Ørsted
Annual report
2020
Ørsted Annual report 2020
Contents
Our vision
Let’s create a
world that runs
entirely on
green energy
In 2021, we were ranked the most sustainable energy company
in the world in the Corporate Knights Global 100 Index
Ørsted Annual report 2020
Contents
Contents
Ørsted
Remuneration
report 2020
Ørsted
ESG performance
report 2020
A sustainable
build-out of
green energy
Sustainability report
2020
Other reports 2020
Remuneration
ESG performance
Sustainability
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 and governance
Parent company financial statements
Income statement
Balance sheet
Statement of changes in equity
Notes
Management’s statement,
auditor’s reports, and glossary
Statement by the Executive Board
and the Board of Directors
Independent auditor’s reports
Limited assurance report on the
consolidated ESG statements
Glossary
Overview
Chairman’s statement
CEO’s review
Performance highlights
Financial outlook
Financial outlook 2021
Financial estimates and policies
Our business
A catalyst for change
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, 2019-2020
Business units
Our business units
Offshore
Onshore
Markets & Bioenergy
Governance
Message from the Chairman
Corporate governance
Board of Directors
The Executive Committee
Risk and risk management
Shareholder information
4
5
7
12
14
15
17
18
19
22
23
29
30
32
33
35
38
39
43
44
46
47
48
49
54
57
61
62
63
65
69
70
74
76
77
78
79
80
81
82
168
169
170
172
175
176
176
177
178
185
186
187
191
192
3 / 193
Ørsted Annual report 2020
Contents
Overview
5 Chairman’s statement
7 CEO’s review
12 Performance highlights
Our newly-built operations hub in
Vlissingen in the Dutch province
of Zeeland is the base for our first
offshore wind farm in the Netherlands,
Borssele 1 & 2. As well as hiring staff
locally where possible, we work
closely with nearby schools, libraries,
and museums to inspire the next
generation of wind turbine technicians.
Ørsted Annual report 2020
Management’s review
Overview
Contents
Chairman’s statement
Enabling the world’s green
transformation
The decisions our global society takes today,
and in the next few years, determine whether
we pass a habitable planet on to future gen-
erations. Science recommends that we halve
global carbon emissions by 2030 to have a
chance of limiting the temperature rise to
1.5˚ C and mitigating the risk of irreversible
tipping points in our global ecosystems.
In 2020, we saw progress. Many governments
raised their carbon emission reduction targets
and further reinforced their build-out plans
for renewable energy production capacity.
Several large companies also set targets for
their decarbonisation and acted firmly to
make their business models more sustainable.
Targets and actions by both governments and
corporations bode well for our planet, but
to limit the increase in temperature to 1.5 ˚ C,
even more decisive action is needed.
Our target is to become a fully carbon-neutral
company by 2025. In 2020, we continued
the build-out of our green power generation
capacity both onshore and offshore. We also
initiated a range of renewable hydrogen
projects. Renewable hydrogen will enable
sectors like cement, ammonia, heavy road
transport, aviation, and shipping to transition
to fossil-free energy. Like it was for offshore
wind, innovation and industrialisation in
renewable hydrogen are required to bring
down costs, making the new green fuels
competitive.
This year, we divested our downstream retail
customer and power distribution businesses,
which marks another big step in the renew-
able energy transformation. Our vision is a
world that runs entirely on green energy.
Ørsted wants to partner with countries and
companies, helping them to leave fossil fuels
behind, and in 2020, we saw a breakthrough
for comprehensive long-term green power
purchase agreements.
The COVID-19 pandemic affected everybody
in 2020. We are a safety-first company, and
during the pandemic, our priority has been the
health and well-being of our employees, their
families, and the communities which we are
a part of. Thanks to our careful and talented
staff, Ørsted’s operations have remained
stable, and our development and construction
projects have moved forward according to
plan during the pandemic. All employees have
adapted impressively to new routines and
pushed through with projects, despite sudden
and unforeseen obstacles. We will continue
to closely follow the situation in the markets
where we operate and will continue adhering
to national guidelines and regulations to help
minimise the spread of the pandemic and
keep our employees and partners safe.
