s UN Climate Action Summit,
Ørsted and 86 other major global companies
(incl. Iberdrola, Acciona, Enel, IKEA, HPE and
Novo Nordisk) committed to setting ambitious
carbon emission reduction targets to limit
global warming to 1.5˚C.
Development in risks in 2019
Our increased activities in North America,
including our success in two key US offshore
wind auctions in 2019, significantly increase
our exposure to the US market. Similarly, the
final investment decision to construct the
Changhua 1 & 2a Offshore Wind Farm has
Safety is an integral part
of our daily operations,
including daily briefings
at each site.
increased our exposure to the Taiwanese
market. These developments, together with
an observed fierce competition in several
auctions and tenders during the year, have
had an impact on the ranking of our top five
business risks.
Our exposure to exchange rate fluctuations,
primarily GBP, USD and New Taiwan dollar
(NTD), has increased in 2019 due to significant
investments in offshore and onshore wind in
these areas. Currency and interest rate risks
are deemed to be our most significant busi-
ness risk, whereas commodity prices are rated
our second-largest risk.
Due to our increasing pipeline of US projects,
we have carved out the development and
construction of our US portfolio as a new risk
in 2019 – our third-largest risk. The immature
market leads to higher development risks,
such as regulatory risks and increased
construction risks due to supply chain
immaturity and local content requirements.
The risk associated with construction of our
offshore (excl. US) and onshore wind farms is
our fourth-largest risk.
The risk associated with the future competi-
tiveness in Offshore has increased during the
year and is now our fifth-largest risk.
A significant part of ‘Regulatory risks
within offshore wind’ has been absorbed in
our third-largest risk and has no longer a
separate risk ranking. Risks associated with
the operation of offshore wind farms remain
a key focus area, but has moved out of our
top five risks.
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Ørsted Annual report 2019Management’s review Governance
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2
Commodity prices
3
US offshore portfolio
4
Construction risks
1
Currencies, inflation and
interest rates
Description
Our main currency exposure relates to GBP
due to our substantial investments in offshore
wind farms in the UK. However, our recent
international expansion has increased our
USD and NTD exposure.
To a large extent, our medium- to long-term
earnings can be expected to follow the
development in consumer and market prices,
thereby protecting the real value of our assets
and equity. However, fixed nominal subsidies
from wind assets in Denmark, Germany
and the Netherlands and fixed-price power
purchase agreements (PPAs) from assets in
the US and Taiwan are exceptions to this, as is
fixed nominal cash flows related to debt. We
are exposed to inflation risk in these markets
where an increase in inflation will adversely
impact the expected real value of the revenue.
Description
We are primarily exposed to power price
risks from the sale of our wind-based power
generation in the US, the UK and Denmark. In
addition, we are exposed to risks caused by
differences in local node prices and market
hub prices in our onshore business, which
impact the realised revenue generation.
To a lesser extent, we are exposed to oil and
gas price risks related to sourcing contracts for
gas on oil-indexed prices as well as the sale of
gas at fixed prices. Finally, power generation
from our CHP plants entails an exposure to
power prices and fuel prices. As the green
transformation in Ørsted advances, the main
fuel we use at the CHP plants is biomass. The
market for biomass has less liquidity than e.g.
gas and coal, adding a risk to which we are
exposed.
Potential impact
Fluctuations in exchange rates, interest rates and
inflation may adversely impact our earnings.
Potential impact
Fluctuations in commodity prices may
adversely impact our earnings.
Mitigating actions
Our general strategy is to hedge more of
the risk in the first years and less in the latter
years. In the medium- to long-term horizon,
the risk is managed by matching income and
liabilities in the same currencies. For our USD
and NTD exposures from new markets, we do
not have an existing portfolio to net construc-
tion payments against. Therefore, we seek to
hedge the price risk in the near term, while
simultaneously hedging a similar, but opposite,
exposure in the longer term.
Our inflation and interest rate exposures are
managed by matching assets and liabilities in
the same currency and with similar payment
structures. Hence, our European fixed nominal
subsidies are offset by EUR-denominated
fixed-rate debt. The risks that arise from
Taiwan and US onshore and offshore projects
can be reduced by obtaining matching-
duration fixed-rate debt denominated in the
same currency as the revenue.
Mitigating actions
We hedge commodity prices for up to five
years, and in some cases longer, to reduce cash
flow fluctuations. The general strategy is to
hedge more of the commodity price risk in the
first years and less in the later years. This is due
to decreasing market liquidity and increasing
uncertainty about generated volumes.
As an alternative to hedging, we seek to enter
into long-term corporate power purchase
agreements (CPPAs), under which we sell
power from our renewable assets. CPPAs
or hedges with a duration of 12-15 years are
often a prerequisite for obtaining tax equity
partnerships in the US. In addition, CPPAs will
be a means to mitigate merchant risk for off-
shore wind farms to be built without subsidies.
Our offshore wind farms situated off the US
East Coast are guaranteed a fixed price for
a period of approx 20 years and thus do not
introduce any additional merchant risk.
Description
Our expanding pipeline of US offshore projects
entails risks in the development and construc-
tion phases caused by the relatively immature
US offshore wind market, including the federal
permitting framework. In the US, contrary to
the EU markets, it is possible to participate
in auctions and be awarded projects where
consent and/or grid connections are not yet
secured. Thus, following an award, project
development entails regulatory risks in
obtaining key consents as well as securing grid
connection(s).
In addition, the US tax incentive schemes imply
that we must take on major financial commit-
ments early on to qualify for tax credits. On
the other hand, this also de-risks the projects.
Furthermore, local content requirements and
the immature US offshore wind market also
lead to increased construction risks in the US,
such as the availability of locally manufactured
components and harbour facilities.
Potential impact
To maintain project schedules, permits, con-
sents and approvals from federal, state-level
and local authorities must be obtained in
due time. Securing sufficient grid connection
capacity on time is also key. Delays within
these areas can lead to project delays and/or
cost overruns which may erode the value of
the projects.
Mitigating actions
We mitigate the risks by having sufficient float
in our project timelines and by proactively
engaging with all stakeholders. Furthermore,
we secure grid connection capacity through a
strategy of having multiple points of intercon-
nections available to us in due time relative to
wind turbine commissioning. We fulfil part of
the local content obligations by investing in
harbour infrastructure, thereby also securing
critical harbour capacity for staging and load-
out of wind turbines.
Description
Our main investments include several major
offshore and onshore construction projects.
Value creation from new projects heavily
depends on choosing the right technical and
commercial solutions, on the construction
phase progressing as planned, on our suppliers
living up to their obligations, on maturing
the value chain in new markets, on avoiding
investment budget overruns and on timely
start-up of generation. A large part of our new
investments are made in offshore assets, which
naturally increases the risks in the construc-
tion phase. Some of these relate to site and
seabed conditions, weather conditions and
dependence on installation and transit vessels.
Projects won in competitive auctions and
tenders often include less contingency in order
to stay competitive. This increases the risk in a
scenario where the deadlines are not met.
Potential impact
If we fail to take any of the conditions
mentioned above into account, we may
experience delays and budget overruns.
Delays can lead to failure to meet deadlines
and possibly partial loss of subsidies, grid
connection and/or project rights.
Mitigating actions
We are continuously working on standardising
processes based on our vast experience from
previous complex investment projects. This has
led to, and will continue to lead to, industrial-
isation of the installation activities. In recent
years, this has led to successful completion
of several large investment projects, many
of which have been completed ahead of
schedule and below budget.
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Ørsted Annual report 2019Management’s review
5
Future competitiveness
in Offshore
Description
As the offshore industry has become a more
mature and established industry, competition
has increased with new market players
entering. The industry is becoming more global,
and diversification of developers is increasing.
We expect a diversified competitive landscape
going forward, including oil majors, utilities,
institutional investors and regional developers.
Governments soliciting offshore wind have in-
troduced auction/tender mechanisms designed
to increase competition and thereby lowering
costs for consumers. In some markets, we now
see zero-bid tenders with projects being award-
ed on qualitative assessment criteria, such as
procurement and supply chain capabilities. In
new markets, such as the US and Taiwan, local
content requirements are important assess-
ment criteria. Further, we expect innovation
and system integration (e.g. storage and
renewable hydrogen) to play an increasingly
important role in auctions and tenders.
Potential impact
There is a risk that we do not win capacity in
the auctions and tenders we participate in, or
that our value creation from the projects we
win ends up being below our cost of capital.
Mitigating actions
We will remain disciplined in our bidding
approach and focus on opportunities where
we can create meaningful value. With this
year’s US awards, we have seen that strong
local knowledge and deep market insights,
provided partly through our acquisition of
Deepwater Wind and partly through our
various US partners, can give us a deeper
understanding of what the ‘customers’ require,
enabling us to optimise our bid proposition.
Furthermore, we utilise portfolio scale advan-
tages and knowhow gained from previously
executed projects to develop supply chain
solutions and reduce costs and risks in order
to win future projects.
Governance
Contents
Legal compliance
Cybersecurity
Climate scenario analysis
Description
Risks associated with legal compliance are
assessed based on financial and reputational
significance and probability. Our most signifi-
cant risks are tax law, financial regulation and
the EU General Data Protection Regulation
(GDPR). We operate in tax regimes with
different tax rules and rates, and our tax affairs
span over corporate tax compliance, transfer
pricing and indirect taxes. We are subject to
several financial regulations, such as REMIT,
MAR, EMIR, Dodd Frank, MiFID, SFTR and
AML1. The financial regulations are relevant
for a large part of our activities. In relation to
GDPR, we are primarily processing personal
data about our Danish residential customers
and our employees.
Potential impact
Failure to comply with the above-mentioned
rules and regulations may result in severe
legal sanctions, such as imprisonment, fines
and damage claims.
Mitigating initiatives
A comprehensive tax control framework is
being designed, and mandatory compliance,
including transfer pricing documentation in
line with OECD recommendations and local
requirements, is being prepared to mitigate
our tax risks. We have implemented com-
prehensive policies, procedures, training and
controls for relevant parts of our business to
ensure compliance with financial regulations.
To ensure that we process personal data in
compliance with GDPR, we have mapped
and analysed our personal data processing
and developed a Group-wide compliance pro-
gramme. The compliance programme includes
various organisational and technical measures
as well as mandatory training of employees in
risk-exposed positions.
Description
In recent years, several major cyberattacks
have been launched against companies
around the world, and according to the Danish
Centre for Cybersecurity, the risk of cyberat-
tacks aimed at the energy sector is high. Thus,
we have a strong focus on IT security. We are
responsible for critical infrastructure, and we
own various types of intellectual property
rights. This means that we are a potential tar-
get for cyberattacks or industrial espionage.
Potential impact
Minor digital risk events, such as viruses and
attempted break-ins, are everyday risks
without significant impact. However, major
cyberattacks or events may impact all or part
of our shared infrastructure for administrative
systems or industrial control systems. For the
latter, the impact could range from a single
asset to potentially all assets and activities
in the company. Cyberattacks of a certain
size can be costly if it forces us to shut down
operations for a period of time.
Mitigating initiatives
We have launched a significantly resourced
programme with the aim to improve resilience
against cyberattacks and other threats across
Ørsted. Workshops have been held across
business units to assess the cyber risks. In
addition, we are running cyber risk awareness
campaigns throughout the organisation in
order to decrease threats from phishing cam-
paigns, etc. Furthermore, we are participating
in relevant forums across the energy sector to
harvest and contribute with information and
experience.
In 2019, we assessed the resilience of our
Offshore business to climate change in two
scenarios: a 1.5-2°C and 3-4°C temperature rise
by 2100, respectively.
Through research, interviews and a work-
shop, we analysed potential climate change
impacts on direct operations in Offshore,
which accounted for 87% of our EBITDA in
2019. Impacts were qualitatively assessed, and
supply chain and other business units were not
included in the assessment.
Focus was on the degree to which climate
change can potentially add to existing
climate-related risks summarised on page
61. Please refer to our CDP Climate Change
disclosure for detailed descriptions here.
We concluded that our offshore business
is well positioned to manage potential
climate-related transitional and physical
impacts in both scenarios.
Transitional impacts related to climate
change in terms of markets, regulation,
technology and reputation are primarily linked
to opportunities in both scenarios, especially
in scenario 1. A growing share of offshore wind
is projected in both scenarios, and Offshore
has strong assets, processes and stakeholder
engagement in place to identify and meet
growing market demand.
Physical impacts from climate change pre-
sented no material risk to Offshore. Scenario
projections for wind patterns were inconclu-
sive, as the best available science shows no
clear positive or negative trend and lacks
locational precision. Due to engineering safety
factors integrated into wind farm design, the
assets are resilient to physical climate change
impacts, such as sea level rise and more ex-
treme weather. Finally, considering the lifetime
of a wind farm and the pace of technological
development, any gradual climate change will
be factored into the design and each business
case in a timely manner.
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Ørsted Annual report 2019Management’s review Governance
Contents
Shareholder information
The Ørsted share yielded a total
return of 61% in 2019, an increase
in the share price of 58%, and
dividends of DKK 9.75 per share.
Price development for the Ørsted share
The Ørsted share started the year at a price
of DKK 436 and closed the year at DKK
689. Prices of comparable European utility
companies increased by 32%, and the OMX
C25 cap increased by 26% in 2019. The market
value of Ørsted was DKK 290 billion at the
end of the year. Since the IPO in June 2016,
the Ørsted share has generated an aggregate
return from share price appreciation and
dividends of 204%.
The year’s highest traded price of DKK 691
was on 27 December. The year’s lowest traded
price of DKK 428 was on 2 January.
The average daily turnover on Nasdaq
Copenhagen was 447,657 shares. The trading
volume increased by 0.1% compared to 2018.
In connection with SEAS-NVE’s acquisition
of our Danish power distribution, residential
customer and city light businesses, SEAS-NVE
stated an intention to reduce its shareholding
from 9.54% to a shareholding of approx 5%
over the coming 12 months. In both November
2019 and January 2020, SEAS-NVE sold shares
equivalent to 2.27% of the shares in Ørsted,
bringing their shareholding to 5.01%.
Share price development in 2019
Ørsted share price compared to peers
DKK
700
650
600
550
500
450
400
Jan
Feb Mar Apr May June July Aug Sep Oct Nov Dec
Ørsted
OMX C25
MSCI Europe
Utilities
Share capital
Ørsted’s share capital is divided into
420 million shares, enjoying the same voting
and dividend rights. The company’s share
capital remained unchanged in 2019. At the
end of 2019, the company held a total of
396 thousand treasury shares, which will
be used to cover incentive schemes.
Selected company announcements in 2019
30 Jan. Taiwan announces 2019 feed-in tariff.
8 Feb.
Ørsted divests 50% of South Fork, Revolu-
tion Wind and two New England offshore
wind lease areas to Eversource.
30 Apr. Ørsted takes final investment decision on
Changhua 1 & 2a Offshore Wind Farm.
9 May Ørsted successfully issues green bonds in UK.
Composition of shareholders
At the end of the year, the number of share-
holders had increased by 45% to 42,911 and
the majority (65%) lies with Danish owners.
The figure on the next page shows the
composition of our shareholders by coun-
try, specifying the three shareholders each
holding more than 5% of the share capital.
Approximately 2% of the share capital is
owned by retail investors.
Annual general meeting and dividends
The annual general meeting will be held on
2 March 2020 in Copenhagen. Dividends for
the year are expected to amount to DKK 10.5
per share, corresponding to DKK 4.4 billion
and a yield of 1.5% compared to the share
price of DKK 689 at the end of 2019.
21 June Ørsted selected as preferred bidder for
New Jersey’s first offshore wind farm.
18 July Ørsted selected as preferred bidder for
New York offshore wind farm.
18 Sep. Ørsted enters into an agreement to divest
its Danish power distribution, residential
customer and city light businesses to
SEAS-NVE.
25 Sep.
Elsam is again acquitted of the compe-
tition authorities’ claim of abuse. The
provision is reversed.
29 Oct. Ørsted to negotiate divestment of 25% of
Ocean Wind to Public Service Enterprise
Group (PSEG).
29 Oct. Ørsted presents update on its long-term
financial targets.
5 Nov. Ørsted issues green bonds in Taiwan.
18 Dec. Ørsted enters into an agreement to divest
its LNG business.
In 2019, dividends of DKK 9.75 per share were
paid for the 2018 financial year, corresponding
to a dividend yield of 2.2%.
Financial calendar 2020
30 Jan. Annual report 2019
2 Mar.
Annual general meeting
29 Apr.
Interim report for the first quarter of 2020
12 Aug.
Interim report for the first half-year of
2020
28 Oct.
Interim report for the first nine months
of 2020
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Ørsted Annual report 2019Management’s review
Governance
Contents
Investor relations
In order to achieve a fair pricing of our shares
and corporate bonds, we seek to ensure a high
level of openness and stability in our financial
communication. In addition, our management
and our Investor Relations function engage in
regular dialogues with investors and analysts.
The dialogues take the form of quarterly
conference calls, roadshows, conferences,
capital markets days and regular meetings
with individual or groups of investors and
analysts. The dialogues are subject to certain
restrictions prior to the publication of our
financial reporting.
The Group is covered by 23 equity analysts
and 12 bond analysts. Their recommendations
and consensus estimates for Ørsted’s future
financial performance are available at orsted.
com/en/investors. On this site, you can also
download our financial reports, our remuner-
ation report, our ESG and our sustainability
reports as well as investor presentations and
a wide range of other data.
Shareholders at 31 December 2019,
share capital and/or voting share %*
Danish state (majority shareholder)
SEAS-NVE, Denmark
The Capital Group, the US
Retail investors, Denmark
Rest of Denmark
United Kingdom
Rest of the US
Others
10%
6%
7%
9%
2%
50.1%
5-10%
7.28%
* See note 16 in the parent company
financial statements.
Share information
ISIN
Share classes
Nominal value
DK 0060094928220
1
DKK 10 per share
Average daily volume
447,657
Exchange
Ticker
Year high
Year low
Nasdaq OMX
Copenhagen
ORSTED
DKK 691 (27 Dec.)
DKK 428 (2 Jan.)
Registered share
99.6%
Number of shares
420,381,080 shares
Number of treasury shares 395,619 shares
We constantly work to
achieve a fair pricing of our
shares and corporate bonds.
65 / 183
Ørsted Annual report 2019Management’s review Notes
Contents
Consolidated
financial
statements
2019
1 January – 31 December
Ørsted Annual report 2019 Consolidated financial statements
Notes
Contents
Income statement
1 January - 31 December
Note
DKKm
2.2, 2.4
Revenue
2.3
Cost of sales
Other external expenses
2.6, 2.7
Employee costs
2.5
2.5
3.1
Share of profit (loss) in associates and joint ventures
Other operating income
Other operating expenses
Operating profit (loss) before depreciation,
amortisation and impairment losses (EBITDA)
Amortisation, depreciation and impairment losses on
intangible assets and property, plant and equipment
Operating profit (loss) (EBIT)
3.4
Gain (loss) on divestment of enterprises
Share of profit (loss) in associates and joint ventures
6.5
6.5
Financial income
Financial expenses
Profit (loss) before tax
5.2
Tax on profit (loss) for the year
Profit (loss) for the year from continuing operations
3.7
Profit (loss) for the year from discontinued
operations
Profit (loss) for the year
Profit (loss) for the year is attributable to:
2019
2018
Business
performance
Adjustments
67,842
(41,816)
(6,091)
(3,952)
(20)
1,781
(260)
2,556
(1,020)
-
-
-
-
-
IFRS
70,398
(42,836)
(6,091)
(3,952)
(20)
1,781
(260)
Business
performance
Adjustments
76,946
(53,906)
(5,865)
(3,126)
(6)
16,275
(289)
(1,426)
(112)
-
-
-
-
-
IFRS
75,520
(54,018)
(5,865)
(3,126)
(6)
16,275
(289)
17,484
1,536
19,020
30,029
(1,538)
28,491
(7,432)
10,052
(63)
2
7,718
(8,853)
8,856
(2,756)
6,100
(56)
6,044
-
1,536
-
-
-
-
1,536
(345)
1,191
-
1,191
(7,432)
11,588
(63)
2
7,718
(8,853)
10,392
(3,101)
7,291
(56)
7,235
(5,375)
24,654
127
1
3,179
(4,457)
23,504
(4,018)
19,486
-
(1,538)
-
-
-
-
(1,538)
318
(1,220)
(5,375)
23,116
127
1
3,179
(4,457)
21,966
(3,700)
18,266
10
-
10
19,496
(1,220)
18,276
Shareholders in Ørsted A/S
5,315
1,191
6,506
19,046
(1,220)
17,826
Interests and costs, hybrid capital owners
of Ørsted A/S
Non-controlling interests
6.2
Profit (loss) per share, DKK:
From continuing operations
From discontinued operations
Total profit (loss) per share
675
54
12.8
(0.1)
12.7
675
54
15.6
(0.1)
15.5
425
25
45.3
0.0
45.3
425
25
42.4
0.0
42.4
Profit (loss) per share
Diluted profit (loss) per share corresponds to profit (loss)
per share, as the dilutive effect of the share incentive
programme is less than 0.1% of the share capital.
Accounting policies
Business performance
The business performance principle is our alternative
performance measure. Under business performance,
the market value adjustment of our energy hedges,
where we do not apply IFRS hedge accounting, are
deferred and recognised in the profit (loss) in the year
in which the hedged exposure materialises. Energy
hedges comprise hedging of energy and associated
currency risks as well as fixed-price physical gas and
power contracts. According to IFRS, the market value
of energy hedges, where we do not apply IFRS hedge
accounting, are recognised on an ongoing basis in
the profit (loss) for the year. The difference between
IFRS and business performance is specified in the
'Adjustments' column. Read more about the business
performance principle in note 1.5 'Business performance'.
67 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements
Notes
Contents
Statement of comprehensive income
2019
2018
Business
performance
Adjustments
6,044
1,191
IFRS
7,235
Business
performance
Adjustments
19,496
(1,220)
IFRS
18,276
Statement of comprehensive income
All items in 'Other comprehensive income' may be
recycled to the income statement.
1 January - 31 December
Note
DKKm
Profit (loss) for the year
Other comprehensive income:
Cash flow hedging:
1.5, 7.2
Value adjustments for the year
6.2
Value adjustments transferred to income statement
1,598
1,751
(141)
(1,395)
Exchange rate adjustments:
Exchange rate adjustments relating to net
investment in foreign enterprises
Value adjustment of net investment hedges
Value adjustments and hedges transferred to
income statement
7.2
6.2
Tax:
Tax on hedging instruments
Tax on exchange rate adjustments
Other:
Share of other comprehensive income of associated
companies, after tax
Other comprehensive income
Total comprehensive income
Comprehensive income for the year is attributable
to:
Shareholders in Ørsted A/S
Interest payments and costs,
hybrid capital owners of Ørsted A/S
Non-controlling interests
Total comprehensive income
2,722
(1,907)
-
(504)
(35)
(17)
3,608
9,652
-
-
-
345
-
-
(1,191)
-
1,457
356
2,722
(1,907)
-
(159)
(35)
(17)
2,417
9,652
8,729
675
248
9,652
(2,841)
961
1,734
(196)
(1,107)
765
(417)
401
(67)
380
31
(28)
(1,580)
17,916
-
-
-
(318)
-
-
1,220
-
(417)
401
(67)
62
31
(28)
(360)
17,916
17,495
425
(4)
17,916
Cash flow hedging:
Value adjustments for the year for cash flow hedging
according to IFRS of DKK 1,457 million mainly consist
of gains related to hedging of US power and UK
inflation. The loss of DKK 356 million transferred
to the income statement mainly consist of foreign
exchange losses related to the construction of
Hornsea 1.
Value adjustments transferred to the income
statement according to the adjustment column of
DKK -1,395 million, mainly consist of gains on power
hedges that are recognised in the income statement
underbusiness performance, but where the gains
under IFRS was recognised in previous periods,
as the gains/losses under business performance
are deferred to the period to which the hedged
exposure relates.
Exchange rate adjustments:
Foreign exchange gains relating to net investments
in foreign enterprises of DKK 2,722 million were in
2019 primarily attributable to an increase of 6%
in the GBP exchange rate. A large part of the net
investments were hedged.
68 / 183
Ørsted Annual report 2019Financial statements
Consolidated financial statements
Notes
Contents
Balance sheet
31 December
Note
Assets, DKKm
3.1
3.1
3.1
3.1
3.1
5.4
4.4
4.1
7
4.2
4.3
4.4
6.4
6.4
3.6
Intangible assets
Land and buildings
Production assets
Fixtures and fittings, tools and equipment
Property, plant and equipment under construction
Property, plant and equipment
Investments in associates and joint ventures
Receivables from associates and joint ventures
Other securities and equity investments
Deferred tax
Other receivables
Other non-current assets
Non-current assets
Inventories
Derivatives
Contract assets
Trade receivables
Other receivables
Income tax
Securities
Cash
Current assets
Assets classified as held for sale
Assets
2019
672
5,177
76,682
652
23,502
106,013
497
-
217
6,847
1,713
9,274
115,959
14,031
7,740
739
8,140
5,253
346
16,552
7,148
59,949
16,952
2018
Note
Equity and liabilities, DKKm
777
969
66,310
342
16,434
84,055
457
60
211
4,588
2,670
7,986
92,818
13,943
5,468
1,451
10,741
4,390
1,525
25,501
3,515
66,534
15,223
6.2
6.2
6.3
3.8
5.4
3.2
8.2
6.1
4.2
4.5
4.6
3.2
8.2
6.1
7
4.2
4.5
4.6
Share capital
Reserves
Retained earnings
Equity attributable to shareholders in Ørsted A/S
Hybrid capital
Non-controlling interests
Equity
Deferred tax
Provisions
Lease liabilities
Bond and bank debt
Contract liabilities
Tax equity liabilities
Other payables
Non-current liabilities
Provisions
Lease liabilities
Bond and bank debt
Derivatives
Contract liabilities
Trade payables
Tax equity liabilities
Other payables
Income tax
Current liabilities
Liabilities
192,860
174,575
2019
4,204
413
68,465
73,082
13,232
3,248
89,562
3,371
12,063
4,728
36,039
3,762
4,563
469
2018
4,204
(1,827)
66,111
68,488
13,239
3,388
85,115
4,025
12,774
-
25,095
3,642
3,728
409
64,995
49,673
538
604
801
6,958
784
10,832
632
4,247
4,075
29,471
94,466
8,832
680
-
2,201
8,094
924
13,082
445
4,793
4,717
34,936
84,609
4,851
Leases
On 1 January 2019, we implemented IFRS 16 'Leases'.
We have not restated comparative figures for the
2018 financial year, as we have implemented IFRS 16
with the modified retrospective method.
In accordance with IFRS 16, we recognise our leases,
except for short-term leases, in the balance sheet.
Lease obligations are recognised as 'Lease liabilities',
and lease assets are recognised alongside our
owned assets of similar type under 'Property, plant
and equipment'.
Read more about the impact in note 1.3 'Implemen-
tation of new or changed accounting standards and
interpretations'.
3.6
Liabilities relating to assets classified as held for sale
Equity and liabilities
192,860
174,575
69 / 183
Ørsted Annual report 2019Financial statements
Consolidated financial statements
Notes
Contents
Statement of changes in equity
1 January - 31 December
DKKm
Share
capital Reserves*
Retained
earnings
Proposed
dividends
Share-
holders in
Ørsted A/S
Hybrid
capital
Non-con-
trolling
interests
Total
Group
Share
capital Reserves*
Retained
earnings
Proposed
dividends
Share-
holders in
Ørsted A/S
Hybrid
capital
Non-con-
trolling
interests
Total
Group
Equity at 1 January
4,204
(1,827)
62,012
4,099
68,488
13,239
3,388
85,115
4,204
(1,524)
48,328
3,783
54,791
13,239
3,807
71,837
2019
2018
Comprehensive income for the year:
Profit (loss) for the year
Other comprehensive income:
Cash flow hedging
Exchange rate adjustments
Tax on other comprehensive income
Share of other comprehensive
income of associated companies,
after tax
Total comprehensive income
Transactions with owners:
Coupon payments, hybrid capital
Tax, hybrid capital
Additions, hybrid capital
Disposals, hybrid capital
Proposed dividends
Dividends paid
Purchase of treasury shares
Other changes
Total transactions with owners
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,506
1,813
621
(194)
-
-
-
-
(17)
2,240
6,489
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,506
675
54
7,235
1,813
621
(194)
(17)
8,729
-
-
-
-
-
-
-
-
-
-
1,813
194
-
-
815
(194)
(17)
675
248
9,652
(556)
34
4,416
(4,576)
-
-
-
-
-
-
-
-
-
(556)
34
4,416
(4,576)
-
(388)
(4,484)
-
-
(99)
60
(4,414)
4,414
3
(4,099)
(4,096)
(99)
60
-
-
(99)
60
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
17,826
(342)
(54)
93
-
-
-
-
(28)
(303)
17,798
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
17,826
425
25
18,276
(342)
(54)
93
(28)
-
-
-
-
-
(29)
-
-
(342)
(83)
93
(28)
17,495
425
(4)
17,916
-
-
-
-
-
(545)
120
-
-
-
-
-
-
-
-
-
-
-
(545)
120
-
-
-
(400)
(4,181)
-
(15)
(48)
16
(4,099)
4,099
2
(3,783)
(3,781)
(48)
31
(48)
31
-
(4,450)
315
(4,135)
(682)
(388)
(5,205)
(4,114)
316
(3,798)
(425)
(415)
(4,638)
Equity at 31 December
4,204
413
64,051
4,414
73,082
13,232
3,248
89,562
4,204
(1,827)
62,012
4,099
68,488
13,239
3,388
85,115
* See note 6.2 'Equity' for more information about reserves.
70 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements
Notes
Contents
Statement of cash flows
1 January - 31 December
Note
DKKm
2019
2018
Note
DKKm
Operating profit (loss) before depreciation, amortisation and
impairment losses (EBITDA), IFRS
1.5
Change in derivatives, business performance adjustments
Change in derivatives, other adjustments
Change in provisions
Reversal of gain (loss) on divestment of assets
4.7
4.7
4.7
Other items
Change in work in progress
Change in tax equity partner liabilities
Change in other working capital
Interest received and similar items
Interest paid and similar items
5.3
Income tax paid
Cash flows from operating activities
Purchase of intangible assets and property, plant and equipment
Sale of intangible assets and property, plant and equipment
3.3
3.4
Acquisition of enterprises
Divestment of enterprises
Purchase of other equity investments
Purchase of securities
Sale/maturation of securities
Change in other non-current assets
Transactions with associates and joint ventures
Dividends received and capital reductions
Cash flows from investing activities
19,020
(1,536)
(1,040)
727
101
86
1,417
630
(477)
4,094
(5,143)
(4,800)
13,079
(22,445)
3,424
(764)
(89)
(5)
(20,503)
29,452
-
(88)
21
28,491
1,538
369
(278)
(14,995)
203
(2,326)
1,835
(427)
6,648
(7,348)
(3,367)
10,343
(14,655)
19,639
(5,602)
363
(78)
(40,444)
39,849
(1)
(122)
25
(10,997)
(1,026)
Leases
On 1 January 2019, we implemented IFRS 16 'Leases'.
We have not restated comparative figures for the
2018 financial year, as we have implemented IFRS 16
with the modified retrospective method.
Supplementary statements
Our supplementary statements of gross and net
investments appear from note 3.5 'Gross and net
investments' and free cash flows (FCF) from note
2.1 'Segment information'.
Read more about the impact in note 1.3 'Implemen-
tation of new or changed accounting standards and
interpretations'.
Proceeds from raising of loans
Instalments on loans
Instalments on leases
Coupon payments on hybrid capital
Repurchase of hybrid capital
Proceeds from issuance of hybrid capital
Dividends paid to shareholders in Ørsted A/S
Purchase of own shares
3.8
Transactions with non-controlling interests
Net proceeds from tax equity partners
Change in collateral related to derivatives
Cash flows from financing activities
Cash flows from continuing operations
Cash flows from discontinued operations
Total net change in cash and cash equivalents
Cash and cash equivalents at 1 January
Total net change in cash and cash equivalents
Other change in cash and cash equivalents
3.7
6.4
Exchange rate adjustments of cash and cash equivalents
6.4
Cash and cash equivalents at 31 December
2019
10,174
(2,043)
(664)
(556)
(4,005)
4,416
(4,096)
(99)
(462)
1
(1,332)
1,334
3,416
174
3,590
2,663
3,590
(17)
223
6,459
2018
-
(6,429)
-
(545)
-
-
(3,781)
(48)
(391)
78
422
(10,694)
(1,377)
209
(1,168)
3,891
(1,168)
(27)
(33)
2,663
Accounting policies
Cash flows from operating activities are determined
using the indirect method as operating profit (loss) be-
fore depreciation, amortisation and impairment losses
adjusted for changes in operating items without cash
flow effect. Trade payables relating to purchases of
intangible assets and property, plant and equipment
are not recognised in change in net working capital.
Change in work in progress consists of elements in
contract assets, contract liabilities, construction
management agreements related to construction of
offshore wind farms, construction of offshore trans-
mission assets (inventory) and related trade payables.
Change in tax equity partner liabilities relates to cash
contributions from tax equity partners and repay-
ment hereof through production tax credits (PTCs)
and other tax attributes to tax equity partners.
See also note 4.5 'Tax equity liabilities'.
Cash flows from investing activities comprise
payments in connection with the purchase and sale
of non-current assets and enterprises as well as the
purchase and sale of securities that are not
recognised as cash and cash equivalents.
Cash flows from financing activities comprise changes
in the size or composition of equity and loans, includ-
ing instalments on leases and net proceeds related to
interest-bearing tax equity liabilities. Proceeds from
raising of short-term repo loans are presented net.
Cash flows in currencies other than the functional
currency are translated at the average exchange
rates for the month in question, unless these differ
significantly from the rates at the transaction date.
71 / 183
Ørsted Annual report 2019Financial statements
Notes
Consolidated financial statements
Notes
Contents
Consolidated financial statements
1. Basis of reporting
1.1 Basis of preparation
1.2 Key accounting estimates and judgements
1.3 Implementation of new or changed accounting
standards and interpretations
1.4 Alternative performance measures
1.5 Business performance
2. Return on capital employed
2.1 Segment information
2.2 Revenue
2.3 Cost of sales
2.4 Government grants
2.5 Other operating income and expenses
2.6 Employee costs
2.7 Share-based payment
3. Capital employed
3.1 Intangible assets and property, plant
and equipment
3.2 Provisions and contingent assets and liabilities
3.3 Acquisition of enterprises
3.4 Divestment of enterprises
3.5 Gross and net investments
3.6 Assets classified as held for sale
3.7 Discontinued operations
3.8 Non-controlling interests
4. Working capital
4.1 Inventories
4.2 Contract assets and liabilities
4.3 Trade receivables
4.4 Other receivables
4.5 Tax equity liabilities
4.6 Other payables
4.7 Changes in net working capital
73
74
76
77
79
80
83
85
88
91
92
93
94
95
97
99
102
104
105
105
106
107
108
109
111
111
112
112
113
114
114
5. Tax
5.1 Tax policy and tax regimes
5.2 Tax on profit (loss) for the year
5.3 Taxes paid
5.4 Deferred tax
5.5 Total tax contribution
6. Capital structure
6.1 Interest-bearing debt and FFO
6.2 Equity
6.3 Hybrid capital
6.4 Financial resources
6.5 Financial income and expenses
7. Risk management
7.1 Market risks
7.2 Hedge accounting and economic hedging
7.3 Energy trading portfolio
7.4 Sensitivity analysis of financial instruments
7.5 Credit risks
7.6 Categories of financial instruments
7.7 Fair value measurement
8. Other notes
8.1 Related-party transactions
8.2 Leases
8.3 Auditor's fees
8.4 Contractual obligations
8.5 Company overview
115
117
118
120
121
124
125
127
129
131
132
134
135
137
139
142
143
144
145
146
148
149
150
151
151
152
72 / 183
Ørsted Annual report 2019Financial statements
Notes
Contents
1.
Basis of reporting
74 Basis of preparation
76 Key accounting estimates and judgements
77
Implementation of new or changed accounting
standards and interpretations
79 Alternative performance measures
80 Business performance
Ørsted Annual report 2019 Consolidated financial statements – 1. Basis of reporting
Notes
Contents
1.1 Basis of preparation
This section provides an overall description of
the accounting policies applied in our consoli-
dated financial statements. We provide a more
detailed description of the accounting policies
applied in the specific notes. Key estimates
and judgements and new and amended IFRS
standards and interpretations are discussed in
detail in notes 1.2 'Key accounting estimates
and judgements' and 1.3 'Implementation of
new or changed accounting standards and
interpretations', respectively.
Basis of preparation
The financial statements for the period
1 January - 31 December 2019 comprise the
consolidated financial statements of Ørsted
A/S and its subsidiaries (the Group) as well as
separate financial statements for the parent
company, Ørsted A/S. See page 166 for the
parent company's accounting policies.
The consolidated financial statements have
been prepared in accordance with the Inter-
national Financial Reporting Standards (IFRS)
as adopted by the EU and further require-
ments in the Danish Financial Statements Act
(Årsregnskabsloven).
The financial statements are presented in
million Danish kroner (DKK), unless otherwise
stated.
Measurement basis
The consolidated financial statements have
been prepared on the historical cost basis,
except for derivatives, financial instruments
in the trading portfolio, and carbon emission
allowances in the trading portfolio, which are
measured at market value.
The accounting policies have been applied
consistently in the financial year and for the
comparative figures except for the adoption
of IFRS 16 'Leases'.
We have also changed our reportable seg-
ments and have therefore restated comparative
figures. See note 2.1 'Segment information'.
Principles for consolidation
The consolidated financial statements com-
prise the financial statements of Ørsted
A/S (the parent company) and subsidiaries
controlled by Ørsted A/S. See more in
note 8.5 'Company overview'.
and losses arising from intra-group transac-
tions are eliminated on consolidation.
Unrealised gains resulting from transactions
with associates and joint ventures are elimi-
nated to the extent of our ownership interest.
Unrealised losses are eliminated in the same
way as unrealised gains to the extent that
there has been no impairment.
Enterprises are accounted for as associates if
we hold or have the ability to exercise, directly
or indirectly, 20%-50% of the voting rights
and do not exercise control. However, we
carry out a specific assessment of our ability
to exercise influence, including our ability to
influence financial and operational decisions
and thus our return. Enterprises that satisfy
the criteria for joint control are accounted for
as investments in joint ventures, unless the
nature of the joint arrangement is considered
a joint operation, see 'Consolidation method
for partnerships' in the next column.
The consolidated financial statements
have been prepared as a consolidation of
the parent company's and the individual
subsidiaries' financial statements which have
been prepared in accordance with the Group's
accounting policies. Intra- group income and
expenses, shareholdings, balances and divi-
dends as well as realised and unrealised gains
Our shares in joint operations are recognised
in the consolidated balance sheet through
recognition of the Group's own assets, liabili-
ties, income and expenses. The proportionate
share of realised and unrealised gains and
losses arising from intra-group transactions
between fully consolidated enterprises and
joint operations is eliminated.
Key accounting judgements
Consolidation method for partnerships
On establishment of partnerships and in connection
with any restructuring of existing partnerships, we
assess whether the structure is a joint arrangement
under shared control. For joint arrangements, we
subsequently assess whether they are joint ventures
or joint operations.
In assessing joint operations, we look at:
– the corporate form of the operation
– whether we are only entitled to the net profit
(loss) or income and expenses resulting from the
operation.
In addition, the fact that the parties buy or are
assigned all output, for example the power generated,
will lead to the structure being considered a joint
operation if we have joint control.
74 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 1. Basis of reporting
Notes
Contents
– Disposal not resulting in loss of control:
A proportionate share of the foreign currency
translation reserve is transferred from the
parent company shareholders' share of equity
to the minority shareholders' share of equity.
Repayment of balances that are considered
part of the net investment does not constitute
a partial disposal of the subsidiary.
The above types of exchange differences are
recognised in other comprehensive income.
Such exchange rate adjustments are divided
between the equity of the parent company
and the equity of the non-controlling interests.
On full or partial divestment of the net
investment, the accumulated exchange rate
adjustments are recognised as follows:
– Disposal resulting in loss of control:
The accumulated exchange rate adjust-
ments, including any associated hedges, are
recognised in the profit (loss) for the year if
a foreign exchange gain (loss) is realised by
the selling enterprise. Any foreign exchange
gain (loss) is transferred to the item in
which the gain (loss) from the disposal is
recognised. The part of the foreign currency
translation reserve that relates to non-
controlling interests is not transferred to
profit (loss) for the year.
Foreign currency translation
For each reporting enterprise in the Group, items
are determined in the currency of the primary
economic environment in which the individual
reporting enterprise operates (functional
currency). Transactions in currencies other than
the functional currency of each enterprise
are accounted for as trans actions in foreign
currencies and translated on initial recognition
at the exchange rate on the transaction date.
Exchange differences arising between the ex-
change rate on the transaction date and on the
date of payment are recognised in profit (loss)
for the year as financial income or expenses.
All exchange differences are recognised in
profit (loss) for the year, except for exchange
differences arising on:
– translation of the opening equity of these
entities at the exchange rates on the
balance sheet date
– translation of the statements of compre-
hensive income of these enterprises from
the average for the month exchange rates
to the exchange rates on the balance
sheet date
– translation of balances accounted for as
part of the total net investment
– translation of the portion of loans and
derivatives that has been entered into to
hedge the net investment in these enter-
prises, and that provides an effective hedge
against corresponding foreign exchange
gains (losses) on the net investment in
the enterprise.
Receivables, payables and other monetary
items in foreign currencies are translated at
the exchange rates on the balance sheet date.
The difference between the exchange rate
on the balance sheet date and on the date
at which the receivable or payable arose,
is recognised in profit (loss) for the year as
financial income or expenses.
For foreign subsidiaries, joint operations,
associates and joint ventures, the statements
of comprehensive income are translated at
monthly average exchange rates in so far
as these do not deviate materially from the
actual exchange rates at the transaction
dates. Balance sheet items are translated
at the exchange rates on the balance
sheet date.
Block Island wind farm,
Rhode Island, US.
75 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 1. Basis of reporting
Notes
Contents
1.2 Key accounting estimates and judgements
The use of resonable estimates and judge-
ments is an essential part of the preparation
of the consolidated financial statements.
Given the uncertainties inherent in our business
activities, we make a number of estimates and
judgements. The estimates and judgements
are based on assumptions concerning future
developments which affect our application
of accounting policies and the reported
amounts of our assets, liabilities, sales, costs,
cash flows and related disclosures. Actual
amounts may differ from the amounts
estimated and judgements made, as more
detailed information becomes available.
We regularly reassess these estimates and
judgements, based among other things on
historical experience, the current situation
in the financial markets and a number of
other relevant factors, ie. the update in the
annual estimated production.
Accounting estimates, judgements and
assump tions which may entail a risk of mate-
rial adjustments in subsequent years are listed
in the table below.
In addition, we make judgements when we
apply the accounting policies.
Reference is made to the specific notes for
further information on the key accounting
estimates and judgements as well as
the assumptions applied.
Basis of preparation
Consolidation method for partnerships
Key accounting estimates and judgements
Note
1.1
2.2
Revenue
Assessment of assumptions for recognition of revenue from the
construction of offshore wind farms over time
Assumptions for the determination of the expected selling price and
expected costs
Assessment of classification of divestment
Assumptions for the accounting treatment of divestment gains related
to the share purchase agreements and construction agreements1
Assumptions used for value-in-use calculations when impairment testing Estimate
2.5
Other operating income
3.1
3.2
3.3
4.5
5.2
Intangible assets and property,
plant and equipment
Provisions and contingent assets
and liabilities
Assumptions for provisions
Acquisition of enterprises
Purchase price allocation in business combinations1
Tax equity liabilities
Assesment of recognition of tax equity partners
Tax on profit (loss) for the year
Estimates regarding recognition of income taxes
1 Relevant for prior year.
Impact of accounting
estimates and judgements
Estimate/
judgement
Judgement
Judgement
Estimate
Judgement
Estimate
Impact of accounting estimates and judgements
relates to objectivity and business practice.