Our company is stronger than ever and – even
more important – has developed a promising
platform for continued growth.
Even in this time of significantly increased
global uncertainty, Ørsted’s business model
has demonstrated its resilience. We were able
to raise our financial guidance in March and
maintained it throughout the year. EBITDA for
the year amounted to DKK 18.1 billion, thereby
exceeding our expectations and resulting in
a ROCE of 10 %. Profit for the year amounted
to DKK 16.7 billion, significantly impacted
by the gain from divestment of our power
distribution activities. The Board of Directors
recommends paying a dividend of DKK 11.5
per share, corresponding to DKK 4.8 billion.
On behalf of the Board of Directors, I would
like to thank the employees and management
of Ørsted for an outstanding effort during a
period of global uncertainty and for keeping
us on track towards creating a world that runs
entirely on green energy.
I would also like to express special thanks to
former CEO Henrik Poulsen for his exemplary
leadership in the past eight years during
which Ørsted was transformed completely
from a financially challenged, regional,
fossil-based energy company to a highly
profitable global leader in renewable energy.
With Mads Nipper on board as our new CEO
from this January, we remain as committed as
ever to staying at the forefront of the global
energy transformation and to offering cost-
effective green energy solutions and enabling
governments and companies to power the
world with green energy.
Thomas Thune Andersen
Chairman
5 / 193
Ørsted Annual report 2020
Contents
“ We are very satisfied with our strategic
progress and results in 2020, and I am
grateful for the support and professionalism
of our customers and partners. I am keenly
aware that only together, we can do great
things and live up to our high ambitions.
We maintain a leading position in a global
high-growth market and have built a strong
and financially sustainable pipeline,
laying the path for future growth.
Mads Nipper
CEO
Ørsted Annual report 2020
Management’s review
Overview
Contents
CEO’s review
2020 showed very strong results, both operationally and
financially. Although the world is in the midst of a global
pandemic crisis, our business model has proved resilient.
2020 also showed great strategic progress.
Highlights 2020
Financials
Operating profit (EBITDA) increased
by 4 % to DKK 18.1 billion.
EBITDA from offshore and onshore
wind farms in operation increased
by 14 % to DKK 16.9 billion.
Financial results
In 2020, our operating profit (EBITDA)
amounted to DKK 18.1 billion, a 4 % increase
compared to last year.
Earnings from our offshore and onshore wind
farms in operation increased by 14 %. This was
driven by ramp-up of green power generation
from Hornsea 1, Borssele 1 & 2, Lockett, Sage
Draw, Plum Creek, and Willow Creek and
receipt of CfDs of another 400 MW of
Hornsea 1 from April. Futhermore, we had
higher wind speeds in 2020.
These positive effects were partly offset
by lower earnings from trading related to
hedging of our power exposures, which gener-
ated very high earnings in 2019, and adverse
COVID-19 related impacts. The latter mainly
manifested itself in the UK power prices due
to a lower demand for electricity. This led to
higher balancing tariffs (BSUoS) from National
Grid and lower ROC recycle prices. Further-
more, we saw hours with negative prices in
the UK from April to July.
We are on track to meet our target of an
average yearly increase in EBITDA from
offshore and onshore wind farms and solar
farms in operation of 20 % from 2017 to 2023.
ROCE was 10 %.
Operations
Stable operations throughout the year
despite the COVID-19 pandemic.
Green share of heat and power genera-
tion increased from 86 % to 90 %.
Borssele 1 & 2, our first Dutch offshore
wind farm, was commissioned.
The onshore wind farms Sage Draw,
Plum Creek, and Willow Creek were
successfully commissioned.
Our Renescience plant in the UK was
commissioned.
Business development
Signed agreements to farm-down 50 %
of the offshore wind farms Greater
Changhua 1 and 25 % of Ocean Wind 1.
The divestment of our Danish power distribution,
residential customer, and city light businesses
resulted in proceeds of DKK 20.5 billion with a
gain of DKK 10.9 billion which will be deployed
into our global renewable energy build-out plan.
Our green share of heat and power generation
continued to increase and reached a new high
of 90 %.
Return on capital employed (ROCE) was 10 %
for 2020, in line with our target.
COVID-19
Since the outbreak of COVID-19, our Corporate
Crisis Management Organisation (CCMO) has
met regularly, focusing on the health and
safety of our employees and on ensuring
business continuity. During 2020, we had 146
confirmed infected colleagues and fortunately
no casualties from COVID-19. We continue to
do our utmost to keep our colleagues safe
across our locations. Our asset base has been
fully operational, and we maintained normal
availability rates at our offshore and onshore
Signed corporate power purchase
agreements (CPPAs) with TSMC for
our offshore wind project Greater
Changhua 2b & 4 in Taiwan and with
Amazon for Borkum Riffgrund 3 in
Germany. The first being the largest-
ever renewable energy CPPA.
We took FID on the onshore wind farm
Western Trail and the Old 300 Solar
Center in Texas.
We acquired and took FID on the solar
project Muscle Shoals in Alabama and
the onshore wind project Haystack in
Nebraska.
We secured funding for three renewable
hydrogen projects, one in the UK, one in
Germany, and a joint project consortium
in the EU. We also entered into three
additional renewable hydrogen partner-
ships in the Netherlands, Denmark, and
Germany, respectively.
We divested the Danish power distribu-
tion, residential customer, and city light
businesses which resulted in a gain of
DKK 10.9 billion.
The divestment of our LNG business was
completed, and an agreement to divest
our B2B business in the UK was signed.
7 / 193
Ørsted Annual report 2020
Management’s review
Overview
Contents
wind farms and CHP plants throughout 2020.
Construction of our projects largely pro-
gressed according to plan, both in Europe,
Asia Pacific, and the US. The construction
project most affected by COVID-19 was the
offshore wind farm Hornsea 2, due to delays
in the offshore topside construction at a
shipyard in Singapore which was temporarily
closed. However, we do not expect the delay
to affect the commissioning date.
Offshore
2020 was a good year for our offshore
business with many significant milestones
and achievements, although with some
headwind in the US.
In December, we commissioned the 752 MW
Dutch wind farm Borssele 1 & 2 on schedule
and within budget. The wind farm deploys 94
Siemens Gamesa 8 MW wind turbines, making
it the largest-ever built in the Netherlands, and
will supply renewable energy to 1 million house-
holds. During the construction of Borssele 1 & 2,
we passed a significant milestone by installing
Ørsted’s offshore wind turbine number 1,500.
We are installing foundations at our 1,386 MW
offshore wind project Hornsea 2 in the UK.
At our 900 MW offshore wind project Greater
Changhua 1 & 2a in Taiwan, we are preparing
for installation of foundations which will
commence in the first quarter of 2021. Both
wind farms are expected to be commissioned
in 2022 and will become the largest offshore
wind farms in their respective regions.
In North America, the 12 MW Coastal Virginia
demonstration project, which we have
constructed for Dominion Energy as an EPC
contractor, was commissioned. The offshore
wind farm is the first-ever to receive federal
permits and be installed in US federal waters.
In December, we signed an agreement to
farm down 50 % of the 605 MW offshore wind
farm Greater Changhua 1 to CDPQ, a Canadian
pension fund, and Cathay PE, a Taiwanese
private equity fund. The farm-down is the
largest-ever renewable energy M&A
transaction in Taiwan and underpins the
attractiveness of our offshore wind assets
in Asia Pacific.
We selected Siemens Gamesa as preferred
wind turbine supplier for our 900 MW Borkum
Riffgrund 3 and 242 MW Gode Wind 3 projects.
Subject to final investment decision, both
projects will deploy 11 MW wind turbines with
200-metre rotors. In addition, we signed a
10-year corporate power purchase agreement
(CPPA) with Amazon to buy 250 MW of the
output from Borkum Riffgrund 3. This is our
first offshore wind PPA with a global tech
company and the largest offshore wind
CPPA in Europe.