Very objective/market-conforming
Objective/partially conforming
Partially subjective/partially distinctive
Subjective/distinctive for Ørsted
Estimate
Estimate
Judgement
Estimate
76 / 183
Ørsted Annual report 2019Financial statements
Consolidated financial statements – 1. Basis of reporting
Notes
Contents
1.3 Implementation of new or changed accounting
standards and interpretations
We regularly assess the impact of new IFRS
standards and interpretations. We implement
new IFRS standards and interpretations from
their mandatory effective dates at the latest.
from restating comparative figures (modified
retrospective method). Therefore, the compar-
ative figures are prepared and presented in
accordance with IAS 17 and IFRIC 4.
As permitted when applying IFRS 16 for
the first time, we have used the following
practical expedients and:
Effective from 1 January 2019, we have
implemented the following new or changed
standards (IAS and IFRS) and interpretations:
– IFRS 16 'Leases'. See separate section below.
– Annual improvements to IFRSs 2015-2017.
Besides the impact from IFRS 16, the adoption
of the new and amended standards has not
impacted our consolidated financial state-
ments for 2019.
In the following section, you can read more
about the impact on recognition, measurement
and presentation from IFRS 16 'Leases'. The
standard has a significant impact on our
EBITDA, but an insignificant impact on profit
(loss) for the year, profit (loss) per share and
diluted profit (loss) per share. Besides classifi-
cation, equity and the consolidated statement
of cash flows are not affected.
Implementation of IFRS 16
On 1 January 2019, we implemented IFRS 16,
'Leases', which replaced IAS 17 and IFRIC 4.
We have implemented IFRS 16 with retrospec-
tive effect. However, we have used the relief
The most important changes resulting from
IFRS 16 compared to IAS 17 can be summarised
as follows:
– The dual model in IAS 17 with operating and
finance leases has been ceased. Under IFRS
16, all leases, except for short-term leases
and ‘low-value’ leases, shall be recognised in
the balance sheet.
– Fixed lease payments are recognised as
lease liabilities and lease assets. Lease
assets are depreciated and interests on
lease liabilities are recognised as financial
expenses (both below EBITDA). Under IAS
17, fixed lease expenses were recognised as
other external expenses (above EBITDA).
– Lease debt repayments are classified as
cash flows from financing activities, and
payments of interest are classified as cash
flows from operating activities in the state-
ment of cash flows. Under IAS 17, all lease
payments were classified as cash flows
from operating activities.
– elected not to reassess whether a contract
is, or contains, a lease on 1 January 2019
– applied a single discount rate to a port-
folio of leases with reasonable similar
characteristics (asset type, currency, and
remaining lease term)
– relied on previous assessments concluding
whether leases are onerous and offset
a provision for an onerous lease in the
lease asset
– elected to account for leases with a remain-
ing lease term of less than 12 months as at
1 January 2019 as short-term leases.
We do not apply the recognition exemption
regarding low value leases.
Our new accounting policies for leases are
described in note 8.2 'Leases'.
Impact on our consolidated financial
statements
On 1 January 2019, we recognised lease assets
amounting to DKK 5,065 million and lease
obligations amounting to DKK 5,224 million.
The value of the lease assets was lower due
to accrued lease payments and a provision for
an onerous contract totalling DKK 159 million
at 1 January 2019, which was offset against
the value of the lease assets.
The most affected class of property, plant
and equipment is land and buildings. This
category mainly comprises our office premises
in Gentofte and London as well as seabeds
and plots of land relating to offshore and
onshore wind farms, respectively. Lease assets
classified as fixtures and fittings, tools and
equipment primarily include vessels used for
operations in Offshore.
Under IAS 17, our operating lease obligations
at 31 December 2018 amounted to DKK 4,819
million (net present value). Compared to our
recognised lease obligations at 1 January 2019
under IFRS 16, the operating lease obligations
were DKK 405 million lower. The main difference
is related to the average weighted incremental
borrowing rate. Under IFRS 16, our average
weighted rate applied is 3.0%, which is 0.5%
lower than the rate applied for calculating the
net present value of our operating lease obliga-
tions at 31 December 2018 in accordance with
our accounting policy for key credit metrics.
Upon transition to IFRS 16, we did not have
any material finance leases.
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Ørsted Annual report 2019Financial statements Consolidated financial statements – 1. Basis of reporting
Notes
Contents
In summary, the adjustments made to the
amounts recognised in the balance sheet at
1 January 2019 are illustrated in the table.
Our EBITDA for 2019 increased by DKK 634
million due to the implementation of IFRS 16,
compared to a continued expensing of
operational lease costs under the previous
accounting policy. Depreciation of lease
assets amounted to DKK 599 million, and
interests on lease debt amounted to DKK
171 million for 2019 under IFRS 16. Our total
cash flows for the year were not impacted
by IFRS 16, but repayments of lease liabilities
(DKK 664 million) are classified as cash flows
from financing activities under IFRS 16 where
all lease related cash flows under the previous
accounting policy were classified as cash
flows from operating activities.
New standards and interpretations
IASB has issued a number of amended
standards which have not yet entered into
force, and which have consequently not been
incorporated into the consolidated financial
statements for 2019.
Extract
Impact of adoption, DKKm
Assets
Property, plant and equipment
Land and buildings
Production assets
Fixtures and fittings, tools and equipment
Property, plant and equipment under
construction
Property, plant and equipment
Assets
Equity and liabilities
Share capital
Reserves
Retained earnings
Equity attributable to shareholders in
Ørsted A/S
Liabilities
Non-current liabilities
Provisions
Lease liabilities
Other payables
Current liabilities
Provisions
Lease liabilities
1 January 2019
Previous
accounting policy
Effect of change in
accounting policy
New accounting
policy
969
66,310
342
16,434
84,055
174,575
4,204
(1,827)
66,111
68,488
12,774
-
409
680
-
4,165
440
460
-
5,065
5,065
-
-
-
-
(25)
4,650
(134)
-
574
5,134
66,750
802
16,434
89,120
179,640
4,204
(1,827)
66,111
68,488
12,749
4,650
275
680
574
Equity and liabilities
174,575
5,065
179,640
Amazon wind farm,
Texas, US.
Comparatives for the
2018 financial year are
not restated, as we have
applied the modified
retrospective method.
The effects of change
in accounting policy are
identical for IFRS and
business per formance
profit (loss).
78 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 1. Basis of reporting
Notes
Contents
1.4 Alternative performance measures
Performance measures are calculated in accordance with the business performance principle.
Business performance
Gross investments
Net investments
Funds from operations
(FFO)
Business performance is a supplement to our financial statements prepared in
accordance with IFRS. Under the business performance principle, the value of the
hedging transaction is deferred and recognised for the period in which the hedged
risk materialises. Reference is made to note 1.5 'Business performance'.
Gross investments reflect our total investments in assets and enterprises.
It comprises cash flows from investing activities, excluding dividends received
from associates, joint ventures and equity investments, purchase and sale of
securities, loans to joint ventures and joint operations, and divestments of assets
and enterprises. To this is added acquired debt and restricted cash in connection
with acquisitions.
Net investments are gross investments less divestments of assets and enterprises,
the selling price for non-controlling interests and subsequent capital injections
from non-controlling interests. Furthermore, interest-bearing debt transferred in
connection with a divestment is deducted.
Funds from operations are a supplementary statement for cash flows from
operating activities determined as business performance EBITDA less the effect
of gains on the divestments of ownership interests in offshore wind farms, interest
expenses (net) on interest-bearing net debt and hybrid capital (50%) as well as
interest elements of decommissioning obligations and current tax.
Adjusted interest-
bearing net debt1
Adjusted interest-bearing net debt is interest-bearing net debt plus 50% of the hybrid
capital, cash and securities not available for use (except for repo transactions), and
the present value of decommissioning obligations less deferred tax.
FFO to adjusted interest-
bearing net debt
Free cash flow (FCF)
FFO
Adjusted interest-bearing net debt
Free cash flows are cash flows from operating activities less gross investments and
plus divestments.
Capital employed
Capital employed are all assets and liabilities except for equity and interest-
bearing net debt.
1
In 2018, lease obligations were not recognised in the balance sheet and therefore not included in interest-
bearing debt. The present value of lease payments (operating lease obligations calculated as if they were
finance lease obligations) were, however, included in the alternative performance measure as specified in
note 6.1. The change is due to implementation of IFRS 16 ‘Leases’. See also note 1.3.
Average capital
employed
Return on capital
employed (ROCE)
Proposed dividend per
share (DPS)
Dividend yield
Average number of
shares
Capital employed beginning of year + capital employed year-end
2
EBIT
Average capital employed
Total proposed dividend
Number of shares year-end
Dividend per share (proposed)
Share price on the last trading day of the year
1
×
Number of
days
= X1
Number of
days
∑
i=1
Net working capital
Net working capital is inventories, contract assets (net), trade receivables and other
current operating assets less trade payables, other current operating liabilities and
working capital elements of tax equity balances.
Net working capital, excluding trade payables relating to purchases of intangible
assets and property, plant and equipment.
Net working capital,
excluding trade
payables relating to
capital expenditure
Other definitions
Profit (loss) per share
Shareholders' share of the profit (loss) for the period
Average number of shares
Diluted profit (loss)
per share
Shareholders' share of the profit (loss) for the period
Average number of shares, including dilutive effect of free shares
79 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 1. Basis of reporting
Notes
Contents
1.5 Business performance
Description of business performance
In 2011, we introduced an alternative perfor-
mance measure, business performance, as
a supplement to the financial statements
prepared in accordance with IFRS. The busi-
ness performance results reflect our internal
risk management and show the results for the
period under review. Under the business per-
formance principle, the value of the hedging
transaction is deferred and recognised for the
period in which the hedged risk materialises.
This is illustrated in the example overleaf.
Our reason for introducing the business
per formance principle was that:
– we could not achieve the same timing of
recognition of our commercial exposure
and hedging contracts in accordance with
the IFRS rules, for example with respect to
option premiums and certain commercial
fixed-price contracts, and
– there was a high risk that the hedging
contracts were not consistent with the
IFRS hedge accounting rules, requiring us to
recognise the hedging contracts at market
value with value adjustments via the
income statement, whereas our commercial
exposure is accrued.
Our risk management is described in note
7.1 'Market risks'.
Business performance – background
We mainly hedge market risks for up to five
years (some for a longer period) with the
aim of stabilising our cash flows and create
certainty about our finances. With a view to
ensuring transparency, we want the financial
impact of the hedging transactions to be
reflected in the financial reporting simultane-
ously with the hedged exposure (for example
sales of power). We can normally achieve this
by applying the IFRS rules on hedge account-
ing. For energy companies, it is, however,
sometimes difficult to ensure simultaneity. The
reason for this is that hedging instruments are
not always available which precisely match
the exposure which must be hedged, or that
there is no sufficiently liquid market available.
Consequently, some hedging takes place in
alternative markets or subject to alternative
time horizons. For example, power generation
in Denmark is to some extent hedged by
financial contracts for nearby trading areas,
such as the European Energy Exchange (EEX)
in Germany and Nord Pool in Scandinavia.
These areas normally develop relatively
uniformly over time compared to Denmark.
Type of hedging
IFRS
This hedging method means that only some
of the financial hedging transactions comply
with the IFRS rules on hedge accounting even
though the financial risk has been reduced. In
case of non-compliance, the hedging trans-
actions must be recognised in the income
statement on a regular basis under IFRS.
This may give rise to considerable fluctuations
in the income statement, as the effects of the
hedging and, for example, the sale of power
are not recognised in the same period.
Consequently, we have decided not to apply
the IFRS rules on hedge accounting to trans-
actions hedging energy prices and associated
currency risks. Therefore, value adjustments
of these hedges are recognised in the income
statement in accordance with IFRS.
Recognition
In the income statement, the business
performance results are shown alongside the
IFRS results. The difference between the two
performance measures is shown in a separate
column, 'Adjustments'. Two types of contracts
are included in the business performance
principle:
– Hedging contracts concerning energy and
related currencies.
– Commercial contracts concerning energy
recognised at market value (typically fixed-
price physical gas and power contracts).
When we use hedging instruments which do
not fully correspond to the underlying risk, any
difference between the hedging instruments
and the underlying risk is recognised imme-
diately in the income statement. See note 7.3
' Energy trading portfolio'. The accounting treat-
ment under business performance is other wise
identical to the accounting treatment under
IFRS. Our assets, liabilities, cash flows and
equity are consequently not affected. The
accounting treatment of our hedging contracts
according to IFRS and business performance is
summarised in the table below.
Hedging of energy and associated
currency risks as well as fixed-price
physical gas and power contracts
Hedging of:
– proceeds from the divestment of
newly constructed offshore wind farms
– interest and inflation risk
Hedging of currency risks associated
with investments in foreign entities
Trading portfolio
Market value adjustments of power hedges related
to Onshore are recognised in other comprehensive
income. Other market value adjustment are
recognised in the income statement
Market value adjustments are deferred and
recognised in the period in which the exposure
materialises
Business performance
Market value adjustments are deferred
and recognised in the period in which the
exposure materialises
Recognition is the same as under IFRS
Market value adjustments are recognised in other
comprehensive income
Market value adjustments are recognised in the
income statement
Recognition is the same as under IFRS
Recognition is the same as under IFRS
Only the recognition of
the hedging of energy
and associated currency
risks as well as fixed-
price physical gas and
power contracts differs
under IFRS and the
business performance
principle.
80 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 1. Basis of reporting
Notes
Contents
Expected impact on business performance
EBITDA from energy and currency hedging
At 31 December 2019, a gain of DKK 1,434 mil-
lion has been deferred (2018: loss of DKK 1,849
million), which will affect business performance
EBITDA in subsequent years. Of the total
deferred gain, a gain of DKK 687 million is
expected in business performance EBITDA in
2020 (2018: DKK 1,470 million loss in 2019).
Power prices decreased in 2019, which means
that the market value of the hedges has
increased as we are selling power. The decrease
in the deferred gain on currency hedging is
primarily attributable to an increase in the GBP/
DKK rate causing a loss as we are selling GBP.
Expected impact on business performance EBITDA from energy and currency hedging, DKKm
Power
Gas
Oil
Coal
Currency
Inflation
Total hedges
Deferred revenue from US
power purchase agreements
Total
Deferred for subsequent recognition
at 31 December 2019
Deferred for subsequent recognition
at 31 December 2018
2020
2021 After 2021
Total
2019
2020
After 2020
Total
16
702
48
(33)
(336)
879
53
9
(3)
15
(1)
-
559
770
56
(36)
(233)
(374)
(886)
(1,493)
-
-
500
(651)
187
687
157
(494)
585
592
649
1,241
585
441
993
1,434
(1,324)
(1,190)
(353)
(2,867)
(294)
(65)
6
(2)
-
(118)
(81)
1
254
-
-
(36)
-
239
(69)
(412)
(182)
7
491
(69)
(1,679)
(1,134)
(219)
(3,032)
209
(1,470)
183
(951)
791
572
1,183
(1,849)
The table shows when
the deferred value ad-
justments are expected
to be recognised in the
business performance
EBITDA. The table
covers both hedging
classified as business
performance and IFRS.
Gains are shown as '+'
and losses are shown
as '-'. Deferred reve-
nue from US power
purchase agreements is
explained in more detail
in note 7.7 'Fair value
measurement'.
Explanation of the business
performance principle
In year 1, we enter into a contract hedging
the price risk associated with Offshore's
generation of 1,000GWh in year 5 at
GBP 52,000 per GWh. This ensures a
total revenue of GBP 52 million. In year
5, the cost of power has decreased to
GBP 45,000 per GWh, which means that
the hedging contract has a positive market
value of GBP 7 million (a hedged price of
GBP 52,000 per GWh minus the spot price
of GBP 45,000 per GWh). This means that
we ensure that the total income, including
the hedging transaction, is still GBP 52 mil-
lion. The income of GBP 52 million consists
of a gain from the hedging contract of
GBP 7 million and GBP 45 million from
the sale of 1,000GWh at a spot price of
GBP 45,000 per GWh. The financial impact
of the hedging transaction in years 1-5 is
shown in the table. Under the business
performance principle, the hedging trans-
action is recognised in the income state-
ment in year 5, i.e. at the same time as the
hedged contract with a positive market
value of GBP 7 million. The value develop-
ment is, however, recognised continuously
in the income statement according to
IFRS. Upon the expiry of the contract in
year 5, the total effect on results over the
period is the same under the IFRS and the
business performance principle. Only the
timing differs. The business performance
principle ensures simultaneity of recogni-
tion of the underlying exposure and the
hedging contract.
Power price and sale
of power, GBP million
Recognised in the income
statement as follows
Total financial impact
Power price
(GBP '000
per GWh)
Sale of
power,
GBP million
Market value
Business
performance
Business
performance
IFRS
Year 1
Year 2
Year 3
Year 4
Year 5
Total
52
50
55
46
45
-
-
-
-
45
45
-
2
(3)
6
7
-
-
-
-
7
7
-
2
(5)
9
1
7
-
-
-
-
52
52
IFRS
-
2
(5)
9
46
52
Example of recognition of the market value
of a hedging contract according to the
business performance and IFRS principles
in the income statement.
81 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 1. Basis of reporting
Notes
Contents
Specification of the difference between EBITDA according to
business performance and according to IFRS, DKKm
EBITDA – business performance
Business performance adjustments in respect of revenue for the year
Business performance adjustments in respect of cost of sales for the year
EBITDA – IFRS
Total business performance adjustments for the year comprise:
2019
17,484
2,556
(1,020)
19,020
2018
30,029
(1,426)
(112)
28,491
Market value adjustments for the year of financial and physical hedging
contracts relating to a future period
141
(1,734)
Reversal of deferred gains (losses) relating to hedging contracts from
previous periods, where the hedged production or trade is recognised in
business performance EBITDA in this period
Total adjustments
1,395
1,536
196
(1,538)
Difference between IFRS and business
performance for the year
The value adjustment in respect of future
periods totalled a gain of DKK 141 million
(2018: DKK -1,734 million), and reversal of
deferred gains (losses) recognised according
to business performance in 2019 totalled
DKK 1,395 million (2018: DKK 196 million).
Market value adjustments for the year
related to hedging contracts
2019 was mainly affected by gains on the
hedging of power and gas as a result of a
drop in prices combined with a selling position.
This was partly countered by losses on curren-
cy hedges, mainly related to an increase in the
GBP/DKK rate as a result of a selling position.
Deferred gains (losses) from previous periods
In 2019, a loss of DKK 1,395 million was
recognised in business performance EBITDA,
but as the loss was recognised in IFRS EBITDA
in a previous period, the loss was reversed
in the 'Adjustments' column in the income
statement. The loss was primarily attributable
to the hedging of power.
Market value adjustments for the year of financial and physical hedging
contracts relating to a future period, DKKm
Currency
Power (commercial and hedge)
Gas (commercial and hedge)
Oil
Coal
Total value adjustments
Reversal of deferred gains (losses) relating to hedging contracts from
previous periods, where the hedged production or trade is recognised in
business performance EBITDA in this period, DKKm
Currency
Power (commercial and hedge)
Gas (commercial and hedge)
Oil
Coal
Total deferred gains (losses) from previous periods
2019
(1,916)
1,144
857
94
(38)
141
2019
(320)
1,249
327
144
(5)
1,395
2018
313
(1,617)
(48)
(382)
-
(1,734)
2018
(165)
307
262
(174)
(34)
196
The table shows value
adjustments by product.
The value adjustments
are recognised in IFRS
EBITDA, but not in
business performance
EBITDA, as the value
relates to future periods.
The table shows reversal
of value adjustments
by product. These gains
(losses) are recognised
in business performance
EBITDA. The reversal of
value adjustment was
recognised in IFRS EBITDA
in a previous period.
Asnæs power plant,
Kalundborg, Denmark.
82 / 183
Ørsted Annual report 2019Financial statements Notes
Contents
2.
Return on capital
employed
84 Return on capital employed
85 Segment information
88 Revenue
91 Cost of sales
92 Government grants
93 Other operating income and expenses
94 Employee costs
95 Share-based payment
Ørsted Annual report 2019 Consolidated financial statements – 2. Return on capital employed
Notes
Contents
2. Return on capital employed
Return on capital employed (ROCE) is a key
ratio showing how profitable our business
activities are. Our target is an average
ROCE of around 10% for the Group for the
2019-2025 period.
Return on capital employed
Return on capital employed was 10.6% in
2019 compared to 32.1% in 2018. The de-
crease was mainly due to lower EBIT in 2019
compared to 2018. EBIT in 2018 was signifi-
cantly positively affected by the Hornsea 1
farm-down gain. Reference is made to note
2.1 'Segment information'.
Offshore
Onshore
Markets & Bioenergy
4%
2%
0
EBIT by segment,
percentage of DKK 10,231 million in 2019
EBIT, business performance
DKKbn
24.7
16.2
13.9
94%
10.1
1.9
17.5bn
EBITDA totalled DKK 17,484 million in 2019
against DKK 30,029 million in 2018.
10.1bn
2015
2016
2017
2018
2019
Operating profit (EBIT) totalled DKK 10,052 million
in 2019 against DKK 24,654 million in 2018.
EBIT is stated according to the business performance
principle. EBIT of DKK 10,231 million is calculated as
EBIT for reportable segments.
Return on capital employed (ROCE)
%
32.1
24.4
25.2
10.6
3.6
2015
2016
2017
2018
2019
10.6%
Return on capital employed totalled
10.6% in 2019 against 32.1% in 2018.
84 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 2. Return on capital employed
Notes
Contents
2.1 Segment information
(2018: DKK 0 million) were transferred to
Offshore and Onshore, respectively. We have
restated comparative figures for 2018.
location, we use the physical locations of the
exchange or hub since we do not know the
physical location of our customers in all cases.
Offshore, DKKm
Revenue
EBITDA
Gross investments
Number of employees
Primary activity
40,216
15,161
15,121
2,777
Development, construction, ownership and operation
of offshore wind farms in the UK, Germany,
Denmark, the Netherlands, the US and Taiwan.
Onshore, DKKm
Revenue
EBITDA
Gross investments
Number of employees
Primary activity
670
786
6,158
95
New segment structure
In June, we decided to consolidate the business
units Customer Solutions and Bioenergy into a
new business unit, named Markets & Bioenergy.
In addition, as we run the business on an end-
to-end value chain thinking, we decided that all
activities and earnings that relate to Offshore
and Onshore will be reported in these segments,
even if the daily activities are performed on
behalf of the Group in Markets & Bioenergy.
Therefore, earnings from trading related to hedg-
ing of our power exposures and power portfolio
optimisation activities in relation to Offshore
and Onshore are now presented in these busi-
ness units. In 2019, EBITDA of DKK 725 million
(2018: DKK 237 million) and DKK -18 million
Geographical distribution of revenue as
well as intangible assets and property,
plant and equipment
Geographical revenue is broken down, as far
as possible, by the customer's geographical
location based on supply point.
A significant part of our sales takes place via
power exchanges and gas hubs in Europe,
whose physical locations do not reflect the
geo graphical locations of our customers. When
breaking down these sales by geographi cal
Development, ownership and operation of onshore
wind and solar farms in the US and a minor storage
solution in the UK.
Denmark (DK)
The UK
The US
Germany (DE)
The Netherlands (NL)
Other
Denmark (DK)
The UK
The US
Germany (DE)
The Netherlands (NL)
Other
Revenue
DKKm 2019 1 (2018)
Intangible assets and property, plant and
equipment, DKKm 2019 (2018)
Markets & Bioenergy, DKKm
Revenue
EBITDA
Gross investments
Number of employees
Primary activity
DE 7,060
(14,374)
US 1,317
(338)
32,816
1,495
1,898
1,828
Generation of heat and power at CHP plants in
Denmark, sale of power and gas in wholesale and
retail markets, distribution of power in Denmark, as
well as optimisation and hedging of Ørsted's entire
energy portfolio.
NL 5,081
(6,083)
OTHER 935
(476)
NL 4,685
(1,273)
OTHER 2,629
(10)
DK 13,610
(12,139)
DK 16,607
(17,713)
DE 12,809
(14,057)
DKK 67,842
million
DKK 106,685
million
In 2019, one customer in Offshore had a
revenue of DKK 10,339 million, accounting for
more than 10% of our consolidated revenue.
No single customer accounted for more than
10% or our consolidated revenue in 2018.
Non-current assets are broken down geo-
graphically based on the physical locations
of the assets.
Accounting policies
Our operating segments are consistent with our
internal reporting to our chief operating decision
maker, Group Executive Management.
We apply the business performance principle, as
described in note 1.5 'Business performance', in
connection with our internal management.
The operating segments are managed primarily on
the basis of EBITDA and investments. Financial income,
expenses, depreciation and amortisations as well as
tax are allocated to the operating segments, while we
manage them at Group level.
Segment income and segment expenses are those
items that, in our internal management reporting, are
directly attributable to individual segments or can
be indirectly allocated to individual segments on a
reliable basis.
US 24,068
(17,726)
UK 36,842
(37,962)
Revenue, intangible assets as well as property, plant
and equipment are presented based on the locations
of our customers and assets.
UK 48,884
(39,627)
1
Revenue determined according to the business
performance principle.
85 / 183
Ørsted Annual report 2019Financial statements
Consolidated financial statements – 2. Return on capital employed
Notes
Contents
Offshore
Onshore
Markets &
Bioenergy
Reportable
segments
Other
activities/
eliminations
Business
performance
Adjustments
67,828
5,874
73,702
(47,480)
(10,294)
(96)
1,630
(20)
17,442
(6,643)
(568)
-
14
67,842
(5,874)1
(5,860)
5,664
251
(5)
(8)
-
42
(221)
-
-
-
67,842
(41,816)
(10,043)
(101)
1,622
(20)
17,484
(6,864)
(568)
-
2,556
-
2,556
(1,020)
-
-
-
-
1,536
-
-
-
10,231
(179)
10,052
1,536
11,588
IFRS
70,398
-
70,398
(42,836)
(10,043)
(101)
1,622
(20)
19,020
(6,864)
(568)
-
In 2019, we consolidated
the business units
Customer Solutions and
Bioenergy into a new
business unit, named
Markets & Bioenergy.
Profit (loss) and cash
flows are shown only for
continuing operations.
The column 'Other
activities/eliminations'
primarily covers the
elimination of inter-
segment transactions.
It also includes income
and costs, assets and
liabilities, investment
activity, taxes, etc.,
handled at Group level.
2019
Income statement, DKKm
External revenue
Intra-group revenue
Revenue
Cost of sales
Employee costs and other external expenses
Gain (loss) on disposal of non-current assets
Additional other operating income and expenses
Share of profit (loss) in associates and joint ventures
EBITDA
Depreciation and amortisation
Impairment losses
Impairment losses, reversed
Operating profit (loss) (EBIT)
Key ratios
Intangible assets and property, plant and equipment
Equity investments and non-current receivables
Net working capital, work in progress
Net working capital, tax equity
Net working capital, capital expenditures
Net working capital, other items
Derivatives, net
Assets classified as held for sale, net
Decommissioning obligations
Other provisions
Tax, net
Other receivables and other payables, net
Capital employed at 31 December
Of which, capital employed from discontinued operations
Of which, capital employed from continuing operations
Return on capital employed (ROCE) %
Cash flows from operating activities
Gross investments
Divestments
Free cash flow (FCF)
33,801
6,415
40,216
(18,981)
(6,440)
(106)
490
(18)
15,161
(5,494)
-
-
9,667
78,483
650
8,756
670
-
670
(6)
(528)
21
629
-
786
(351)
(68)
-
367
17,616
-
-
-
(4,587)
(3,123)
3,441
(961)
-
(4,562)
(3,878)
1,065
(424)
79,447
9,283
(15,121)
3,052
(2,786)
(67)
9
545
-
(306)
-
(1,409)
(67)
11,734
1,007
(6,158)
255
(4,896)
33,357
(541)
32,816
(28,493)
(3,326)
(11)
511
(2)
1,495
(798)
(500)
-
197
8,743
263
-
-
(114)
(1,277)
2,058
8,211
(1,290)
(1,836)
951
80
104,842
913
8,756
(4,587)
(3,304)
2,173
1,642
8,211
(6,158)
(5,714)
607
(411)
15,789
106,970
1,218
(1,898)
25
(655)
11,508
(23,177)
3,332
(8,337)
1,843
131
-
-
-
367
(860)
-
-
(729)
(860)
(70)
(178)
1,571
(128)
(3)
1,440
106,685
1,044
8,756
(4,587)
(3,304)
2,540
782
8,211
(6,158)
(6,443)
(253)
(481)
106,792
(41)
106,833
10.6
13,079
(23,305)
3,329
(6,897)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
106,685
1,044
8,756
(4,587)
(3,304)
2,540
782
8,211
(6,158)
(6,443)
(253)
(481)
106,792
(41)
106,833
13,079
(23,305)
3,329
(6,897)
1
Including the elimin ation of other activities, the total elimination of intra-group revenue amounts to DKK -8,425 million, which primarily relates to our Shared functions services, and B2B, B2C
and power distribution businesses.
86 / 183
Ørsted Annual report 2019Financial statements 2018
Income statement, DKKm
External revenue
Intra-group revenue
Revenue
Cost of sales
Employee costs and other external expenses
Gain (loss) on disposal of non-current assets
Additional other operating income and expenses
Share of profit (loss) in associates and joint ventures
EBITDA
Depreciation and amortisation
Impairment losses
Impairment losses, reversed
Operating profit (loss) (EBIT)
Key ratios
Intangible assets and property, plant and equipment
Equity investments and non-current receivables
Net working capital, work in progress
Net working capital, tax equity
Net working capital, capital expenditures
Net working capital, other items
Derivatives, net
Assets classified as held for sale, net
Decommissioning obligations
Other provisions
Tax, net
Other receivables and other payables, net
Capital employed at 31 December
Of which, capital employed from discontinued operations
Of which, capital employed from continuing operations
Return on capital employed (ROCE) %
Cash flows from operating activities
Gross investments
Divestments
Free cash flow (FCF)
37,434
5,676
43,110
(25,551)
(5,435)
15,076
851
(5)
28,046
(4,456)
-
-
23,590
64,444
269
9,654
80
-
80
-
(121)
-
85
-
44
(51)
-
-
(7)
10,913
5
-
-
(3,719)
(2,612)
3,567
(1,888)
-
(4,010)
(3,116)
(1,944)
1,110
65,474
(167)
(125)
(722)
-
(217)
(130)
(1,059)
-
Consolidated financial statements – 2. Return on capital employed
Notes
Contents
Offshore
Onshore
Markets &
Bioenergy
Reportable
segments
Other
activities/
eliminations
39,566
270
39,836
(34,241)
(3,467)
(81)
54
(1)
2,100
(1,430)
-
603
77,080
5,946
83,026
(59,792)
(9,023)
14,995
990
(6)
30,190
(5,937)
-
603
(134)
(5,946)1
(6,080)
5,886
32
-
1
-
(161)
(41)
-
-
We have changed our
reportable segments
and have therefore
restated comparative
figures.
Business
performance
Adjustments
76,946
(1,426)
-
76,946
(53,906)
(8,991)
14,995
991
(6)
30,029
(5,978)
-
603
-
(1,426)
(112)
-
-
-
-
(1,538)
-
-
-
IFRS
75,520
-
75,520
(54,018)
(8,991)
14,995
991
(6)
28,491
(5,978)
-
603
1,273
24,856
(202)
24,654
(1,538)
23,116
9,170
336
-
-
(199)
(2,322)
203
10,372
(1,245)
(3,878)
576
1
84,527
610
9,654
(3,719)
(2,978)
1,120
(2,407)
10,372
(5,472)
(7,124)
(2,427)
1,111
83,267
305
835
-
-
-
369
(219)
-
-
(858)
(202)
(601)
(371)
4,779
13,014
6,710
(15,081)
19,676
11,305
1,868
(6,779)
1
(4,910)
2,874
(2,522)
320
672
11,452
(24,382)
19,997
7,067
(1,109)
(99)
(47)
(1,255)
84,832
1,445
9,654
(3,719)
(2,978)
1,489
(2,626)
10,372
(5,472)
(7,982)
(2,629)
510
82,896
(143)
83,039
32.1
10,343
(24,481)
19,950
5,812
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
84,832
1,445
9,654
(3,719)
(2,978)
1,489
(2,626)
10,372
(5,472)
(7,982)
(2,629)
510
82,896
(143)
83,039
10,343
(24,481)
19,950
5,812
1
Including the elimination of other activities, the total elimination of intra-group revenue amounts to DKK -8,281 million, which primarily relates to our Shared Functions services, and B2B, B2C
and power distribution businesses.
87 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 2. Return on capital employed
Notes
Contents
2.2 Revenue
Revenue 2019, DKKm
Sale of gas
Generation of power
Sale of power
Revenue from construction of offshore wind
farms and transmission assets
Generation and sale of heat and steam
Distribution and transmission
Other revenue
Total revenue from customers, IFRS
Government grants
Economic hedging
Other revenue
Total revenue, IFRS
Adjustments
Total revenue, business performance
Timing of revenue recognition from
customers, IFRS
At a point in time
Over time
Total revenue from customers, IFRS
Offshore
Onshore
Markets &
Bioenergy
Other
activities/
eliminations
-
4,870
10,372
12,385
-
-
1,868
29,495
9,934
(492)
621
39,558
658
40,216
11,842
17,653
29,495
-
427
-
-
-
-
-
427
29
231
(3)
684
(14)
670
427
-
427
15,341
2,377
7,593
-
2,887
2,555
669
31,422
505
1,383
3,189
36,499
(3,683)
32,816
18,945
12,477
31,422
(27)
-
(5,825)
-
-
(3)
(35)
(5,890)
-
(530)
77
(6,343)
483
(5,860)
(899)
(4,991)
(5,890)
2019
Total
15,314
7,674
12,140
12,385
2,887
2,552
2,502
55,454
10,468
592
3,884
70,398
(2,556)
67,842
30,315
25,139
55,454
Offshore
Onshore
Markets &
Bioenergy
Other
activities/
eliminations
-
4,969
12,468
16,560
-
-
1,531
35,528
7,917
(2,213)
137
41,369
1,741
43,110
17,278
18,250
35,528
-
64
-
-
-
-
-
64
5
465
11
545
(465)
80
64
-
64
22,795
3,114
7,006
-
2,903
2,749
789
39,356
560
39
(673)
39,282
554
39,836
22,397
16,959
39,356
(351)
-
(5,742)
-
-
(4)
68
(6,029)
(21)
122
252
(5,676)
(404)
(6,080)
(428)
(5,601)
(6,029)
2018
Total
22,444
8,147
13,732
16,560
2,903
2,745
2,388
68,919
8,461
(1,587)
(273)
75,520
1,426
76,946
39,311
29,608
68,919
We have changed our reportable segments and have
therefore restated comparative figures. See note 2.1.
The timing of transfer of goods or services to
customers is categorised as follows:
'At a point in time' mainly comprises:
– sale of gas or power in the market, e.g.
North Pool, TTF, NBP
– transmission assets for offshore wind farms.
'Over time' mainly comprises:
– construction agreements for offshore wind farms
and transmission assets
– long-term contracts with customers to deliver
gas, power or heat.
Revenue for the year (business performance)
decreased by 12% to DKK 67,842 million in
2019. The decrease was mainly due to the
significant drop in gas prices during the year,
lower revenue from construction of offshore
wind farms for partners, lower gas volumes,
lower revenue from power sales as well as
lower thermal heat and power generation.
This was partly offset by higher revenue from
wind farms in operation.
Revenue for the year from construction
of offshore wind farms mainly related to
the construction of the offshore wind farm
Hornsea 1 and the divestment of the Race
Bank transmission asset.
Other revenue in Offshore primarily related
to operation and maintenance agreeements,
which increased due to ramp-ups of offshore
wind farms in 2019.
In 2019, revenue was DKK 70,398 million (2018:
DKK 75,520 million) according to IFRS, of
which DKK 65,914 million (2018: DKK 70,736
million) was revenue from the sale of goods,
and DKK 4,484 million (2018: DKK 4,784 mil-
lion) was revenue from the sale of services.
88 / 183
Ørsted Annual report 2019Financial statements
Consolidated financial statements – 2. Return on capital employed
Notes
Contents
Unsatisfied long-term contracts
with customers, DKKm
2019
2018
Expected to be recognised
Accounting policies
31 December
within one year
in more than one year
1,345
11,473
100%
91%
0%
9%
Revenue is measured based on the consideration
specified in a contract with a customer (transaction
price) and excludes amounts collected on behalf of
third parties, i.e. VAT. We recognise revenue when
we transfer control over a product or service to
a customer.
or delivered to the customer. The delivery of gas is
invoiced on a monthly basis, and the payment is due
within 10-30 days.
Sale of power
Types of goods and services
Revenue from the sale of power includes the sale of
power sourced from other producers.
Unsatisfied long-term contracts
Our remaining performance obligations
expected to be recognised in more than one
year relate to the construction of wind farms
and offshore transmission assets.
The transaction price allocated to the remaining
performance obligation (unsatisfied or partially
satisfied).
In accordance with IFRS 15, the overview does not
include revenue from contracts with customers
to deliver power, gas and heat or our operation
and maintenance agreements. For these types of
goods and services, we recognise the revenue that
corresponds directly to the value transferred to
the customer.
Key accounting estimates
Key accounting judgements
Assumptions for the determination of the expected
selling price and expected costs
We make estimates when determining the expected
selling price of individual construction agreements.
These estimates are influenced by our assessment of:
– the degree of completion of the individual off-
shore wind farms and offshore transmission assets
– total expected costs for the individual contract
– the value of incentive agreements under which we
may be paid a bonus for early delivery or have to
pay compensation for late delivery
– the guarantee commitments undertaken
– the share of total costs associated with transmis-
Assumptions for the recognition of revenue from the
construction of offshore wind farms over time
We construct offshore wind farms with partners,
where we construct our partner's share of the wind
farm. We assess each construction agreement at
the time of conclusion of the agreement.
In our view, our partner assumes control of the
offshore wind farm in step with the construction.
This is supported by:
– the regular approval of part deliveries
– the approval or rejection of significant variations
to the construction
– the partner's take-over of work from subcon-
sion assets which are expected to be covered upon
handover, etc.
tractors, both concerning risk and legal title to
the wind farm on an on-going basis
Therefore, our determination of profit and the recogni-
tion of revenue and related contract assets are subject
to significant uncertainty. We believe that our esti-
mates are the most likely outcomes of future events.
– the milestone payments from the partner.
Therefore, revenue is recognised over time during
the construction of the offshore wind farms.
If a part of the transaction price is variable, i.e. bonus
payments, incentive payments for unmissed dead-
lines, etc., the variable consideration is recognised in
revenue when it is highly probable that the revenue
will not be reversed in subsequent periods.
Timing of satisfaction of delivery obligations
and significant estimates
Revenue is recognised when control of the goods is
transferred to the buyer. Transfer of control occurs
when the actual power is delivered to the customer.
We adjust the transaction price for the time value of
money if the payments exceed twelve months.
Sales agreements are divided into individually identi-
fiable performance obligations. If a sales agreement
includes several performance obligations, the sales
agreement's transaction price is allocated to each
performance obligation's stand-alone selling price.
Sale of gas
Timing of satisfaction of delivery obligations
and significant estimates
Revenue is recognised when control of the gas is
transferred to the buyer. Transfer of control occurs
either when the gas is injected into the distribution
system or physically delivered to the customer.
Significant terms of payment and associated
estimates and judgements
Sales contracts for a fixed amount of gas at a
variable price, or where we are exclusive suppliers to
the customer at a variable price, are considered one
performance obligation with multiple deliveries to be
satisfied over time. For such contracts, we recognise
revenue in the amount up to which we have a right
to invoice.
Some long-term gas sales contracts include clauses
which give the right to renegotiate the fixed sales
prices. Expectations for the outcomes of renegotia-
tions are not included in revenue before we know the
outcome of the individual renegotiations.
In most cases, the consideration for the gas is due
when the gas is injected into the distribution system
Significant terms of payment and associated
estimates and assessments
Sales contracts for a fixed amount of power at a
variable price, or where we are exclusive suppliers to
the customer at a variable price, are considered one
performance obligation with multiple deliveries to be
satisfied over time. For such contracts and for long-
term agreements on selling power at a fixed price,
we recognise revenue in the amount up to which we
have a right to invoice.
In most cases, the consideration for the power is due
when the actual power is delivered to the customer.
The delivery of power is invoiced on a monthly basis,
and the payment is due within 10-30 days.
Generation of power
Types of goods and services
Revenue from generation of power is our sale of
power produced at our own wind farms and power
stations, and the sale of ancillary services.
Timing of satisfaction of delivery obligations,
and significant estimates
Revenue is recognised when control of the goods is
transferred to the buyer. Transfer of control occurs
when the actual power is delivered to the customer,
which for power generated by us occurs when it
is produced.
Significant terms of payment and associated
estimates and assessments
Revenue from ancillary services consists of fees for
having power stations on standby in periods with
a demand for power generation. Ancillary services
89 / 183
Ørsted Annual report 2019Financial statements
Consolidated financial statements – 2. Return on capital employed
Notes
Contents
are considered one performance obligation which is
fulfilled over time when the power stations are on
standby.
Sales contracts for a fixed amount of power at a
variable price, or where we are exclusive suppliers to
the customer at a variable price, are considered one
performance obligation with multiple deliveries to be
satisfied over time. For such contracts and for long-
term agreements on selling power at a fixed price,
we recognise revenue in the amount up to which we
have a right to invoice.
In most cases, the consideration for the power is due
when the actual power is delivered to the customer.
Ancillary services are invoiced on a monthly basis,
and consideration is payable when invoiced.
Revenue from construction of offshore wind farms
Types of goods and services
Revenue from construction of offshore wind farms
includes development and construction.
The construction agreements cover the construction
phase from design to delivery of an operational
asset. The agreement consists of two performance
obligations:
– Offshore wind farms.
– Offshore transmission assets, if applicable.
The construction agreements cover our partners’
shares of the construction of the wind farm and
offshore transmission asset, if applicable.
If the contracts include multiple performance obliga-
tions, the transaction price will be allocated to each
performance obligation based on the stand-alone
selling prices. Where these are not directly observ-
able, they are estimated based on the expected
cost-plus margin.
Timing of satisfaction of delivery obligations,
and significant estimates
We recognise revenue from the construction
agreements over time, using an input method to
measure progress towards complete satisfaction of
the performance obligation because the customer
gains control of the offshore wind farm during the
construction process. The input method reflects our
ongoing transfer of control to the customer.
When the outcome of the performance obligation in
the contract can be measured reasonably, the con-
struction agreement is measured at the transaction
price of the work performed less progress billings,
based on the percentage of completion of the con-
tract at balance sheet date and the total expected
revenues from the individual contracts.
We estimate the degree of completion on the basis
of an assessment of the work performed, normally
calculated as the ratio between the costs incurred
and the total costs expected related to the contract
in question.
The transaction price is based on the total expected
income from individual contracts. Estimates of
revenues are based on the transaction price and the
completion degree of the offshore wind farm or off-
shore transmission asset at the balance sheet date.
Estimates of revenues, costs and percentage of
completion are revised if circumstances change. Any
resulting increases or decreases in estimated revenue
or costs are reflected in profit or loss in the period in
which the circumstances that give rise to the revision
come to our knowledge.
An expected loss is recognised when it is deemed
probable that the total construction costs will ex-
ceed the total revenue from the individual contracts.
Significant terms of payment and associated
estimates and assessments
The consideration for the construction of an offshore
wind farm consists of a fixed fee and a relatively
minor variable fee, depending on when the wind farm
can be put into operation.
The consideration for an offshore transmission asset
is a fixed fee.
After signing the construction agreement, we carry
out an assessment determining when the wind farm
is expected to be completed, and calculate the
size of the variable payment on this basis. We only
recognise the variable fee when it is highly probable
that a subsequent reversal will not take place.
At each balance sheet date, an assessment is made of
the size of the variable payment which can be included
in the transaction price. Revenue is adjusted accordingly.
The customer pays the fixed consideration based on
a payment schedule. The payment schedule is de-
termined and based on the expected progress of the
construction and transfer of control to the customer.
Other revenue
Types of goods and services
Other revenue primarily includes operations and
maintenance agreements and other services.
If the work we have performed exceeds invoicing
on account, a contract asset is recognised. If the
payments exceed the work we have performed, a
contract liability is recognised.
Timing of satisfaction of delivery obligations and
significant estimates
Revenue from providing services is recognised in the
accounting period in which the services are rendered.
Generation and sale of heat
Timing of satisfaction of delivery obligations and
significant estimates
Heat is sold under long-term heat contracts.
Revenue is recognised when control is transferred to
the customer. Transfer of control occurs when the
heat is physically delivered to the customer.
In connection with a biomass conversion of a CHP
plant, the heat customer makes a prepayment to
finance the majority of our CAPEX associated with the
conversion. The prepayment is recognised as a contract
liability. The contract liability is recognised as revenue
in step with the transfer of heat to the customer.
Significant terms of payment and associated
estimates and assessments
Payment for the sale of heat consists of fixed costs
associated with operation and maintenance of a
CHP plant plus fuel costs for the generation of heat
and a financial return.
The delivery of heat is invoiced on a monthly basis,
and the payment is due within 10-30 days.
Distribution and transmission
Timing of satisfaction of delivery obligations, and
significant estimates
Revenue from the distribution and transmission of
gas and power is recognised when the gas or power
is delivered to the buyer, or when the capacity is
made available.
Significant terms of payment and associated
estimates and assessments
Revenue is calculated as the amount to which we
are entitled when the service is delivered to the
customer and invoiced on a monthly basis, and
consideration is payable when invoiced.
For fixed-priced contracts, revenue is recognised
based on the actual service rendered at the end
of the reporting period as a proportion of the total
services to be rendered because the customer
receives and uses the benefits simultaneously. This is
determined based on the actual labour hours spent
relative to the total labour hours expected.
Significant terms of payment and associated
estimates and assessments
The consideration for operations and maintenance
agreements consists of a fixed fee and a minor
variable fee, e.g. bonuses or compensation for wind
farm availability.
Availability bonuses will be recognised on an ongoing
basis when it is highly probable that a subsequent
reversal will not take place.
Fixed-price contracts are invoiced on a monthly basis,
and consideration is payable when invoiced. Variable
fee services are generally due after the services are
rendered.
Warranty obligations
We typically have a five-year responsibility to
remedy defects that exists at the relevant
taking-over date when we construct offshore wind
farms. These types of warranties are accounted
for under IAS 37 'Provisions, Contingent Liabilities
and Contingent Assets'. Reference is made to the
accounting policy on warranty provisions in note
3.2 'Provisions and contingent assets and liabilities'.
90 / 183
Ørsted Annual report 2019Financial statements
Consolidated financial statements – 2. Return on capital employed
Notes
Contents
2.3 Cost of sales
Cost of sales, DKKm
Offshore
Onshore
Gas
Power
Biomass
Coal
Distribution and transmission costs
Costs for construction of offshore wind
farms and transmission assets
Other cost of sales
Total, IFRS
Adjustments
Total, business performance
-
10,086
-
-
921
7,957
17
18,981
-
18,981
-
-
-
-
-
-
6
6
-
6
Markets &
Bioenergy
15,342
5,760
2,519
520
3,956
-
2,024
30,121
(1,628)
28,493
Other
activities/
eliminations
-
(5,828)
-
-
(24)
-
(420)
(6,272)
608
(5,664)
2019
total
15,342
10,018
2,519
520
4,853
7,957
1,627
42,836
(1,020)
41,816
Offshore
Onshore
-
12,096
-
-
871
12,590
(6)
25,551
-
25,551
-
-
-
-
-
-
-
-
-
-
Markets &
Bioenergy
20,399
6,296
2,468
941
2,710
-
1,371
Other
activities/
eliminations
-
(5,868)
-
-
(13)
-
163
34,185
(5,718)
56
(168)
2018
total
20,399
12,524
2,468
941
3,568
12,590
1,528
54,018
(112)
34,241
(5,886)
53,906
We have changed our
reportable segments
and have therefore
restated comparative
figures. See note 2.1
'Segment information'.
Cost of sales according to business perfor-
mance decreased from DKK 53,906 million in
2018 to DKK 41,816 million in 2019.
The decrease was mainly due to lower gas
and power prices. Also, costs from the con-
struction of offshore wind farms and transmis-
sion assets were lower, primarily due to high
activity in 2018 related to the construction of
the Borkum Riffgrund 2 and Walney Extension
offshore wind farms for partners as well as
divestment of the Burbo Bank Extension trans-
mission assets and the partial divestment of
the Hornsea 1 transmission assets as part of
the 50% farm-down of Hornsea 1.
In 2019, costs from construction of offshore
wind farms and transmission assets primarily
related to Hornsea 1 and Race Bank.
Hornsea 1, Yorkshire
coast, UK.
91 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 2. Return on capital employed
Notes
Contents
2.4 Government grants
Energinet, the transmission system operator
in Denmark, administers subsidies for envi-
ronmentally sustainable power generation,
including biomass and offshore wind farms.
We regard the grant for environmentally
sustainable power generation as a govern-
ment grant, as it is paid by the Danish state.
In the UK, we receive subsidies under the
schemes: contracts for difference (CfD) and
the Renewable Obligations scheme (ROCs) for
renewable energy projects. The Burbo Bank
Extension, Walney Extension and Hornsea 1
offshore wind farms are under the CfD
regime, while our other UK offshore wind
farms are under the ROC regime. We treat
the payments from the ROC and CfD scheme
as government grants.
Feed-in tariffs in Germany under the German
Renewable Energy Sources Act (EEG2014) are
also recognised as government grants.
Illustrative example of CfD
Accounting policies
Market price of power
Government grants (difference between the
market price of power and the power price fixed
in the CfD contracts)
Power price fixed in the CfD contract
Price
Time
When participating in a CfD, we receive a feed-in
premium in connection with the generation of power
from an offshore wind turbine. The feed-in premium
is the difference between the market price of power
and the price fixed in the CfD (strike price).
Government grants comprise grants for environ-
mentally sustainable power generation, grants for
the funding of development projects as well as
investment grants, etc.
Government grants are recognised when there
is reasonable assurance that the grants will be
received.
Grants for the purchase of assets which we recognise
in the balance sheet are recognised under deferred
revenue and are transferred to other operating
income in step with the depreciation of the assets to
which the grants relate.
As grants for power generation are intended as a
compensation for the price of power, we system-
atically recognise the grants under revenue in step
with the power generation and thus the related
revenue.
Government grants, DKKm
Government grants recognised in profit (loss) for the year under revenue
Government grants recognised in profit (loss) for the year under other
operating income
Government grants recognised in the balance sheet
2019
10,468
4
(4)
2018
8,461
4
(4)
Government grants recognised for the year
10,468
8,461
92 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 2. Return on capital employed
Notes
Contents
2.5 Other operating income and expenses
Other operating income, DKKm
Gain on divestment of assets
Other compensation
US tax credits and tax equity income
Miscellaneous operating income
Total other operating income
Other operating expenses, DKKm
Loss on divestment of assets
Miscellaneous operating expenses
Total other operating expenses
Other operating income
In 2019, other operating income was DKK 1,781
million, which was 89% lower than in 2018. In
2019, we had no gains on divestment of assets,
whereas we had gains related to the divest-
ment of 50% of the Hornsea 1 offshore wind
farm in 2018.
US tax credits and tax equity income originate
from our acquisition of Lincoln Clean Energy
in October 2018 and correspond to the tax
credits and other tax attributes provided to
tax equity partners as well as our own share.
The increase was mainly due to a full year of
operation in 2019, whereas we only had three
months of operation in 2018.
2019
2018
Accounting policies
-
478
629
674
15,086
594
85
510
In connection with the divestment of ownership
interests in offshore wind farms before or during the
construction phase, the gain is recognised on the
divestment date under other operating income/
expenses in the income statement.
Divestment of ownership interests in our
offshore wind farms
When we divest an ownership interest in an offshore
wind farm to a partner, we typically also enter into
agreements on the future construction and operation
of the offshore wind farm.
1,781
16,275
2019
101
159
260
2018
91
198
289
The gain for the future construction of the partner's
share of the offshore wind farm is recognised over
time in the income statement in step with the con-
struction. See notes 2.2 'Revenue' and 4.2 'Contract
assets and liabilities'.
The accounting policies for US tax credits and tax
equity income is described in note 4.5 'Tax equity
liabilities'.
Contracts in connection with a divestment are
typically:
– Agreements on the sale of shares (divestment
of assets) (SPA).
– Agreements on the future construction of the
offshore wind farm (construction agreements).
– Agreements on the future operation of the
offshore wind farm (O&M agreements).
Key accounting judgements
Assessment of classification of divestment
When we divest ownership interests in an offshore
wind farm under development, we carry out an
individual assessment determining whether the
divestment qualifies as a divestment of an enterprise
or a divestment of assets. We have typically assessed
that the offshore wind farms do not constitute an
enterprise, as no employees are transferred, and
processes are transferred to a limited extent only.
Key accounting estimates
Assumptions about the accounting treatment of
divestment gains related to share purchase
agreements and construction agreements
Our accounting recognition of the gains related to
the divestment contracts is based on the individual
accounting transaction prices of the relevant
contracts.
Therefore, our accounting treatment of the gains
related to the contracts is not necessarily identical
with the prices negotiated in the individual contracts.
93 / 183
Burbo Bank Extension,
Bay of Liverpool, UK.
Ørsted Annual report 2019Financial statements Consolidated financial statements – 2. Return on capital employed
Notes
Contents
2.6 Employee costs
Employee costs, DKKm
Wages, salaries and remuneration
Share-based payment
Pensions
Other social security costs
Other employee costs
Employee costs before transfer to assets
Transfer to assets
Total employee costs
Salaries and remuneration for
Group Executive Management and
the Board of Directors, DKK '000
Fixed salary
Cash-based incentive scheme
Retention bonus, etc.
Share-based payment
Pension, incl. social security and
benefits
Retention-dependent purchase
price related to the acquisition of
Lincoln Clean Energy
Salary in notice period
Termination payment
Total
2019
4,376
57
362
146
103
5,044
(1,092)
3,952
2018
3,768
24
317
124
24
4,257
(1,131)
3,126
Employee costs
Employee costs before transfer to assets
were 18% higher in 2019 compared to 2018,
mainly reflecting a higher average number
of employees. Employee costs transferred to
assets relate to investment projects, which
are capitalised in the balance sheet.
Pension plans and number of employees
Pension plans are defined-contribution plans
that do not commit Ørsted beyond the
amounts contributed.
In 2019, our average number of employees
was 6,329 (2018: 5,796).
Remuneration of Group Executive
Management
The remuneration of the Executive Board is
based on a fixed salary, including personal
benefits, such as a company car, free tele-
phone, etc., a variable salary, a retention
bonus in connection with the IPO (ceased in
2018), and share-based payment. The other
members of Group Executive Management1
also receive a pension.
The members of the Board of Directors are
paid fixed remuneration only for their work
in Ørsted. In addition, Ørsted reimburses any
travel expenses.
Executive Board
Other members of Group
Executive Management1
Board of Directors
Total
2019
16,810
4,561
-
4,046
2018
16,400
4,630
1,875
3,537
2019
20,933
5,419
180
2,626
2018
19,611
5,329
2,860
3,142
564
555
5,333
5,060
-
-
-
-
-
-
25,981
26,997
840
11,5602
4,4892
51,380
-
-
-
36,002
4,779
5,133
2019
4,779
2018
5,133
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Other members of Group Executive
Management in 2019 are: Morten Hultberg Buch-
greitz, Thomas Dalsgaard (resigned 1 July 2019),
Henriette Fenger Ellekrog (joined 1 June 2019),
Declan Flanagan (joined 1 December 2019), Anders
Lindberg, Martin Neubert and Ole Kjems Sørensen
(resigned 1 December 2019).
Relates to Thomas Dalsgaard and Ole Kjems
Sørensen
2019
42,522
9,980
180
6,672
5,897
840
11,560
4,489
82,140
2018
41,144
1
9,959
4,735
6,679
5,615
2
-
-
-
68,132
94 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 2. Return on capital employed
Notes
Contents
2.7 Share-based payment
Required number of locked-up shares relative to fixed salary
CEO
CFO and other members of Group Executive
Management
Senior vice presidents
Vice presidents and senior directors
Fair value of PSUs and key assumptions for valuation
in executive share programme
Fair value of 1 PSU
Key assumptions:
Share price
Average volatility, peers
Volatility, Ørsted
Risk-free interest rate
75% of fixed salary
50% of fixed salary
25% of fixed salary
15% of fixed salary
The figure shows the
value of Ørsted shares
in percent of the partici-
pants' fixed salary which,
at the time of granting,
must be locked up for the
duration of the executive
share programme.
Time of
granting
2019
Time of
granting
2018
Time of
granting
2017
598
461
320
504
22.3%
20.9%
-0.4%
392
24.5%
19.7%
-0.3%
269
24.9%
20.3%
-0.3%
Expected term at time of granting
3 years
3 years
3 years
Executive share programme
Group Executive Management and a number
of other senior executives participate in the
share programme (99 in total). As a condition
for the granting of performance share units
(PSUs), the participant must own a number of
shares in Ørsted corresponding to a portion of
the individual participant's annual fixed salary.
The portion depends on the employee catego-
ry and, for our CEO, makes up 75% of the fixed
salary; see the figure above for more informa-
tion. The participants in the programme must
invest in Ørsted shares prior to the first granting.
If the participants fulfil the shareholding
requirement at the time of granting, they
will be granted a number of PSUs each year,
representing a value of 15%-20% of the annual
fixed salary on the date of granting.
The granted PSUs have a vesting period of
approximately three years, after which each
PSU entitles the holder, without payment,
to receive a number of shares corresponding
to 0-200% of the number of PSUs granted.
Assuming no share price development since
the grant, this would correspond to 0-30%
or 0-40% of the fixed salary on the date of
grant. The final number of shares for each
participant will be determined on the basis
of the total shareholder return delivered by
Ørsted, benchmarked against ten comparable
European energy companies.
The highest rate (200%) will be triggered if
Ørsted's results, measured as the total return
to shareholders, outperform those of the com-
parable companies. For each lower ranking,
the number of shares granted will fall by
20 percentage points. If, for example, Ørsted
ranks third, the participants will be entitled
to 160% of the target.
If Ørsted ranks 11 in the comparison, no shares
will be granted to the participants. The right
to shares is conditional upon continued
employment.
Retention share programme
In 2018, we introduced a share-based retention
agreements as a replacement for cash-based
settlement by using restricted share units (RSUs)
when granting new retention agreements.
The target group for the share-based reten-
tion agreements will typically be employees
responsible for vital, long-term projects. The use
of these share-based retention agreements will
be limited to 25 concurrent agreements with
an individual time frame of up to five years.
Members of the Executive Board (CEO and CFO)
cannot be granted such retention agreements.
The number of RSUs to be granted will
be determined on the basis of the price of
Ørsted's shares at the time of the grant and
will be limited to an amount corresponding
to a maximum of six months' base pay for
the employee in question. At vesting, each
RSU will entitle the employee to one Ørsted
share free of charge. However, the total value
of the shares to be received at vesting will be
capped at a maximum of twelve months' base
pay for the employee in question.
Accounting policies
The share programme is classified as an equity-based
programme as the programme is settled in shares.
The market value of the PSUs/RSUs and the estimated
number of PSUs granted are measured at the time of
granting and recognised:
– in the income statement under employee costs
over the vesting period
– as an offset in the balance sheet under equity over
the vesting period.
The valuation of the PSUs/RSUs and the estimate
of the number of PSUs/RSUs expected to be granted
are carried out as a probability simulation based on
Ørsted's expected total shareholder return relative
to ten comparable European energy companies.
The expect ations are factored into the market value
and are not adjusted subsequently. The participants
are compensated for any dividend payments by
receiving additional PSUs/RSUs.
95 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 2. Return on capital employed
Notes
Contents
Maximum number of outstanding shares at the time of granting, '000
Time of granting
1 April 2017
1 April 2018
1 April 2019
Share retention programme
Maximum number of outstanding shares at 31 December 2019
Development in maximum number of outstanding shares, '000
Maximum number of outstanding shares at 1 January
Compensation for dividends paid (2017 and 2018 programme)
Exercised (2016 programme)
Granted (2019 programme)
Granted (2018 programme)
Cancelled (2019 programme)
Cancelled (2018 programme)
Cancelled (2017 programme)
Share retention program
Maximum number of outstanding shares at 31 December
(DKKm)
Market value of share programme at the time of granting
Maximum market value of share programme on 31 December
Other mem-
bers of Group
Executive
Management
Executive
Board
Senior
executives
Other
employees
24
19
14
-
57
16
17
16
-
49
129
81
71
-
281
Other mem-
bers of Group
Executive
Management
Executive
Board
Senior
executives
Other
employees
64
1
(22)
14
-
-
-
-
-
57
12
39
57
1
(15)1
16
-
(4)
(4)
(2)
-
49
11
34
327
7
(115)
75
-
-
(7)
(6)
281
61
193
18
0
-
-
-
-
3
21
5
14
21
21
2019
466
9
(152)
105
-
(4)
(11)
(8)
3
408
89
280
Market value
(at time of
granting)
DKK million
% of share
capital
Years until
expiry
0.04%
0.03%
0.02%
0.00%
0.09%
27
27
30
5
89
0.3
1.3
2.3
-
2019 in % of
share capital
0.11%
0.00%
(0.04)%
0.03%
-
0.00%
0.00%
0.00%
0.00%
0.10%
The maximum market value
of the share programme at
31 December is based on the
assumption that the partici-
pants receive the maximum
number of shares (i.e. 200%
of the granted PSUs/RSUs).
This requires that Ørsted
delivers the highest share-
holder return benchmarked
against the ten comparable
companies.
1
Of which DKK 2.6 million
was paid out in cash.
Total
169
117
101
21
408
2018
327
7
-
-
124
-
(6)
(4)
18
466
85
203
96 / 183
Ørsted Annual report 2019Financial statements Notes
Contents
3.
Capital employed
98 Capital employed
99
Intangible assets and property, plant and equipment
102 Provisions and contingent assets and liabilities
104 Acquisition of enterprises
105
Divestment of enterprises
105 Gross and net investments
106
107
Assets classified as held for sale
Discontinued operations
108
Non-controlling interests
Ørsted Annual report 2019 Consolidated financial statements – 3. Capital employed
Notes
Contents
3. Capital employed
Our capital employed primarily relates to
production assets, including assets under
construction. We monitor investment projects
closely, as a large part of our value is created
in the development and construction phases.
Investments and divestments in 2019
Our gross investments amounted to
DKK 23.3 billion in 2019, of which Offshore
accounted for 65%.
Investments were primarily related to:
– offshore wind farms (DKK 15.1 billion),
mainly Hornsea 1 and 2 in the UK,
Borssele 1 & 2 in the Netherlands and
Greater Changhua 1 & 2a in Taiwan
– onshore wind and solar farms
(DKK 6.2 billion), including Sage Draw,
Plum Creek, Lockett, Willow Creek and
Permian Energy Center in the US
– Markets & Bioenergy (DKK 1.9 billion),
mainly the biomass conversion of
Asnæs Power Station and the replacement
of smart meters at our residential power
customers in Radius.
Divestments amounted to DKK 3.3 billion
and were primarily related to the receipt of
deferred proceeds from our farm-down of 50%
of Hornsea 1 in 2018 (DKK 1.7 billion) and to
the strengthening of our strategic partnership
with Eversource as they became a 50%
partner in our activities in the New England
area in the US in February (DKK 1.4 billion).
Capital employed, DKKm
Intangible assets and property, plant and equipment
Equity investments and non-current receivables
Net working capital, work in progress
Net working capital, tax equity
Net working capital, capital expenditures
Net working capital, other items
Derivatives, net
Assets classified as held for sale, net
Decommissioning obligations
Other provisions
Tax, net
Other receivables and other payables, net
Total capital employed
Of which, discontinued operations
Of which, continuing operations
The adaption of IFRS 16 'Leases' increased our
capital employed at 1 January 2019 through the
addition of lease assets (property, plant and
equipment) of DKK 5,065 million.
2019
106,685
1,044
8,756
(4,587)
(3,304)
2,540
782
8,211
(6,158)
(6,443)
(253)
(481)
106,792
(41)
106,833
2018
84,832
1,445
9,654
(3,719)
(2,978)
1,489
(2,626)
10,372
(5,472)
(7,982)
(2,629)
510
82,896
(143)
83,039
106.8bn
Capital employed totalled DKK 106,792 million
on 31 December 2019 against DKK 82,896 million
in 2018.
23.3bn
Gross investments amounted to DKK 23,305 million
in 2019 against DKK 24,481 million in 2018.
Capital employed by segment, % 2019
3.3bn
Offshore
Onshore
Markets & Bioenergy
Cash flows from divestments totalled DKK 3,329
million in 2019 against DKK 19,950 million in 2018.
The most significant assets under construction
at the end of 2019, were the offshore wind
farms Hornsea 2, Borssele 1 & 2 and Greater
Changua 1 & 2a and the onshore wind and
solar farms Sage Draw, Plum Creek and
Permian Energy Center.
11%
15%
DKK 106,792
million
Capital employed by
segment is based on
capital employed for
reportable segments of
DKK 106,970 million.
74%
98 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 3. Capital employed
Notes
Contents
3.1 Intangible assets and property,
plant and equipment
Intangible assets and property, plant and equipment
DKKm
Intangible
assets
Land and
buildings
Production
assets
Fixtures and
fittings, tools
and equipment
Property, plant and
equipment under
construction
Property,
plant and
equipment
Cost at 1 January 2019
Lease assets at 1 January 2019
Exchange rate adjustments
Addition of acquisition of enterprises
Additions
Disposals
Adjustment of decommissioning obligations
Reclassified assets
Reclassified to assets classified as held for sale
Cost at 31 December 2019
Depreciation and amortisation at 1 January 2019
Exchange rate adjustments
Depreciation and amortisation
Disposals
Reclassified to assets classified as held for sale
Depreciation and amortisation at 31 December 2019
Impairment losses at 1 January 2019
Exchange rate adjustments
Impairment losses and reversals
Impairment losses at 31 December 2019
Carrying amount at 31 December 2019
4,164
-
(33)
66
354
(312)
-
-
(260)
3,979
(2,745)
37
(73)
-
118
(2,663)
(642)
(2)
-
(644)
672
2,082
4,165
147
1
426
(80)
-
117
(230)
6,628
(1,074)
(1)
(423)
14
78
(1,406)
(39)
(6)
-
(45)
5,177
98,823
440
3,446
-
1,718
(3)
75
11,671
(49)
116,121
(31,421)
(765)
(6,121)
10
18
(38,279)
(1,092)
-
(68)
(1,160)
76,682
Intangible assets
Intangible assets consist of goodwill of
DKK 125 million (2018: DKK 125 million),
carbon emission allowances of DKK 294
million (2018: DKK 330 million), other rights
of DKK 65 million (2018 DKK 46 million),
completed development projects of
DKK 119 million (2018: DKK 142 million),
and development projects in progress of
DKK 69 million (2018: DKK 134 million).
Production assets by segment, % 2019
Markets & Bioenergy
Offshore
Onshore
14%
8%
DKK 76,682
million
78%
Property, plant and equipment
under construction by segment, % 2019
Offshore
Onshore
7%
Markets & Bioenergy
1,185
460
(173)
-
82
(22)
-
45
(124)
1,453
(843)
184
(247)
17
88
(801)
-
-
-
-
16,605
118,695
-
903
85
20,214
(2,044)
255
(11,833)
(11)
24,174
-
-
-
-
-
-
(171)
(1)
(500)
(672)
5,065
4,323
86
22,440
(2,149)
330
-
(414)
148,376
(33,338)
(582)
(6,791)
41
184
(40,486)
(1,302)
(7)
(568)
(1,877)
652
23,502
106,013
27%
DKK 23,502
million
66%
99 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 3. Capital employed
Notes
Contents
Intangible assets and property, plant and equipment
DKKm
Intangible
assets
Land and
buildings
Production
assets
Fixtures and
fittings, tools
and equipment
Property, plant and
equipment under
construction
Property,
plant and
equipment
Cost at 1 January 2018
Exchange rate adjustments
Addition of acquisition of enterprises
Additions
Divestment of enterprises
Disposals
Adjustment of decommissioning obligations
Reclassified assets
Reclassified to assets classified as held for sale
Cost at 31 December 2018
Depreciation and amortisation at 1 January 2018
Exchange rate adjustments
Depreciation and amortisation
Divestment of enterprises
Disposals
Reclassified to assets classified as held for sale
Depreciation and amortisation at 31 December 2018
Impairment losses at 1 January 2018
Exchange rate adjustments
Impairment losses and reversals
Divestment of enterprises
Disposals
Reclassified to assets classified as held for sale
Impairment losses at 31 December 2018
Carrying amount at 31 December 2018
4,775
2,644
97,086
1,174
13,890
114,794
-
-
422
-
(171)
-
53
(915)
4,164
(3,299)
-
(158)
-
-
712
(2,745)
(787)
-
-
-
-
145
(642)
777
-
11
9
(30)
-
-
76
(628)
2,082
(1,079)
-
(76)
5
-
76
(1,074)
(64)
-
-
25
-
-
(39)
969
(395)
7,672
5
(2,772)
(1,242)
101
14,358
(15,990)
98,823
(32,114)
103
(5,653)
391
1,125
4,727
(31,421)
(4,369)
5
603
2,379
-
290
(1,092)
66,310
(1)
-
16
(12)
(2)
-
11
(1)
1,185
(761)
1
(91)
7
1
-
(843)
-
-
-
-
-
-
-
342
(277)
7,805
14,406
(125)
(4,809)
512
(14,498)
(299)
16,605
-
-
-
-
-
-
-
(562)
8
-
-
383
-
(171)
16,434
(673)
15,488
14,436
(2,939)
(6,053)
613
(53)
(16,918)
118,695
(33,954)
104
(5,820)
403
1,126
4,803
(33,338)
(4,995)
13
603
2,404
383
290
(1,302)
84,055
Production assets by segment, % 2018
Markets & Bioenergy
Offshore
Onshore
13%
9%
DKK 66,310
million
78%
Property, plant and equipment
under construction by segment, % 2018
Markets & Bioenergy
Offshore
Onshore
12%
13%
DKK 16,434
million
75%
100 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 3. Capital employed
Notes
Contents
CGUs in Offshore
The cash generating units (CGUs) are made up
of individual offshore wind farms, each of which
generates cash flows for the segment indepen-
dently of each other.
Significant CGUs:
Anholt, Borkum Riffgrund 1, Borkum Riffgrund 2,
Borssele 1 & 2, Burbo Bank Extension, Gode Wind 1,
Gode Wind 2, Greater Changhua 1 & 2a,
Horns Rev 2, Hornsea 1, London Array,
Race Bank, Revolution Wind, Skip Jack,
South Fork, Westermost Rough, Walney,
Walney Extention, and West of Duddon Sands.
CGUs in Onshore
The CGUs are made up of individual onshore wind
farms, each of which generates cash flows for the
segment independently of each other.
Significant CGUs:
Amazon, Lockett, Tahoka, Willow Springs, Sage
Draw, Plum Creek, and Permian Energy Center.
CGUs in Markets & Bioenergy
The Danish power stations constitute a single CGU,
as overall production planning is for the entire
Danish portfolio of CHP plants. The not-yet-
commissioned waste-to-energy plant Renescience
in Northwich in the UK is deemed to constitute an
independent CGU.
The distribution assets, each of which generates
cash flows for the segment independently of each
other, also constitute CGUs.
Significant CGUs:
Central CHP plants (including goodwill), Renescience
Northwich, power distribution business, the offshore
gas pipelines and the city light business.
Impairment losses
Impairment losses relating to goodwill
We have not impaired goodwill or other
intangible assets in 2019.
2018. This reversal occurred, as we expected
to recover a higher amount than the carrying
amounts of the assets after reversal of the
impairment loss in previous years.
Impairment losses relating to property,
plant and equipment
In 2019, property, plant and equipment under
construction related to the Renescience facility
was impaired by DKK 500 million. Renescience
is part of our Markets & Bioenergy segment.
Useful lives
Buildings
Offshore wind farms
Onshore wind farms
Production assets, power (thermal)
and district heating
The impairment losses related to Renescience
are primarily due to delays in commissioning,
increases in capex, as we are optimising the
waste conversion technology, and changes in
cost and price estimates.
Gas transportation system
(marine pipelines)
Distribution grids, power
Fixtures and fittings, tools and
equipment
20-50 years
20-30 years
24-30 years
20-25 years
20-40 years
20-40 years
3-10 years
The recoverable amount of Renescience is
measured on the basis of its value in use and
based on internal budgets and forecasts. Sig-
nificant assumptions in the forecasts include
the facility capacity, the waste conversation
ratios, and potential revenue streams from
increased recycling. The estimated cash flows
are discounted with a pre-tax rate of 7.5%.
In 2019, production assets related to the battery
storage project, Carnegie Road, were fully
impaired by DKK 68 million. Carnegie Road is
part of our Onshore segment. The recoverable
amount is measured on the basis of its value in
use. The impairment losses related to Carnegie
Road were primarily due to a decrease in prices
of the firm frequency response market in the UK.
In connection with the reclassification of our
power distribution business to assets classified
as held for sale, we reversed an impairment loss
from previous years of DKK 603 million during
Key accounting estimates
Key assumptions for value in use
CGUs are tested for impairment if there is any indica-
tion of impairment. In performing an impairment test,
we assess whether the CGU to which the net book
value relates exceeds the recoverable amount. When
performing value in use tests, we see if the CGU will
be able to generate positive net cash flows sufficient
to support the net book values.
Value in use calculations are based on expected
future cash flows from financial budgets and
forecasts and include a number of assumptions and
estimates. These assumptions include future market
conditions, market prices of power and biofuel, estimat-
ed discount rates, estimated useful lives of the projects,
etc. The market prices applied are based on available
forward prices for a period of up to five years and our
best estimate of long-term prices for the remainder of
the period.
When calculating the recoverable amount of property,
plant and equipment under construction, other materi-
al assumptions include the expected completion costs
and the commissioning dates.
Accounting policies
Intangible assets
Rights are measured at cost less accumulated
amort isation and impairment losses. Rights are
amortised on a straight-line basis over their
estimated future useful lives, which are 5-20 years.
Property, plant and equipment
Property, plant and equipment which is not a lease is
measured at cost less accumulated depreciation and
impairment losses. Cost of property, plant and
equipment is depreciated by using the straight-line
method, the diminishing-balance method or the
reducing - fraction method. The diminishing-balance
method and the reducing-fraction method result in
decreasing depreci ation over the useful life. These
methods are used for some of the offshore wind farms.
Cost comprises purchase price and any costs directly
attributable to the acquisition until the date the
asset is available for use. The cost of self-constructed
assets comprises direct and indirect costs of materials,
components, sub-suppliers and labour. Borrowing costs
relating to both specific and general borrowing directly
attributable to assets under construction with a lengthy
construction period are recognised in cost during the
construction period. Cost is increased by the present
value of the estimated obligations for demolition
and decommissioning of assets to the extent that the
obligations are recognised as a provision.
Subsequent costs, for example in connection with
replacement of parts of an item of property, plant
and equipment, are recognised in the carrying
amount of the asset in question when it is probable
that future economic benefits will flow to the
Group from the expenses incurred. Other repair
and maintenance expenses are recognised in profit
(loss) for the year as incurred.
In 2019, we implemented IFRS 16, which resulted in
the recognition of lease assets of DKK 5,066 million
as of the implementation date (1 January 2019).
Please see notes 1 and 8 for further information on
the implementation of IFRS 16.
101 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 3. Capital employed
Notes
Contents
3.2 Provisions and contingent assets and liabilities
Decommissioning obligations
Decommissioning obligations mainly comprise
estimated expenses relating to decommission-
ing and disposal of our offshore and onshore
wind farms, restoration of seabeds and the
decommissioning of our CHP plants.
As developers of offshore and onshore wind
farms, we are obliged to decommission our wind
farms and restore the surroundings at our own
expense. When we construct offshore wind farms
in cooperation with partners, they are liable for
their share of the decommissioning costs. There-
fore, we have included only the decommissioning
obligations associated with our ownership
interest in the offshore wind farms.
Decommissioning obligations increased by
DKK 686 million from 2018 to 2019, primarily
due to the construction of new wind farms.
Onerous contracts
The provision for onerous contracts related to
the LNG terminal capacity increased by
DKK 1,165 million following our agreement to
divest the activities, and has subsequently been
transferred to assets and liabilities held for sale.
Onerous contracts hereafter comprise:
– two contracts for gas storage capacity in
Germany amounting to DKK 814 million
(2018: DKK 949 million)
– a contract for gas storage capacity in
Denmark amounting to DKK 164 million
(2018: DKK 229 million).
Provisions, DKKm
Provisions at 1 January
Change in accounting policy
Exchange rate adjustments
Used during the year
Provisions reversed during the year
Provisions made during the year
Change in estimates
Transferred to assets and liabilities
classified as held for sale
Interest element of provisions
Additions of acquisition of enterprises
Disposal related to divestment of
enterprises
Disposal related to sale of assets
Total provisions
Falling due as follows:
0-1 year
1-5 years
After 5 years
2019
2018
Onerous
contracts
Other
provisions
Total
Decom-
missioning
obligations
Decom-
missioning
obligations
5,472
-
160
(3)
-
421
(93)
(11)
212
-
-
-
2,418
(25)
-
(380)
-
1,165
-
(2,277)
77
-
-
-
5,564
13,454
-
29
(636)
(596)
1,104
-
-
-
-
-
-
(25)
189
(1,019)
(596)
2,690
(93)
(2,288)
289
-
-
-
Onerous
contracts
Other
provisions
Total
2,711
4,058
11,520
-
-
(373)
(8)
-
-
-
88
-
-
-
-
(1)
(636)
(484)
2,459
-
-
-
168
-
-
-
(27)
(1,126)
(493)
3,006
86
(12)
280
427
(12)
(195)
2,418
5,564
13,454
4,751
-
(26)
(117)
(1)
547
86
(12)
192
259
(12)
(195)
5,472
-
193
6,158
978
5,465
12,601
-
213
5,945
184
537
257
353
4,279
833
537
5,029
7,035
271
967
409
4,508
647
680
5,668
7,106
5,279
1,180
Other provisions
Provisions made during the year primarily
relate to partly divested offshore wind farms.
Provisions reversed primarily relate to the
Elsam competition case (DKK 564 million).
Other provisions comprise primarily:
– offshore partnership provisions, including
warranty obligations and wake effect
compensations
– obligations in relation to the divestment
of our Oil & Gas business in 2017
– obligations in respect of our own carbon
emissions
– other contractual obligations.
102 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 3. Capital employed
Notes
Contents
We have been party to actions relating to the
Danish competition authorities’ claim that the
former Elsam A/S and Elsam Kraft A/S ('Elsam'),
now part of Ørsted, charged excessive prices
in the Danish wholesale power market in the
period 1 July 2003 to 31 December 2006.
claim was filed in 2007 before the Copenhagen
Maritime & Commercial Court, amounting
to approx DKK 4.4 billion with addition of
litigation interest. Despite the outcome of the
actions with the competition authorities, the
plaintiffs continue to pursue their claim.
Key accounting estimates
Assumptions for provisions
We continually assess our provisions recognised
to cover contractual obligations and claims raised
against Ørsted. Timing, probabilities, amounts, etc.,
which have a bearing on our provisions' estimates are
updated quarterly based on our expectations.
Contingent liabilities
Liability to pay compensation
In case of any environmental accidents or
other types of damage caused by our oil and
gas transport, the companies Ørsted Salg &
Service A/S and Danish Oil Pipe A/S are liable
to pay compensation according to legisla-
tion. This also applies if there is no proof of
negligence (strict liability). We have taken out
insurance to cover any such claims.
Secondary liability
As part of the divestment of our Oil & Gas
business, we assumed a secondary liability
regarding the decommissioning of offshore
installations.
In May 2018, the High Court of Western
Denmark found that it had not been proved
that Elsam charged excessive prices in the
period from 1 January 2005 to 30 June 2006.
The ruling lead to a subsequent settlement
with the competition authorities with the
same conclusion for another part of the
period. From this time, there are no outstand-
ing cases with the competition authorities
claiming Elsam infringed competition law.
Litigation
We are party to a number of court cases and
legal disputes. In our assessment, none of these
will significantly impact Ørsted's financial
position, neither individually nor collectively.
In connection with the cases against the
competition authorities, some energy trading
companies, some of their customers and others
have filed claims for damages. The biggest
Decommissioning obligations by
swegment DKKm
Offshore
Onshore
Markets
& Bioenergy
0-5 years
5-10 years
10-20 years
After 20 years
2019
2018
204
490
2,068
1,800
4,562
4,010
-
-
-
306
306
217
9
95
296
890
1,290
1,245
Total
213
585
2,364
2,996
6,158
5,472
In 2010, Ørsted made a provision of DKK 298
million plus litigation interest. As the competi-
tion authorities' claims against Elsam have been
dismissed, we reversed the provision in 2019.
Estimates of provisions are based on our
expectations of, for example:
– timing and scope of obligation
– future cost level
– legal assessment.
Change of control
Some of our activities are subject to con-
sents, permits and licences granted by public
authorities. We may be faced with a claim
for acceptance of any transfer, possibly with
additional terms and conditions, if the Danish
State holds less than 50% of the share capital
or voting rights in Ørsted A/S. Read more in
note 6.1 'Interest-bearing debt'.
The outcome of our contractual obligations and
claims may depend on future events which, by
nature, are uncertain.
Accounting policies
Provisions are recognised when the following
criteria are fulfilled:
– We have a legal or constructive obligation as
a result of an earlier event.
– The settlement of the obligation is expected
to result in an outflow of resources.
– The obligation can be measured reliably.
Decommissioning obligations are measured at the
present value of the future liability in respect of
decommissioning as expected at the balance sheet
date. The present value of the provision and changes
in estimate are recognised as part of the cost of
prop erty, plant and equipment and depreciated
together with the associated asset. The addition
of interest on provisions is recognised in the income
statement under financial expenses.
For onerous contracts, a provision is made when
the expected income to be derived from a contract
is lower than the unavoidable cost of meeting our
obligations under the contract.
Provisions concerning carbon emissions are
recognised when our actual emissions exceed our
holding of carbon emission allowances.
103 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 3. Capital employed
Notes
Contents
3.3 Acquisition of enterprises
In 2019, we have paid contingent consider-
ations of DKK 616 million in total, related to
the acquisition of Deepwater Wind in 2018.
The contingent payments were depending
upon the regulator's approval of two power
purchase agreements for our Revolution Wind
project (Offshore). The contingent consid-
erations were fully covered by provisions
and therefore, profit (loss) for the year was
not affected.
In 2019, we also paid DKK 148 million for the
acquistion of Coronal Energy's development
business (Onshore) and recognised a contingent
payment of DKK 50 million.
On 8 November 2018, we acquired all of the
membership interests in Deepwater Wind LLC,
effectively gaining control of the company,
which was incorporated into our Offshore
business unit.
On 1 October 2018, we acquired all of the
membership interests in Lincoln Clean
Energy LLC, effectively gaining control of the
company. The acquisition represented the first
step into our new business unit, Onshore.
The opening balances for Lincoln Clean Energy
and Deepwater Wind have been finalised in
2019 without any adjustments to the provisional
opening balances.
Accounting policies
Acquisition of enterprises are recognised using the
acquisition method, whereby assets and liabilities
as well as contingent liabilities of the acquired
enterprise are measured at fair value on the date of
acquisition.
The fair value of production assets and assets under
construction are normally determined using an
income approach where they are valued at present
value based on the expected cash flows they
can generate, including any non-separable power
purchase agreements, as well as income, such as
production tax credits.
Cash flows used for acquisitions, DKKm
Fair value at time of acquisition:
Property, plant and equipment
Other assets
Cash
Interest-bearing debt
Tax equity liabilities
Provisions
Derivatives
Deferred tax, net
Other liabilities
Net assets acquired
Goodwill
Purchase price
Cash, available and acquired
Contingent consideration – Coronal Energy
Contingent consideration – Deepwater Wind
Cash flow used for acquisition of enterprises
Purchase price
Adjustments for cash
Adjustments for interest-bearing tax equity
liability
Adjustments for interest-bearing debt
Enterprise value
2019
Total
86
115
-
-
-
-
-
-
(3)
198
-
198
-
(50)
616
764
764
-
-
-
764
2018
Key accounting estimates
Lincoln Clean
Energy
Deepwater
Wind
9,707
28
77
(2,337)
(2,126)
(384)
(1,185)
(486)
(198)
3,096
-
3,096
(28)
-
-
3,068
3,096
(77)
280
2,337
5,636
5,781
158
363
(1,702)
(90)
(43)
57
(1,239)
(57)
3,228
-
3,228
(37)
-
(657)
2,534
3,228
(363)
90
1,702
4,657
Total
15,488
186
440
(4,039)
(2,216)
(427)
(1,128)
(1,725)
(255)
6,324
-
6,324
(65)
-
(657)
5,602
6,324
(440)
370
4,039
10,293
Purchase price allocations in business combinations
By nature, the application of the acquisition method
for business combinations involves judgement in
assessing the fair value of identifiable assets and
liabilities.
The fair value of derivatives is determined using our
normal approach for such items, based on market
prices or expectations for prices over the term of
the derivatives, as described in note 7.7 'Fair value
measurement'.
Property, plant and equipment
Our assessment of fair value is based on a number of
estimates regarding WACC and expected cash flows
which both have a large impact on the fair value.
The fair values of other assets and liabilities are
valued using the approach we find most relevant
for the individual item, which can be either a market
approach, an income approach or a cost approach.
Derivatives
Our assessment of fair value is dependent on expected
future prices. See note 7.7 'Fair value measurement' for
our valuation principles.
Deferred tax
Our expectation of the timing of repayment of tax
equity liabilities, and thereby the expected 'flip' of
the tax equity structure, impacts the fair value of
deferred tax on the assets and liabilities that are part
of wind farms with tax equity partners. The expected
tax rate also significantly impacts deferred tax.
An acquired enterprise is included in the consolidated
financial statements from the date of acquisition,
which is the date when we obtain control of the
acquired enterprise.
When an acquired enterprise has entered into a
power purchase agreement classified as a derivative,
the fair value of the agreement will be included in
the opening balance. Post-acquisition, this fair value
is recognised as an adjustment to revenue over the
duration of the contract, based on the fair value
calculation at the time of the acquisition.