Events in 2020
April – June
July
August
September
October
November
December
Onshore
Sage Draw, Texas,
commissioned
(338 MW)
Onshore
Plum Creek,
Nebraska,
commissioned
(230 MW)
Onshore
Muscle Shoals,
Alabama,
acquired and
FID’ed (227 MWac),
expected COD
in 2021
Offshore
CPPA with Taiwan-
based TSMC to
offtake full
generation from
Greater Changhua
2b & 4 (920 MW)
Markets &
Bioenergy
Divestment of
Danish power distri-
bution, residential
customer, and city
light businesses
to SEAS-NVE
completed
Renewable
hydrogen
Funding secured
together with part-
ners for renewable
hydrogen project
Westküste 100 in
Germany
Onshore
Willow Creek,
South Dakota,
commissioned
(103 MW)
Onshore
Western Trail,
Texas, FID’ed
(367 MW),
expected COD
in 2021
Onshore
Haystack, Nebraska,
acquired and FID’ed
(298 MW), expected
COD in 2021
Markets &
Bioenergy
Renescience
plant, the UK,
commissioned
Renewable
hydrogen
Collaboration with
Yara on developing
project to replace
fossil hydrogen with
renewable hydrogen
in ammonia
production
Onshore
Old 300, Texas,
FiD’ed (430 MWac),
expected COD
in 2022
Renewable
hydrogen
Agreement with
bp to develop a
potential large-
scale renewable
hydrogen project
in Germany
Markets &
Bioenergy
Agreement to
balance 40 % of the
power generated
from Dogger Bank
Offshore
Borssele 1 & 2,
the Netherlands,
commissioned
(752 MW)
Offshore
Farm-down of 50 %
of Greater
Changhua 1 to
CDPQ and Cathay
PE signed
Offshore
Agreement with
PSEG signed to sell
25 % of the offshore
wind development
project Ocean
Wind 1
Offshore
CPPA with Amazon
to buy the output
from Borkum
Riffgrund 3
(250 MW) signed
Markets &
Bioenergy
Divestment of
our LNG business
to Glencore
Ørsted
Appeal against
decision from
the Danish Tax
Agency on Danish
taxation of two
offshore wind farms
in the UK
8 / 193
Ørsted Annual report 2020
Management’s review
Overview
Contents
“In December, we were granted
consent to move into the final
development phase of the
offshore wind farm Hornsea 3.
In July, we signed a CPPA with Taiwan-based
TSMC, the world’s largest semiconductor
foundry. TSMC will offtake the full generation
from our 920 MW offshore wind farm Greater
Changhua 2b & 4, making it the largest-ever
renewable energy CPPA. The 20-year fixed-
price contract period will start once the wind
farm reaches commercial operation, expect-
edly in 2025 or 2026, subject to grid availabili-
ty and Ørsted’s final investment decision.
the offshore wind farm Hornsea 3 by the UK
Secretary of State for the Department for
Business, Energy & Industrial Strategy. The
offshore wind farm has a potential capacity
of more than 2.4 GW and is adjacent to our
offshore wind farms Hornsea 1 and Hornsea 2,
off the East Coast of the UK. With the consent
granted, the wind farm will be able to enter
the next UK auction round for a contract for
difference (CfD), expectedly in 2021.
In December, we entered into an agreement
with New Jersey’s Public Service Enterprise
Group (PSEG) to sell a 25 % ownership interest
in our 1.1 GW offshore wind development
project Ocean Wind 1. The project is the first
large-scale offshore wind farm in New Jersey.
In March, we entered into an agreement with
TEPCO to establish a joint venture company
for offshore wind in Japan, with the intention
of working towards a joint bid in the first
Japanese auction, now expectedly this year.
In December, we were granted consent to
move into the final development phase of
Our pipeline of US offshore development
projects is moving forward, but we are still
waiting for the US Bureau of Ocean Energy
Management (BOEM) to decide on the
preferred wind farm layout for the build-
out of offshore wind for our north-eastern
projects in our New England lease areas.