104 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 3. Capital employed
Notes
Contents
3.4 Divestment of
enterprises
3.5 Gross and net
investments
2019
2018
Gross and net investments, DKKm
Selling price, DKKm
Payment
Working capital adjustment
Selling price on divestment of enterprises
Transaction costs
Of which, selling price receivable
Cash selling price on divestment of enterprises
Payments related to provisions of divestments in previous years
Total cash flows from divestment of enterprises
Gain (loss) on divestment of enterprises, DKKm
Selling price on divestment of enterprises
Net assets sold
Provisions as a result of the transaction
Transaction costs
Gain (loss) on divestment of enterprises
-
-
-
(63)
-
(63)
(26)
(89)
2019
-
-
-
(63)
(63)
497
(68)
429
(66)
-
363
-
363
2018
429
(240)
4
(66)
127
We have not divested any enterprises in 2019.
Accounting policies
Cash flows related to divestment of enter-
prises totalled DKK -89 million in 2019 (2018:
DKK 363 million) and consisted of transaction
costs and payments on a provision of a divest-
ment in a previous year.
In 2018, divestment of enterprises related
to the sale of our 50% ownership interest
in Enecogen (Markets & Bioenergy). Trans-
ferred cash and cash equivalents totalled
DKK 6 million.
We recognise income from divested enterprises in the
income statement up until the date of divestment.
The date of divestment is the date on which we
relinquish control of the divested enterprise.
Gains or losses on the divestment or discontinuation
of subsidiaries and associates are determined as the
difference between the selling price and the carrying
amount of the net assets divested.
Moreover, we deduct the fees of advisers, etc., in
connection with the divestment or discontinuation of
the enterprise.
Cash flows from investing activities
Dividends received and capital reductions reversed
Purchase and sale of securities, reversed
Loans to associates and joint ventures, reversed
Sale of non-current assets, reversed
Interest-bearing debt in acquired enterprises
Restricted cash in acquired enterprises
Total gross investments
Transactions with non-controlling interests in connection with divestments
Sale of non-current assets
Total cash flows from divestments
Total net investments
2019
(10,997)
(21)
(8,949)
(3)
(3,335)
-
-
(23,305)
(6)
3,335
3,329
(19,976)
2018
(1,026)
(25)
595
12
(20,002)
(4,409)
374
(24,481)
(52)
20,002
19,950
(4,531)
Gross investments totalled DKK 23,305 million
in 2019, which was 5% lower than in 2018.
Gross investments in Offshore was DKK 15,121
million and was primarily related to the
construction of Hornsea 1 and 2 in the UK,
Borssele 1 & 2 in the Netherlands and Greater
Changhua 1 & 2a in Taiwan.
In Onshore, gross investments was DKK 6,158
million and was primarily related to the
construction of Sage Draw, Plum Creek,
Lockett, Willow Creek and Permian Energy
Center in the US.
In 2018, gross investments of DKK 15,081
million in Offshore related to the construction
of Hornsea 1, Walney Extension, Borkum
Riffgrund 2, Borssele 1 & 2, early investments
in the US to qualify for future tax credits as
well as the acquisition of Deepwater Wind in
the US. Gross investments of DKK 6,779 million
in Onshore related to the acquisition of Lincoln
Clean Energy in US and the construction of
the Tahoka and Lockett wind farms.
Divestments totalled DKK 3,329 in 2019 and
primarily related to the divestment of 50%
of certain Deepwater Wind assets and the
receipt of deferred proceeds from the 50%
farm-down of Hornsea 1 in 2018.
In 2018, divestments related to the 50%
farm-down of Hornsea 1 and the receipt of
deferred proceeds from the 50% farm-down
of Walney Extension in 2017 and proceeds
related to the divestment of our 50% owner-
ship share in Enecogen.
105 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 3. Capital employed
Notes
Contents
3.6 Assets classified as held for sale
At 31 December 2019, assets and related liabil-
ities held for sale comprised our Danish power
distribution, residental customer and city light
businesses, our oil pipe system in Denmark and
our LNG business. All activities are part of
Markets & Bioenergy.
In September 2019, we signed an agreement
to divest our Danish power distribution
(Radius), residental customer and city light
businesses to SEAS-NVE. We expect that the
transaction will close in the first half of 2020.
In December 2019, we signed an agreement
to divest our LNG business, and we expect
that the transaction will close during the
summer of 2020.
Due to a new payment agreement with the
Hejre partners on the stabilisation plant
(part of the oil pipe system), we have impaired
property, plant and equipment related to the
stabilisation plant and recognised a receivable
compensation of approx the same amount.
At 31 December 2019, the compensation
receivable was DKK 1.9 billion.
Assets classified as held for sale at 31 Decem-
ber 2018 comprised the same activities as per
31 December 2019, except for the LNG business.
Assets classified as held for sale, DKKm
Intangible assets
Property, plant and equipment
Deferred tax
Inventories
Trade receivables
Other receivables
Income tax
Total assets classified as held for sale
Deferred tax
Provisions
Contract liabilities
Trade payables
Other payables
Income tax
Total liabilities relating to assets classified as held for sale
Net assets classified as held for sale
The table shows assets
and liabilities which
have been put up for
sale, and which are
therefore not expected
to contribute to our
future earnings.
2019
226
13,243
589
43
736
2,113
2
16,952
1,315
2,662
3,107
333
970
445
8,832
8,120
2018
80
13,951
-
16
701
430
45
15,223
823
372
2,737
92
826
1
4,851
10,372
Accounting policies
Assets classified as held for sale comprise assets and
liabilities, the values of which are highly probable to
be recovered through a sale within 12 months rather
than through continued use.
Assets and liabilities classified as held for sale are
measured at the carrying amount at the time of
classification as 'held for sale' or at market value less
selling costs, whichever is lower. The carrying amount
is measured in accordance with the Group's account-
ing policies.
No depreciation or amortisation is effected on
intangible assets and prop er ty, plant and equipment
from the time of classification as 'held for sale'.
East Coast Hub,
Grimsby, UK.
106 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 3. Capital employed
Notes
Contents
3.7 Discontinued operations
Capital employed
Our capital employed in discontinued opera-
tions at 31 December 2019 mainly consisted
of provisions relating to the divestment of the
Oil & Gas business (tax indemnifications and
payments related to the Fredericia stabilisa-
tion plant) as well as a receivable selling price
which does not carry interest. We expect to re-
ceive the outstanding selling price in 2020 and
therefore, it was reclassified from non-current
to current receivables at 31 December 2019.
In addition, we have an interest-bearing
receivable of DKK 333 million (not part of
capital employed), which we also expect to
receive in 2020.
Discontinued operations comprise assets and
liabilities related to our divested Oil & Gas
business, which was sold to INEOS on
29 September 2017.
Financial results
Profit (loss) in 2019 amounted to DKK -56
million (2018: DKK 10 million) and primarily
concerned adjustments related to currency
and the fair value of a receivable.
Total cash flows in 2019 amounted to
DKK 174 million (2018: DKK 209 million), of
which DKK -211 million was from operating
activities and primarily concerned payments
related to the Fredericia stabilisation plant and
payment of fees for existing Oil & Gas insur-
ance activities. The insurance fee was provided
for at the time of the divestment in 2017. Cash
flows from investing activities amounted to
DKK 385 million and primarily concerned the
receipt of a selling price receivable. The receiv-
able was interest-bearing and therefore had no
impact on our interest -bearing net debt.
Profit from discontinued operations, DKKm
2019
2018
Operating profit (loss) (EBIT)
Gain (loss) on divestment of enterprises
Financial income and expenses, net
Profit (loss) before tax
Tax on profit (loss) for the year
Profit from discontinued operations
(7)
(43)
(8)
(58)
2
(56)
-
(44)
(53)
(97)
107
10
Tax for the period, discontinued operations, DKKm
2019
2018
Adjustment related to prior years
Gains (losses) from divestments as well as other non-taxable income and
non-deductible costs
Other activities in Oil & Gas
Total, business performance
Total, IFRS
Cash flows, DKKm
Cash flows from operating activities
Cash flows from other investing activities
Cash flows from financing activities
Total cash flows
The remaining net
assets under dis-
continued operations
consist of the selling
price receivable and
provisions as a result
of the divestment of
Oil & Gas.
Capital employed, DKKm
Non-current receivables
Derivatives, net
Other provisions
Tax, net
Other receivables and other payables, net
Total net assets
-
1
1
2
2
2019
(211)
385
-
174
2019
-
(47)
(672)
13
665
(41)
79
16
12
107
107
2018
(53)
262
-
209
2018
746
(106)
(820)
29
8
(143)
107 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 3. Capital employed
Notes
Contents
3.8 Non-controlling interests
Transactions with non-controlling interests, DKKm
2019
2018
Transactions with non-controlling interests
Dividends paid to non-controlling interests
Divestment of equity investments to non-controlling interests
Other capital transactions with non-controlling interests
Total transactions, see statement of cash flows
Divestment of equity investments to non-controlling interests
Changes in receivables relating to the acquisition and divestment of non-controlling interests
Cash selling price, total
(388)
(74)
-
(462)
(74)
(74)
(400)
13
(4)
(391)
13
13
Subsidiaries with significant
non-controlling interests
Gunfleet Sands Holding Ltd.
Walney (UK) Offshore Windfarms Ltd.
Non-controlling
interest
49.9%
49.9%
Registered
office
London, UK
London, UK
DKKm
Statement of comprehensive income
Revenue
EBITDA
Profit (loss) for the year
Total comprehensive income
Profit (loss) for the year attributable to non-controlling interests
Balance sheet
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Carrying amount of non-controlling interests
Statement of cash flows
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
– of which, dividends paid to non-controlling interests
Gunfleet Sands
Holding Ltd. group
Walney (UK) Offshore
Windfarms Ltd.
2019
2018
2019
2018
Accounting policies
In the table, we provide
financial information for
subsidiaries with signifi-
cant non-controlling
interests. The amounts
stated are the con-
solidated accounting
figures of the individual
enterprises/groups,
determined according to
our accounting policies.
Amounts are stated
before intra-group
eliminations.
Transactions with non-controlling interests are
accounted for as transactions with the shareholder
base.
Gains and losses on the divestment of equity invest-
ments to non-controlling interests are recognised in
equity when the divestment does not result in a loss
of control.
Net assets acquired are not revalued on the acquisi-
tion of non-controlling interests. Any difference
between the carrying amount and the acquisition
or selling price is recognised in equity.
448
275
60
84
30
431
237
26
5
13
1,170
616
104
192
52
1,079
554
66
12
33
2,121
2,153
5,681
5,656
187
423
62
910
293
-
(241)
(119)
139
311
88
944
264
-
(283)
(144)
247
982
303
213
795
223
2,330
2,433
647
(13)
(600)
(268)
563
(16)
(566)
(256)
108 / 183
Ørsted Annual report 2019Financial statements Notes
Contents
4.
Working capital
110 Working capital
111
Inventories
111
Contract assets and liabilities
112 Trade receivables
112
Other receivables
113
Tax equity liabilities
114 Other payables
114 Changes in net working capital
Ørsted Annual report 2019 Consolidated financial statements – 4. Working capital
Notes
Contents
4. Working capital
Construction of offshore transmission assets in
the UK, which are recognised as inventories, will
continue to tie up cash until they are divested.
Tax equity liabilities also vary within and
across years. This is due to the fact that we
receive cash contributions from tax equity
partners at the point in time when a US wind
farm enters into operation.
Trade payables relating to capital investments
are not included in this section, as they are
presented as part of the cash flows from
investing activities.
Working capital, DKKm 2019
Offshore
Onshore
Markets & Bioenergy
Other
6.7bn
12,197
Our net working capital, excluding trade payables
relating to capital expenditure, amounted to
DKK 6,709 million in 2019 against DKK 7,424 million
in 2018.
-4,578
-1,277
367
0
Offshore primarily has funds tied up in inventories,
construction agreements and trade receivables.
The most significant working capital item in
Onshore consists of liabilities regarding tax equity
contributions from our partners. Markets & Bioenergy
also has a net negative working capital due to
prepayments from heat customers which are only
partly countered by inventories and receivables.
-0.7bn
We reduced funds tied up in working capital by
DKK 715 million relative to 2018, of which
DKK 898 million pertained to work in progress
and related trade payables in Offshore.
Our key working capital items consist of
inventories, net contract assets, trade receiv-
ables and payables, tax equity liabilities and
other payables.
Working capital items vary with the seasonal
variations in our generation and sales activities
during the year.
Our net contract assets relate primarily to
prepayments from heat customers in connec-
tion with bioconversions and construction of
offshore wind farms for partners.
The net contract assets vary within and
across years, depending on the portfolio of
offshore construction assets, and when we
reach certain milestones and trigger pay-
ments from our partners.
Working capital, DKKm
Inventories
Contract assets, net
Trade receivables
Other receivables
Trade payables, excluding trade payables relating to capital expenditure
Tax equity liabilities
Other payables
Net working capital, excluding trade payables relating to capital expenditure
at 31 December
Of which, work in progress and related trade payables
Of which, tax equity partner liabilities and other working capital
(2,047)
(2,230)
2019
14,031
(3,807)
8,140
3,253
(7,529)
(4,587)
(2,793)
6,709
8,756
2018
13,943
(3,115)
10,741
2,968
(10,099)
(3,719)
(3,295)
7,424
9,654
Work in progress consists of inventories related to
transmission assets, construction agreements and
construction management agreements in connec-
tion with the construction of transmission assets and
offshore wind farms for partners as well as related
trade payables.
110 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 4. Working capital
Notes
Contents
4.1 Inventories
Inventories, DKKm
Offshore transmission assets
Biomass
Gas
Coal
Oil
Green certificates
Carbon emission allowances (purchased)
Other inventories
Total inventories
Inventories recognised as an expense in 'Cost of sales' during the year
2019
10,114
445
1,057
242
106
1,717
345
5
14,031
16,871
2018
9,885
253
1,620
261
119
1,555
172
78
13,943
25,262
Inventories measured at fair value in the table above
are disclosed in note 7.7 'Fair value measurement'.
We use biomass, coal, gas and, to a limited extent,
oil as fuel at our CHP plants. From 2019, the use
of gas is very limited as a result of the biomass
conversion of the Skærbæk Power Station in Den-
mark and the divestment of the Enecogen Power
Station in the Netherlands. Green certificates are
primarily renewable obligation certificates (ROCs)
which are issued to power generators sourcing
from renewable energy sources in the UK.
Gas at storage primarily relates to our gas
trade activities.
Accounting policies
Offshore transmission assets are measured at
cost. The costs comprises costs of materials used
in construction, site labour costs, costs of renting
equipment as well as indirect production costs, such
as employee costs.
Gas storage in non-Danish facilities are managed on a
fair value basis, and therefore the gas in these storage
facilities is recognised at fair value less costs to sell.
Changes in the fair value less costs to sell are recog-
nised in cost of sales in the period of the change.
Gas in Danish storage facilities are recognised at cost
determined as a weighted average of the previous
months purchase price, including transportation costs.
Purchased carbon emission allowances are measured
at market value.
Green certificates, which we earn by generating
power using renewable energy sources, are recog-
nised in inventories in step with our generation.
We measure green certificates (earned and bought)
at cost using the first in, first out (FIFO) principle.
Other inventories are measured at cost determined
on a first in, first out basis or a net realisable value,
where this is lower.
Inventories are written down to the lower of net
realisable value and cost price. For the offshore
transmission assets, it is the expected final transfer
value announced by Ofgem.
The net realisable value is the sum (discounted)
which the inventories are expected to generate
through a normal sale.
4.2 Contract assets
and liabilities
Revenue from contracts with customers DKKm
Revenue recognised included in contract liabilities at the beginning of the year
Revenue recognised from perfomance obligations satisfied in previous years
Contract balances, DKKm
Contract assets
Current contract assets
Total contract assets
Contract liabilities
Non-current contract liabilities
Current contract liabilities
Total contract liabilities
2019
771
128
2018
228
95
2019
2018
739
739
3,762
784
4,546
1,451
1,451
3,642
924
4,566
Contract asset and contract liabilities are
primarily related to:
– the construction of offshore wind farms with
partners, with each party usually owning
50% of the offshore wind farm
The table shows how much of our revenue that relates
to contract liabilities carried forward (as prepayments
and deferred revenue), and how much that relates to
performance obligatons satisfied in a prior year (e.g. re-
negotiations or constraints on variable considerations
that are not recognised until they are highly probable).
– prepayments from heat customers.
At the end of 2019, contract assets and
liabilities regarding construction agreements
relates to our partners' share of the offshore
wind farm Hornsea 1 and the Coastal Virginia
demonstration project in the US.
At the end of 2018, contract assets and liabili-
ties included the construction of our partners'
shares of the Hornsea 1, Walney Extension and
Borkum Riffgrund 2 offshore wind farms.
Accounting policies
We recognise a contract asset when we perform
a service or transfer goods in advance of receiving
consideration, and the consideration is conditional.
When the consideration is unconditional, and the
goods or services are delivered, we recognise a receiv-
able. A right to consideration is unconditional if only
the passage of time is required before the payment is
due. Contract assets are measured at the transac-
tion price of the good or services which we have
performed less invoicing on account. We recognise a
contract liability when the invoicing on account and
expected losses exceed the transaction price of the
goods or services transferred to our customer.
111 / 183
Ørsted Annual report 2019Financial statements
Consolidated financial statements – 4. Working capital
Notes
Contents
4.3 Trade
receivables
4.4 Other
receivables
Trade receivables, DKKm
Trade receivables, not due
Trade receivables, 1-30 days overdue
Trade receivables, more than 30 days overdue
Trade receivables, write-down
Total trade receivables
We continuously perform credit ratings of
our customers, as described in note 7.5 'Credit
risks'. For customers with a general credit risk,
a write-down of 0-1% is carried out on initial
recognition. In 2019, write-downs of receivables
were DKK 33 million (2018: DKK 35 million).
Losses for the year totalled DKK 0 million
(2018: DKK 36 million).
2018
Other receivables, DKKm
2019
2018
Receivables from the divestment of assets and
enterprises
1,456
3,218
2019
7,353
445
416
(74)
10,186
293
326
(64)
Receivables from the divestment of equity
investments to non-controlling interests
VAT and other indirect tax receivables
8,140
10,741
Collateral provided
The table shows our
other receivables broken
down into working
capital, interest-bearing
net debt and other
capital employed.
Deposits
Prepayments
Other accounts receivables
Other receivables
Of which, working capital
Of which, other capital employed
Of which, interest-bearing net debt
717
574
1,940
411
556
1,312
6,966
3,253
1,216
2,497
634
427
710
240
330
1,501
7,060
2,968
2,628
1,464
Accounting policies
We keep our receivables until maturity, and therefore,
they are measured at amortised cost.
Write-downs are carried out from initial recognition
of our receivables. The write-down is calculated as
the difference between the carrying amount of the
receivable and the net present value of expected
future cash flows from the receivable. The discount
rate used is the effective interest rate for the
individual receivable or the individual portfolio.
We apply the simplified approach to the write-down
of trade receivables, which permits calculating the
write-down as the full loss during the entire term of
the receivable.
In 2019, receivables from the divestment of
assets and enterprises primarily related to the
divestment of our Oil & Gas business.
primarily relate to the divestment in 2011 of
our ownership interests in Gunfleet Sands.
In 2018, receivables from the divestment of
assets and enterprises primarily related to re-
ceivables in connection with the divestment of
50% of our ownership interests in the offshore
wind farm Hornsea 1 and receivables related
to the divestment of our Oil & Gas business.
The collateral provided by the Group is
receivables from banks in connection with
trading of derivatives.
The short-term portion of other receiv-
ables amounted to DKK 5,253 million
(2018: DKK 4,390 million).
Walney Extension,
Irish Sea, UK.
Receivables from the divestment of equity
investments to non-controlling interests
112 / 183
Ørsted Annual report 2019Financial statements
Consolidated financial statements – 4. Working capital
Notes
Contents
4.5 Tax equity liabilities
Tax equity liabilities, DKKm
Balance at 1 January
Contribution received from tax equity partners
Tax equity balances from business acquisitions
Tax attributes and PTCs recognised in other
operating income
Cash paid to tax equity partners
Tax equity partners' contractual return
Exchange rate adjustments
Balance at 31 December
Of which, working capital
Of which, interest-bearing debt
2019
4,173
1,306
-
(622)
(73)
327
84
5,195
4,587
608
2018
-
1,995
2,216
(79)
(3)
44
-
4,173
3,719
454
2018 was the first
year we recognised
US tax liabilities
originating from our
acquisitions and entry
into the US market.
In the US, we have several wind farms with
tax equity partners. During 2019, we com-
missioned one onshore wind farm, Lockett
(184MW), with a tax equity partner.
We have four additional wind farms, three
onshore and one offshore, with tax equity
partners. These wind farms were commissioned
during 2018 or prior to our acquisitions of
Lincoln Clean Energy and Deepwater Wind.
Description of tax equity partnerships
Tax equity partnerships are characterised by a
tax equity partner who contributes an upfront
payment as part of the initial project invest-
ment and does not have an operational role
in the project. The partner receives a contrac-
tually agreed return on the contribution. In
order to ‘repay’ the initial contribution and
the return, a disproportionate share of the
production tax credits (PTCs) and other tax
attributes (accelerated tax depreciation and
other taxable results) are allocated to the
partner during the first part of the project’s
lifetime. The partner also receives some cash
payment-based percentages specified in the
partnership agreements. Once the partner
receives the agreed return, the agreement
'flips', and the partner is typically entitled to
a minor part of the cash distributions from the
project, unless we repurchase this right from
them, which is highly likely.
Accounting policies
When a tax equity partnership is formed, we evaluate
if the company should still be fully consolidated based
on our right to variable returns as well as our ability
to exercise influence on financial and operational
decisions impacting those returns. Due to the oper-
ational and financial nature of the projects, and the
influence normally given to tax equity partners in such
agreements, we normally have the influence to fully
consolidate companies that have tax equity partners.
The terms of the tax equity partner's contribution are
evaluated to determine the accounting treatment.
The contribution generally has the characteristics
of a liability as the initial contribution is repaid,
including an agreed return, and the partner does not
share in the risks of the project in the same way as a
shareholder. As such, the contribution is accounted
for as a liability and measured at amortised cost.
The liability is based on the expected method of
repayment and is divided into:
– a net working-capital element to be repaid
through PTCs and other tax attributes
– an interest-bearing debt element expected to be
repaid through cash distributions.
The partner's agreed return is expensed as a financial
expense and is recognised as an increase of the tax
equity liability. PTCs and other tax attributes trans-
ferred to the tax equity partner are recognised as
other operating income. Tax attributes allocated to
the tax equity partner are deferred and recognised
on a straight-line basis over the estimated contrac-
tual length of the partnership structure, while PTCs
are recognised in the periods earned, similar to
recognition of our own PTCs.
In addition to the above, we recognise a liability for
the expected purchase price for the partner's post-
flip rights to cash distributions. This liability is recog-
nised at fair value, and adjustments are expensed
as a financial item. This recognition reflects the
intention and high likelihood that we will purchase
the partner's post-flip rights, and they are part of the
financial costs of the arrangement.
If we choose not to buy the partner's right to post-
flip rights, the tax equity partner will be entitled to
part of the company's returns in the post-flip period.
At that point, the partner will share in the risks and
rewards in the company as a shareholder and will be
considered a non-controlling interest.
Key accounting judgements
Assessment of recognition of tax equity partner
On formation of a tax equity partnership, we assess
the appropriate recognition of the partner's contri-
bution as well as the method of recognition for the
elements used to repay the partner, such as PTCs
and tax attributes.
In assessing the recognition of the partner's contri-
bution, we look at:
– the expected flows of PTCs, tax attributes and
cash payments to the partner
– the rights and obligations of both us and the
tax equity partner.
The deferral of the income related to tax attributes
and the recognition of the contribution as working
capital or interest-bearing debt, are affected by
our expectation to the size, method and timing of
repayments.
113 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 4. Working capital
Notes
Contents
4.6 Other
payables
4.7 Changes in net
working capital
Other payables, DKKm
Carbon rights
VAT and other indirect taxes payable
Salary-related items payable
Accrued interest
Virtual gas storage
Other deferred income
Collateral received
Purchase price, acquisition of enterprises
Other
Total other payables
Of which, working capital
Of which, other capital employed
Of which, interest-bearing net debt
In 2019, the short-term portion of other
payables amounted to DKK 4,247 million
(2018: DKK 4,793 million).
90
686
793
1,239
-
-
205
116
1,587
4,716
2,793
1,367
556
62
780
809
687
107
84
34
653
1,986
5,202
3,295
1,337
570
2019
2018
Change in net working capital, DKKm
The table shows our
other payables broken
down into working
capital, interest-bearing
net debt and other
capital employed.
Change in inventories
Change in contract assets and liabilities
Change in trade receivables
Change in other receivables
Change in trade payables
Change in tax equity liabilities
Change in other payables
Total change in net working capital
Of which, changes relating to work in progress
2019
529
612
2,846
(250)
(2,371)
630
(427)
1,569
1,416
2018
243
(1,478)
(2,261)
(31)
1,601
1,835
(827)
(918)
(2,326)
Work in progress
consists of elements
in contract assets and
liabilities, construc-
tion manage ment
agreements related to
construction of offshore
wind farms, construction
of offshore transmission
assets (inventory) and
related trade payables.
Of which, changes relating to tax equity liabilities
and other working capital
153
1,408
The change in funds tied up in work in
progress and related trade payables was
DKK 1,416 million in 2019 due to high activity
related to the construction of offshore
wind farms for partners (Hornsea 1) as well
as offshore transmission assets in the UK
(mainly Hornsea 2), partly offset by the
receipt of milestone payments from part-
ners and the divestment of the Race Bank
transmission asset.
In 2018, the change in funds tied up in work
in progress and related trade payables was
DKK -2,326 million due to the construction
of offshore wind farms for partners (Walney
Extension and Borkum Riffgrund 2) as well
as offshore transmission assets in the UK
( Hornsea 1 and Hornsea 2), partly offset by
the receipt of milestone payments from
partners and the divestment of the Burbo
Bank Extension transmission asset.
The change in funds tied up in other working
capital was a cash inflow of DKK 153 million
in 2019.
114 / 183
Ørsted Annual report 2019Financial statements Notes
Contents
5.
Tax
116 Tax
117 Tax policy and tax regimes
118 Tax on profit (loss) for the year
120 Taxes paid
121 Deferred tax
124 Total tax contribution
Ørsted Annual report 2019 Consolidated financial statements – 5. Tax
Notes
Contents
5. Tax
Tax on profit (loss) for the year
The effective tax rate was 31% for the
continuing operations. The effective tax rate
was primarily affected by the sale of assets
in certain wind farm projects to a partner in
the US as well as recognition of a tax liability
in connection with the tax equity partnership
related to the Lockett Onshore Wind Farm.
Corporate income taxes paid
We have paid DKK 4,800 million in taxes
in 2019, of which DKK 17 million related to
residual tax for 2017, and DKK 81 million
related to receivable residual tax regarding
2018. We expect to have a residual tax of
DKK 595 million regarding 2019, as we had a
higher portion of income related to financial
instruments in 2019 than we expected at the
time we paid taxes on account.
Corporate income tax paid by segment, 2019, DKKm
Development in current and deferred tax asset and liabilities (tax, net), 2019, DKKm
Offshore
Onshore
Markets & Bioenergy
Ørsted A/S and other activities
Tax, net liability
Tax on profit (loss) for the year
Tax on other comprehensive income and
hybrid capital
Corporate taxes paid
Other effects
4,643
539
-4,800
2,756
4.8bn
Corporate income tax paid by the Group in 2019
totalled DKK 4,800 million against DKK 3,367 million
in 2018.
5.6bn
Current corporate income tax in 2019 totalled
DKK 5,605 million against DKK 3,161 million in 2018.
0
454
-297
0
2,629
2018
-871
253
2019
Business performance
2019, DKKm
Profit (loss) before tax
Tax equity, deferred tax liability, Lockett
Rest of the Group
Effective tax for the year
-
8,856
8,856
Tax
(118)
(2,638)
(2,756)
Tax in %
n.a.
30%
31%
The tax rate for 'Rest of the Group' is higher than the
weighted average tax rate in the countries in which we
generate income as a result of adjustments relating to
previous years as well as net non- deductible expenses.
116 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 5. Tax
Notes
Contents
5.1 Tax policy and tax regimes
Our tax policy
We recognise the key role that tax plays in
society and in the development of the coun-
tries where we operate. We also believe that a
responsible approach to tax is essential to the
long-term sustainability of the societies where
we have activities and of our business across
the globe.
The world's governments have defined the
greatest challenges for our societies towards
2030 through the UN Sustainable Development
Goals (SDGs). At Ørsted, we are committed to
running our business in a way that contributes
to the SDGs. Tax payments contribute both
directly and indirectly to most of the SDGs, in
particular target #16.6 on the development
of effective, accountable and transparent
institutions.
Tax is a core part of our corporate responsi-
bility and governance and is overseen by the
Board of Directors. The Board of Directors
is accountable for the tax policy, and the
responsibility for tax risk management lies
with the CFO and is overseen by the Audit &
Risk Committee.
Compliance
Our ambition is to apply best practices at all
times and act in accordance with applicable
legislation on tax computation and tax report-
ing to ensure that we pay the right amount
of tax at the right time in the countries where
we operate. We continuously evaluate our
processes and controls to ensure that we
are compliant with local and international
standards relevant to our business.
Our attitude to tax planning
We only use business structures that are
driven by commercial considerations, aligned
with business activity, and which have
genuine substance.
We make use of incentives and tax reliefs
where they apply in areas where we have
commercial substance.
We seek, wherever possible, to develop
cooperative relationships with tax authori-
ties, based on mutual respect, transparency
and trust.
Transparency
In line with our belief in transparency, we
provide regular information to our stake-
holders – including investors, policy makers,
employees, civil society and the general public
– about our approach to tax and taxes paid.
Read more about our tax policy at
https://orsted.com/taxpolicy
Tax regimes
At the end of 2019, our major activities were in
Denmark, the UK, Germany, the Netherlands,
the US and Taiwan.
US tax equity partnerships
We have entered into several tax equity
partnership agreements in the US. For more
information on our tax equity partnership
structure, see note 4.5 'Tax equity liabilities'.
We are also making material investments
in Taiwan, and we expect to start paying
corporate tax in 2022/2023. We expect to
start paying withholding taxes on dividends
in Taiwan in 2020.
The expected value of the deferred tax
liability related to property, plant and
equipment at the 'flip date' in the tax equity
partnership agreement is included in our
accounts when the tax equity partnership
is established.
Local taxes paid
Our taxes paid in Denmark for 2019 were
affected by the completed construction
agreement related to the Hornsea 1 Offshore
Wind Farm in the UK.
We have made significant investments in
offshore wind farms in the UK, Germany and
the Netherlands, resulting in the accumulation
of large tax assets in recent years. Accordingly,
we have not paid significant taxes in these
countries prior to 2019. This is changing, as the
offshore wind farms are commissioned and are
generating positive tax results, resulting in paid
taxes in the UK and in Germany. We expect to
start paying corporate tax in the Netherlands
in 2021.
We are currently making significant invest-
ments in the US, and we do therefore not
expect to pay any material corporate income
tax in the foreseeable future.
Danish CFC taxation
Denmark has proposed to introduce the CFC
rules in the EU Anti Tax Avoidance Directive
with the most likely entry into force being on
1 July 2020. The overarching purpose of the
CFC rules is to prevent companies undermine
the domestic tax base by moving mobile
income to low tax jurisdictions. In such a case,
the CFC rules will ensure that the income will
still be subject to domestic taxation.
A foreign subsidiary shall be considered to be a
CFC company if 1/3 or more of its income stems
from CFC income, which now also includes
'other income from intangible property'. There
is very little guidance on what is included in
other income from intangible property.
The EU directive contains an exception for
companies which have real commercial
activity, or which are not situated in a low tax
jurisdiction. However, Denmark has chosen
not to make use of any of these exceptions.
This means that operational foreign subsidi-
aries which are located in countries with the
same or a higher tax rate than Denmark, and
which have been established for commercial
purposes, can be considered to be CFC com-
panies. We see this as a risk.
117 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 5. Tax
Notes
Contents
5.2 Tax on profit (loss) for the year
Business performance
IFRS
Business performance
IFRS
2019
2018
Effective tax rate, DKKm/%
DKK million
%
DKK million
%
DKK million
%
DKK million
Tax on profit (loss) for the year can be explained as follows:
Calculated 22% tax on profit (loss) before tax (2018: 22%)
(1,948)
22
(2,286)
22
(5,172)
Adjustments of calculated tax in foreign subsidiaries in
relation to 22% (2018: 22%)
Tax effect of:
Non-taxable income and non-deductible costs, etc., net
Unrecognised tax assets and capitalisation of tax assets not
previously capitalised
Adjustment of tax concerning previous years
25
(540)
(32)
(261)
-
6
-
3
18
(540)
(32)
(261)
-
5
-
3
94
1,912
(50)
(802)
Effective tax for the year
(2,756)
31
(3,101)
30
(4,018)
22
-
(8)
-
3
17
(4,834)
74
1,912
(50)
(802)
(3,700)
%
22
-
(9)
-
4
17
Non-taxable income
and non-deductible
expenses primarily
concern the tax-exempt
loss on a divestment
of assets and other US
investment matters.
See more in note
2.5 'Other operating
income and expenses'.
The difference in tax rates from 22% to the
statutory tax rates across our jurisdiction had
limited impact on the effective tax rate.
The effective tax rate in 2018 was particularly
affected by a tax-exempt gain on the 50%
farm-down of Hornsea 1. In addition, the
effective tax rate was affected by the recog-
nition of a deferred tax liability related to the
tax equity partner for Tahoka.
Income tax
Tax on business performance profit (loss) was
DKK 2,756 million in 2019 against DKK 4,018
million in 2018. The effective tax rate was 31%
in 2019 against 17% in 2018.
The effective tax rate in 2019 was primarily
affected by the sale of assets in certain wind
farm projects to a partner in the US as well
as recognition of a tax liability in connection
with the tax equity partnership related to
the Lockett Onshore Wind Farm (see more
regarding tax equity partnerships in notes
4.5 ' Tax equity liabilities' and 5.4 'Deferred
tax'). The deferred tax liability from existing tax
equity partnerships will be reduced gradually
as the assets are depreciated.
Accounting policies
Tax for the year consists of current tax, changes in
deferred tax and adjustments in respect of previous
years. Tax on profit (loss) for the year is recognised in
the income statement. Tax relating to other items is
recognised in other comprehensive income.
Key accounting estimate
Estimates regarding recognition of income taxes
Ørsted is subject to income taxes in all the coun-
tries where we operate. Significant judgement and
estimates are required in determining the worldwide
income taxes, income tax assets and liabilities and
provisions for uncertain tax positions.
In the course of conducting business around the
world, tax and transfer pricing disputes with tax
authorities may occur due to the complex nature
of the tax rules related to the business. Judgement
is applied to assess the possible outcome of such
disputes. We apply the methods prescribed in IFRIC
23 'Uncertainty over Income Tax Treatments' when
making provisions for uncertain tax positions, and we
consider the provisions made to be adequate.
However, the actual obligation may deviate and
might lead to additional tax in excess of provisions
included as uncertain tax provisions depending on
the result of litigations and settlements with the
relevant tax authorities.
Ongoing tax disputes, primarily related to transfer
pricing cases, are included as part of 'Tax payables',
'Tax receivables' and 'Deferred tax'.
118 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 5. Tax
Notes
Contents
Because of the high level of investments and
the subsequent deferrals of payable tax as a
consequence of tax depreciation, our current
tax is generally lower than the statutory cor-
porate tax rates during construction and the
initial years after first power. In 2019, however,
the current tax included DKK 4,230 million
which relate to accumulated income from the
construction agreement regarding Hornsea 1.
Tax on profit (loss) for the year and other
comprehensive income
In 2019, tax on IFRS profit (loss) for the year
amounted to DKK 3,101 million, consisting of
current tax expenses of DKK 5,605 million,
changes in deferred tax of DKK 2,765 million,
and tax expenses concerning previous years
of DKK 261 million. The adjustment primarily
relates to updates of asset values in the UK
and Germany.
Current tax
Current tax is the payable tax expense incurred
in Ørsted on profit for the year. This deviates
from taxes paid as a result of payments or
refunds regarding prior years and residual
payments regarding the current year.
Current and deferred tax (business performance), 2019, DKKbn
Profit before tax
Current tax
Deferred tax
8.8
5.3
-3.1
1.7
0.3
0.2
0.8
0.3
0.0
0.0 0.0
0.0
0.0
-0.2
0.0
-0.3
-1.0
-1.4
Denmark
The UK
Germany
The
Netherlands
The US
Taiwan
2019
2018
The figure shows the relationship between profit before tax and current tax in
the main countries where we do business.
Income tax, DKKm
Tax on profit (loss) for the year
Tax on other comprehensive income
Tax on hybrid capital
Total tax for the year
Tax on profit (loss) for the year can
be broken down as follows:
Current tax
Deferred tax
Adjustment of tax concerning
previous years, etc.
Tax on profit (loss) for the year
Tax on other comprehensive income
can be broken down as follows:
Current tax
Deferred tax
Tax on other comprehensive income
Business
performance
(2,756)
(539)
34
(3,261)
(5,605)
3,110
(261)
(2,756)
(194)
(345)
(539)
IFRS
(3,101)
(194)
34
(3,261)
(5,605)
2,765
(261)
(3,101)
(194)
-
(194)
Business
performance
(4,018)
411
120
IFRS
(3,700)
93
120
Effective current tax rate (business performance), 2019, %
(3,487)
(3,487)
60.4
(3,161)
(55)
(802)
(4,018)
93
318
411
(3,161)
263
(802)
(3,700)
93
-
93
Income tax for the
year is calculated on
the basis of the profit
(loss) before tax from
continuing operations.
16.6
1.5
0.0
0.2
0.0
Denmark
The UK
Germany
The
Netherlands
The US
Taiwan
The figure shows the tax rates based on business performance in the main
countries where we do business.
119 / 183
Ørsted Annual report 2019Financial statements
Consolidated financial statements – 5. Tax
Notes
Contents
5.3 Taxes paid
We have paid DKK 4,800 million in taxes in
2019, of which DKK 17 million related to resid-
ual tax for 2017, and DKK 81 million related to
receivable residual tax regarding 2018.
Taxes paid, DKKm
Continuing operations
Discontinued operations
We paid most of our Danish taxes in March.
Accordingly, the income tax paid for the year
was based on estimates and preliminary
tax positions.
As we had a higher portion of income related
to financial instruments in 2019 than we ex-
pected at the time we paid taxes on account,
we expect to have a residual tax of DKK 595
million regarding 2019.
Tax on profit (loss) for the year (business
performance), DKKm
4,800
Continuing operations
Discontinued operations
4,032
3,911
3,292
2,373
2,267
2,754
2,660
3,367
4,800
1,765
4,018
2,756
-2871
-75
0
-107
-2
2017
2018
2019
2017
2018
2019
Taxes paid for the year, 2019, DKKm
Denmark
Sweden
Germany
Poland
The UK
The US
10 8 3 2 36
DKK 4,800
million
4,741
The figure only
shows our continuing
operations.
The figures show the
relationship between
the tax on business per-
formance profit (loss) for
the year for accounting
purposes and the taxes
paid for the year.
1
Relates to internal
transfers between
continuing and dis-
continued operations.
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Ørsted Annual report 2019Financial statements
Consolidated financial statements – 5. Tax
Notes
Contents
5.4 Deferred tax
Development in deferred tax
In 2019, net deferred tax assets from continuing
operations increased, primarily due to the com-
pletion of the construction of Hornsea 1, which
triggered current tax on the deferred gain.
The adjustment regarding previous years com-
prised a decrease in recognition of tax assets
relating to offshore wind farms and true-up
of the 2018 tax return position with offset on
current tax.
In 2018, deferred tax from continuing
operations decreased due to the completion
of the construction of Borkum Riffgrund 2 and
Walney Extension, as these taxes were paid
and increased due to the ongoing construc-
tion of Hornsea 1. Furthermore, our tax equity
partner agreements in the US resulted in
the recognition of the expected deferred
tax liability that we will take over once the
contribution from the tax equity partner has
been repaid.
The adjustment regarding previous years
comprised recognition of tax assets relating
to offshore wind farms.
Deferred tax by segment
Net deferred tax in our segments primarily
concerned the following:
– Offshore: upfront taxable income on internal
gains where we get future tax depreciations
in project companies, tax loss carryforwards
and property, plant and equipment, for
which depreciation for tax purposes exceeds
depreciation for accounting purposes.
– Onshore: recognised deferred tax liabilities
regarding wind farm assets in tax equity
structures.
– Markets & Bioenergy: financial instruments
and property, plant and equipment, for
which depreciation for tax purposes exceeds
depreciation for accounting purposes.
– Other activities/eliminations comprised
intra-group eliminations in the joint taxation
across segments.
Net deferred tax and accumulated investments, 2019, DKKbn
Net deferred tax balance
Accumulated investments
55.5
43.8
The figure shows the net
deferred tax asset (+) or
liability (-) on country
level as well as total
accumulated invest-
ments in each country
17.3
24.5
3.3
0.1
1.6
4.7
0.0
2.6
0.3
Denmark
The UK
Germany
The
Netherlands
The US
Taiwan
-1.8
Deferred tax 2019, DKKm
Offshore
Onshore
Markets &
Bioenergy
Other
activities/
eliminations
Deferred
tax at 31
December
The table shows
the reconciliation of
deferred tax to the
balance sheet by
segment. The non-
recognised deferred
tax assets are not
expected to give rise to
any material income
tax consequence in
the event of dividends
received.
Deferred tax, assets
Deferred tax, liabilities
Unrecognised tax assets
Deferred tax 2018, DKKm
Deferred tax, assets
Deferred tax, liabilities
Unrecognised tax assets
6,441
1,611
7
3,565
2,838
53
-
1,422
-
235
1,293
19
189
338
25
1,152
249
64
217
-
-
(364)
(355)
-
6,847
3,371
32
4,588
4,025
136
121 / 183
Ørsted Annual report 2019Financial statements
Consolidated financial statements – 5. Tax
Notes
Contents
Accounting policies
Deferred tax is recognised in respect of all temporary
differences arising between the tax bases of assets
and liabilities and their carrying amounts.
However, deferred tax is not recognised in respect of
temporary differences relating to:
– the acquisition of joint operations, including
licence interests
– other items where differences arise at the time of
acquisition, affecting neither the profit (loss) for
the year nor the taxable income. However, this
does not include differences arising in connection
with company acquisitions.
Deferred tax is measured depending on how we plan
to use the assets and settle the liabilities. We set off
tax assets and liabilities when the tax assets can be
offset against tax liabilities in the year in which the
deferred tax assets are expected to be used.
Deferred tax assets are recognised at the value at
which they are expected to be used. They may be
offset against future earnings. This is done within a
joint taxation scheme. Intra-group gains and losses
are eliminated.
Deferred tax is measured based on the tax rules
and rates applying when the deferred tax becomes
current tax. Changes in deferred tax as a result of
changes in tax rates are recognised in profit (loss) for
the year.
Deferred tax (net liability) related to the tax equity
structures is recognised as tax income in the income
statement when we take over the agreements. The
liability recognised is the amount that we expect
to take over once the contribution from the equity
partner is repaid, and the tax equity structure 'flips.'
Liabilities in respect of uncertain tax positions are
measured as follows:
– The most-likely-outcome method is applied in
cases where there are only two possible outcomes.
– The weighted-average method is used in cases
where there are more than two possible outcomes.
The liability is recognised under income tax payable
or deferred tax, depending on how the realisation of
the tax position will affect the financial statement.
Burbo Bank Extension,
Bay of Liverpool, UK.
122 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 5. Tax
Notes
Contents
Development in deferred tax assets and liabilities,
2019, DKKm
Balance sheet
at 1 January
Transferred to
assets and liabilities
classified as assets
held for sale
Exchange rate
adjustments
Net acquisition
of enterprises,
individual assets
and activities, net
Recognised in
profit (loss)
for the year
Adjustments
to prior
years, etc.
Balance sheet
at 31 December
Intangible assets
Property, plant and equipment
Other non-current assets
Current assets
Decommissioning obligations
Other non-current liabilities
Current liabilities
Tax loss carryforwards
Deferred tax
Of which, recognised in the balance sheet under assets
Of which, recognised in the balance sheet under equity
and liabilities
Development in deferred tax assets and liabilities,
2018, DKKm
Intangible assets
Property, plant and equipment
Other non-current assets
Current assets
Decommissioning obligations
Other non-current liabilities
Current liabilities
Tax loss carryforwards
Deferred tax
Of which, recognised in the balance sheet under assets
Of which, recognised in the balance sheet under equity
and liabilities
36
3,031
405
(25)
(757)
(1,386)
(614)
(1,253)
(563)
4,588
4,025
61
2,018
140
(11)
(797)
(1,106)
(348)
(694)
(737)
2,865
2,128
131
(120)
-
66
-
-
-
-
77
(13)
(1,263)
-
-
3
436
14
-
(823)
-
159
22
.
(16)
(1)
(1)
(53)
110
-
(18)
(1)
-
2
(2)
(1)
6
(14)
-
(375)
8
(68)
-
245
23
(42)
(209)
-
2,252
9
-
(11)
(312)
(67)
(146)
1,725
(140)
(2,432)
(68)
3
(33)
346
495
(936)
(2,765)
(28)
150
132
(13)
(8)
88
(163)
(424)
(266)
2
690
(440)
29
(60)
(48)
-
(299)
(126)
16
(108)
125
(1)
54
(490)
(49)
5
(448)
29
953
(73)
5
(866)
(844)
(97)
(2,583)
(3,476)
6,847
3,371
36
3,031
405
(25)
(757)
(1,386)
(614)
(1,253)
(563)
4,588
4,025
The increase in tax
losses carried forward
during 2019 is primarily
a result of accelerated
depreciations on fixed
assets for tax purposes,
as more wind farms
enter into operation.
The tax loss carryfor-
wards are either offset
against deferred tax lia-
bilities on the same wind
farm or jurisdiction or
offset against expected
future profits from the
very same wind farm or
jurisdiction.
Adjustments to
prior years primarily
relate to a decrease in
recognition of tax assets
relating to offshore wind
farms and movements
between deferred tax
and current tax payable.
The amounts transferred
to assets and liabilities
classified as assets held
for sale in 2018 concern
our Danish power
distribution, residental
customer and city light
businesses.
Addition of enterprises
in 2018 includes the
deferred tax liability
recognised in relation
to our US aquisitions.
123 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 5. Tax
Notes
Contents
5.5 Total tax contribution
According to the OECD classification, tax is a
compulsory unrequited payment to general
government. This means a payment by Ørsted
paid to the government, including amounts
paid through an agent. Tax does not result in
a return of value to Ørsted for a right or asset
used in the business.
Taxes collected are those which are generated
by Ørsted's operations, but not a tax liability
for Ørsted. Ørsted generates the commercial
activity that gives rise to the taxes and then
collects and administers them on behalf of
the tax authorities in the countries in which
we operate.
Total tax contribution, 2019, %
Total tax contribution, 2019, DKKm
Profit taxes
People taxes
Product taxes
Property taxes
Profit taxes
People taxes
Product taxes
Property taxes
0%
26%
15,010
19,999
Taxes borne by Ørsted are those that represent
a direct cost and are reflected in the financial
result. Taxes borne are charged to the profit
and loss account or capitalised as part of an
asset's costs.
DKK 19,999
million
8%
66%
13,117
13,117
4,989
96
93
4,800
1,523
370
96
1,616
5,170
Borne
taxes
Collected
taxes
Total
Total global taxes that we paid in 2019
Total tax contribution, 2019, %
Profit taxes
These include taxes on company profits that are borne (such as corporate income
tax) and collected (such as withholding tax on payments to third parties). In
2019, Ørsted paid DKK 4,800 million in borne profit taxes and DKK 370 million
in collected profit taxes. The collected profit taxes relate to withholding tax on
dividends paid to Ørsted's shareholders.
People taxes
Taxes on employment, both borne and collected (including income tax and social
security tax payments). In 2019, Ørsted paid DKK 93 million in borne people taxes
and DKK 1,523 million in collected people taxes.
Product taxes
Indirect taxes on the production and consumption of goods and services, including
VAT and sales tax, custom duties and insurance premium tax. In 2019, Ørsted
paid DKK 13,117 million in collected product taxes. Borne product taxes were
insignificant in 2019 for this summary.
Property taxes
Taxes on the ownership, sale, transfer or occupancy of property. In 2019, Ørsted paid
DKK 96 million in borne property taxes. Collected property taxes were insignificant
in 2019 for this summary.
Borne taxes
Collected taxes
25%
DKK 19,999
million
75%
Total tax contribution
is highly impacted by
collection of VAT, sales
taxes, duties as well as
profit taxes.
The chart shows the
distribution between
borne and collected
taxes in 2019.
124 / 183
Ørsted Annual report 2019Financial statements Notes
Contents
6.
Capital structure
126 Capital structure
127
Interest-bearing debt and FFO
129 Equity
131 Hybrid capital
132 Financial resources
134 Financial income and expenses
Ørsted Annual report 2019 Consolidated financial statements – 6. Capital structure
Notes
Contents
6. Capital structure
An appropriate capital structure is important
to ensure we have the ability to raise new
debt at attractive terms.
In 2019, we issued new green senior bonds with
a total proceed of DKK 10,174 million, consist-
ing of GBP 900 million and NTD 12 billion.
We further issued a new hybrid bond of
EUR 600 million (DKK 4,483 million) to
refinance our 3015 hybrid bond, of which we
redeemed EUR 524 million at the same time.
All new bonds were issued in accordance with
our green finance framework.
In the coming years, we expect to raise new
debt to partly fund our DKK 200 billion
investment programme covering the period
2019-2025.
Capital structure
To ensure the financial strength to operate
in the international energy and capital
markets and secure financing on attractive
terms, we have defined credit rating and
capital structure targets. The overarching
capital structure targets are a credit rating
of Baa1/BBB+ and an FFO/adjusted net debt
credit metric of around 30%.
Financing policy
The aim of our financing policy is to ensure
that hedging needs and the best possible
financing arrangements are taken into
account, while also minimising financing costs,
liquidity and refinancing risks.
Cash management
One of the most significant cash management
objectives is to secure sufficient and flexible
financial resources in relation to our day-to-
day operations, investment programme and
debt maturity profile.
Therefore, we define minimum financial
resources for the coming calendar year.
We maintain robust financial resources to
limit the company's sensitivity to unrest in
the financial markets.
The borrowing activities are diversified among
various funding sources and maturities. In
addition, we have robust financial resources.
Our borrowing activities are primarily
consolidated in the parent company, where
cash resources are available to the Group
companies via an internal bank.
Equity and interest-bearing net debt, DKKbn
Interest-bearing assets
Interest-bearing debt
Hybrid capital
Equity attributable to shareholders in Ørsted A/S
Non-controlling interests
2019
Assets
DKK 26.2 billion
2018
DKK 106.8 billion
Equity and liabilities
DKK 132.6 billion
DKK 82.9 billion
Assets
DKK 30.5 billion
Equity and liabilities
DKK 113.4 billion
31.0%
Funds from operations (FFO) relative to
adjusted interest-bearing net debt amounted
to 31% at 31 December 2019 against 69%
at 31 December 2018.
17.2bn
Our interest-bearing net debt totalled
DKK 17,230 million at 31 December 2019 against
DKK -2.219 million at 31 December 2018.
38.2bn
Our financial resources totalled DKK 38,244 million
at 31 December 2019 against DKK 37,879 million
at 31 December 2018.
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Ørsted Annual report 2019Financial statements Consolidated financial statements – 6. Capital structure
Notes
Contents
6.1 Interest-bearing debt and FFO
Interest-bearing debt and interest-bearing assets
DKKm
2019
2018
Interest-bearing debt:
Bank debt
Bond debt
Total bond and bank debt
Tax equity liability (see note 4.5)
Lease liability
Other interest-bearing debt
Total interest-bearing debt
Interest-bearing assets:
Securities
Cash
Receivables from associates and joint ventures
Other receivables
Receivables in connection with divestments
Total interest-bearing assets
Total interest-bearing net debt
Changes in interest-bearing debt, DKKm
Interest-bearing debt at 1 January
Lease debt at 1 January (IFRS 16)
Instalments on loans according to the statement of
cash flows
Proceeds from raising of loans according to the
statement of cash flows
Debt from acquisition of enterprises
Instalments on leases
Raising of lease debt, etc.
Change in other interest-bearing debt and tax
equity liability
Hybrid bond reclassified to interest-bearing debt
Foreign exchange adjustments and amortisation
3,466
33,373
36,839
608
5,332
649
3,582
23,714
27,296
454
-
570
43,428
28,320
16,552
7,148
-
1,781
717
26,198
17,230
25,501
3,515
60
779
684
30,539
(2,219)
2019
28,320
5,224
2018
29,636
-
(2,043)
(6,429)
10,174
-
(664)
772
231
570
844
-
4,409
-
-
570
-
134
Interest-bearing debt at 31 December
43,428
28,320
Funds from operations (FFO), DKKm
EBITDA – business performance
Interest expenses, net
Interest expenses, leasing
Reversal of interest expenses transferred to assets
Interest element of decommissioning obligations
Calculated interest paid on operating lease
obligations
50% of coupon payments on hybrid capital
Adjusted interest expenses, net
Reversal of gain (loss) on divestment of assets
Reversal of recognised operating lease payment in
profit (loss) for the year
Total current tax
Funds from operations (FFO)
The market value of
our bond and bank
debt amounted to
DKK 39,281 million
and DKK 3,526 million,
respectively, at
31 December 2019
(2018: DKK 28,048 million
and DKK 3,622 million,
respectively).
The market value of
our bond and bank debt
exceeds the carrying
amount due to the drop
in interest levels since
the issuance of the debt.
Due to the implementa-
tion of IFRS 16 ’Leases’
at 1 January 2019, the
lease liability is included
in interest-bearing debt
on the balance sheet
in 2019.
Adjusted interest-bearing net debt, DKKm
Total interest-bearing net debt
50% of hybrid capital
Cash and securities not available for distribution,
excluding repo loans
Present value of operating lease payments
Decommissioning obligations
Deferred tax on decommissioning obligations
2019
17,484
(1,312)
(171)
(344)
(212)
-
(279)
(2,318)
101
-
(5,799)
9,468
2019
17,230
6,616
1,437
-
6,158
(866)
2018
30,029
(877)
-
(506)
(192)
(196)
(272)
(2,043)
(14,995)
778
(3,068)
10,701
2018
(2,219)
6,619
1,583
4,819
5,471
(757)
Total adjusted interest-bearing net debt
30,575
15,516
Funds from operations (FFO)/
adjusted interest-bearing net debt, %
Funds from operations (FFO)/
adjusted interest-bearing net debt
2019
2018
31.0%
69.0%
FFO is calculated for the
continuing operations.
We implemented IFRS
16 ’Leases’ at 1 January
2019. This has impacted
FFO, as the in-substance
fixed lease payments
are recognised as depre-
ciation of lease assets.
Due to the implementa-
tion of IFRS 16 ’Leases’
at 1 January 2019, the
lease liability is included
in ’Total interest-bearing
net debt’ in 2019.
127 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 6. Capital structure
Notes
Contents
Interest-bearing net debt
Interest-bearing net debt totalled DKK 17,230
million at the end of 2019, an increase of
DKK 19,449 million relative to 2018. The in-
crease in interest-bearing net debt consists of a
increase in interest-bearing debt of DKK 15,108
million and a decrease in interest -bearing assets
of DKK 4,341 million.
In May 2019, we repaid the remaining out-
standing amount EUR 280 million (DKK 2,092
million) on our bonds issued in May 2009.
In May 2019, we also issued a total of
GBP 900 million (DKK 7,684 million) in new
green bonds, split on three separat issues:
– GBP 350 million (DKK 2,988 million), 2.125%
interest, maturing in May 2027.
– GBP 300 million (DKK 2,561 million), 2.5%
interest, maturing in May 2033.
– GBP 250 million (DKK 2,135 million), interest
of CPI+0.375%, maturing in May 2034.
In November, we issued a total of NTD 12
billion (DKK 2,653 million) in new green bonds,
split on two separte issues:
– NTD 8 billion (DKK 1,769 million), 1.5% inter-
est, maturing in November 2034.
– NTD 4 billion (DKK 884 million), 0.92%
interest, maturing in November 2026.
Rating
We have a corporate credit rating of BBB+/
Baa1, stable outlook, from Standard & Poor's,
Moody's and Fitch, which is in line with our
target. FFO/adjusted interest-bearing net debt
was 31% in 2019, in line with our target.
Loan arrangements
At 31 December 2019, we had loan obligations
totalling DKK 1,861 million (2018: DKK 1,964 mil-
lion) to the European Investment Bank and the
Nordic Investment Bank. The loans are recog-
nised in the balance sheet under bank debt.
The loans offered by these multilateral financial
institutions include loans to co-fund infrastruc-
ture and energy projects on favourable terms
and with maturities exceeding those normally
available in the commercial banking market. In
connection with these loans, the Group may be
met with demands for repayment or collateral
in the event of the Danish state holding less
than 50% of the share capital or voting rights in
Ørsted A/S (change of control), or for repayment
in the event of Moody's or S&P's downgrading
our rating to Baa3 or BBB- or below, respectively.
Credit facilities
Furthermore, we had non-cancellable credit
facilities of DKK 15,990 million at 31 December
2019 (2018: DKK 10,447 million) with a number
of Scandinavian, international and local banks
in Taiwan. In connection with these credit
facilities, we may be met with demands for
cancellation and repayment of any drawn
amount in the event of players other than a
group consisting of the Danish state and Danish
power distribution companies controlling more
than 50% of the share capital or voting rights in
Ørsted A/S, or in the event of the Danish state
ceasing to hold at least 20% of the share cap-
ital. Our financing agreements are not subject
to any other unusual terms or conditions.
Accounting policies
Bond debt, bank debt and other payables are
recognised at inception at market value (typically
proceeds received) net of transaction costs incurred.
In subsequent periods, the liabilities are measured at
amortised cost, so that the difference between the
cost (proceeds) and the nominal value is recognised
in profit (loss) for the year as interest expenses over
the term of the loan, using the effective interest
rate method.
Financial liabilities are classified as current, unless
the Group has an unconditional right to defer settle-
ment of the liability to at least one year after the
balance sheet date.
The market value of issued bonds has been
determined as the market value at 31 December
(level 1 – quoted prices).
The market value of bank loans has been determined
as the present value of expected future instalments
and interest payments using the Group's current
interest rate on loans as the discount rate (level 2
– observable inputs).
Senior bonds issued at 31 December 2019
Million
Outstanding amount
Currency
Issued
DKK
Coupon (%)
Time of issue
Maturing
Quoted in
EUR
EUR
EUR
GBP
GBP
GBP
GBP
GBP
NTD
NTD
272
517
750
350
750
300
250
500
8,000
4,000
2,033
3,863
5,604
3,087
6,614
2,646
2,205
4,409
1,777
888
4.875
2.625
1.500
2.125
4.875
2.500
16 Dec. 2009
16 Dec. 2021
19 Sep. 2012
19 Sep. 2022
24 Nov. 2017
26 Nov. 2029
London
London
London
16 May 2019
17 May 2027
Luxembourg
12 Jan. 2012
12 Jan. 2032
London
16 May 2019
16 May 2033
Luxembourg
In addition to senior
bonds, we have issued a
number of hybrid bonds;
see note 6.3 'Hybrid
capital'.
CPI+0.375
16 May 2019
16 May 2034
Luxembourg
5.750
1.500
0.920
9 Apr. 2010
9 Apr. 2040
London
19 Nov. 2019
19 Nov 2034
19 Nov. 2019
19 Nov 2026
Taipei
Taipei
In 2020, we have an
instalment on a bank
loan and repayment
of the remaining 3013
hybrid bond.
Maturity profile, DKKbn
Bond debt
Bank debt
23.3
4.8
2.1
0.8
0.1
0.1
1.5
1.4
3.1
0.0
2020
2021
2022
2023
2024
2025
2026
2027
2028 2029+
128 / 183
Ørsted Annual report 2019Financial statements
Consolidated financial statements – 6. Capital structure
Notes
Contents
6.2 Equity
Share capital
Ørsted's share capital is DKK 4,203,810,800
(2018: 4,204 million), divided into shares of
DKK 10. The share capital is unchanged from
last year. No shares are subject to special
rights or restrictions on voting rights. All shares
are fully paid up.
Treasury shares
To secure our share programme, we acquired
additional treasury shares in May 2019.
The total portfolio of treasury shares consists
of 395,619 shares at 31 December 2019
(2018: 335,904), corresponding to 0.1% of the
share capital.
Dividend yield, %
2.7
2.2
1.5
Dividends
The Board of Directors recommends that
dividends of DKK 4,414 million (2018:
DKK 4,099 million) be paid for the financial
year, corresponding to DKK 10.50 per share
(2018: DKK 9.75 per share). The proposed
dividends correspond to a dividend yield of
1.5% (2018: 2.2%), calculated on the basis of
the closing price for an Ørsted share on the
last trading day of the year.
Owners in Ørsted
The Danish state is the principal shareholder
with an ownership interest of 50.1%. In addition,
SEAS-NVE also has significant ownership
interests. See note 16 'Ownership information'
in the parent company's financial statements.
Earnings per share, DKKm
Profit (loss) for the year from
continuing operations
Interest and costs, hybrid capital
owners of Ørsted A/S
Non-controlling interests
Ørsted's share of profit (loss) for the
year from continuing operations
Profit (loss) for the year from
discontinued operations
Ørsted's share of profit (loss) for the
year from discontinued operations
('000)
Average number of outstanding
shares
2019
2018
Business
performance
IFRS
Business
performance
IFRS
6,100
7,291
19,486
18,266
(675)
(54)
(675)
(54)
(425)
(25)
(425)
(25)
5,371
6,562
19,036
17,816
(56)
(56)
(56)
(56)
10
10
10
10
420,080
420,080
420,139
420,139
Dilutive effect of share programme
408
408
466
466
Average number of outstanding
shares, diluted
420,488
420,488
420,605
420,605
(DKK)
Profit (loss) per share
From continuing operations
From discontinued operations
Total profit (loss) per share
12.8
(0.1)
12.7
15.6
(0.1)
15.5
45.3
0.0
45.3
42.4
0.0
42.4
2017
2018
2019
The graph shows the proposed dividends in relation
to the closing price for an Ørsted share on the last
trading day of the year.
Asnæs power plant,
Kalundborg, Denmark.
The table shows earnings per share distributed on
continuing and discontinued operations. Diluted profit
(loss) per share corresponds to profit (loss) per share,
as the dilutive effect of the share programme is 0.1%
of the share capital (2018: 0.1% of the share capital).
129 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 6. Capital structure
Notes
Contents
Hedging reserve1
Hedging of net
investments
Hedging of
revenue
Hedging of
divestments
Hedging of
interest
Reserves 2019, DKKm
Reserves at 1 January 2019
Exchange rate adjustments
Value adjustments of hedging
Value adjustments transferred to:
Revenue
Financial income and expenses
Tax:
Tax on hedging and currency adjustments
Movement in comprehensive income for the year
Total reserves at 31 December
Foreign currency
translation
reserve
(1,906)
2,528
-
-
-
(454)
2,074
168
512
-
(1,907)
-
-
419
(1,488)
(976)
(97)
-
1,641
49
-
(134)
1,556
1,459
(40)
-
(172)
219
-
(10)
37
(3)
1 Costs of hedging related to basis spread on currency swaps included in hedging reserve amount to DKK 94 million (2018: 183 million).
Reserves 2018, DKKm
Reserves at 1 January 2018
Exchange rate adjustments
Value adjustments of hedging
Value adjustments transferred to:
Revenue
Other operating income
Financial income and expenses
Tax:
Tax on hedging and currency adjustments
Movement in comprehensive income for the year
(1,825)
(388)
-
-
259
-
48
(81)
Total reserves at 31 December
(1,906)
454
-
401
-
(326)
-
(17)
58
512
10
304
-
(137)
(1,054)
-
-
-
30
(107)
(97)
(301)
931
-
80
(344)
(40)
(296)
-
(12)
-
88
(15)
61
(235)
(467)
-
84
-
-
135
(48)
171
(296)
Total
reserves
(1,827)
2,528
(450)
268
88
(194)
2,240
413
(1,524)
(388)
(706)
(301)
864
135
93
(303)
(1,827)
Foreign currency translation reserve
The foreign currency translation reserve comprises:
– exchange rate adjustments arising on translation
of the financial statements of foreign entities
with a currency that is not the Group's functional
currency
– exchange rate adjustments relating to loans that
form part of our net investment in such entities
– exchange rate adjustments relating to hedging
transactions on our net investment in such entities.
On realisation or partial realisation of the net
investment, the exchange rate adjustments are
recognised in profit (loss) for the year if a foreign
exchange gain (loss) is realised by the divested entity.
The foreign exchange gain (loss) is transferred to the
item in which the gain (loss) is recognised.
Hedging reserve
The hedging reserve covers:
– hedging of net investments in foreign operations
– cash flow hedging of currency risks, inflation risks
associated with revenue and power price risk
– cash flow hedging of interest expenses and the
currency risk associated with the construction of
offshore wind farms.
Deferred costs of hedging
Changes in the basic spread on currency swaps and
time value of options are included in deferred costs
of hedging.
Share premium reserve
Retained earnings include the share premium reserve
of DKK 21,279 million (2018: 21,279 million), represent-
ing the excess of the amount of subscribed-for share
capital over the nominal value of these shares in
connection with capital injections.
130 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 6. Capital structure
Notes
Contents
6.3 Hybrid capital
Hybrid bonds
Type
Carrying amount
Financial classification
Notional amount
Issued
Maturing
Quoated in
First redemption date at par
Interest
Due in 3013
Due in 3015
Due in 3017
Due in 3019
Subordinate to other creditors
Subordinate to other creditors
Subordinate to other creditors
Subordinate to other creditors
DKK 5,148 million
Equity
DKK 570 million
Interest-bearing debt
DKK 3,668 million
Equity
DKK 4,416 million
Equity
EUR 700 million (DKK 5,230 million)
EUR 76 million (DKK 570 million)
EUR 500 million (DKK 3,736 million)
EUR 600 million (DKK 4,483 million)
June 2013
June 3013
Luxembourg
26 June 2023
May 2015
November 3015
Luxembourg
7 February 2020
November 2017
November 3017
Luxembourg
24 November 2024
December 2019
December 3019
Luxembourg
9 December 2027
For the first ten years, the coupon is fixed
at 6.25% p.a., after which it is adjusted
every five years with the five-year euro
swap + 4.75 percentage points from
2023-2043 and + 5.5 percentage points
after 2043
Coupon for the first 5.5 years is fixed at
3.0% p.a., after which it is adjusted every
five years with the five-year euro swap
+ 2.819 percentage points from 2020,
+ 3.069 percentage points from 2025, and
+ 3.819 percentage points from 2040
Coupon for the first seven years is fixed at
2.25% p.a., after which it is adjusted every
five years with the five-year euro swap
+ 1.899 percentage points from 2024,
+ 2.149 percentage points from 2029, and
+ 2.899 percentage points from 2044
Coupon for the first eight years at 1.75%
p.a., after which it is adjusted every five
years with the five-year euro swap + 1.952
percentage points from 2027, + 2.02
percentage points from 2032, and + 2.952
percentage points from 2047
Deferral of interest payment
Optional
Optional
Optional
Optional
We have issued hybrid capital which is sub-
ordinate to our other creditors. The purpose
of issuing hybrid capital is to strengthen
our capital base and fund our investments.
We have issued EUR hybrid bonds with a
total nominal value of EUR 1,876 million
(DKK 14,019 million).
In 2019, we have issued a new hybrid bond at
a nominal value of EUR 600 million which is
classified as equity. In addition, we redeemed
EUR 524 million of the hybrid bond maturing
in November 2020. The remaining EUR 76
million is to be settled on 7 February 2020.
For hybrid bonds, we may defer coupon pay-
ments to bond holders and ultimately decide
not to pay them at maturity. Deferred coupon
payments become payable, however, if we
decide to pay dividends to our shareholders or
pay coupon payments on other hybrid bonds.
As a consequence of the special terms
regarding the hybrid bonds, these are classi-
fied as equity, and therefore coupon payments
are recognised in equity.
Accounting policies
This hybrid bond is therefore classified as
interest-bearing debt as of 31 December 2019.
Hybrid capital comprises issued bonds that qualify for
treatment in accordance with the rules on compound
financial instruments due to the special characteristics
of the bonds. The notional amount, which constitutes
a liability, is recognised at present value, and equity
has been increased by the difference between the net
proceeds received and the present value of the dis-
counted liability. Accordingly, any coupon payments
are accounted for as dividends, which are recognised
directly in equity at the time the payment obligation
arises. This is because the coupon is discretionary, and
therefore any deferred coupon lapses upon maturity
of the hybrid capital. Consequently, coupon payments
do not have any effect on profit (loss) for the year.
The part of the hybrid capital that is accounted for
as a liability is measured at amortised cost. However,
as the carrying amount of this component amounted
to nil on initial recognition and due to the 1,000-year
term of the hybrid capital, amortisation charges
will only have an impact on profit (loss) for the year
towards the end of the 1,000-year term of the hybrid
capital. Coupon payments are recognised in the
statement of cash flows in the same way as dividend
payments within financing activities.
On redemption of the hybrid capital, the payment
will be distributed between liability and equity,
applying the same principles as used when the hybrid
capital was issued. This means that the difference
between the payment on redemption and the net
proceeds received on issue is recognised directly
in equity, as the debt portion of the existing hybrid
issues will be nil during the first part of the life of
the hybrid capital.
On the date when the Board of Directors decides
to exercise an option to redeem hybrid capital, the
part of the hybrid capital that will be redeemed
will be reclassified to loans and borrowings. The
reclassification will be made at the market value of
the hybrid capital at the date the decision is made.
Coupon payments and exchange rate adjust-
ments following the reclassification to loans and
borrowings will be recognised in profit (loss) for the
year as financial income or expenses.
131 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 6. Capital structure
Notes
Contents
6.4 Financial resources
Financial resources at 31 December 2019
amount to DKK 38,244 million (2018: 37,879
million). The change in financial resources is
due an increase in cash and undrawn credit
facilities of DKK 3,796 million and DKK 5,543
million, respectively; partially offset by a
decrease of DKK 8,974 million in securitites.
The increase in undrawn credit facilities relates
to establishment of a NTD 25 billion facility
in Taiwan.
Cash, cash equivalents and securities
Securities are a key element in our financial
resources, and therefore investments are mainly
made in liquid AAA-rated Danish mortgage
bonds and to a lesser extent in other bonds.
Most of the securities qualify for repo transac-
tions with the Danish central bank, 'Danmarks
Nationalbank'.
Securities not available for use comprise
securities pledged as collateral for:
– insurance- related provisions:
DKK 397 million at 31 December 2019
(2018: DKK 399 million)
– trading in financial instruments:
DKK 360 million at 31 December 2019
(2018: DKK 333 million).
At 31 December 2019, we had received cash
collateral in the amount of DKK 1,439 million
(2018: DKK 852 million) concerning the positive
market value of derivatives.
Cash not available for use comprises:
– collateral for insurance-related provisions:
DKK 277 million (2018: DKK 264 million)
– collateral for US power purchase agreements:
DKK 132 million (2018: DKK 246 million)
– collateral for other transactions:
DKK 280 million (2018: DKK 342 million).
Cash and cash equivalents, securities, DKKm
Cash, available
Total cash and cash equivalents at 31 December, cf. statement of cash flows
Cash can be specified as follows:
Cash, available
Cash, not available for use
Total cash at 31 December, cf. balance sheet
Securities can be specified as follows:
Securities, available
Securities, not available for use
Total securities at 31 December
The table shows our cash and securities divided into
available and not available for use.
2019
6,459
6,459
6,459
689
7,148
2018
2,663
2,663
2,663
852
3,515
15,795
24,769
757
732
16,552
25,501
Financial resources, DKK million
Overview of securities, DKKm
Cash, available
Securities, available
Undrawn, non-cancellable credit facilities
2019
DKK 38,244 million
2018
DKK 37,879 million
Maturities
0-2 years
2-5 years
After 5 years
Fixed
rate
929
7,309
3,982
Floating
rate
932
2019
1,861
3,400
10,709
-
3,982
Fixed
rate
3,178
15,073
2,671
Floating
rate
1,086
3,460
2018
4,264
18,533
33
2,704
Total carrying amount
12,220
4,332
16,552
20,922
4,579
25,501
The table shows our securities split into maturities
and fixed or floating interest rates.
132 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 6. Capital structure
Notes
Contents
Maturity analysis of financial liabilities 2019, DKKm
2020
2021
2022-2023
After 2023
2019
Accounting policies
Bank loans and issued bonds:
- Notional amount
- Interest payments
Trade payables
Derivatives
Tax equity debt
Other payables
Liabilities relating to assets classified as held for sale
804
1,076
10,957
5,226
58
4,940
1,287
2,169
1,056
-
1,814
51
-
-
4,854
1,819
-
1,663
64
-
-
29,349
9,089
-
495
1,133
-
-
37,176
13,040
10,957
9,198
1,306
4,940
1,287
Total payment obligations
24,348
5,090
8,400
40,066
77,904
Maturity analysis of financial liabilities 2018, DKKm
2019
2020
2021-2022
After 2022
2018
Bank loans and issued bonds:
- Notional amount
- Interest payments
Trade payables
Derivatives
Tax equity debt
Other payables
Liabilities relating to assets classified as held for sale
2,213
1,003
13,093
6,066
66
5,327
812
235
873
-
1,626
59
-
-
6,917
1,654
-
133
143
-
-
18,179
8,074
-
414
334
-
-
27,544
11,604
13,093
8,239
602
5,327
812
Total payment obligations
28,580
2,793
8,847
27,001
67,221
Securities comprise bonds that are monitored,
measured and reported at market value on an on-
going basis in conformity with the Group's investment
policy. Changes in market value are recognised in
profit (loss) for the year as financial income and
expenses. Purchase and sale of securities are recog-
nised at the settlement date.
For listed securities, market value equals the market
price, and for unlisted securities, market value is
estimated based on generally accepted valuation
methods and market data.
Divested securities where repurchase agreements
(repo transactions) have been made at the time
of sale are recognised in the balance sheet at the
settlement date as if the securities were still held.
The amount received is recognised as a liability, and
the difference between the selling price and the pur-
chase price is recognised in profit (loss) for the year
over the term as interest. The return on the securities
is recognised in profit (loss) for the year.
The Group's cash needs in respect of its financial
loans and borrowings are shown in the table on
the left. The maturity analysis was determined on
31 December.
The maturity analysis is based on undiscounted cash
flows, including estimated interest payments. Interest
payments are based on market conditions and
interest -rate hedging entered into on 31 December.
The maturity analysis does not include hybrid capital
classified as equity. At 31 December 2019, we had
issued hybrid capital with a notional amount totalling
DKK 13,449 million due in 3013 (DKK 5,230 million),
3017 (DKK 3,736 million) and 3019 (DKK 4,483 million),
respectively.
The maturity analysis for leasing is part of note
8.2 'Leases'.
133 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 6. Capital structure
Notes
Contents
6.5 Financial income and expenses
Net financial income and expenses, DKKm
Interest expenses, net
Interest expenses, leasing
Interest element of provisions, etc.
Tax equity partner's contractual return
Value adjustments of derivatives, net
Exchange rate adjustments, net
Value adjustments of securities, net
Other financial income and expenses
Net financial income and expenses
Financial income and expenses, DKKm
Interest income from cash, etc.
Interest income from securities at market value
Capital gains on securities at market value
Foreign exchange gains
Value adjustments of derivatives
Other financial income
Total financial income
Interest expenses relating to loans and borrowings, etc.
Interest expenses transferred to assets
Interest expenses, leasing
Interest element of provisions
Tax equity partner's contractual return
Capital losses on securities at market value
Foreign exchange losses
Value adjustments of derivatives
Other financial expenses
Total financial expenses
Net financial income and expenses
2019
(1,312)
(171)
(428)
(307)
(181)
1,038
147
79
2018
(877)
-
(408)
(44)
(64)
285
(176)
6
(1,135)
(1,278)
The table shows net financial income and expenses,
corresponding to our internal reporting.
Exchange rate adjustments and hedging contracts
entered into to hedge currency risks are presented
net under the item 'Exchange rate adjustments, net'.
In 2019, interest expenses, net were affected by the
reversal of previously recognised interest expenses
regarding the provision related to the Elsam compe-
tition case (DKK 276 million) and interest expenses
related to payable tax.
Accounting policies
Market value adjustments of interest rate and
currency derivatives that have not been entered
into for hedging purposes are presented as financial
income or expenses.
The accounting policy for the tax equity partner's
contractual return is described in note 4.5 'Tax equity
liabilities'.
The implementation of IFRS 16 as of 1 January 2019
has caused the interest element regarding lease
liabilities to be recognised as financial expenses,
see note 1.3 for further details.
Exchange rate adjust ments of currency hedging are
recognised in revenue and cost of sales with a loss of
DKK 1,943 million (2018: a gain of DKK 268 million).
Borrowing costs transferred to property, plant and
equipment under construction are calculated at the
weighted average effective interest rate for general
borrowing. This amounted to 4.0% in 2019 (2018: 4.1%).
2019
65
226
161
3,020
4,185
61
7,718
(1,947)
344
(171)
(289)
(307)
(24)
(2,219)
(4,069)
(171)
(8,853)
(1,135)
2018
62
264
119
2,033
670
31
3,179
(1,710)
506
-
(280)
(44)
(304)
(1,978)
(466)
(181)
(4,457)
(1,278)
134 / 183
Ørsted Annual report 2019Financial statements Notes
Contents
7.
Risk management
136 Risk management
137 Market risks
139
Hedge accounting and economic hedging
142
Energy trading portfolio
143
Sensitivity analysis of financial instruments
144
Credit risks
Categories of financial instruments
145
146 Fair value measurement
Ørsted Annual report 2019 Consolidated financial statements – 7. Risk management
Notes
Contents
7. Risk management
Currency exposure, GBP 2020-2024,
USD 2020-2034, DKKbn
Energy exposure 2020-2024
DKKbn
Before hedging
After hedging
56.9
16.4
-2.5
0.0
Before hedging
After hedging
19.4
6.2
2.0
0.5
1.1 0.7
-0.1
-4.0
GBP
USD
Power
Gas
Oil
Spread
For USD, we manage our risk as a natural time
spread between front-end capital expenditures
and long-end revenue between 2020-2034.
NTD is not a material risk for the period 2020-2024.
We do not deem EUR to constitute a risk, as
we expect that Denmark will maintain its fixed
exchange-rate policy.
Our energy exposures are significantly reduced due
to hedging.
Market and credit risks are a natural part
of our business activities and a precondition
for being able to create value. Through
risk management, risks are reduced to an
acceptable level.
Currency and energy exposures
Our forward-looking energy and currency
exposures from produc tion, sales, investments
and divestments are presented in the figures
to the right.
In April 2019, we took final investment decision
on an offshore wind farm located in Taiwan
and thereby increased our exposure towards
NTD that, however, remains an insigificant risk
for the period 2020-2024.
Trading portfolio
We have a limited trading portfolio, the main
purpose of which is to optimise the execution
of hedging contracts and gains from short-
term energy price fluctuations.
In 2019, we expanded our trading activities
into the US energy market with the setup of a
trading desk in Chicago to exploit opportunities
from our growing activities in the US.
The trading activities comply with the man-
dates approved by the Board of Directors.
Read more in note 7.3 'Energy trading portfolio'.
+0.4bn
The value of our energy and currency hedging
instruments at 31 December 2019 was a gain
of DKK 441 million (2018 DKK -3,032 million),
which will increase business performance EBITDA
in a future period.
136 / 183
Ørsted Annual report 2019Financial statements
Consolidated financial statements – 7. Risk management
Notes
Contents
7.1 Market risks
Market risks and market risk management
Our most significant market risks relate to:
– energy prices
– foreign exchange rates
– interest and inflation.
We manage market risks to protect Ørsted
against market price volatility and ensure
stable and robust financial ratios that support
our growth strategy as well as protect the
value of our assets.
In the short- to medium-term horizon, we
primarily hedge future prices using derivatives
to reduce cash flow fluctuations after tax.
Minimum hedging levels are determined by
the Board of Directors. In the first two years,
we are almost fully hedged. The degree of
hedging is declining in subsequent years
due to:
– reduced certainty about long-term
production volumes
– increasing hedging costs in the medium
to long term; both spread costs and cost
of collateral,
– adverse impact from collateral, potentially
tying up large amounts of capital if hedging
contracts become unfavourable.
Our long-term market risk picture is deter-
mined by our strategic asset portfolio. Our
power exposure is partly mitigated through
long-term power purchasing agreements
(PPA), and we use debt to manage currency,
interest rate and inflation risk.
Energy price risks
Our consolidated energy exposure after hedg-
ing for the years 2020-2024 can be summarised
as shown in the table.
In general, highly certain cash flows in a
foreign currency is hedged within the first
five years.
Our GBP exposure amounted to DKK 16.4 billion
after hedging for the years 2020-2024. This
unhedged GBP exposure stems from subsidised
GBP income less operational expenditures.
Risk after hedging
DKKbn
Effect of price change
-10%
+10%
Power: 6.2 sales position
Gas: 0.5 sales position
Oil: 0.1 purchase position
Spread: 0.7 sales position
+0.6
+0.0
-0.0
+0.1
-0.6
-0.0
+0.0
-0.1
A 10% increase in the power price in 2020-2024
will therefore result in a gain of DKK 0.6 billion
in the period, all else remaining unchanged.
Currency risks
Our consolidated currency exposure after
hedging for the years 2020-2024 can be
summarised as shown in the table.
Exchange rates related to energy prices in
foreign currencies are not hedged until the
energy price is hedged. Hence, the GBP
exchange rate associated with power
generation in the UK is not hedged until the
GBP power price is hedged.
Cash flows that relate to fixed tariffs and
guaranteed minimum prices from offshore
wind farms in the UK deviate from the main
principle. Hedging of these, less operating
expenses, is based on a declining level of
hedging over the five-year risk management
horizon. The target is to hedge 100% of the
risk in year 1, declining by 20 percentage
points each year, to 20% in year 5.
The GBP exchange rate for hedges impacting
EBITDA in 2020 and 2021 is hedged at an aver-
age exchange rate of DKK/GBP 8.4 and 8.2,
respectively.
For our USD and NTD exposures from new
markets, we do not yet have an existing port-
folio against which we can net construction
payments. Therefore, we seek to hedge the
price risk in the near term, while simultaneously
hedging a similar, but opposite, exposure in the
longer term. Our EUR risk is subject to contin-
uous assessment, but is generally not hedged,
as we believe that Denmark will maintain its
fixed-exchange-rate policy.
Risk after hedging
DKKbn
Effect of price change
-10%
+10%
GBP: 16.4 sales position
NTD: 0.3 sales position
USD: 0.0 purchase position
+1.6
+0.0
-0.0
-1.6
-0.0
+0.0
GBP exposures, DKKbn
Before hedging
After hedging
14
Our main currency exposure stems from
offshore wind farms in the UK, but activities
in the US and Taiwan have increased our USD
and NTD exposure.
10
6
17
12
10
8
0
0
-3
2020
2021
2022
2023
2024
The graph shows our
GBP exposure before
and after hedges from:
– divestment and
investment
– green certificates
– hedged energy.
137 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 7. Risk management
Notes
Contents
Interest and inflation risk
To a certain extent, our medium- to long-
term earnings can be expected to follow the
development in consumer and market prices,
thereby protecting the real value of our assets
and equity. This is the case for earnings related
to our UK wind farms.
However, we are exposed to inflation risk on
projects with fixed nominal cash flows, as an
increase in inflation will erode the expected
real value of the revenue. This is the case for:
– fixed nominal subsidies from offshore
wind assets in Denmark, Germany, the
Netherlands, Taiwan and the US
– fixed nominal power purchase agreements
on onshore wind assets in the US.
The close relationship between inflation and
interest rates protects our equity value against
changes in interest rates to some extent.
We manage interest rate and inflation risk by
matching the sensitivity of our assets with the
sensitivity of our debt. The share of our debt
which is fixed in nominal terms partially offsets
the inflation risk. We have fixed the inflation
for part of the future revenue from our UK
offshore wind farms at an average of 3.6% for
the period 2024-2037 to create a better match
with our fixed-rate UK debt.
Offshore
Earnings from power generation from offshore
wind farms mainly comprise:
– fixed tariffs in Denmark, Germany, the
Netherlands, the UK (CfD wind farms),
the US and Taiwan,
– guaranteed minimum prices for green
certificates in the UK (ROC wind farms)
– sale of power at market price from our
out-of-subsidy wind farms or ROC wind
farms in the UK.
At the end of 2019, such fixed tariffs and
guaranteed minimum prices cover approx 87%
of the expected income from offshore wind
farms for the period 2020-2024. The remaining
price exposure concerns sales of power at
market price in the UK and Denmark.
Onshore
Earnings from power generation from onshore
wind farms in the US comprise tax incentives,
such as PTCs or ITCs, and power. The tax
incentives have a fixed value. However, there
is a price risk associated with the power which
is reduced by entering into power purchase
agreements (PPAs). The current PPAs cover
approx 72% of the expected generation, span-
ning 12-15 years from the commissioning of
the wind farm. The PPAs are entered into with
large corporates or financial institutions.
Markets & Bioenergy
Our CHP plant portfolio consists of biomass
and fossil-fuelled plants in Denmark. The CHP
plants generate both heat and power. Concur-
rently with the biomass conversion of our CHP
plants, a larger share of the related earnings
will be coming from our heat generation. Heat
generation does not give rise to price risks as
the associated costs are covered by the heat
customers. However, heat generation often
entails a price risk for power, as heat and power
are generated simultaneously to a large extent.
The profitability of power generation is deter-
mined by the difference between the selling
price of power and the purchase price of fuel
and carbon emissions allowances. For our coal-
based power generation, we secure profitabili-
ty by selling power and buying fuel and carbon
emissions allowances, while for biomass-based
power generation, we secure profitability by
buying biomass at fixed prices and hedging the
associated power generation. At the end of
2019, 50% of the expected power generation
from our power stations in 2020 was hedged.
The total net risk associated with the power
stations' power generation for the 2020-2024
period is DKK 0.7 billion after hedging.
Our price risks in Markets arises from the
purchase and sale of power and gas. The price
risks associated with the purchase and sale
of gas result from differences in the indexing
of sales and purchase prices. Our largest gas
purchase contracts include the option of
renegotiating the contract price if it no longer
reflects market conditions. We have completed
most of these renegotiations in recent years;
as a result, the contract prices have largely
been indexed to pure gas prices and not to oil
prices, as was previously the case. Therefore,
we are less sensitive to differences in the oil
and gas price development than before. The
price risks associated with power purchases
and sales are given by the difference between
the purchase and sales prices. The price risk
relates primarily to timing differences between
purchases and sales and the related hedges
and is therefore considered to be limited.