Furthermore, while we are still waiting for
clarity concerning the federal permitting
process for our projects, there are positive
signs that the bottleneck will be resolved
imminently. We had expected to receive
the ‘notices of intent’ (NOIs) from BOEM for
our advanced-stage development projects
following the release and public comment
process regarding the Vineyard Wind Supple-
mental Environmental Impact Study in 2020.
While that did not happen, we are starting
to see some promising signs of movement.
The timely issuance of the draft ‘environmental
impact statement’ (EIS) on 4 January 2021 for
our South Fork project bodes well. So does
the announcement of the ‘initiation of action
notice’ (IAN) (a prelude to NOIs issuance) for
the Ocean Wind 1 project. All signs from the
incoming Joe Biden Administration indicate
they will support a timely, predictable permit-
ting regime.
Revolution Wind, Ocean Wind 1, Skipjack
Wind, and Sunrise Wind will likely be delayed
beyond the previously expected 2023 and
2024 construction years. We have flexibility in
the timeline for all four projects, and we have
been able to make good progress on other
project milestones in the meantime. However,
until there is a clear timeline from BOEM, we
cannot solidify our construction schedules.
With regards to South Fork Wind, we remain
comfortable with our previously communicated
timeline with COD in late 2023.
Despite the permitting delays, we remain
confident that we can deliver our US project
portfolio with satisfactory value creation,
which is supported by the commitment to
rapid clean energy deployment from the Joe
Biden Administration, the US Treasury’s recent
announcement of a 10-year continuity safe
harbour for offshore wind in addition to a new
30 % ITC level for projects starting construc-
tion in 2017-2025, which will help expand tax
credit eligibility. We continue to see solid long-
term growth and value creation potential
in US offshore wind.
In 2020, we made progress towards a greener
future based on renewable hydrogen. We
continuously pursue opportunities within
industrial-scale production of renewable
hydrogen, and during 2020 and early 2021,
we have secured funding for three projects,
one in the UK, one in Germany, and a joint
consortium in the EU. We also entered into an
additional three partnerships, one in Germany,
one in the Netherlands, and one in Denmark.
Our most recent hydrogen partnership was
agreed with British energy company bp
in November and will comprise a 50 MW
electrolyser plant at bp’s Lingen Refinery in
Germany. The plant is expected to be opera-
tional in 2024 and will replace approx. 20 % of
the fuel-based hydrogen from the refinery. The
project is the first stage towards a long-term
ambition to build a capacity of more than
500 MW of renewable hydrogen at Lingen.
This would replace the entire production of
fuel-based hydrogen at the refinery.
Furthermore, we joined forces with Yara,
the world’s leading fertiliser company, to
develop a pioneering project aiming at
replacing fossil hydrogen with renewable
hydrogen in the production of ammonia
with the potential to abate more than
100,000 tonnes of CO2 per year.
Onshore
In 2020, we saw strong traction in our Onshore
business, underpinned by the commissioning
of three new wind farms, the acquisitions of
two late-stage projects, and the decision to
9 / 193
Ørsted Annual report 2020
Management’s review
Overview
Contents
construct another onshore wind farm and a
solar farm.
During the year, we successfully commissioned
the three US onshore wind farms Sage Draw,
Plum Creek, and Willow Creek, located in Texas,
Nebraska, and South Dakota, respectively.
In July, we acquired the 227 MWac solar project
Muscle Shoals in Alabama, US. The project is
expected to be commissioned in Q3 this year
and will become the largest solar energy
asset in the south-eastern US. The project is
eligible for 30 % ITC and has a fully contracted
20-year utility PPA. The project further diver-
sifies the geographic footprint of our asset
base by establishing a foothold in the rapidly
growing south-eastern solar market.
In September, we took final investment deci-
sion on constructing the onshore wind farm
Western Trail in Texas. This greenfield project
has a capacity of 367 MW and is eligible for
100 % PTC when commissioned, expectedly
during Q3 this year.
In October, we acquired the late-stage 298 MW
onshore development project Haystack.