Offshore's power price exposure, DKKbn
Before hedging
After hedging
4.2
3.0
3.0
2.7
2.5
2.3
1.7
1.0
0.1
0.2
2020
2021
2022
2023
2024
The table shows the exposure from Offshore's
generation of power before and after hedges.
Expected value for recognition in
business performance EBITDA, DKKbn
Power
Gas
Oil
Coal
0.7
Currency
Inflation
US PPAs
1.2
-0.5
2021
2020
After 2021
Principles for estimating exposures
Exposure is calculated as the expected production
(or net purchase/sale) times the forward price for the
respective years. In addition, the exposure is deter-
mined on the basis of the expected exposure after
renegotiations of oil-indexed gas purchase contracts.
The table shows the time of the transfer of the
value of hedging contracts in business performance
EBITDA for both business performance and
IFRS hedges together with deferred revenue
from US power purchase agreements; see note
1.5 'Business performance'.
138 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 7. Risk management
Notes
Contents
7.2 Hedge accounting and economic hedging
Note
Overview of the Group's
derivative positions, DKKm
Recognised with EBITDA impact
1.5, 7.2
Economic hedging, currency
1.5, 7.2
Economic hedging, energy
Hedging of cash flows, inflation
Hedging of cash flows, energy
Hedging of cash flows, currency
Trading portfolio
Total
Recognised in financial income and expenses
Hedging of fair value, currency
Hedging of cash flows, currency and interest
Other currency derivatives
Other interest derivatives
Total
Recognised in other line items
7.2
7.3
7.2
7.2
7.2
7.2
7.2
2019
2018
Contractual
principal
amount
30,744
19,026
17,373
6,988
243
9,271
83,645
25,825
3,890
8,052
4,431
42,198
Market
value
(1,509)
617
585
545
(108)
1,148
1,278
43
(130)
504
(85)
332
Contractual
principal
amount
29,684
27,927
15,547
-
12,434
6,509
Market
value
712
(3,806)
(69)
-
22
313
92,101
(2,828)
10,388
4,323
3,798
6,588
25,097
-
2,285
27,839
(761)
(216)
436
(39)
(580)
-
(106)
888
Hedging of cash flows, energy and currency
(gain/loss on divestment of enterprises)
Hedging of fair value, currency (discontinued)
Hedging of net investments (OCI)
10,487
999
318
(50)
46,717
(1,096)
Economic hedging and commercial
contracts
The purpose of economic hedging is to reduce
our risk from generation and sale of energy.
Fluctuations in value are expected to be offset
by the underlying exposure.
Accounting policies
Economic hedging and commercial contracts
Market value adjustments of financial contracts
offered to customers with a view to price hedging
and financial instruments that have been entered
into to hedge the Group's principal operating
activities are recognised as revenue or cost of sales.
Under the business performance principle, economic
hedging is accounted for as effective hedging. The
resulting market value adjustment is consequently
deferred to the period in which the hedged transac-
tion affects results. See note 1.5 'Business performance'
for further information.
The contractual principal amount has been
determined as net position per derivative type.
2019
2018
Economic hedging
and commercial
contracts, DKKm
Contractual
principal
amount
Market
value
Contractual
principal
amount
Total
184,046
782
147,322
(2,626)
The table shows the Group's derivatives and
commercial contracts according to the type of
accounting treatment and the items affected:
– Economic hedging comprises hedging of energy-
related risks and related currency risks. These
hedging contracts are treated as hedge accoun-
ting in accordance with the business performance
principle (see note 1.5 'Business performance' for a
detailed description).
– Hedging of cash flows includes hedging of interest
rates, inflation, currencies, power prices and market
risks related to the divestment of the LNG business.
– Hedging of the market value of securities or
currencies comprises hedging of recognised assets
or liabilities.
– Hedging of net investments comprises hedging
of the currency risk associated with investments
in assets located in foreign countries.
– The trading portfolio and other interest and
currency derivatives are recognised at market
value in the income statement.
The contractual principal amount has been deter-
mined as the net position per derivative type.
Energy
Oil swaps
Gas swaps
Gas options
Power swaps
Power options
Coal
Total
Currency
Forward exchange
contracts
Total
993
-
3,180
10,523
4,193
137
19,026
56
-
770
(490)
317
(36)
617
Market
value
(182)
(412)
-
2,442
5,717
-
16,543
(3,267)
2,900
325
48
7
27,927
(3,806)
30,744
49,770
(1,509)
(892)
29,684
57,611
712
(3,094)
Economic hedging is
accounted for under the
business performance
principle, see description
above.
The market value of
DKK -892 million (2018:
DKK -3,094 million) will
be recognised in business
performance profit or
loss in a future period.
139 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 7. Risk management
Notes
Contents
Cash flow and fair value hedging
We have entered into forward exchange con-
tracts for the purpose of hedging the currency
risk associated with the construction of our
partners' share of offshore wind farms.
Forward exchange contracts have also been
concluded for the purpose of hedging the
currency risk associated with interest payments
on loans in GBP.
Ineffectiveness
Ineffectiveness of cash flow and fair
value hedging totalled DKK 0 million
(2018: DKK 0 million).
Cash flow
hedge accounting
2019, DKKm
Revenue (power)
Revenue (USD)
Revenue (UK inflation)
Divestments (GBP)
Divestments (USD)
Divestments (oil)
Divestments (gas)
Interest payments (GBP)
Interest payments (fixed)
2018, DKKm
Revenue (USD)
Revenue (UK inflation)
Divestments (GBP)
Interest payments (GBP)
Interest payments (fixed)
Contractual
principal
amount
Maturity analysis
Market value
2020
2021 After 2021
Asset
Liability
Recognised in
comprehen-
sive income
Expected transfers to income statement
2020
2021 After 2021
6,988
116
17,373
127
3,518
3,442
3,527
2,310
1,580
1,152
15,547
11,282
2,721
1,602
499
115
-
127
433
556
503
576
25
2019
214
-
10,733
543
18
615
1
-
-
830
1,013
936
664
29
5,874
-
17,3731
-
2,255
1,873
2,088
1,070
1,526
2020 After 2020
935
-
549
543
24
3
15,5471
-
1,635
1,560
824
120
585
96
158
74
534
37
-
-
34
113
-
56
(279)
(182)
-
(142)
(37)
(142)
(269)
(43)
124
(55)
(103)
(36)
(272)
-
1,021
(41)
585
(4)
-
-
-
43
(331)
(55)
(69)
(51)
(187)
(193)
46
(41)
-
(4)
-
-
-
(42)
(59)
46
-
-
-
-
-
-
1
(55)
929
-
585
-
-
-
-
84
(217)
2019
2020 After 2020
(11)
-
(49)
(99)
(41)
(42)
-
(2)
(65)
(38)
(2)
(69)
-
(23)
(114)
1 The hedge covers inflations risk for the period 2024-2037.
Fair value
hedge accounting
2019, DKKm
GBP (sell position)
EUR (sell position)
NTD (sell position)
USD (buy position)
2018, DKKm
GBP (sell position)
EUR (sell position)
USD (buy position)
Contractual
principal
amount
18,688
4,483
2,654
999
5,911
4,477
2,285
Maturity analysis
Market value
2020
(273)
-
-
999
2019
(4,481)
-
1,306
2021 After 2021
Asset
Liability
-
-
-
-
18,961
4,483
2,654
-
2020 After 2020
-
-
979
10,392
4,477
-
33
17
1
-
60
11
-
(8)
-
-
(50)
(832)
-
(106)
As of 1 January 2019, we have started to apply IFRS
cash flow hedge accounting on power purchase
agreements related to the Onshore business unit.
Subsequent to entering into an agreement to divest
our LNG business, all hedges related to the period
after an expected closing date are reclassified
from economic hedging to IFRS cash flow hedges
(divestments).
The fair value hedges are related to hedges of loans
and receivables in the balance sheet.
Accounting policies
We primarily use hedge accounting for currency and
interest where it is possible to use hedging instruments
which hedge the desired risk one-to-one. The GBP
exposure, for example, is hedged using GBP forward
exchange contracts, GBP swaps or GBP loans. There
are thus no significant sources of ineffectiveness.
For currency swaps, the basic spread is accounted for
according to the cost of the hedging model.
To the extent that a risk needs to be hedged, and
if there is no fully effective instrument available in
the market, analyses are performed of the expected
effectiveness of the hedging instrument before the
hedging transaction is concluded. In this case, the
ratio between the hedged risk and the hedging instru-
ment may deviate from the one-to-one principle and
will be determined as the ratio which most effectively
hedges the desired risk.
We recognise changes to the market value of
hedging instruments that qualify for recognition as
a hedge of future cash flows in other comprehensive
income in the hedging reserve. On realisation of the
hedged cash flow, the resulting gains or losses are
transferred from equity and recognised in the same
item as the hedged item. However, on hedging of
proceeds from future loans, the resulting gain or loss
is transferred from equity over the term of the loan.
When we conclude a hedging transaction, and each
time we present financial statements thereafter,
we assess whether the hedged exposure and the
hedging instrument are still financially correlated.
If the hedged cash flows are no longer expected
to be realised, the accumulated value change is
transferred to profit (loss) for the year.
Changes in the market value of derivatives that are
classified as hedges of the fair value of a recognised
asset or liability are recognised in profit (loss) for the
year together with changes in the value of the hedged
asset or liability to the extent of the hedged risk.
140 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 7. Risk management
Notes
Contents
Hedging of net investments in foreign subsidiaries, DKKm
Currency
2018
GBP
EUR
USD
NTD
Other
Total
2018
GBP
EUR
USD
Other
Total
Net
investment
Of which non-
controlling
interests
Hedged
amount in
currency
Net position
Accumulated
exchange rate
adjustments in
equity
62,600
22,501
15,979
3,061
122
104,263
46,468
23,871
9,060
237
79,636
(3,292)
-
-
-
-
(3,292)
(3,377)
-
-
-
(3,377)
(35,284)
(4,483)
(4,296)
(2,654)
-
(46,717)
(23,281)
(4,477)
(81)
-
(27,839)
24,024
18,018
11,683
407
122
54,254
19,810
19,394
8,979
237
48,420
(1,165)
38
139
(3)
(66)
(1,057)
(1,583)
14
(48)
(43)
(1,660)
The net position
expresses the
accounting exposure.
If, for example, the
GBP/DKK exchange
rate increased by
10% on 31 December
2019, equity would
have increased by
DKK 2,402 million,
corresponding to 10%
of DKK 24,024 million.
Net investment hedges
2019, DKKm
Contractual
principal
amount
GBP (sell position)
EUR (sell position)
USD (sell position)
NTD (sell position)
2018, DKKm
GBP (sell position)
EUR (sell position)
USD (sell position)
35,284
4,483
4,296
2,654
23,281
4,477
81
Maturity analysis
Market value
2020
2,950
-
(1,548)
-
2019
2,879
-
-
2021 After 2021
Asset
Liability
3,104
-
2,429
-
29,230
4,483
3,415
2,654
2020 After 2020
428
-
-
19,974
4,477
81
149
4
36
-
1,075
2
21
(1,195)
(21)
(68)
(1)
(178)
(13)
(19)
Hedging of net investments in
foreign subsidiaries
Our foreign activities entail currency risk.
We hedge this currency risk by raising loans
in foreign currencies, entering into forward
exchange contracts and investing in currency
swaps and options.
On 31 December 2019, the accumulated
exchange rate adjustments totalled
DKK -1,057 million divided between the
exchange rate adjustment of the net
investment of DKK -857 million and the
hedging thereof of DKK -201 million.
East Coast Hub,
Grimsby, UK.
Accounting policies
Hedging of net investments in foreign subsidiaries
Changes in the market value of derivatives and loans
that are used to hedge net investments in foreign
subsidiaries or associates are recognised in the
consolidated financial statements directly in equity
within a separate foreign currency translation reserve.
141 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 7. Risk management
Notes
Contents
7.3 Energy trading portfolio
Trading portfolio
The purpose of our trading portfolio is to:
– optimise hedging contracts
– contribute to increased market insight and
– profit from short-term fluctuations in
energy prices.
The trading portfolio consists primarily of
positions in power and gas.
Overview of the Group's trading
portfolio, DKKm
Contractual principal
amount
Market value
Contractual principal
amount
Market value
2019
2018
Power swaps and options
Gas swaps and options
Oil swaps
Coal swaps
Carbon emission allowances
Total
7,329
1,467
141
5
329
9,271
386
720
14
36
(8)
1,148
5,142
1,126
184
50
7
6,509
(127)
308
182
(7)
(43)
313
The contractual
principal amount has
been determined as
the net position per
derivative type.
In 2019, we expanded our trading activities
into the US energy market with the setup of a
trading desk in Chicago to exploit opportunities
from our growing activities in the US.
Market trading mandates
VaR limit in 2019:
DKK 70 million
Stress limit in 2019:
DKK 400 million
Maximum open positions in trading portfolio
The trading portfolio constitutes a smaller
part of our total portfolio of derivatives, and
the associated risk is limited.
When an economic hedging instrument
(business performance hedge) does not fully
correspond to the hedged risk, any difference
between the hedging contract entered into
and the hedged exposure is recognised in the
income statement as part of the gain (loss)
from the trading portfolio.
Accounting policies
Market value adjustments of physical and financial
contracts relating to energy that are entered into
with the purpose of generating gains from short-term
price changes are recognised as revenue.
VaR indicates the largest loss in one
trading day to a probability of 95%. VaR
is based on data for the past 60 trading
days with the heaviest weighting being
assigned to the most recent trading days.
Stress indicates the largest daily loss we risk
sustaining with the given portfolio. Stress is
based on data from 1 January 2006 to the
present day.
– Max. 8TWh of power
– Max. 15TWh of gas
– Max. 4 million boe of oil
– Max. 2 million tonnes of coal
– Max. 3 million tonnes of carbon emissions
Daily position in the trading portfolio, market trading mandates, DKKm
Board of Directors mandate
VaR (value at risk) (DKK '000)
Group Executive Management mandate
80
60
40
20
0
The graph shows the
daily value-at-risk
position for the period
2018-2019. The man-
dates from the Board
of Directors and Group
Executive Management
have not been breached
during the period.
2018
2019
Trading activities are
carried out within
mandates approved by
the Board of Directors.
The mandates comprise
a value-at-risk (VaR)
mandate and a stress
mandate as well as a
limit for the maximum
positions measured in
energy units per product
(power, gas, etc.).
142 / 183
Ørsted Annual report 2019Financial statements
Consolidated financial statements – 7. Risk management
Notes
Contents
7.4 Sensitivity analysis of financial instruments
The sensitivity analysis in the table shows the
effect of market value changes assuming a
relative price change at 31 December 2019.
Sensitivity analysis of
financial instruments
DKKm
31 December 2019
31 December 2018
Effect on profit (loss) before tax
Price change
Trading
portfolio
Other financial
instruments1
Effect on
equity before
tax
Effect on profit (loss) before tax
Trading
portfolio
Other financial
instruments1
Effect on
equity before
tax
Risk
Oil
Gas
Power
Coal
USD
GBP
EUR
The effect on profit (loss) before tax com-
prises financial instruments that remained
open at the balance sheet date, and which
have an effect on profit (loss) in the current
financial year. The effect is broken down by:
– trading portfolio: these contracts will
affect profit
– other financial instruments, including
economic hedging and commercial
contracts: the market value changes of
contracts allocated as economic hedges
will be offset, in full or in part, by a change
in the hedged risk.
Effect on equity before tax comprises finan-
cial instruments that remained open at the
balance sheet date, and which are value-
adjusted directly in equity.
Financial instruments include derivatives as
well as receivables and payables in foreign
currencies.
10%
-10%
10%
-10%
10%
-10%
10%
-10%
10%
-10%
10%
-10%
10%
-10%
(423)
423
(22)
22
540
(556)
(10)
10
(126)
126
68
(68)
(263)
263
(268)
-
106
(106)
(169)
169
(1,334)
1,350
1
(1)
81
(81)
(2,539)
2,539
(316)
316
-
-
335
(335)
(328)
328
(827)
827
-
-
135
(135)
119
(119)
(316)
316
159
(1,937)
(220)
220
12
(12)
73
(53)
(33)
33
(16)
16
51
(51)
(228)
228
(454)
-
230
(230)
(511)
511
(2,385)
2,365
(5)
5
(301)
301
(2,905)
2,905
(1,353)
1,353
-
-
-
-
-
-
-
-
-
-
(115)
115
(856)
856
420
(420)
161
(1,770)
Interest
100 basis points
Inflation
100 basis points
The illustrated sensitivities only comprise the
impact from our financial instruments.
If the hedged exposure had been included in the
sensitivity analysis, the effect of a price change
would have been reduced or offset entirely.
Net investments and associated hedging of
net investments in foreign subsidiaries are
not included in the table, as the effect of
the sum of the investment and the hedging
are considered to be neutral to changes
in currencies.
A 10% increase in the currencies hedged
in connection with net investments would
reduce equity by DKK 4,672 million
(2018: DKK -2,784 million).
1
Other financial
instruments, including
derivatives classified
as economic hedging,
comprise derivatives
entered into to hedge
future financial risks.
The market value
changes of these con-
tracts will be offset,
in full or in part, by a
change in the hedged
risk. Also included
are commercial
contracts recognised
at market value.
143 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 7. Risk management
Notes
Contents
7.5 Credit risks
We are exposed to credit risks from our trading
partners and customers. A large part of our
counterparty risks concerns major international
energy companies and banks. Such trading is
regulated under standard agreements, such as
EFET and ISDA agreements, which feature, for
instance, credit rating and netting provisions.
Our credit exposure is mainly concentrated on
counterparties in Denmark, the UK, Germany
and the US.
We limit our credit risks by:
– systematically rating significant
counterparties
– granting credit limits or
– demanding that collateral be furnished
or credit insurance put in place.
The counterparties and credit limits granted
are monitored on an ongoing basis. The
monitoring is based on the framework
established by our Board of Directors and
Group Executive Management. For the most
significant counterparties, an internal rating is
required to determine credit limits. The rating
is based on information from external credit
rating agencies, publicly available information
and our own analyses.
We suffered no losses from any single major
counterparty in 2019 or 2018.
Offsetting of financial assets, DKKm
Derivatives
Financial assets
Financial liabilities, offset
Financial assets in the balance sheet
Amounts not offset in the balance sheet:
Liabilities with offsetting rights
Collateral received
Net
12,174
(6,917)
5,257
(2,044)
(1,438)
1,775
Offsetting of financial liabilities, DKKm
Derivatives
Financial liabilities
Financial assets, offset
Financial liabilities in the balance sheet
Amounts not offset in the balance sheet:
Assets with offsetting rights
Collateral provided
Net
13,108
(6,917)
6,191
(2,044)
(331)
3,816
Trade
receivables
17,219
(13,767)
3,452
-
-
3,452
Trade
payables
16,764
(13,767)
2,997
-
-
2,997
2019
Derivatives
29,393
(20,684)
8,709
(2,044)
(1,438)
5,227
12,173
(7,435)
4,738
(1,485)
(614)
2,639
2019
Derivatives
29,872
(20,684)
9,188
(2,044)
(331)
6,813
13,410
(7,435)
5,975
(1,485)
(713)
3,777
Trade
receivables
23,173
(20,060)
3,113
-
-
3,113
Trade
payables
23,085
(20,060)
3,025
-
-
3,025
2018
35,346
(27,495)
7,851
(1,485)
(614)
5,752
2018
36,495
(27,495)
9,000
(1,485)
(713)
6,802
The table shows our
financial assets and
liabilities where a share
is offset and is therefore
presented net. Offset-
ting is typically limited
within specific products.
The assessment is based on the individual
counterparty's ratings with Standard & Poor's,
Moody's and Fitch. The figures do not reflect
our actual credit exposure as the positions are
calculated before offsetting our debt to such
counterparties.
Credit quality of the Group's
counterparties, DKKm
AAA/Aaa
AA/Aa
A/A
BBB/Baa
Non-rated
2019
9,221
4,000
11,593
5,284
2018
20,949
3,078
6,428
3,817
12,246
11,638
Accounting policies
Total credit exposure
42,344
45,910
The table shows the credit quality of our counter-
parties, distributed by category. In addition, we have
receivables and construction agreements related to
the construction of offshore wind farms amounting
to DKK 1,017 million (2018: DKK 6,951 million) where
we have collateral in the offshore wind farm under
construction. The AAA/Aaa category covers our posi-
tion in Danish AAA-rated government and mortgage
bonds. The non-rated category primarily consists of
trade receivables from customers, such as end-users.
The credit risk from our financial assets
prima rily concerns derivatives, cash and
bond port folios as well as receivables.
We only offset positive and negative values if we
are entitled to and intend to settle several financial
instruments net.
144 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 7. Risk management
Notes
Contents
7.6 Categories of financial instruments
Financial instruments are used for various
purposes. The purpose determines the
category, and whether the value adjustment
of the instrument should be recognised in
the profit (loss) for the year or as part of the
hedging reserve in equity.
The fair value of financial instruments
measured at amortised cost is identical
to the carrying amount with the excep-
tion of bank loans and issued bonds
where the market value is stated in note
6.1 ' Interest-bearing debt'.
The table shows our
financial instruments
divided into categories.
The categories indicate
how the financial instru-
ments are recognised in
the financial statement.
Categories of financial instruments, DKKm
Energy and currency derivatives
Securities
Financial assets measured at fair value via the income statement
Energy derivatives
Interest and inflation derivatives
Currency derivatives
Derivatives (assets) used as hedging instruments
Trade receivables
Other accounts receivable
Financial assets measured at amortised cost
Energy and currency derivatives
Financial liabilities measured at fair value via the income statement
Energy derivatives
Interest and inflation derivatives
Currency derivatives
Derivatives (liabilities) used as hedging instruments
Bank loans and issued bonds
Trade payables
Other accounts payable
Financial liabilities measured at amortised cost
2019
5,072
16,552
21,624
1,432
585
651
2,668
8,140
11,941
20,081
4,397
4,397
690
124
1,747
2,561
36,840
10,832
2,595
50,267
Humberside Airport, UK.
2018
4,096
25,501
29,597
-
90
1,282
1,372
10,741
8,896
19,637
6,480
6,480
-
103
1,511
1,614
27,296
13,082
3,207
43,585
145 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 7. Risk management
Notes
Contents
7.7 Fair value measurement
We measure our securities and derivatives at
fair value. A number of our derivatives, mainly
power purchase agreements, are measured
based on non-observable inputs. The most
significant non-observable input is the long-
term US power price due to the long duration
of the contracts.
Valuation principles and key assumptions
In order to minimise the use of subjective esti-
mates or modifications of parameters and cal-
culation models, it is our policy to determine
fair values based on the external information
that most accurately reflects the market
values. We use pricing services and benchmark
services to increase the data quality. Market
values are determined by the Treasury & Risk
Management function which reports to the
CFO. The development in market values is
monitored on a continuing basis and reported
to the Group Executive Management.
Deferred revenue from US power
purchase agreements
The deferred revenue from US PPAs consist
of losses not recognised at initial recognition
since the market value is based on non-
observable inputs. The PPAs lock in the power
price of the expected power generation over
a period of 13-15 years. These contracts are
accounted for at fair value. Due to the long
duration of these PPAs, power prices are not
observable for the last part of the duration.
The deferred revenue is recognised in profit or
loss in the future period to which the market
value relates. In 2019, we have recognised
an income of DKK 216 million (2018: DKK 12
million) related to the deferred fair value of
PPAs not recognised in profit or loss at initial
recognition. The total amount of deferred
revenue as of 31 December 2019 amounts to
DKK 995 million (2018: DKK 1,183 million).
US power prices (ERCOT)
The US power purchase agreements give
exposure to the long-term US power prices
in the ERCOT region. The price is observable
for the first four to six years. For the following
four to six years, the power price is estimated
based on observable inputs (gas prices and
heat rates). For the subsequent period, the
power price is non-observable and estimated
by extrapolating the power price towards the
U.S. Energy Information Administration's long-
term power price forecast, assuming similar
seasonality as in previous periods.
Significant non-observable inputs
Market values based on non-observable input
comprise primarily long-term contracts on
the purchase/sale of espcially power and to
a less extent gas and coal. Since there are
no active markets for the long-term prices
Fair value hierarchy, DKKm
Inventories
Derivatives Other receivables
Securities
Derivatives
Other payables
Assets
Liabilities
2019
Quoted prices
Observable input
Non-observable input
Total 2019
2018
Quoted prices
Observable input
Non-observable input
Total 2018
959
-
-
959
172
-
-
172
16
7,467
257
7,740
3
5,206
259
5,468
-
-
-
-
-
-
109
109
-
16,552
-
16,552
-
25,501
-
25,501
21
6,916
21
6,958
9
7,179
906
8,094
-
-
-
-
-
-
657
657
of power and gas, the market values have
been determined through an estimate of
the future prices. Normally, the price can be
observed for a maximum of four to six years
in the power market, after which an active
market no longer exists.
For market prices other than ERCOT, the price
is projected by extending the observable
forward curve, only adjusted for the expected
development in inflation.
Accounting policies
Market values based on quoted prices comprise
quoted securities and derivatives that are traded in
active markets. The market value of derivatives
traded in an active market are often settled on a
daily basis, thereby minimising the market value
presented on the balance sheet.
Market values based on observable inputs comprise
derivatives where valuation models with observable
inputs are used to measure fair value.
All assets and liabilities measured at market value
are measured on a recurring basis.
In business combinations, gain (loss) at initial
recognition on derivatives whose values are based
on non-observable inputs are deferred and recog-
nised in the period to which the value relates.
146 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 7. Risk management
Notes
Contents
Derivatives valued on the basis of non-observable input, DKKm
Market value at 1 January
Value adjustments through profit or loss
Value adjustments through other comprehensive income
Sales/redemptions
Purchases/issues
Additions due to acquisitions of enterprises
Transferred from quoted prices and observable input
Transferred to quoted prices and observable input
Market value at 31 December before deferred gain/loss
Deferred loss at initial recognition on 1 January
Market value at 31 December
2019
(2,458)
289
955
20
97
-
-
1,333
236
-
236
Non-observable inputs 2018, Monthly average power price (USD per MWh)
SPP North RT
Ercot North RT
Ercot West DA
Ercot West RT
Ercot North DA
(1,814)
(1,184)
(344)
400
(2,458)
1,811
(647)
100
90
80
70
60
50
40
30
20
10
3
2
/
1
0
/
1
0
4
2
/
1
0
/
1
0
5
2
/
1
0
/
1
0
6
2
/
1
0
/
1
0
7
2
/
1
0
/
1
0
8
2
/
1
0
/
1
0
9
2
/
1
0
/
1
0
0
3
/
1
0
/
1
0
1
3
/
1
0
/
1
0
2
3
/
1
0
/
1
0
3
3
/
1
0
/
1
0
4
3
/
1
0
/
1
0
US power prices are no longer valued based on
significant non-observable inputs, but we include
2018 comparatives. The graph shows the US power
prices in the period when prices are not observable,
and which we have used as basis for calculating
market value as of 31 December 2018.
2018
(157)
61
-
Non-observable inputs per commodity price input, DKKm
US power prices
Other power prices
Gas prices
580
Total
2019
-
221
15
236
2018
(2,533)
(52)
127
(2,458)
After a change in the valuation methodology,
US power prices are no longer valued based on
significant non-observable inputs, see description
on previous page.
Sensitivity of non-observable inputs 2018, DKKm
Non-observable inputs
Market value
ERCOT North real time, 2024-2033
ERCOT North day ahead, 2024-2033
ERCOT West day ahead, 2023-2033
ERCOT West real time, 2025-2033
SPP North real time, 2023-2033
Total
(194)
(388)
(90)
(132)
(288)
(1,092)
2018
Sensitivity
+10%
(105)
(275)
(33)
(34)
(68)
(515)
-10%
105
275
33
34
68
515
US power prices are no longer valued based on
significant non-observable inputs, but we include
2018 comparatives. The table shows the market
value related to the non-observable input for
the stated period and sensitivity per power price
index. The sensitivity illustrates the impact on
the market value as of 31 December 2018 if the
non-observable price increases/decreases by 10%.
The most critical non- observable input in 2018 is US
power prices in the period 2023-2033. If power prices
as of 31 December 2018 increased/decreased by
10%, the market value would decrease/increase by
DKK 515 million.
147 / 183
Ørsted Annual report 2019Financial statements
Notes
Contents
8.
Other notes
149 Related-party transactions
150 Leases
151 Auditor's fees
151 Contractual obligations
152 Company overview
Ørsted Annual report 2019 Consolidated financial statements – 8. Other notes
Notes
Contents
8.1 Related-party transactions
Related parties that have control over the
Group comprise the Danish state, represented
by the Danish Ministry of Finance.
The remuneration and share programme for
Group Executive Management and the Board of
Directors are described in notes 2.6 ' Employee
costs' and 2.7 'Share-based payment'.
Other related parties are the Group's associ-
ates and joint ventures, members of the Board
of Directors and the Executive Board as well
as other senior executives.
See note 8.5 'Company overview' for an over-
view of our joint ventures and associates.
Related-party transactions are made on
arm's length terms. Intra-group transactions
have been eliminated in the consolidated
financial statements.
Through a directly owned company, Peter
Korsholm, board member, has had ordin ary
transactions with Danish Oil Pipe A/S, a
wholly owned subsidiary in the Ørsted Group.
We use the exemption set out in IAS 24.25
concerning entities in which the Danish state is
a related party, and therefore transactions with
government-related companies are not disclosed.
There were no other related-party transac-
tions during the period.
Joint ventures, DKKm
Capital transactions, net
Sale of goods and services
Purchase of goods and services
Receivables
Associates, DKKm
Dividends received and capital reductions
Capital transactions, net
Sale of goods and services
Purchase of goods and services
Interest, net
Payables
Receivables
Board of Directors, DKKm
Purchase of goods and services
Payables
Gode Wind 1 & 2,
North Sea, Germany.
2019
118
3
(6)
1
-
(46)
13
(130)
-
(18)
1
(107)
(11)
2018
129
16
(9)
-
15
(20)
-
(169)
3
-
60
(139)
-
149 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 8. Other notes
Notes
Contents
8.2 Leases
Our lease liabilities increased by DKK 108 million
relative to 1 January 2019. Additions primarily
related to commenced leases of plots of land
related to development and construction
projects in Onshore.
Offshore's leases mainly comprise seabeds
related to the offshore wind farms in the UK
and US and service vessels. Onshore's leases
comprise plots of land related to onshore wind
farms. Markets & Bioenergy mainly lease gas
storage facilities in Germany.
Leased assets recognised under 'Other activ i-
ties' mainly comprise our two office premises
in Gentofte and London. The premises are used
by employees in all of our business units.
Seabed leases include variable lease pay-
ments which depend on the number of mega-
watt hours generated. However, we have
typically agreed on minimum lease payments
for the seabeds, and these minimum pay-
ments are included in the lease liabilities.
Expenses for the year relating to variable
lease payments not included in lease liabil-
ities amounted to DKK 311 million. Interests
on lease debt expensed in profit (loss) were
DKK 171 million in 2019. Operating lease pay-
ments recognised in profit (loss) in 2018 were
DKK 778 million.
Total cash outflows for leases were DKK 1,147
million in 2019.
Accounting policies
Our lease liabilities are initially measured at the net
present value of the in-substance fixed lease payments
for the use of a lease asset. If, at inception of the lease,
we are reasonably certain about exercising an option
to extend a lease, we will include the lease payments
in the option period when calculating the lease liability.
We measure the lease asset to the value of the lease
liability at initial recognition.
Our lease assets are classified alongside our owned
assets of similar type under property, plant and equip-
ment. We depreciate our lease assets during the lease
term. The depreciation method is straight-line basis for
all our lease assets, except for seabed leases where the
depreciation method is aligned with the depreciation
method for the related offshore wind farm. Therefore,
seabed lease assets are depreciated by using either the
straight-line method or the reducing-fraction method.
Contracts may contain both lease and non-lease com-
ponents. We allocate the consideration in a contract
to the lease and non-lease components based on their
relative stand-alone prices. We account for non-lease
components in accordance with the accounting policy
applicable for such items. Non-lease components
comprise building services and operating costs of
leased vessels, etc.
Variable lease expenses are recognised in other
external expenses in the period when the condition
triggering those payments occurs. Interests of lease
liabilities are recognised in financial expenses.
Each lease payment is separated into repayment of
the lease liability and payment of interests of the lease
liability. Debt repayments are classified as cash flows
from financing activities, and payment of interests are
classified as cash flows from operating activities.
We implemented the new lease accounting rules
in IFRS 16 'Leases' on 1 January 2019. See note
1.3 ' Implementation of new or changed accounting
standards and interpretations'.
We have entered into leases of DKK 96 million
which are not commenced and therefore, they
are not included in our lease liabilities.
Lease assets, DKKm
Carrying amount at 1 January 2019
Exchange rate adjustments
Additions
Disposals
Depreciation
Carrying amount at 31 December 2019
Land and
buildings
Production
assets
Fixtures and fittings,
tools and equipment
Property,
plant and
equipment
460
5,065
4,165
131
535
(61)
(363)
4,407
440
1
109
-
(74)
476
5
5
-
(162)
308
Lease liabilities by segment 2019, DKKm
Offshore
Onshore
Markets &
Bioenergy
Other
activities
0-1 year
1-3 years
3-5 years
5-10 years
10-15 years
After 15 years
Total (non-discounted)
Carrying amount at 31 December 2019
Operating lease liabilities by segment 2018, DKKm
0-1 year
1-3 years
3-5 years
5-10 years
10-15 years
After 15 years
Total (non-discounted)
Present value at 31 December 2018
We have implemented IFRS 16 after the
modified restrospective method. Therefore,
we have not restated comparative figures.
309
205
20
46
489
2,954
4,023
2,432
737
584
363
731
726
748
3,889
2,336
16
24
9
121
75
1,281
1,526
864
15
31
31
75
79
284
515
308
89
185
41
44
-
66
425
368
168
172
175
56
39
62
672
422
199
224
287
1,224
26
14
1,974
1,668
198
409
399
1,007
280
38
2,331
1,753
137
649
(61)
(599)
5,191
Total
613
638
357
1,435
590
4,315
7,948
5,332
1,118
1,196
968
1,869
1,124
1,132
7,407
4,819
150 / 183
Ørsted Annual report 2019Financial statements
Consolidated financial statements – 8. Other notes
Notes
Contents
8.3 Auditor's fees
8.4 Contractual
obligations
PwC is Ørsted's auditor appointed by the
annual general meeting. PwC audits the
consolidated financial statements of Ørsted
and our subsidiaries' financial statements in
all the countries where we are represented.
It is our policy that the annual fee for non-
audit services provided by our statutory
auditor cannot exceed the annual fee for
statutory audit services measured at Group
level. The cap may be exceeded subject to
approval by the Audit & Risk Committee.
Other assurance engagements primarily
included reviews of ESG data and reviews of
regulatory financial statements.
Tax and VAT advice primarily included advice
in connection with the divestment of assets
and enterprises and advice in connection with
the preparation of tax returns.
Other services included other consultancy
services from PwC, including advice in connec-
tion with accounting, GDPR, due diligence and
divestment of assets and enterprises.
Our contractual obligations at 31 December
2019 mainly related to offshore wind turbines,
foundations and cables, etc., for the construc-
tion of offshore wind farms. We have increased
the obligations significantly relative to the last
year due to the signing of contracts related
to the construction of primarily Greater
Changhua 1 & 2a in Taiwan, Hornsea 2 in the
UK and Borssele 1 & 2 in the Netherlands.
The obligations in Onshore mainly related to
purchases of onshore wind turbines and solar
PV modules.
Lease liabilities are not part of the contractual
obligations. See note 8.2 'Leases'.
Fees for services other than statutory audit
supplied by PwC Denmark to Ørsted amounted
to DKK 6 million (2018: DKK 11 million) and con-
sisted of accounting and tax advice in connec-
tion with both acquisition and divest ment of
assets and enterprises, review of ESG data and
other general accounting and tax advice.
Contractual obligations by segment,
DKKm
Offshore
Onshore
Markets &
Bioenergy
0-1 year
1-5 years
2019
2018
22,991
27,824
50,815
18,813
1,316
11
1,327
2,811
209
-
209
981
Auditor's fees, DKKm
Audit and audit-related fees
Statutory audit
Other assurance engagements
Non-audit services
Tax and VAT advice
Other services
Total fees to PwC
Fee for non-audit services in percent of statutory audit fee
2019
2018
Overview of concluded contracts where delivery
had not taken place at 31 December 2019.
12
2
2
4
20
47%
11
2
3
7
23
94%
Total
24,516
27,835
52,351
22,605
151 / 183
Ørsted Annual report 2019Financial statements
Consolidated financial statements – 8. Other notes
Notes
Contents
8.5 Company overview
Segment/company/registered office
Parent company
Ørsted A/S, Fredericia, Denmark
Offshore
Acceber B.V., 's-Gravenhage, the Netherlands
Anholt Havvindmøllepark I/S ²,³, Fredericia, Denmark
Barrow Offshore Wind Limited, London, UK
Bay State HoldCo LLC., Delaware, USA
Bay State Wind LLC²., Delaware, USA
Blue Champion B.V., 's-Gravenhage, the Netherlands
Boreas B.V., 's-Gravenhage, the Netherlands
Borkum Riffgrund I Holding A/S, Fredericia, Denmark
Borkum Riffgrund I Offshore Windpark A/S GmbH & Co. oHG, Norden, Germany
Borkum Riffgrund 2 Holding GmbH, Hamburg, Germany
Borkum Riffgrund 2 Offshore Wind Farm GmbH & Co. oHG, Norden, Germany
Borkum Riffgrund 3 GmbH, Hamburg, Germany
Borssele Wind Farm C.V., 's-Gravenhage, the Netherlands
Breesea Limited, London, UK
BSW Holdco LLC, Delaware, USA
BSW Projectco LLC 2, Delaware, USA
Burbo Extension Holding Ltd, London, UK
Burbo Extension Ltd ², London, UK
Calgary Flames B.V., 's-Gravenhage, the Netherlands
Celtic Array Limited, Berkshire, UK
Cerulea Limited, London, UK
CT Offshore A/S under frivillig likvidation, Fredericia, Denmark
Cygnus Wind Transmission Limited, London, UK
Type1
Ownership
interest
Segment/company/registered office
Deepwater Wind, LLC, Delaware, USA
-
S
JO
S
JO
JO
S
S
S
JO
S
JO
S
S
S
JO
JO
JO
S
S
JV
S
S
S
-
Deepwater Wind Block Island Transmission, LLC, Delaware, USA
Deepwater Wind Block Island, LLC, Delaware, USA
100%
Deepwater Wind Block Islands Holdings, LLC 5, Delaware, USA
50%
Deepwater Wind New England, LLC, Delaware, USA
100%
Deepwater Wind New Jersey, LLC, Delaware, USA
50%
50%
Deepwater Wind New York, LLC, Delaware, USA
Deepwater Wind Operating, LLC, Delaware, USA
100%
Deepwater Wind Rhode Island, LLC (taxed as corporation), Delaware, USA
100%
Deepwater Wind South Fork, LLC, Delaware, USA
100%
DWBI Class B member, LLC, Delaware, USA
50%
DWW MARI Holdings, LLC, Delaware, USA
100%
DWW Rev 1, LLC, Delaware, USA
50%
Euros B.V., 's-Gravenhage, the Netherlands
100%
Formosa I International Investment Co., Limited, Taipei City, Taiwan
100%
Formosa I Wind Power Co2., Ltd, Taipei City, Taiwan
100%
Garden State Offshore Energy, LLC, Delaware, USA
50%
50%
50%
50%
Gavota B.V., 's-Gravenhage, the Netherlands
Gode Wind 1 Offshore Wind Farm GmbH & Co. oHG, Norden, Germany
Gode Wind 2 Offshore Wind Farm P/S GmbH & Co. oHG, Norden, Germany
Gode Wind 3 GmbH, Hamburg, Germany
100%
Golden Melody B.V., 's-Gravenhage, the Netherlands
50%
Greater Changhua Offshore Wind Farm SE Ltd., Changhua County, Taiwan
100%
Greater Changhua Offshore Wind Farm SW Ltd., Changhua County, Taiwan
100%
Gunfleet Sands Holding Ltd., London, UK
100%
Gunfleet Sands II Limited 2, London, UK
Gunfleet Sands Limited 2, London, UK
GSOE I, LLC, Delaware, USA
Type1
Ownership
interest
S
S
S
S
S
S
S
S
S
S
S
S
S
S
JV
JV
JV
S
JO
JO
S
S
S
S
S
S
S
JV
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
35%
35%
50%
100%
50%
50%
100%
100%
100%
100%
50%
50%
50%
50%
152 / 183
Ørsted Annual report 2019Financial statements Segment/company/registered office
Horns Rev I Offshore Wind Farm 6, Fredericia, Denmark
Hornsea 1 Holdings Limited, London, UK
Hornsea 1 Limited 2, London, UK
Lincs Renewable Energy Holdings Limited, London, UK
Lincs Wind Farm (Holding) Limited, London, UK
Lincs Wind Farm Limited 2, Aberdeen, UK
London Array Limited, Kent, UK
Morecambe Wind Limited, London, UK
Njord Limited 2, London, UK
North East Offshore, LLC, Delaware, USA.
Northeast Wind Energy LLC, Delaware , USA
Notos B.V., 's-Gravenhage, the Netherlands
Nysted Havmøllepark 6, Fredericia, Denmark
Nysted I A/S, Fredericia, Denmark
Nördlicher Grund GmbH, Hamburg, Germany
Ocean Wind LLC, Delaware, USA
OFTRAC Limited, London, UK
Optimus Wind Limited, London, UK
Optimus Wind Transmission Limited, London, UK
Orsted Borkum Riffgrund I GmbH, Hamburg, Germany
Orsted Borkum Riffgrund I HoldCo GmbH, Hamburg, Germany
Orsted Borssele 1 B.V., 's-Gravenhage, the Netherlands
Orsted Borssele Holding B.V., 's-Gravenhage, the Netherlands
Orsted Burbo (UK) Limited, London, UK
Orsted Burbo Extension Holding Ltd, London, UK
Orsted Gode Wind 1 Holding GmbH, Hamburg, Germany
Orsted Gode Wind 2 GmbH, Hamburg, Germany
Orsted Gunfleet Sands Demo (UK), Ltd, London, UK
Orsted HKZ III&IV Holding B.V., 's-Gravenhage, the Netherlands
Orsted Hornsea 1 Holdings Limited, London, UK
Orsted Hornsea Project Four Limited, London, UK
Orsted Hornsea Project Three (UK) Limited, London, UK
Consolidated financial statements – 8. Other notes
Notes
Contents
Type1
Ownership
interest
Segment/company/registered office
Orsted InvestCo Limited, Taipei City, Taiwan
Orsted Isle of Man (UK) Limited, Isle of Man
Orsted Japan K.K., Tokyo, Japan
Orsted Korea Limited, Seoul, Korea
Orsted Lincs (UK) Ltd., London, UK
Orsted London Array II Limited, London, UK
Orsted London Array Limited, London, UK
Orsted North America Inc., Delaware, USA
Orsted Power (Gunfleet Sands) Ltd, London, UK
Orsted Power (Participation) Ltd, London, UK
Orsted Power (UK) Limited, London, UK
40%
50%
50%
50%
25%
25%
25%
50%
50%
50%
50%
100%
Orsted Race Bank (Holding) Ltd., London, UK
43%
86%
Orsted Shell Flats (UK) Limited, London, UK
Orsted Singapore Pte. Ltd., Singapore, Republic of Singapore
100%
Orsted Speicher R GmbH, Hamburg, Germany
100%
Orsted Taiwan Ltd., Taipei City, Taiwan
100%
Orsted UK III Limited, London, UK
100%
Orsted US East Coast Offshore Wind Holdco, LLC, Delaware, USA
100%
Orsted Walney Extension Holdings Limited, London, UK
100%
Orsted West of Duddon Sands (UK) Limited, London, UK
100%
Orsted Westermost Rough Limited, London, UK
100%
Orsted Wind Power A/S (French Branch), , Denmark
100%
Orsted Wind Power Germany GmbH, Hamburg, Germany
100%
Orsted Wind Power Netherlands B.V., 's-Gravenhage, the Netherlands
100%
Orsted Wind Power Netherlands Holding B.V., 's-Gravenhage, the Netherlands
100%
Orsted Wind Power North America LLC, USA, Delaware, USA
100%
Orsted Wind Power A/S (UK branch), London, UK
100%
100%
100%
100%
100%
Preparatory Office of Greater Changhua Offshore Wind Farm NE Ltd., Changhua
County, Taiwan 6
Preparatory Office of Greater Changhua Offshore Wind Farm NW Ltd., Changhua
County, Taiwan 6
Race Bank Wind Farm (Holding) Limited, London, UK
Race Bank Wind Farm Limited 2, London, UK
JO
JO
JO
JO
JO
JO
JO
JO
S
JO
S
S
JO
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
Type1
Ownership
interest
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
JO
JO
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
50%
153 / 183
Ørsted Annual report 2019Financial statements Segment/company/registered office
Rhiannon Wind Farm Limited 2, Windsor, UK
Scarweather Sands Limited, Coventry, UK
Skipjack Offshore Energy, LLC, Delaware, USA
SMart Wind Limited, London, UK
SMRT Line, LLC, Delaware, USA
Sonningmay Wind Limited, London, UK
Soundmark Wind Limited, London, UK
Sunrise Wind, LLC, Delaware, USA
UMBO GmbH, Hamburg, Germany
Varinas B.V., 's-Gravenhage, the Netherlands
VI Aura Limited 2, London, UK
VI Aura Transmission Limited, London, UK
Walney (UK) Offshore Windfarms Limited, London, UK
Walney Extension Holdings Limited, London, UK
Walney Extension Limited 2 , London, UK
West of Duddon Sands 6
Westermost Rough (Holding) Limited, London, UK
Westermost Rough Limited 2 , London, UK
Zephyrus B.V. 's-Gravenhage, the Netherlands
Ørsted - Anholt Offshore A/S, Fredericia, Denmark
Ørsted Horns Rev 2 A/S, Fredericia, Denmark
Ørsted Horns Rev I A/S, Fredericia, Denmark
Ørsted Nearshore Wind ApS, Fredericia, Denmark
Ørsted VE A/S, Fredericia, Denmark
Ørsted Vind A/S, Fredericia, Denmark
Ørsted Wind Power A/S4, Fredericia, Denmark
Ørsted Wind Power A/S, Taiwan Branch, Taipei City, Taiwan
Ørsted Wind Power Denmark A/S, Fredericia, Denmark
Ørsted Wind Power Holding A/S 4, Fredericia, Denmark
Ørsted Wind Power NL, branch of Ørsted Wind Power A/S Denmark, 's-Gravenhage,
the Netherlands
Consolidated financial statements – 8. Other notes
Notes
Contents
Type1
Ownership
interest
Segment/company/registered office
Type1
Ownership
interest
JV
JV
S
S
S
S
S
S
JV
S
JO
S
S
JO
JO
JO
JO
JO
S
S
S
S
S
S
S
S
S
S
S
S
50%
50%
100%
100%
100%
100%
100%
100%
Onshore
2w Permian Solar, LLC, Delaware, USA
Albaugh Solar Center, LLC, Ohio, USA
Antelope Flats Wind, LLC, Delaware, USA
Armardillo Solar Center, LLC, Delaware, USA
Aromas Solar Energy Center, LLC, Delaware,,USA
Badger Wind, LLC, Delaware, USA
Barranca Wind Energy, LLC, Delaware, USA
90%
Barranca Wind Energy II, LLC, Delaware, USA
100%
Bayshore Energy Center, LLC, Delaware, USA
50%
Bedford Solar Center, LLC, Virginia, USA
100%
Biggs Ford Solar Center, LLC, Virginia, USA
50%
50%
50%
50%
50%
50%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Bowen Solar Center, LLC, Mississippi, USA
Brackin Mill Solar Center, LLC, Virginia , USA
Cabin Point Solar Center, LLC, Virginia , USA
Camino Solar Center, LLC, New Mexico, USA
Canutillo Energy Center, LLC, Texas, USA
Casper Creek Solar Center, LLC, Delaware, USA
Casper Solar Center, LLC, Virginia, USA
Chiefland Solar Center, LLC, Florida, USA
Cloud Peak Solar Center, LLC, Delaware, USA
Cockleburr Solar, LLC, Delaware, USA
Coolidge Solar Center, LLC, Arizona, USA
Dermott Wind Class B Holdco, LLC, Delaware, USA
Dermott Wind Class B Member, LLC, Delaware, USA
Dermott Wind, LLC 5, Delaware, USA
Dunbar Solar, LLC, Delaware, USA
Eastgate Solar Center, LLC, Florida, USA
Emerick Wind, LLC, Delaware, USA
Firefly Solar Center, LLC, Delaware, USA
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
154 / 183
Ørsted Annual report 2019Financial statements Segment/company/registered office
Garland Wind, LLC, Delaware, USA
Goose Solar Center, LLC, Texas, USA
Hamilton Solar Center, LLC, Florida, USA
Happy Hollow Solar Center, LLC, Georgia, USA
Helena Wind, LLC, Delaware, USA
Highline Solar Energy Center, LLC, Delaware, USA
Holloman Solar Center, LLC, North Carolina, USA
Holocrystalline Energy Venter, LLC, California, USA
Huning Ranch Solar Center, LLC, Delaware, USA
Jasper Solar Center, LLC, Florida, USA
Jones Solar Center, LLC, Florida, USA
Kittias Solar Center, LLC, Washington, USA
Legore Bridge Solar Center, LLC, Virginia, USA
Live Oak Solar Center, LLC, Florida, USA
Lockett Windfarm Class B Member, LLC, Delaware, USA
Lockett Windfarm Project Holdings, LLC 5, Delaware, USA
Lockett Windfarm LLC, Delaware, USA
Lower River Solar Center, LLC, Arizona, USA
Lux Solar Center, LLC, Nevada, USA
Madden Solar Center, LLC, Georgia, USA
Mason Dixon Solar Center, LLC, Virginia, USA
Mastodon Solar Center, LLC, Delaware, USA
McAlpin Solar Center, LLC, Florida, USA
McGrath Energy Center, LLC, Delaware, USA
McGrath Energy Center II, LLC, California, USA
McGrath Energy Center III, LLC, California, USA
Michaux Solar Center, LLC, Virginia, USA
Mineola Wind, LLC, Delaware, USA
Mockingbird Solar Center, LLC, Delaware,USA
Moonscape Solar Center, LLC, New Mexico, USA
Napoleon Wind, LLC, Delaware, USA
NJ Oak Solar Finco, LLC, Delaware, USA
Consolidated financial statements – 8. Other notes
Notes
Contents
Type1
Ownership
interest
Segment/company/registered office
Type1
Ownership
interest
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
100%
NJ Oak Solar Holdco, LLC, Delaware, USA
100%
NJ Oak Solar, LLC, Delaware, USA
100%
Old 300 Solar Center, LLC, Delaware, USA
100%
Orsted Energy Storage & Solar N.A. LLC, Delaware, USA
100%
Orsted ESS Mersey Limited, London, UK
100%
Orsted Onshore Asset Management Services, LLC, Delaware, USA
100%
Orsted Onshore Dermott Holdings, Inc., Delaware, USA
100%
Orsted Onshore DevCo, LLC, Delaware, USA
100%
Orsted Onshore Development North America, LLC, Delaware, USA
100%
Orsted Onshore Equipment Company, LLC, Delaware, USA
100%
Orsted Onshore Equipment Holdings, Inc, Delaware, USA
100%
Orsted Onshore North America, LLC, Delaware, USA
100%
Orsted Onshore North America Power, LLC, Delaware, USA
100%
Orsted Onshore Real Estate Holdings, LLC, Delaware, USA
100%
Orsted Onshore WS Holdings, Inc, Delaware, USA
100%
Orsted Onshore Services, LLC, Delaware, USA
100%
Orsted Renewables N.A. LLC, Delaware, USA
100%
Owl Canyon Solar Center, LLC, Colorado, USA
100%
Pactolus Solar, LLC, Delaware, USA
100%
Palacios Wind, LLC, Delaware, USA
100%
Piccadilly Solar Energy Center, LLC, Colorado, USA
100%
Placid Solar Center, LLC, Delaware, USA
100%
Placid Solar II, LLC, Delaware, USA
100%
Plum Creek Wind, LLC, Delaware, USA
100%
100%
Plum Creek and Willow Creek Class B Member, LLC, Delaware, USA
Plum Creek and Willow Creek Project Holdings, LLC, Delaware, USA
100%
Pyramid Lake Solar Center, LLC, Delaware, USA
100%
Poleline Solar Energy Center, LLC, California, USA
100%
Rockwood Energy Center, LLC, Delaware, USA
100%
Rum Solar Center, LLC, Florida, USA
100%
Sage Draw Wind Class B Member, LLC, Delaware, USA
100%
Sage Draw Wind, LLC, Delaware, USA
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
155 / 183
Ørsted Annual report 2019Financial statements Segment/company/registered office
Sage Draw Wind Project Holdings, LLC, Delaware, USA
Shawnee Energy Center, LLC, Delaware, USA
SP Energy 1, LLC, Delaware, USA
SP Energy DM, LLC, Delaware, USA
SP Energy ET, LLC, Delaware, USA
SP Energy GL, LLC, Delaware, USA
SP Energy PV, LLC, Delaware, USA
SP Energy TL, LLC, Delaware, USA
Staked Plains Energy, LLC, Delaware, USA
Stratford Solar Center, LLC, Virginia, USA
Surry Solar Center, LLC, Virginia, USA
Tahoka Wind Class B Holdco, LLC, Delaware, USA
Tahoka Wind Class B Member, LLC, Delaware, USA
Tahoka Wind Project Holdings, LLC 5, Delaware, USA
Tahoka Wind, LLC, Delaware, USA
Tovey Wind, LLC, Delaware, USA
Waukeenah Solar Center, LLC, Florida, USA
Webb East Solar Center, LLC, Virginia, USA
Western Trail Wind, LLC, Delaware, USA
Westwing Solar Center, LLC, Delaware, USA
Willow Creek Wind Power, LLC, Delaware, USA
Willow Springs Class B Holdco, LLC, Delaware, USA
Willow Springs Class B Member, LLC, Delaware, USA
Willow Springs Project Holdings, LLC 5, Delaware, USA
Willow Springs Windfarm, LLC, Delaware, USA
Ørsted Onshore A/S, Fredericia, Denmark
Ørsted Onshore Holding A/S 4, Fredericia, Denmark
Markets & Bioenergy
Cure Renescience B.V., 's-Gravenhage, the Netherlands
Danish Distribution Services sp. z.o.o, Warsaw, Poland
Danish Offshore Gas Systems A/S, Fredericia, Denmark
Danish Oil Pipe A/S 4, Fredericia, Denmark
Consolidated financial statements – 8. Other notes
Notes
Contents
Type1
Ownership
interest
Segment/company/registered office
Type1
Ownership
interest
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
JV
S
S
S
100%
DE Thermal Power Nr. 1 A/S in voluntary liquidation, Fredericia, Denmark
100%
Emineral A/S, Fredericia, Denmark
100%
Etzel-Kavernenbetriebsgesellschaft mbH & Co. KG, Bremen, Germany
100%
Etzel-Kavernenbetriebs-Verwaltungsgesellschaft mbH, Bremen, Germany
100%
Haderslev Kraftvarmeværk A/S in voluntary liquidation, Fredericia, Denmark
100%
Inbicon A/S, Fredericia, Denmark
100%
Maabjerg Energy Concept A/S, Fredericia, Denmark
100%
Obviux A/S, Frederiksberg, Denmark
100%
Orsted AB, Malmö, Sweden
100%
Orsted Bioenergy & Thermal Power A/S (UK branch) 4, London, UK
100%
Orsted Customer Solutions Holding LLC, Delaware, USA
100%
Orsted Energy Solutions (UK) Limited, London, UK
100%
Orsted Holding Ludwigsau I GmbH, Hamburg, Germany
100%
Orsted Infrastructure GmbH ³,4, Hamburg, Germany
100%
Orsted Kraftwerke Holding GmbH, Hamburg, Germany
100%
Orsted Leitung E GmbH, Hamburg, Germany
100%
Orsted Markets GmbH, Hamburg, Germany
100%
Orsted Netherlands B.V., 's-Gravenhage, the Netherlands
100%
Orsted Power Sales (UK) Limited, London, UK
100%
Orsted Renescience Northwich Limited, London, UK
100%
Orsted Renescience Northwich O&M Limited, London, UK
100%
Orsted S&D (UK) Limited, London, UK
100%
Orsted Sales (UK) Limited, London, UK
100%
Orsted Sales GmbH, Hamburg, Germany
100%
Orsted Salg & Service A/S (UK branch), London, UK
100%
Orsted Services B.V., 's-Gravenhage, the Netherlands
100%
Orsted SP (UK) Limited, London, UK
Orsted SP Holding (UK) Limited, London, UK
50%
Orsted Speicher E GmbH, Hamburg, Germany
100%
Orsted US Trading LLC, Delaware, USA
100%
Nordic Impact Bridge ApS, Copenhagen, Denmark
100%
Pyroneer A/S, Fredericia, Denmark
S
A
A
A
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
A
S
100%
50%
33%
33%
100%
100%
70%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
23.5%
100%
156 / 183
Ørsted Annual report 2019Financial statements Consolidated financial statements – 8. Other notes
Notes
Contents
Segment/company/registered office
Radius Elnet A/S, Fredericia, Denmark
Radius Forsyningsnet A/S4, Fredericia, Denmark
Renescience A/S, Fredericia, Denmark
Severn Power Funding Limited, London, UK
Type1
Ownership
interest
S
S
S
S
100%
100%
100%
100%
Segment/company/registered office
Other
EM El Holding A/S, Fredericia, Denmark
EnergiGruppen Jylland El A/S, Fredericia, Denmark
EnergiGruppen Jylland El Holding A/S, Fredericia, Denmark
Stigsnæs Vandindvinding I/S, Skælskør, Denmark
NC
64%
Lithium Balance A/S, Smørum, Denmark
Vejen Kraftvarmeværk A/S in voluntary liquidation, Fredericia, Denmark
Wilson Battery Storage LLC, Delaware, USA
Ørsted Bioenergy & Thermal Power A/S 4 , Fredericia, Denmark
Ørsted City Light A/S4, Fredericia, Denmark
Ørsted GWS Avedøre Biogas A/S, Fredericia, Danmark
Ørsted New Bio Solutions China A/S, Fredericia, Denmark
Ørsted New Bio Solutions Holding A/S, Fredericia, Denmark
Ørsted Pipelines A/S, Fredericia, Denmark
Ørsted Privatsalg El & Gas A/S4, Fredericia, Denmark
Ørsted Real Estate A/S, Fredericia, Denmark
Ørsted Sales & Distribution A/S, Fredericia, Denmark
Ørsted Salg & Service A/S4, Fredericia, Denmark
Ørsted Salg & Service NL, branch of Ørsted Salg & Service A/S Denmark, 's-Gravenhage,
the Netherlands
Ørsted Varmeservice A/S4, Fredericia, Denmark
S
S
S
S
S
S
S
S
S
S
S
S
S
S
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Orsted (UK) Limited, London, UK
Orsted Holdings N.A. Inc, Delaware, USA
Orsted Services Malaysia Sdn. Bhd., Kuala Lumpur, Malaysia
Orsted Venture N.A. LLC, Delaware, USA
Orsted Polska Sp. z o. o., Warsaw, Poland
Pict Offshore Limited, London, UK
Taiwan Orsted Financial Services Co., Ltd., Taipai City, Taiwan
Ørsted EGJ A/S, Fredericia, Denmark
Ørsted El A/S4, Fredericia, Denmark
Ørsted Insurance A/S 4 , Fredericia, Denmark
Ørsted North America Holding A/S, Fredericia, Denmark
Ørsted nr. 1 2008 A/S 3 4, Fredericia, Denmark
Ørsted Nr. 1 2014 A/S 3 4 , Fredericia, Denmark
Ørsted Services A/S 4, Fredericia, Denmark
Ørsted Ventures Europe A/S4, Fredericia, Denmark
Ørsted Wind Power TW Holding A/S, Fredericia, Denmark
1 S = subsidiary
A = associate
JO = joint operation
JV = joint venture
NC = non-consolidated entity
2 The company is owned through a company which
is not owned 100% by Ørsted. The disclosed owner-
ship interest is Ørsted's ultimate ownership interest
in the company.
3 The company applies the provision in section 5
or section 6 of the Danish Financial Statements Act
to omit presenting a separate annual report.
4 Subsidiaries owned directly by Ørsted A/S.
5 One or more tax equity partners own an
insignificant share of the company. See note
4.5 'Tax equity liabilities'. The company is fully
consolidated.
6 Unincorporated activity which is owned jointly with
partners.
Type1
Ownership
interest
S
S
S
A
S
S
S
S
S
A
S
S
S
S
S
S
S
S
S
S
100%
100%
100%
15%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
157 / 183
Ørsted Annual report 2019Financial statements Consolidated
ESG statements
(additional information)
159 Basis of reporting
160 Environment
162 Social
163 Governance
Contents
The now operational Lockett
Wind Farm is providing the
state of Texas with green
and flexible wind power. It
is also supporting the local
community, contributing to
youth programmes, food
bank donations and other
non-profit contributions in
the Wilbarger area.
Ørsted Annual report 2019 Consolidated ESG statements (additional information)
Contents
Basis of reporting
Consolidated environmental, social and
governance (ESG) statements
In the consolidated ESG statements, we
present our results, objectives and account-
ing policies for the ESG data included in the
management's review in this report.
Our full ESG data set can be seen in the
independent publication 'ESG performance
report 2019'. The ESG performance report
also includes additional information, such
as selected ESG indicators by country and
all ESG accounting policies, including a list
of references for conversion factors used
in calculations.
Scope and consolidation
Unless otherwise stated, ESG data is reported
on the basis of the same principles as the
financial statements. Thus, the consolidated
ESG statements include consolidated data
from the parent company, Ørsted A/S,
and subsidiaries controlled by Ørsted A/S.
Data from associates and joint ventures are
not included.
The consolidation of safety data deviates
from the above described principles. Safety
data is collected using an operational scope.
This means that we, irrespective of our owner-
ship share, include 100% of injuries and hours
worked, etc., arising from all operations where
Ørsted is responsible for safety, including
safety related to external suppliers.
Data from acquisitions and divestments
are included/excluded from the date of
acquisition/divestment.
New ESG indicators in 2019
– Scope 3 greenhouse gas emissions (intro-
duced in the H1 2019 interim ESG report).
Revised ESG indicator
– GHG intensity: Scope 1 and 2 GHG emission
per kWh energy generated (introduced in
the H1 2019 interim ESG report).
– People powered (added onshore wind
capacity, solar capacity, revised load factors
and state-specific emission factors for sites
in the US).
Discontinued ESG indicators
– System average interruption frequency
index (SAIFI).
– Customer satisfaction.
The two indicators can still be found in the
ESG performance report for 2019.
Danish Financial Statements Act,
sections 99a and 99b
Pursuant to section 99a of the Danish
Financial Statements Act, Ørsted is under an
obligation to account for the company's CSR
activities and report on business strategies
and activities with regard to human rights,
labour rights, anti-corruption, the environment
and the climate. By publishing our sustaina-
bility report (orsted.com/sustainability2019),
Ørsted complies with section 99a of the
Danish Financial Statements Act.
Ørsted's work for greater gender diversity
at management level is reported in ac-
cordance with section 99b of the Danish
Financial Statements Act. The reporting
of gender diversity can be seen in our
2019 ESG performance report.
Business changes in 2019 affecting
ESG data
There has been no M&A related business
changes with significant ESG impact in 2019.
9.9GW
Our installed renewable capacity increased
by 19% from 2018 to 2019. We have a target of 30GW
installed renewable capacity in 2030.
86%
The green share of our heat and power
generation increased from 75% in 2018 to 86%
in 2019. We have a target of 99% in 2025.
65g CO2e/
kWh
Our greenhouse gas intensity was reduced by
50% to 65g CO2e/kWh in 2019. Our target is to
reach 10g CO2e/kWh in 2025.
96%
Our full ESG data set can be seen in the
ESG performance report 2019.
(orsted.com/ESGperformance2019)
The certified sustainable share of our sourced wooden
biomass increased from 83% in 2018 to 96% in 2019. Our
target is to reach 100% in 2020.
159 / 183
Ørsted Annual report 2019Financial statements Consolidated ESG statements (additional information)
Contents
Environment
Strategic
target
Business
driver
Indicator
Green share of heat and power generation
Unit
%
Greenhouse gas (GHG) intensity (scopes 1 and 2)
g CO2e/kWh
Direct GHG emissions (scope 1)
Thousand tonnes CO2e
Indirect GHG emissions (scope 2), market-based
Thousand tonnes CO2e
Indirect GHG emissions (scope 3)
– Category 2: Capital goods 3
Thousand tonnes CO2e
Thousand tonnes CO2e
– Category 3: Fuel- and energy-related activities 4
Thousand tonnes CO2e
– Category 11: Use of sold products 5
– Other 6
Scope 3 GHG reduction from base year 2018
Installed renewable capacity
– Offshore wind
– Onshore wind
– Onshore solar
– Thermal heat, biomass
Decided (FID) renewable capacity (not yet installed)
– Offshore wind
– Onshore wind
– Onshore solar
– Thermal heat, biomass
Awarded and contracted renewable capacity
(no FID yet)
– Offshore wind
– Onshore wind
– Onshore solar
Sum of installed and FID renewable capacity
Sum of installed, FID, awarded and contracted
renewable capacity
Thousand tonnes CO2e
Thousand tonnes CO2e
%
MW
MW
MW
MW
MW
MW
MW
MW
MW
MW
MW
MW
MW
MW
MW
MW
Target
99 (2025) 1
10 (2025) 2
50% by 2032
30GW (2030)
15GW (2025)
5GW (2025)7
2019
86
65
1,846
4
34,604
740
3,217
30,377
270
4
9,870
6,820
987
10
2,053
4,129
3,038
671
420
-
4,996
4,996
-
-
2018
75
131
3,483
45
36,234
1,032
3,570
31,383
249
-
8,303
5,602
803
10
1,888
3,665
3,356
184
-
125
4,796
3,916
530
350
13,999
11,968
18,995
16,764
The green (renewable) share of our heat and power
generation amounted to 86% in 2019, up 11 percent-
age points relative to 2018. The increase was primarily
due to higher generation from wind farms, a larger
share of biomass-based generation as well as lower
use of gas following the divestment of the Enecogen
power plant in 2018. Our target is 99% green energy
generation in 2025.
Our greenhouse gas intensity was reduced by 50% for
the same reasons as for the increase in the renewable
energy share. We are well on track to meeting our
target of a greenhouse gas emission intensity of no
more than 10g CO2e/ kWh in 2025. We will continue
to investigate solutions for the remaining emissions,
which could also include investing in certified carbon
removal projects.
Our scope 3 greenhouse gas emissions were reduced
by 4% from 2018 to 2019. The main driver for this re-
duction was the reduced sales of gas (category 11, use
of sold products). The second-largest scope 3 emission
category ‘3: Fuel- and energy-related activities’ was
reduced by 10% from 2018 to 2019 due to lower fossil
fuel consumption in the thermal heat and power
generation and reduced sale of fossil -based power to
end-customers. The third-largest category '2: Capital
goods' includes greenhouse gas emissions from the
supply chain and installation of the offshore wind
farm Hornsea 1 and the onshore wind farm Lockett.
The installed renewable capacity increased by 19%
in 2019 due to commisioning of the offshore wind
farm Hornsea 1 (1,218MW) and the onshore wind farm
Lockett (184MW).
1 Additional target is 95% (2023).
2 Additional target is 20 (2023).
3 Primary source of emission: wind farm suppliers.
4 Primary source of emission: fossil-based power sales.
5 Primary source of emission: natural gas sales.
6 Remaining categories of the 15 defined scope 3 GHG
categories according to the Greenhouse Gas Protocol.
7 The 5GW target (2025) is for onshore wind and solar combined.
160 / 183
Ørsted Annual report 2019Financial statements Strategic
target
Business
driver
Indicator
Generation, power and heat total
Power generation
– Offshore wind
– Onshore wind
– Solar
– Thermal
Heat generation, thermal
Offshore wind
Generation capacity
Wind speed
Wind speed, normal wind year
Load factor
Availability
Onshore wind
Generation capacity
Wind speed
Load factor
Availability
Thermal heat and power generation
Power generation capacity
Heat generation capacity
Degree days, Denmark
Coal share of fuels
Sourcing of certified wooden biomass
Green share of thermal heat and power generation
Avoided carbon emissions
– From offshore wind generation
– From onshore wind generation
– From biomass-converted generation
Sales and distribution
Gas sales
Power sales
Power distribution
Consolidated ESG statements (additional information)
Contents
Unit
TWh
TWh
TWh
TWh
TWh
TWh
TWh
GW
m/s
m/s
%
%
GW
m/s
%
%
GW
GW
Number
%
%
%
Million tonnes CO2e
Million tonnes CO2e
Million tonnes CO2e
Million tonnes CO2e
TWh
TWh
TWh
Target
0 (2023)
100% (2020)
2019
28.4
20.1
12.0
3.5
0.0
4.6
8.3
3.6
9.2
9.2
42
93
1.0
7.3
45
98
2.9
3.6
2018
26.0
17.2
10.0
0.5
0.0
6.7
8.8
3.0
9.1
9.2
42
93
0.8
7.3
41
98
2.8
3.4
2,399
2,526
24
96
68
11.3
7.6
2.3
1.4
125.0
27.6
8.4
38
83
58
8.1
6.3
0.4
1.4
131.1
27.3 1
8.4
The increase in offshore wind capacity contributed to
a 20% increase in offshore wind-based generation in
2019. The increase in onshore wind and solar power
generation is mainly because it is the first full year
with onshore power capacity.
Thermal power generation decreased by 31% in 2019,
mainly due to generation of heat without combined
power generation at Asnæs Power Station and the
divestment of the Dutch power plant Enecogen
in 2018.
Thermal heat generation decreased by 6% due
to warmer weather in H1 2019, leading to a lower
demand for heat, partly offset by colder weather
and higher heat generation in H2 2019.
The coal share of fuels in our thermal heat and
power generation decreased by 14 percentage points
and the green share increased by 10 percentage
points, in 2019. This was primarely the result of the
Asnæs Power Station generating heat without power
based on coal in the period up until the new biomass
converted unit was taken in use and then generating
heat based on biomass towards the end of the year.
The certified share of renewable wooden biomass
increased from 83% in 2018 to 96% in 2019. Our
target is to source all wooden biomass as certified
sustainable biomass in 2020.
Due to the increase in renewable energy generation,
the amount of avoided carbon emissions increased
by 40% from 2018 to 2019. In 2019, our renewable
energy generation avoided the emission of 11.3 million
tonnes carbon dioxide.
1 We have updated the previously announced 2018 value for power sales, as we have eliminated the internally sourced power generation volumes in Germany and
the UK in the total external sales for Ørsted.
161 / 183
Ørsted Annual report 2019Financial statements Consolidated ESG statements (additional information)
Contents
Social
Strategic
target
Business
driver
Indicator
Employees
Unit
Target
2019
2018
Total number of employees at 31 December
Number of FTEs
Average number of employees for the year
Number of FTEs
Employee satisfaction
Scale 0-100
77 (2020) 1
Safety
Fatalities
Number
LTIF (lost-time injury frequency)
Per million working hours
TRIR (total recordable injury rate)
Per million working hours
2.9 (2025)
Job year creation from offshore wind power value chain
Based on installed capacity
Based on installed + FID capacity
Based on installed capacity + FID + awarded and
contracted capacity
People powered
Based on installed capacity
Based on installed + FID capacity
Based on installed capacity + FID + awarded and
contracted capacity
Thousand job years
Thousand job years
Thousand job years
Million people
Million people
Million people
6,526
6,329
77
1
2.1
4.9
137
197
297
15.2
23.7
32.8
6,080
5,796
76
0
1.5
4.7
112
179
258
12.22
21.3
30.1
1 We have reached our 2020 target of 77 one year in advance. Our new target from 2020 and onward is an employee satisfaction survey result in the top ten percentile
compared with an external benchmark group.
2 We have restated the 2018 value with an adjustment for actual load factors, state-specific consumption factors in the US and added onshore wind and solar capacity.
The number of employees increased by 7% from 2018
to 2019 due to growth in existing and new markets.
Employee satisfaction continued to be high. With
a satisfaction and motivation score of 77 in 2019,
our 2020 target of reaching a satisfaction and
motivation score of 77 has been reached one year
in advance. We have set a new target of staying
in the top 10 percentile compared to our external
benchmark group.
On 1 May 2019, Ørsted experienced a fatal accident at
Avedøre Power Station where a contractor was buried
under coal during work in a silo. An independent
investigation was completed to identify the root
causes. Safety is of utmost importance to us, and we
have initiated several improvement tracks to ensure
that an accident like this will never happen again.
Our total recordable injury rate (TRIR) increased
from 4.7 in 2018 to 4.9 in 2019. We registered 106
total recordable injuries (TRIs), 71 of which involved
employees working for our suppliers. LTIF increased
from 1.5 in 2018 to 2.1 in 2019. We continue to have a
strong focus on safety. Our target is a TRIR of 2.9 or
below in 2025.
In a lifecycle perspective, our and our partners'
investments in deploying green offshore energy
have created 137,000 job years based on the
installed renewable capacity.
Our 2030 target of 30GW renewable energy corre-
sponds to more than 55 million people powered.
162 / 183
Ørsted Annual report 2019Financial statements Consolidated ESG statements (additional information)
Contents
Governance
Strategic
target
Business
driver
Indicator
Board of Directors, Ørsted A/S
Independent board members
Gender diversity
Members, female
Members, male
Gender with lowest representation
Nationality diversity
Members, Danish
Members, non-Danish
Group Executive Management
Gender diversity
Members, female
Members, male
Gender with lowest representation
Nationality diversity
Members, Danish
Members, non-Danish
Good business conduct
Substantiated whistleblower cases
– Cases transferred to the police
Unit
%
Number
Number
%
Number
Number
Number
Number
%
Number
Number
Number
Number
Target
2019
2018
100
100
2
4
33
3
3
2
5
3
5
38
5
3
1
6
29
14
3
4
3
0
4
3
2
1
The Board of Directors is responsible for the
overall management of the company. The Board
of Directors lays down the company’s strategy and
makes decisions concerning major investments and
divestments, the capital base, key policies, control
and audit matters, risk management and significant
operational issues.
Climate change is fundamental to our business
strategy, and climate-related issues are an integral
part of the board agendas. The Board monitors and
oversee progress related to Ørsted’s strategic ambi-
tions, including our ambitious targets for addressing
climate-related issues. The Board integrates con-
siderations for climate protection when setting our
strategic direction, reviewing sustainability risks, set-
ting performance objectives, deciding on our capital
allocation, and when approving and over seeing major
investments, acquisitions and divestments.
Our employees and other associates may report
serious offences, such as cases of bribery, fraud and
other inappropriate or illegal conduct, to our whistle-
blower scheme or through our management system.
In 2019, three substantiated cases of inappropriate
or unlawful behaviour were reported through
our whistleblower scheme. Two cases concerned
violation of good business conduct policies, and
one case concerned conflict of interest between a
third party representative and Ørsted. The cases had
consequences for the individuals involved. None of
the reported cases were critical to our business or
impacted our financial results.
Whistleblower cases are taken very seriously, and we
continuously enhance the awareness about good
business conduct, e.g. through education as well as
awareness campaigns to minimise future similar cases.
163 / 183
Ørsted Annual report 2019Financial statements Consolidated ESG statements (additional information)
Contents
Accounting policies – Environment
Green share of heat and power generation
The green (renewable energy) share of our heat
and power generation and the distribution of the
generation from the individual energy sources and
fuels are calculated on the basis of the energy
sources used and the energy generated at the
different energy plants.
Wind and solar-based generation is computed as
the input from the individual plant (wind and solar),
as there is only one source of power for each plant.
For CHP plants, the share of the specific fuel (e.g.
biomass) is calculated relative to the total fuel con-
sumption for a given plant/unit within a given time
period. The specific fuel share is then multiplied with
the total heat and power generation for the specific
unit in the specific period. The result is the fuel-based
generation for the individual unit – for example the
biomass-based generation of heat and power from
the CHP unit within a given time period.
Energy generation based on fuel, wind and solar is
added up to a total which tallies with total genera-
tion. The percentage shares of the individual energy
sources are calculated by dividing generation from
individual energy source with the total generation.
The following energy sources and fuels are consid-
ered renewable energy: wind, solar, biomass and
biogas. The following energy sources are considered
fossil energy sources: coal, natural gas, oil and
regular power.
Greenhouse gas intensity
Greenhouse gas intensity is defined as the scope
1 and 2 (market-based) greenhouse gas emissions
divided by the total heat and power generation.
Scope 1 and 2 greenhouse gas emissions
The scope 1 and 2 emissions are calculated based
on the Greenhouse Gas Protocol. Scope 1 covers all
direct emissions of greenhouse gases from Ørsted.
The direct carbon emissions from the combined heat
and power plants are determined on the basis of
the fuel quantities used in accordance with the EU
ETS scheme. Carbon dioxide and other greenhouse
gas emissions outside the EU ETS scheme are for
the most part calculated as energy consumptions
multiplied by emission factors. Scope 2 emissions
are primarely calculated as the power volumes
purchased multiplied by country-specific emission
factors. Location based is calculated based on
average emission factors for each country, wheres
as marked based takes account for green power
purchased and assumes the non-green power is
delivered as residual power where the green part
has been taken out.
Scope 3 greenhouse gas emissions
The scope 3 greenhouse gas emissions are reported
based on the Greenhouse Gas Protocol which divides
the scope 3 inventory into 15 subcategories.
GHG emissions from capital goods include
upstream GHG emissions from installed wind farms.
We calculate the emissions based on GHG life-cycle
data from one of our wind turbine suppliers. Carbon
emissions are included from cradle to operation and
maintenance for single wind turbines. Wind farms are
included in the month where the wind farm passes
commercial operation date.
GHG emissions from fuel- and energy-related activi-
ties are calculated based on actual fuel consumption
and power sales as reported in our ESG consolida-
tion system. The fuel consumption is multiplied by
emission factors to calculate the upstream GHG
emissions from extraction, mining, forestry, transpor-
tation, etc., for the fuels. We include all power sales
to end-customers and use separate emission factors
for green and non-green power sales.
GHG emissions from use of sold products are calcu-
lated based on actual sales of gas (to both end-users
and wholesale) as reported in our ESG consolidation
system. The total gas sale is divided into natural gas,
LNG gas and biogas which have specific upstream
and downstream emission factors.
'Other' includes GHG emissions from:
– purchased goods and services calculated based
on spend reports from our SAP system. All spends
are divided into categories where relevant emission
factors are used to calculate the GHG emissions
from each spend category
– upstream transportation and distribution which
are included in the emission factors we use
for purchases and sale and are therefore not
reported separately
– waste generated in operations calculated based on
actual waste volumes multiplied with the relevant
emission factors
– business travel which is calculated based on mileage
allowances for employee travel in own car. GHG
emissions from airplane travel is provided by our
travel agent
– employee commuting is calculated based on
estimates for distance travelled and travel type
(e.g. car and train)
– downstream transportation and distribution
which are calculated based on actual volumes of
residual products generated from our CHP plants
multiplied by relevant GHG emission factors for
transportation
Heat and power generation capacity
Power generation capacity from wind farms is
included from the time when the individual wind
turbine has passed a 240-hour test for offshore. For
onshore, wind and solar farms the whole farm is
included after COD. The Gunfleet Sands and Walney
1 and 2 offshore wind farms have been consolidated
according to ownership interest. Other wind farms,
solar and CHP plants are financially consolidated.
The thermal heat and power generation capacity is
a measure of the maximum capability to generate
heat and power. The capacity can change over time
with plant modifications. For each CHP plant, the
capacity is given for generation with the primary fuel
mix. Overload is not included.
Installed, decided and awarded renewable
energy capacity
The installed renewable capacity is calculated as
the cumulative renewable gross capacity installed
by Ørsted before divestments. For installed renew-
able thermal capacity, we use the heat capacity,
as heat is the primary outcome of thermal energy
generation, and as bioconversions of the combined
heat and power plants are driven by heat contracts.
Decided (FID) capacity is the renewable capacity
for which a final investment decision (FID) has been
made. The awarded renewable capacity is based on
the capacities which have been awarded to Ørsted
in auctions and tenders. The contracted capacity is
the capacity for which Ørsted has signed a contract
or power purchase agreement (PPA) concerning a
new renewable energy plant. Typically, offshore wind
farms are awarded, whereas onshore wind farms are
contracted. We include the full capacity if more than
50% of PPAs/offtake are secured.
Heat and power generation
Power generation from wind is calculated as sold
generation. The Gunfleet Sands and Walney 1 and 2
offshore wind farms have been consolidated accord-
ing to ownership interest. The other wind farms are
financially consolidated.
Thermal power generation is determined as net gen-
eration sold based on settlements from the official
Danish production database. Data for generation
from foreign facilities are provided by the operators.
Thermal heat (including steam) generation is meas-
ured as net output sold to heat customers.
Availability and load factor
The production-based availability (PBA) is calculated
as the ratio of actual production to the possible
production, which is the sum of lost production and
actual production in a given period. PBA is impacted
by grid and wind-turbine outages, which are technical
production losses. PBA is not impacted by market-
requested shutdowns and wind farm curtailments, as
this is deemed not to be reflective of site perfor-
mance, but due to external factors.
The load factor is calculated as the ratio between
actual generation over a period relative to potential
generation, which is possible by continuously exploiting
the maximum capacity over the same period. The load
factor is commercially adjusted. Commercially adjusted
means that, for Danish and German offshore wind
farms, the load factor is adjusted if the offshore wind
farm has been financially compensated by the transmis-
sion system operators in situations where the offshore
wind farm is available for generation, but the output
cannot be supplied to the grid due to maintenance or
grid interruptions. Wind farms in other countries are
not compensated for non-access to the grid.
Wind speed
Wind speeds for the areas where Ørsted's offshore
wind farms are located are provided to Ørsted by an
external supplier. Wind speeds are weighted on the
basis of the capacity of the individual offshore wind
farms and consolidated to an Ørsted total. Onshore
wind speed is based on wind speed measurements from
anemometers on the wind turbines. Due to the location
of these anemometers on the wind turbine nacelles,
these measurements understate actual wind speed
conditions on site as they are impacted by the wake and
blockage effects.
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Ørsted Annual report 2019Financial statements Consolidated ESG statements (additional information)
Contents
Sales and distribution
Sales of power and natural gas are calculated as
physical sales to retail and wholesale customers
and exchanges. Sales of power and gas are based
on readings from Ørsted's trading systems. Internal
sales to Bioenergy are not included in the statement.
Power distribution is determined on the basis of data
from the official system in Denmark, which measures
and calculates total area consumption.
Degree days
Degree days are a measure of how cold it has been,
and thus indicate the amount of energy needed to
heat a building. The number of degree days helps to
compare the heat demand for a given year with a
normal year. The number of degree days expresses
the difference between an average indoor tempera-
ture of 17°C and the outside mean temperature for
a given period. The need for heat increases with the
number of degree days.
Coal share of fuels used for thermal heat and power
generation
The coal share is calculated as the coal consumption
in gigajoule relative to the total fuel volume in
gigajoule.
Sourcing of certified wooden biomass
Certified biomass is defined as wooden biomass, i.e.
wood pellets and wood chips. Biomass is measured
as sourced wooden biomass delivered to the indi-
vidual combined heat and power plants within the
reporting period.
Certified sustainable wooden biomass sourced must
be certified within at least one of the claim catego-
ries accepted by the Danish industry agreement on
certified biomass. Accepted claim categories are:
FSC 100%, FSC Mix, PEFC 100%, and SBP compliant.
Certified biomass is calculated as the amount of
sourced wooden biomass compared to the total
amount of sourced wooden biomass delivered to
individual CHP plants within the reporting period.
Biomass share of thermal heat and power
generation
This is calculated as the green share of heat and
power generation, but is only shown for thermal heat
and power generation.
Avoided carbon emissions
The avoided carbon emissions due to generation
from offshore and onshore wind farms are calculated
under the assumption that the generation from wind
farms replace an equal quantity of power generated
using fossil fuels.
The carbon emissions avoided due to conversions of
combined heat and power plants and subsequent
switch of fuel from fossil to biomass is calculated
from the energy content of the fuel used at CHP
plants. It is assumed that the use of 1GJ of biomass
fuel avoids the use of 1GJ of fossil fuels. The upstream
emissions from biomass fuel production and trans-
portation are included.
Accounting policies – Social
Employees
Our reporting covers contractually employed
employees in all Ørsted companies in which Ørsted
holds an ownership interest of more than 50%.
Employees in associates are not included.
Employee data are recognised based on records
from the Group's ordinary registration systems.
The number of employees is determined as the
number of employees at the end of each month
converted to full-time equivalents (FTEs).
Employees who have been made redundant are
recognised until the expiry of their notice period,
regardless of whether they have been released from
all or some of their duties during their notice period.
Employee satisfaction
Ørsted conducts a comprehensive employee satis-
faction survey once a year. With a few exceptions,
all Ørsted employees are invited to participate in
the survey.
The following employees are not invited to
participate: Employees who joined the company
shortly before the employee satisfaction survey,
employees who resigned shortly after the employee
satisfaction survey, interns, consultants/advisers and
external temporary workers who do not have an
employment contract with Ørsted.
subsequently converted to index figures on a scale
from 0 to 100.
Safety
Occupational injuries are calculated according to
operational scope. Data from companies wholly
or partly owned by Ørsted, and where Ørsted is
responsible for safety, is included. Occupational
injuries and lost-time injuries are calculated for both
our own employees and suppliers. Data from all
Ørsted locations is recognised.
The lost-time injury frequency (LTIF) is calculated as
the number of lost-time injuries per one million hours
worked. The number of hours worked is based on
1,667 working hours annually per full-time employee
and monthly records of the number of employees
converted into full-time employees. For suppliers, the
actual number of hours worked is recognised on the
basis of data provided by the supplier, access control
systems at locations or estimates.
LTIF includes lost-time injuries defined as injuries that
result in incapacity to work for one or more calendar
days in addition to the day of the incident. In addi-
tion to lost-time injuries, TRIR also includes injuries
where the injured person is able to perform restricted
work the day after the accident as well as accidents
where the injured person has received medical treat-
ment. Fatalities are the number of employees who
lost their lives as a result of a work-related incident.
Job creation
The number of job years is calculated based on a
factor for job years per megawatt installed provided
by the International Renewable Energy Agency,
IRENA. The job year creation factor is based on a
500MW offshore wind farm. The factor is not adjust-
ed for other details, such as when the wind farm was
constructed (wind turbine size and other parameters),
wind farm size-specific parameters beyond a simple
scaling of capacity size or geographical position (i.e.
water depths and distance to shore).
The number of job years created relates only to the
value chain from procurement and manufacturing,
over installation, operation and maintenance, to
decommissioning.
In the survey, a number of questions are asked. The
answers are given on a scale from 1 to 10 and are
This means that job years related to, for example,
mining and manufacturing of steel and concrete
as well as local jobs, such as hotels and dining for
people working on local sites, are not included.
A lifetime of 25 years for all wind farms is used.
The number of job years relates to the installed
capacity and not Ørsted's ownership share of the
wind farm. The number of job years varies during
the lifespan, and most of the jobs are created in the
beginning during construction and installation.
People powered
The figure for people powered based on installed
capacity is calculated using the capacity installed,
the actual load factor and country-specific power
consumption per person (state-specific consumption
factors are used in the US). People powered based
on FID and awarded capacity is calculated on the
basis of capacity, an average load factor based on
business cases for offshore wind, onshore wind and
solar. Consumption is country-specific consumption
per person (state-specific consumption factors are
used in the US).
Accounting policies – Governance
Board of Directors of Ørsted A/S
The employee representatives on the Board of
Directors are not included in the data for the Board
of Directors.
Substantiated whistleblower cases
Ørsted's whistleblower hotline is available for
internal and external reporting of suspected cases
of inappropriate or illegal behaviour. Whistleblower
cases are received and handled by the Internal Audit
function, which also receives similar reports through
the management system and from compliance offi-
cers. All reports are managed in accordance with the
guidelines for the handling of whistleblower reports
approved by the Audit & Risk Committee, which is
ultimately responsible for the whistleblower scheme.
Only cases, which are closed during the financial
year, and which have been reported to the Audit &
Risk Committee as fully or partially substantiated,
are reported in the ESG statement.
Cases transferred to the police
Cases transferred to the police are defined as the
number of cases reported in accordance with the
above which are transferred to the police.
165 / 183
Ørsted Annual report 2019Financial statements Parent company
financial
statements
167
Income statement
167 Balance sheet
168 Statement of changes in equity
169 Notes
1. Basis of reporting
2. Employee costs
3. Financial income and expenses
4. Tax on profit (loss) for the year and deferred tax
5. Distribution of net profit
6. Property, plant and equipment
7. Investments in subsidiaries
8. Receivables from subsidiaries
9. Derivatives
10. Securities
11. Loans and borrowings
12. Other provisions
13. Contingent liabilities
14. Related-party transactions
15. Auditor's fees
16. Ownership information
Contents
As we expand our operations
in Taiwan’s Changhua County,
we have committed to
establishing a USD 1.94 million
trust fund to provide local
suppliers with further training
and qualifications. It is expected
that the Changhua wind farm
projects will create over 12,000
direct and indirect jobs.
Ørsted Annual report 2019
Parent company financial statements
Contents
Income statement
Balance sheet
1 January - 31 December
31 December
2018
Note Assets, DKKm
Land and buildings
Property, plant and equipment
2019
1,352
1,352
2018
Note Equity and liabilities, DKKm
-
-
Share capital
Reserves
2019
4,204
(81)
2018
4,204
(296)
Investments in subsidiaries
36,850
40,425
Retained earnings
24,350
25,968
Receivables from subsidiaries
91,839
55,131
Proposed dividends
4,414
4,099
Other receivables
Deferred tax
Financial assets
-
126
1,082
-
128,815
96,638
Equity attributable to
shareholders in Ørsted A/S
11
Hybrid capital
Note Income statement, DKKm
Revenue
2
Employee costs
External expenses
2019
173
(36)
(168)
198
(33)
(356)
Operating profit (loss) before depreciation,
amortisation and impaiment losses (EBITDA)
Amortisation, depreciation and impairment
losses on property, plant and equipment
Operating profit (loss) (EBIT)
Gain on divestment of enterprises
3
3
4
5
Financial income
Financial expenses
Profit (loss) before tax
Tax on profit (loss) for the year
Profit (loss) for the year
(31)
(191)
(146)
(177)
(94)
-
(191)
(10)
18,743
10,014
(14,533)
(6,732)
3,939
(376)
3,563
3,081
(69)
3,012
6
7
8
4
Non-current assets
130,167
96,638
Receivables from subsidiaries
20,771
32,933
9
Derivatives
Other receivables
Receivables
10
Securities
Cash
Current assets
Assets
4,260
2,642
3,102
604
27,673
36,639
15,795
24,740
947
1,105
44,415
62,484
174,582
159,122
32,887
33,975
13,232
13,239
46,119
47,214
-
601
1,272
97
794
-
Equity
Deferred tax
Other provisions
Lease liabilities
4
12
11
11
Bond and bank debt
31,808
23,482
Non-current liabilities
33,681
24,373
12
Other provisions
Lease liabilities
Bond and bank debt
9
Derivatives
Trade payables
82
115
1,593
5,119
33
-
-
3,448
3,322
34
Payables to subsidiaries
85,695
79,364
Other payables
Income tax
1,084
1,061
1,242
125
Current liabilities
94,782
87,535
Liabilities
128,463
111,908
Equity and liabilities
174,582
159,122
167 / 183
Ørsted Annual report 2019Financial statements Parent company financial statements
Contents
Statement of changes in equity
1 January - 31 December
Statement of changes in equity, DKKm
Equity at 1 January 2019
Profit (loss) for the year
Dividends paid
Proposed dividends
Purchase of treasury shares
Value adjustments of hedging instruments
Value adjustments transferred to financial income and expenses
Tax on changes in equity
Coupon payments, hybrid capital
Tax on coupon payments
Share-based payment
Additions, hybrid capital
Disposals, hybrid capital
Changes in equity in 2019
Equity at 31 December 2019
Equity at 1 January 2018
Profit (loss) for the year
Dividends paid
Proposed dividends
Purchase of treasury shares
Value adjustments of hedging instruments
Value adjustments transferred to financial income and expenses
Tax on changes in equity
Coupon payments, hybrid capital
Tax on coupon payments
Share-based payment
Changes in equity in 2018
Equity at 31 December 2018
Share capital
4,204
Hedging
reserve
(296)
-
-
-
-
-
-
-
-
-
-
-
-
-
4,204
4,204
-
-
-
-
-
-
-
-
-
-
-
4,204
-
-
-
-
185
90
(60)
-
-
-
-
-
215
(81)
(467)
-
-
-
-
84
135
(48)
-
-
-
171
(296)
Retained
earnings
Proposed
dividends
Shareholders in
Ørsted A/S
Hybrid capital
25,968
2,888
3
(4,414)
(99)
-
-
-
-
-
4
-
-
(1,618)
24,350
27,522
2,587
2
(4,099)
(48)
-
-
-
-
-
4
4,099
-
(4,099)
4,414
-
-
-
-
-
-
-
-
-
315
4,414
3,783
-
(3,783)
4,099
-
-
-
-
-
-
-
33,975
2,888
(4,096)
-
(99)
185
90
(60)
-
-
4
-
-
(1,088)
32,887
35,042
2,587
(3,781)
-
(48)
84
135
(48)
-
-
4
(1,554)
25,968
316
4,099
(1,067)
33,975
13,239
675
-
-
-
-
-
-
(556)
34
-
4,416
(4,576)
(7)
13,232
13,239
425
-
-
-
-
-
-
(545)
120
-
-
13,239
Total
47,214
3,563
(4,096)
-
(99)
185
90
(60)
(556)
34
4
4,416
(4,576)
(1,095)
46,119
48,281
3,012
(3,781)
-
(48)
84
135
(48)
(545)
120
4
(1,067)
47,214
Share capital com-
position and dividends
are disclosed in note 6.2
to the consolidated
financial statements.
Information on trea sury
shares is available in
the note.
168 / 183
Ørsted Annual report 2019Financial statements Parent company financial statements
Contents
1. Basis of reporting
Accounting policies
The parent company financial statements
have been prepared in accordance with the
provisions of the Danish Financial Statements
Act (reporting class D).
The parent company accounting policies
are consistent with the accounting policies
described for the consolidated financial
statements, with the following exceptions.
The Danish Financial Statements Act allows
us to use certain IFRS standards to interpret
the act. Effective from 1 January 2019, we have
implemented IFRS 16 'Leases'.
The implementation of IFRS 16 'Leases' in
2019 has increased our EBITDA for 2019 by
DKK 149 million. Depreciation of lease assets
amounted to DKK 146 million, and interests
on lease debt amounted to DKK 38 million.
The net effect on profit (loss) for 2019 was a
loss of DKK 35 million.
The effect on the balance sheet per
31 December 2019 was an increase in assets of
DKK 1,352 million and an increase in liabilities
of DKK 1,387 million.
Also, IFRS 15 'Revenue' has been implemented.
The implementation has no effect on the figures.
The accounting policies remain unchanged
from the previous year with the exception of
the implementation of IFRS 15 'Revenue' and
IFRS 16 'Leases'.
Unless otherwise stated, the financial
statements are presented in Danish kroner
(DKK) rounded to the nearest million.
Foreign currency translation
We recognise exchange rate adjustments
of receivables from and payables to sub-
sidiaries as financial income and expenses
in the income statement when the balances
are accounted for as part of the total net
investment in foreign enterprises. Likewise,
we recognise foreign exchange gains and
losses on loans and derivatives in the income
statement as financial income and expenses
when they have been entered into to hedge
the net investment in the foreign enterprises.
Revenue
Rental income comprises income from
commercial leases and is recognised over
the term of the lease. Income from services is
recognised when delivery has taken place.
Dividends from investments
Dividends from subsidiaries and associates
are recognised in the income statement for
the financial year in which the dividends are
approved at the annual general meeting.
If the dividends exceed the total income
after the time of takeover, the dividends are
recognised as a reduction of the cost of the
investment under assets.
Investments
We measure our investments in subsidiaries
and associates at cost. If there is any
indication that the value of a company is
lower than our future earnings in the company,
impairment testing of the company is carried
out as described in the consolidated financial
statements. The carrying amount is written
down to the recoverable amount whenever
the carrying amount exceeds the future earn-
ings in the company (recoverable amount).
If we have a legal or constructive obligation
to cover a deficit in subsidiaries and associates,
we recognise a provision for this.
Tax
Ørsted A/S is taxed jointly with its Danish
subsidiaries. The jointly taxed companies are
part of joint taxation with the parent company
as the management company.
Subsidiaries are included in the joint taxation
from the date they are consolidated in the con-
solidated financial statements and up to the
date on which they are no longer consolidated.
Current tax for 2019 is recognised by the
individual jointly taxed companies.
Statement of cash flows
We do not prepare a separate statement of
cash flows for the parent company. Reference
is made to the consolidated statement of
cash flows on page 71.
Key accounting estimates
In connection with the preparation of the financial
statements, a number of accounting estimates
have been made that affect the profit (loss) and
balance sheet. Estimates are regularly reassessed by
management on the basis of historical experience
and other relevant factors.
Impairment test
If there is any indication that the carrying amount
is lower than our future earnings in a company, we
test for impairment as described in the consolidated
financial statements. The future earnings of the
company (recoverable amount) are calculated based
on assumptions concerning significant estimates.
Formosa 1, north-western coast, Taiwan.
169 / 183
Ørsted Annual report 2019Financial statements Parent company financial statements
Contents
2. Employee costs
3. Financial income
and expenses
2019
2018
Financial income and expenses, DKKm
24
Interest income from cash, etc.
4
5
Interest income from subsidiaries
Interest income from securities at market value
33
Capital gains on securities at market value
Employee costs, DKKm
Wages and salaries
Share-based payment
Remuneration of the Board of Directors
Total employee costs
Salaries and remuneration of the Executive Board, DKK '000
Fixed salary
Cash-based incentive scheme
Retention bonus, etc.
Share-based payment
Pension, incl. social security and benefits
Total
27
4
5
36
2019
16,810
4,561
-
4,046
564
2018
16,400
4,630
1,875
3,537
555
25,981
26,997
Notes 2.6 and 2.7 to the consoli dated financial
statements describe the remuneration of the
Executive Board and the Board of Directors,
share-based payment, termination and bonus
scheme for the Executive Board and details on
the remuneration of the Board of Directors.
The parent company had an average of six
employees in 2019 (2018: five employees).
Foreign exchange gains
Value adjustments of derivatives
Dividends received
Other financial income
Total financial income
Interest expenses relating to loans and borrowings
Interest expenses, leases
Interest expenses to subsidiaries
Impairment of investments in subsidiaries
Capital losses on securities at market value
Foreign exchange losses
Value adjustments of derivatives
Other financial expenses
Total financial expenses
Net financial income and expenses
2019
103
2,546
221
166
2,974
8,664
4,068
1
18,743
(1,625)
(38)
(8)
(2,101)
(17)
(1,060)
(9,676)
(8)
(14,533)
4,210
2018
56
1,803
258
119
1,243
2,511
4,024
-
10,014
(1,502)
-
(9)
(1,400)
(292)
(1,169)
(2,330)
(30)
(6,732)
3,282
170 / 183
Ørsted Annual report 2019Financial statements Parent company financial statements
Contents
4. Tax on profit (loss)
for the year
and deferred tax
5. Distribution
of net profit
Income tax, DKKm
Tax on profit (loss) for the year
Tax on changes in equity
Total tax for the year
Tax on profit (loss) for the year can be broken down as follows:
Current tax
Adjustments to deferred tax
Adjustments to current tax in respect of prior years
Adjustments to deferred tax in respect of prior years
Tax on profit (loss) for the year
Development in deferred tax, DKKm
Deferred tax at 1 January
Adjustments for the year recognised in profit (loss) for the year
Adjustments to deferred tax in respect of prior years
Deferred tax at 31 December
Specification of deferred tax, DKKm
Non-current liabilities
Deferred tax, asset
Deferred tax, liability
2019
(376)
(30)
(406)
(704)
226
105
(3)
(376)
2019
97
(226)
3
(126)
2019
126
126
-
2018
Distribution of net profit, DKKm
2019
2018
(69)
(86)
Profit (loss) for the year is attributable to:
Shareholders in Ørsted A/S, proposed dividends for the financial year
(155)
Shareholders in Ørsted A/S, retained earnings
Interest payments and costs, hybrid capital owners of Ørsted A/S
Profit (loss) for the year
(88)
(18)
35
2
(69)
2018
81
18
(2)
97
2018
97
-
97
4,414
(1,526)
675
3,563
4,099
(1,512)
425
3,012
171 / 183
Ørsted Annual report 2019Financial statements Parent company financial statements
Contents
6. Property, plant and
equipment
7. Investments in
subsidiaries
Property, plant and equipment, DKKm
Land and buildings
Investments in subsidiaries, DKKm
Cost at 1 January 2019
Lease assets at 1 January 2019
Cost at 31 December 2019
Depreciation and amortisation at 1 January 2019
Depreciation and amortisation
Depreciation and amortisation at 31 December 2019
Carrying amount at 31 December 2019
-
Cost at 1 January
1,498
Additions
1,498
Disposals
-
Cost at 31 December
146
146
Value adjustments at 1 January
Impairment losses
1,352
Value adjustments at 31 December
Carrying amount at 31 December
Value of leased assets
1,352
Effective from 1 January 2019, we have imple-
mented IFRS 16 'Leases', see note 1 'Basis of
reporting'.
We have entered into leases for office premis-
es, primarily in Gentofte (expiring in 2028).
We have entered into operating leases with
subsidiaries for sublease of office premises.
In 2019, an amount of DKK 106 million was
recognised (2018: DKK 97 million) in profit (loss)
for the year in respect of rental income.
We have tested investments in subsidiaries for
impairment by comparing the expected future
income from the individual subsidiaries with
their carrying amounts.
The impairment test in 2019 gave rise to
an impairment of DKK 2,101 million (2018:
DKK 1,400 million) based on the individual
subsidiaries recoverable amounts.
2019
41,825
27
(1,501)
40,351
(1,400)
(2,101)
(3,501)
36,850
2018
41,762
63
-
41,825
-
(1,400)
(1,400)
40,425
Note 8.5 of the
consolidated financial
statements contains a
complete overview of
subsidiaries, etc.
172 / 183
Ørsted Annual report 2019Financial statements
Parent company financial statements
Contents
8. Receivables from
9. Derivatives
subsidiaries
Non-current receivables from subsidiaries, DKKm
Cost at 1 January
Additions
Disposals
Cost at 31 December
2019
55,131
50,844
2018
48,706
17,641
(14,136)
(11,216)
91,839
55,131
Ørsted A/S has assumed the subsidiaries'
currency risks via forward exchange contracts,
which have subsequently been hedged in the
market. Furthermore, hedging contracts have
been concluded to hedge the currency risk
associated with investments in subsidiaries in
foreign currencies.
We have also entered into a number of
interest rate swaps to manage our interest
rate risk.
The company has fair value hedged loans and
receivables in GBP, USD and EUR. The value
of the fair value hedge offset in the income
statement amounted to DKK 730 million
(2018: DKK 263 million).
Derivatives at the end of December 2019 ma-
ture as follows: 2020: DKK -459 million, 2021:
DKK -175 million, after 2021: DKK -225 million
(2018: 2019: DKK -99 million, 2020: DKK -268
million, after 2020: DKK 147 million).
2019
2018
Overview of
derivative positions,
DKKm
Interest derivatives
Currency derivatives
Total
Assets
Equity and liabilities
Contractual
principal amount
Market value
Contractual
principal amount
Market value
4,431
26,727
31,158
(85)
(774)
(859)
4,260
(5,119)
6,588
17,623
24,211
(39)
(181)
(220)
3,102
(3,322)
See note 7.1 to the consolidated financial statements
and the management's review on pages 60-63 for
more details on risk and risk management.
Our Service Operations
Vessel (SOV), Edda
Mistral, at Hornsea 1,
North Sea, UK.
173 / 183
Ørsted Annual report 2019Financial statements Parent company financial statements
Contents
10. Securities
12. Other provisions
Securities are a key element in our financial
resources, and therefore investments are
primarily made in liquid AAA-rated Danish
mortgage bonds and to a lesser extent in
other bonds. Most of the securities qualify for
repo transactions in the Danish central bank,
'Danmarks Nationalbank'.
We have made provisions for non-current
liabilities totalling DKK 683 million (2018:
DKK 794 million), of which DKK 82 million fall
due within 1 year, DKK 563 million fall due
in 1-5 years, and DKK 38 million fall due in
more than 5 years. The liabilities concern the
divestment of our Oil & Gas business which
was closed in 2017.
Securities, DKKm
Securities, available for us
Securities, not available for use
2019
15,795
-
2018
24,407
333
Total securities
15,795
24,740
Securities not available
for use in 2018 was used
as collateral for repo
loans and trading in
financial instruments.
11. Loans and borrowings
At 31 December 2019, we had issued hybrid
capital with a total notional amount of
DKK 14,019 million (2018: DKK 13,432 million).
The hybrid bonds have a 1,000-year term
and expire as follows: DKK 5,230 million in
3013, DKK 570 million in 3015, DKK 3,736
million in 3017 and DKK 4,483 million in 3019,
respectively.
The long-term portion of bank loans and issued
bonds amounted to DKK 31,808 million at
31 December 2019 (2018: DKK 23,482 million),
of which DKK 24,938 million (2018: DKK 16,376
million) fall due in more than five years.
The long-term portion of lease debt amounted
to DKK 1,272 million, of which DKK 749 million
fall due in more than five years.
13. Contingent liabilities
Contingent liabilities
Guarantees
Ørsted A/S has provided guarantees in connec-
tion with participation by subsidiaries and
subsidiaries' joint operations and joint ventures
in the construction and operation of offshore
wind farms and natural gas installations as
well as guarantees in respect of leases, energy
trading activities, purchase, sale and supply
agreements, decommissioning obligations,
farmdowns and other M&A transactions as
wall as secondary liability on decommission-
ing of offshore installations related to the
divestment of the Oil & Gas business, etc.
Ørsted A/S also acts as guarantor or surety
provider with primary liability for bank
liabilities in certain subsidiaries. This includes
guarantees provided in favour of banks and
investors covering credit facilities established
and bonds issued in Taiwan.
Furthermore, in support of the ratings of Ørsted
Salg & Service A/S by Moody’s and Ørsted Wind
Power TW Holding A/S by Taiwan Ratings, Ørsted
A/S has provided general guarantees covering
all obligations and liabilities undertaken in the
ordinary course of business by these two entities.
Indemnities
Ørsted A/S is taxed jointly with the Danish com-
panies in the Ørsted Group. As management
company, Ørsted A/S has unlimited as well as
joint and several liability together with the other
jointly taxed companies for Danish income taxes
and withholding taxes on dividends, interest and
royalties related to the jointly taxed companies.
Litigation
Ørsted A/S is not a party to any litigation
proceedings or legal disputes that could have
an effect on the company's financial position,
either individually or collectively.
174 / 183
Ørsted Annual report 2019Financial statements Parent company financial statements
Contents
14. Related-party
transactions
16. Ownership
information
Related parties are the Board of Directors,
the Executive Board, Ørsted A/S's subsidiaries
and the Danish state.
payment' in the consolidated financial
statements.
Remuneration of the Board of Directors and
the Executive Board is disclosed in notes
2.6 'Employee costs' and 2.7 'Share-based
Our related-party transactions are made
on arm's length terms.
Ownership information 31 December 2019
Registered office
The Danish state represented by
the Danish Ministry of Finance
SEAS-NVE A.M.B.A.
The Capital Group Companies, Inc.
Copenhagen K, Denmark
Svinninge, Denmark
Los Angeles, USA
1 Interval shown, as precise voting share is not publicly available.
15. Auditor's fees
Auditor's fees, DKKm
Statutory audit
Tax and VAT advice
Total fees to PwC
2019
2018
2
-
2
2
1
3
In connection with SEAS-NVE’s acquisition
of our Danish power distribution, residential
customer and city light businesses, SEAS-NVE
stated an intention to reduce its shareholding
from 9.54% to a shareholding of approx 5%
over the coming 12 months. In both November
2019 and January 2020, SEAS-NVE sold shares
equivalent to 2.27% of the shares in Ørsted,
bringing their shareholding to 5.01%.
Ownership
interests
50.12%
7.28%
-
Voting
share
50.64%
7.35%
5-10%1
The table shows the
shareholders with
ownership interests
and voting shares of
at least 5%. Difference
between ownership
interests and voting
shares arises when
power of attorney
is issued.
175 / 183
Ørsted Annual report 2019Financial statements Management statement,
auditors' reports and glossary
177
Statement by the Executive Board
and the Board of Directors
178
Independent Auditors' Report
181
Limited Assurance Report on the
consolidated ESG statements
182 Glossary
Contents
Walney Extension, located
in the Irish Sea, generates
green power for nearly
600,000 UK homes and was
the world’s largest offshore
wind farm in operation
until Hornsea 1 was commis-
sioned at the end of 2019.
Over the project’s lifetime,
we are investing GBP 15
million in social and environ-
mental projects aimed at
strengthening the local
community and economy.
Ørsted Annual report 2019Financial statements Management statement, auditor's reports and glossary
Contents
Statement by the Executive Board
and the Board of Directors
The Board of Directors and the Executive
Board have today considered and approved
the annual report of Ørsted A/S for the finan-
cial year 1 January - 31 December 2019.
The consolidated financial statements
have been prepared in accordance with the
International Financial Reporting Standards
as adopted by the EU and additional require-
ments in the Danish Financial Statements
Act. The financial statements of the parent
company, Ørsted A/S, have been prepared in
accordance with the provisions of the Danish
Financial Statements Act.
In our opinion, the consolidated financial
statements and the parent company financial
statements provide a true and fair presenta-
tion of the Group's and the parent company's
assets, liabilities and financial position at
31 December 2019 and of the results of the
Group's and the parent company's operations
and the Group's cash flows for the financial
year 1 January - 31 December 2019.
In our opinion, the management's review
provides a true and fair presentation of the
development in the Group's and the parent
company's operations and financial circum-
stances, of the results for the year and of the
overall financial position of the Group and
the parent company as well as a description
of the most significant risks and elements of
uncertainty facing the Group and the parent
company. The management's review has
been prepared in accordance with the Danish
Financial Statements Act.
In our opinion, the consolidated ESG state-
ments ('Additional information') represent a
reasonable, fair and balanced representa-
tion of the Group's social responsibility and
sustainability performance and are presented
in accordance with the stated accounting
policies.
We recommend that the annual report be
adopted at the annual general meeting.
Skærbæk, 30 January 2020
Executive Board:
Henrik Poulsen
President and CEO
Marianne Wiinholt
CFO
Board of Directors:
Thomas Thune Andersen
Chairman
Lene Skole
Deputy Chairman
Lynda Armstrong
Jørgen Kildahl
Peter Korsholm
Dieter Wemmer
Hanne Sten Andersen*
Poul Dreyer*
Benny Gøbel*
* Employee representative
177 / 183
Ørsted Annual report 2019Financial statements Management statement, auditor's reports and glossary
Contents
Independent Auditors’ Report
To the shareholders of Ørsted A/S
Our opinion
In our opinion, the Consolidated Financial
Statements give a true and fair view of the
Group’s financial position at 31 December 2019
and of the results of the Group’s operations
and cash flows for the financial year 1 January
to 31 December 2019 in accordance with
International Financial Reporting Standards as
adopted by the EU (‘IFRS’) and further require-
ments in the Danish Financial Statements Act.
equity, the consolidated cash flow statement
and the notes to the consolidated financial
statements, including summary of significant
accounting policies.
The Parent Company Financial Statements
of Ørsted A/S for the financial year 1 January
to 31 December 2019, pp 166 - 175, comprise
the income statement, the balance sheet, the
statement of changes in equity and the notes
to the parent financial statements, including
summary of significant accounting policies.
Moreover, in our opinion, the Parent Company
Financial Statements give a true and fair view
of the Parent Company’s financial position
at 31 December 2019 and of the results of
the Parent Company’s operations for the
financial year 1 January to 31 December 2019
in accordance with the Danish Financial
Statements Act.
Our opinion is consistent with our Audi-
tor’s Long-form Report to the Audit & Risk
Committee and the Board of Directors.
What we have audited
The Consolidated Financial Statements of
Ørsted A/S for the financial year 1 January
to 31 December 2019, pp 66 - 157 and 177,
comprise the consolidated income statement,
the consolidated statement of comprehen-
sive income, the consolidated balance sheet,
the consolidated statement of changes in
Collectively referred to as the “Financial
Statements”.
Basis for opinion
We conducted our audit in accordance with
International Standards on Auditing (ISAs)
and the additional requirements applicable
in Denmark. Our responsibilities under those
standards and requirements are further
described in the Auditor’s Responsibilities for
the Audit of the Financial Statements section
of our report.
We believe that the audit evidence we have
obtained is sufficient and appropriate to
provide a basis for our opinion.
Independence
We are independent of the Group in accord-
ance with the International Ethics Standards
Board for Accountants’ Code of Ethics for
Professional Accountants (IESBA Code) and
the additional ethical requirements applicable
in Denmark. We have also fulfilled our other
ethical responsibilities in accordance with the
IESBA Code.
To the best of our knowledge and belief,
prohibited non-audit services referred to in
Article 5(1) of Regulation (EU) No 537/2014
were not provided.
Appointment
We were first appointed auditors of Ørsted
A/S on 19 April 2010 for the financial year
2010. We have been reappointed annually
by shareholder resolution for a total period
of uninterrupted engagement of 10 years,
including the financial year 2019.
Key audit matters
Key audit matters are those matters that, in our
professional judgement, were of most signifi-
cance in our audit of the Financial Statements
for 2019. These matters were addressed in the
context of our audit of the Financial Statements
as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on
these matters.
Key audit matter
How our audit addressed the key audit matter
Construction agreements
The accuracy of the revenue recognition related
to large construction agreements for offshore wind
farms and its presentation in the consolidated
financial statements is dependent on complex
estimates, such as the forecasted selling price and
estimated costs related to the constructions as well
as the degree of completion of the offshore wind
farms under construction.
We focused on this area because the revenue
recognised over time with reference to the degree
of completion requires significant judgements and
estimates by Management.
Refer to notes 1.2, 2.2 and 4.2 in the Consolidated
Financial Statements.
We reviewed the individual construction agree-
ments for offshore wind farms and challenged the
accounting treatment applied by Management.
On a sample basis, we tested whether revenue is
accurately recorded by challenging the forecasted
selling price and estimated costs related to the
constructions of offshore wind farms, including the
assumptions used, and by evaluating the outcome
of previous estimates by agreeing the actual selling
price and costs incurred post-year end to the forecast-
ed selling price and estimated costs for the period.
We also assessed how the project managers
determined that the degree of completion was
substantiated by obtaining their calculations and
agreeing the inputs to documentary evidence or our
independently formed expectation as appropriate.
178 / 183
Ørsted Annual report 2019Financial statements Management statement, auditor's reports and glossary
Contents
Statement on Management’s Review
Management is responsible for the Manage-
ment’s Review, pp 4 - 65.
Our opinion on the Financial Statements
does not cover Management’s Review, and
we do not express any form of assurance
conclusion thereon.
In connection with our audit of the Financial
Statements, our responsibility is to read Man-
agement’s Review and, in doing so, consider
whether Management’s Review is materially
inconsistent with the Financial Statements or
our knowledge obtained in the audit, or other-
wise appears to be materially misstated.
Moreover, we considered whether Manage-
ment’s Review includes the disclosures required
by the Danish Financial Statements Act.
Based on the work we have performed, in our
view, Management’s Review is in accordance
with the Consolidated Financial Statements
and the Parent Company Financial State-
ments and has been prepared in accordance
with the requirements of the Danish Financial
Statement Act. We did not identify any materi-
al misstatement in Management’s Review.
Management’s responsibilities for the
Financial Statements
Management is responsible for the prepara-
tion of consolidated financial statements that
give a true and fair view in accordance with
International Financial Reporting Standards
as adopted by the EU and further require-
ments in the Danish Financial Statements Act
and for the preparation of parent company
financial statements that give a true and fair
view in accordance with the Danish Financial
Statements Act, and for such internal control
as Management determines is necessary to
enable the preparation of financial state-
ments that are free from material misstate-
ment, whether due to fraud or error.
In preparing the Financial Statements,
Management is responsible for assessing the
Group’s and the Parent Company’s ability to
continue as a going concern, disclosing, as ap-
plicable, matters related to going concern and
using the going concern basis of accounting
unless Management either intends to liquidate
the Group or the Parent Company or to cease
operations, or has no realistic alternative but
to do so.
Auditor’s responsibilities for the audit of
the Financial Statements
Our objectives are to obtain reasonable
assurance about whether the Financial
Statements as a whole are free from material
misstatement, whether due to fraud or error,
and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs
and the additional requirements applicable in
Denmark will always detect a material mis-
statement when it exists. Misstatements can
arise from fraud or error and are considered
material if, individually or in the aggregate,
they could reasonably be expected to influ-
ence the economic decisions of users taken on
the basis of these Financial Statements.
As part of an audit in accordance with ISAs
and additional requirements applicable in
Denmark, we exercise professional judgement
and maintain professional scepticism through-
out the audit. We also:
– Identify and assess the risks of material
misstatement of the Financial Statements,
whether due to fraud or error, design and
perform audit procedures responsive to
those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis
for our opinion. The risk of not detecting a
material misstatement resulting from fraud
is higher than for one resulting from error,
as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or
the override of internal control.
– Obtain an understanding of internal control
relevant to the audit in order to design
audit procedures that are appropriate in the
circumstances, but not for the purpose of
expressing an opinion on the effectiveness
of the Group’s and the Company’s internal
control.
– Evaluate the appropriateness of accounting
policies used and the reasonableness of ac-
counting estimates and related disclosures
made by Management.
– Conclude on the appropriateness of
Management’s use of the going concern
basis of accounting and based on the audit
evidence obtained, whether a material
uncertainty exists related to events or
conditions that may cast significant doubt
on the Group’s and the Parent Company’s
ability to continue as a going concern. If
we conclude that a material uncertainty
exists, we are required to draw attention in
our auditor’s report to the related disclo-
sures in the Financial Statements or, if such
disclosures are inadequate, to modify our
opinion. Our conclusions are based on the
audit evidence obtained up to the date of
our auditor’s report. However, future events
or conditions may cause the Group or the
Parent Company to cease to continue as a
going concern.
– Evaluate the overall presentation, structure
and content of the Financial Statements,
including the disclosures, and whether the
Financial Statements represent the under-
lying transactions and events in a manner
that achieves fair presentation.
179 / 183
Ørsted Annual report 2019Financial statements
Management statement, auditor's reports and glossary
Contents
– Obtain sufficient appropriate audit evi-
dence regarding the financial information
of the entities or business activities within
the Group to express an opinion on the
Consolidated Financial Statements. We are
responsible for the direction, supervision and
performance of the group audit. We remain
solely responsible for our audit opinion.
determine that a matter should not be com-
municated in our report because the adverse
consequences of doing so would reasonably
be expected to outweigh the public interest
benefits of such communication.
We communicate with those charged with
governance regarding, among other matters,
the planned scope and timing of the audit
and significant audit findings, including any
significant deficiencies in internal control that
we identify during our audit.
Hellerup, 30 January 2020
PricewaterhouseCoopers
Statsautoriseret Revisionspartnerselskab
CVR no. 3377 1231
We also provide those charged with govern-
ance with a statement that we have complied
with relevant ethical requirements regarding
independence, and to communicate with
them all relationships and other matters that
may reasonably be thought to bear on our
independence, and where applicable, related
safeguards.
From the matters communicated with those
charged with governance, we determine
those matters that were of most significance
in the audit of the Financial Statements of
the current period and are therefore the key
audit matters. We describe these matters in
our auditor’s report unless law or regulation
precludes public disclosure about the matter
or when, in extremely rare circumstances, we
Lars Baungaard
State Authorised Public Accountant
mne23331
Rasmus Friis Jørgensen
State Authorised Public Accountant
mne28705
180 / 183
Ørsted Annual report 2019Financial statements Management statement, auditor's reports and glossary
Contents
Limited Assurance Report on the
consolidated ESG statements
To the stakeholders of Ørsted A/S
Ørsted A/S engaged us to provide limited
assurance on the data described below and
set out in the consolidated environment, social
and governance statements for the period
1 January - 31 December 2019 (consolidated
ESG statements) as included on pages 158-165
in the Annual Report of Ørsted A/S for 2019.
engagement in relation to both the risk assess-
ment procedures, including an understanding of
internal control, and the procedures performed in
response to the assessed risks; consequently, the
level of assurance obtained in a limited assurance
engagement is substantially lower than the assur-
ance that would have been obtained had a rea-
sonable assurance engagement been performed.
Our conclusion
Based on the procedures we performed and
the evidence we obtained, nothing came to
our attention that causes us not to believe that
the consolidated ESG statements are free of
material misstatements and are prepared, in
all material respects, in accordance with the
accounting policies as stated on pages 158-165.
This conclusion is to be read in the context of
what we say in the remainder of our report.
What we are assuring
The scope of our work was limited to assurance
over data in the consolidated ESG statements
for the period 1 January - 31 December 2019 on
pages 158-165.
Professional standards applied and level
of assurance
We performed a limited assurance engagement
in accordance with the International Standard
on Assurance Engagements 3000 (revised)
‘Assurance Engagements other than Audits
and Reviews of Historical Financial Information’.
A limited assurance engagement is substantially
less in scope than a reasonable assurance
Our independence and quality control
We have complied with the Code of Ethics
for Professional Accountants issued by the
International Ethics Standards Board for
Accountants, which includes independence and
other ethical requirements founded on funda-
mental principles of integrity, objectivity, profes-
sional competence and due care, confidentiality
and professional behaviour. The firm applies
International Standard on Quality Control 1 and
accordingly maintains a comprehensive system
of quality control, including documented policies
and procedures regarding compliance with
ethical requirements, professional standards and
applicable legal and regulatory requirements.
Our work was carried out by an independent
multi -disciplinary team with experience in
sustain ability reporting and assurance.
Understanding reporting and measurement
methodologies
Data and information need to be read and
understood together with the accounting
policies on pages 158-165, which management
are solely responsible for selecting and applying.
The absence of a significant body of established
practice on which to draw to evaluate and
measure non- financial information allows for
different, but acceptable, measurement tech-
niques and can affect comparability between
entities and over time.
– the content of the consolidated ESG
statements for the period 1 January
- 31 December 2019.
Work performed
We are required to plan and perform our work
in order to consider the risk of material misstate-
ment of the data. In doing so and based on our
professional judgment, we:
– conducted interviews with Group functions
to assess consolidation processes, use
of company -wide systems and controls
performed at Group level;
– performed an assessment of materiality and
the selection of topics for the consolidated
ESG statements for the period 1 January -
31 December 2019;
– conducted analytical review of the data and
trend explanations submitted by all business
units for consolidation at Group level;
– evaluated the evidence obtained.
Management’s responsibilities
Management of Ørsted A/S is responsible for:
– designing, implementing and maintaining
internal control over information relevant to
the preparation of data in the consolidated
ESG statements on pages 158-165 that are
free from material misstatement, whether
due to fraud or error;
– establishing objective accounting policies for
preparing data;
Our responsibility
We are responsible for:
– planning and performing the engagement
to obtain limited assurance about whether
consolidated ESG statements for the period
1 January - 31 December 2019 on pages
158-165 are free from material misstatements
and are prepared, in all material respects, in
accordance with the accounting policies;
– forming an independent conclusion, based on
the procedures performed and the evidence
obtained
– reporting our conclusion to the stakeholders
of Ørsted A/S.
Hellerup, 30 January 2020
PricewaterhouseCoopers
Statsautoriseret Revisionspartnerselskab
CVR no. 3377 1231
Lars Baungaard
State Authorised Public Accountant
mne23331
– measuring and reporting data in the con-
solidated ESG statements based on the
accounting policies; and
Rasmus Friis Jørgensen
State Authorised Public Accountant
mne28705
181 / 183
Ørsted Annual report 2019Financial statements Management statement, auditor's reports and glossary
Contents
Glossary
Alternating Current (AC): The type of power trans-
ported to the utility grid and used in homes.
Availability: Availability is calculated as the ratio of
actual production to the possible production, which is
the sum of lost production and actual production in a
given period. The production-based availability (PBA)
is impacted by grid and wind turbine outages, which
are technical production losses. PBA is not impacted
by market requested shutdowns and wind farm
curtailments, as this is deemed not to be reflective of
site performance, but due to external factors.
Contracted capacity: Onshore capacity where we
have signed a PPA, but where we have not yet taken
final investment decision.
Levelised cost of electricity (LCoE): Average cost
measured as present value per megawatt hour (MWh)
generated power, covering costs for development and
construction as well as subsequent operation and
maintenance of the asset.
Direct Current (DC): The type of power generated by
our solar panels.
Avoided emissions: The amount other sources of
energy would have emitted, if we had not generated
energy from renewable sources
Decided (FID) and installed capacity: Installed gener-
ation capacity plus capacity for assets where a final
investment decision has been made.
Awarded capacity: Offshore capacity that we have
been awarded in auctions and tenders, but where
we have yet to sign a PPA and take final investment
decision.
Biomass conversion: When a CHP plant is converted
from using fossil fuels to using biomass, such as wood
pellets, wood chips and straw. After the conversion,
the CHP plant will typically be able to use biomass
along with the original fuel types.
Degree days: Number of degrees in absolute figures in
difference between the average temperature and the
official Danish indoor temperature of 17ºC.
EPC: Engineering, procurement and construction. The
part of our business which handles the construction
and installation of assets.
FTE: Employees (full-time equivalent). The number of
full-time employees during a fixed time period.
Blockage effect: The blockage effect arises from
the wind slowing down as it approaches the wind
turbines.
Generation capacity: Ørsted's ownership of the
asset. Offshore wind turbines are included when each
turbine has passed the 240-hour test.
Carbon emission allowances: Carbon emission
allowances subject to the European Union Emissions
Trading Scheme (EU ETS).
Green certificates: Certificate awarded to producers
of environment-friendly power as a supplement to the
market price of power in the given price area.
CfD: A contract for difference is a subsidy that guar-
antees the difference between the market reference
price and the exercise price won.
CHP plant: A combined heat and power (CHP) plant
generates both heat and power in the same process.
Green dark spread (GDS): Green dark spread
represents the contribution margin per MWh of power
generated at a coal-fired CHP plant with a given
efficiency. It is determined as the difference between
the market price of power and the cost of the coal (in-
cluding associated freight costs) and carbon emission
allowances used to generate the power.
Commissioning/COD: When our assets are in oper-
ation, and the legal liability has been transferred from
the supplier to us.
Hedging instruments: Financial and physical instru-
ments that can be used to guarantee a specific price
for the purchase or sale of, for example, commodities
and currency.
Installed capacity: Installed capacity where the as-
set has been completed and has passed a final test.
ROCs: Renewable obligation certificates issued
by Ofgem in the UK to operators of accredited
generating stations for the eligible renewable energy
they generate. Operators can trade ROCs with other
parties.
Investment tax credits (ITCs): Federal tax credit based
on qualifying renewable investment costs.
Stress: Method of measuring the market trading risk
of loss on a portfolio from day to day, calculated on a
fair-value basis.
Load factor: The ratio between the actual power
generation in a given period relative to the potential
generation, which is possible by continuously exploit-
ing the maximum capacity over the same period.
Tax equity: An arrangement where an investor obtains
rights to federal tax credits and other tax attributes in
exchange for a cash contribution.
Nord Pool: The Norwegian-based Nordic power
exchange which facilitates power trading in Norway,
Sweden, Finland and Denmark.
Thermal generation: Heat and power generated
through the combustion of fossil fuels, biomass or
waste.
Offshore transmission assets: Offshore transmission
assets connect offshore generation to the onshore
grid and typically include the offshore power trans-
mission infrastructure, an onshore substation and the
electrical equipment relating to the operation of the
substation.
O&M: Operation and maintenance. The part of our
business that operate and maintain our assets after
installation.
Partnership income: Income originating from our
partners' purchase of ownership interests in the
offshore wind farms. Includes both the gain in
connection with the farm-down and the subsequent
construction of the wind farm.
TRIR: In addition to lost-time injuries, the total record-
able injury rate (TRIR) also includes injuries where the
injured person is able to perform restricted work the
day after the accident as well as accidents where the
injured person has received medical treatment.
TTF: Title transfer facility, Dutch gas hub.
TWh: Terawatt hour. The amount of energy generated
in one hour with the effect of 1TW. 1TWh is equivalent
to 1,000GWh or 1,000,000MWh.
Value at risk (VaR): A financial term used for measur-
ing the loss that may occur in connection with a risk
position, assuming a certain volatility, and that the
position is held for a certain period of time.
Power purchase agreement (PPA): An agreement
between us and a buyer/seller to purchase/sell the
power we generate, which includes all commercial
terms (price, delivery, volumes etc).
Production tax credit (PTC): Federal tax credit based
on eligible power generation in the US.
Ramp-up: Generation until an asset has been com-
pleted and commissioned.
Wake effect: Wake within wind farms and between
neighbouring wind farms. There is a wake after each
wind turbine where the wind slows down. As the wind
flow continues, the wake spreads, and the wind speed
recovers.
Wind speed: Shows the wind speed for Ørsted's wind
farms. The wind measurements are weighted on the
basis of our generation capacity and can be compared
to a normal wind period.
182 / 183
Ørsted Annual report 2019Financial statements Ørsted A/S
Kraftværksvej 53
DK-7000 Fredericia
Tel.: +45 99 55 11 11
CVR no. 36213728
orsted.com
Group Communication
Martin Barlebo
Tel.: +45 99 55 95 52
Investor Relations
Allan Bødskov Andersen
Tel.: +45 99 55 79 96
Design and layout
e-Types with Ørsted Global Design
Publication
30 January 2020