The wind project is located very close to our
onshore wind farm Plum Creek in Nebraska,
also residing in the South-West Power Pool
(SPP) area. With the acquisition, we further
expanded our footprint into this market which
will play an important part in our growth in
North America and diversify our portfolio.
In November, we also took final investment
decision on constructing the Old 300 Solar
Center which is a 430 MWac solar project also
located in Texas with 30 % ITC eligibility. We
expect Old 300 to be commissioned during
Q2 2022.
some of our strategic long-term partners and
customers to whom we deliver risk manage-
ment products. We expect the transaction to
close in Q1 2021.
In addition, we are currently constructing
the combined solar (420 MWac) and storage
(40 MWac) project Permian Energy Center in
Texas, US. The project is progressing according
to plan, and we expect Permian to be commis-
sioned by mid-2021 with 30 % ITC eligibility.
With the completion of Sage Draw, Plum
Creek, and Willow Creek and the addition of
Muscle Shoals, Western Trail, Haystack, and
Old 300 Solar Center, we now have 3.4 GW
of combined onshore wind and solar PV in
operation or under construction, and we
remain very satisfied with the expansion of
our onshore business.
Markets & Bioenergy
During 2020, we continued streamlining our
Markets & Bioenergy business.
In August, we completed the divestment
of our Danish power distribution, residential
customer, and city light businesses to SEAS-
NVE (now Andel). The divestment marks an
important strategic milestone for Ørsted,
and the proceeds will be deployed into our
global renewable energy build-out plan.
In December, we completed the divestment
of our LNG activities to Glencore, and in
September, we signed an agreement to divest
the vast majority of our UK B2B customer
portfolio to Total Gas & Power. We will keep
In November, we signed a 15-year route-to-
market agreement with SSE Renewables and
Equinor to balance power generation from their
offshore wind farm Dogger Bank in the UK.
The contract is the largest balancing agreement
won in a competitive tender process in the UK
market. Under the agreement, Ørsted will be
responsible for trading and balancing 40 % of
the 960 MW generated from the first two phases
of the wind farm, when completed in 2026.
The agreement will add further scale to our
portfolio and underlines our position as a leading
green energy trading company in the UK.
In mid-October, the Renescience waste-
recycling plant in Northwich, the UK, was
successfully commissioned after passing
the final performance test. With the commis-
sioning of Renescience Northwich, we reached
another important milestone. We will continue
to monitor the plant’s performance, while
exploring the broader commercial potential
of this recycling technology.
In March, the Copenhagen Maritime & Com-
mercial Court decided to close the action for
damages, ruling in Ørsted’s favour. The action
related to a claimed abuse of a dominant po-
sition on the market for wholesale of physical
electricity in western Denmark from 2003 to
2006. However, the action will continue in
2021 as the claimants have decided to appeal
the case to the Danish Western High Court.
Borssele 1 & 2, near Vlissingen,
the Netherlands.
10 / 193
Ørsted Annual report 2020
Management’s review
Overview
Contents
Other significant events
In 2018, seven bearers of the Ørsted name
filed a subpoena to prevent our use of the
name. In May 2019, the Copenhagen Maritime
& Commercial Court ruled in favour of Ørsted.
Following the ruling, the plaintiffs decided
to appeal the case. In November 2020, the
Danish Supreme Court also ruled in favour of
Ørsted, and the case is now closed.
We are very pleased that the ruling of the
Supreme Court upholds our right to use
the Ørsted name. It was chosen as a tribute
to Hans Christian Ørsted, one of the greatest
Danish scientists of all time. He discovered
electromagnetism 200 years ago and thus
laid the foundation for how we produce
electricity.
In December, we received an administrative
decision from the Danish Tax Agency requiring
Danish taxation of our British offshore wind
farms Walney Extension and Hornsea 1. The
claim amounted to DKK 5.1 billion, plus inter-
est, in addition to the taxes we have already
paid in Denmark. According to the decision,
Ørsted is to be taxed in Denmark on the full
future value of the two offshore wind farms,
despite the fact that they are developed,
owned, and operated by British subsidiaries
of the Ørsted group and are taxed in the UK.
We disagree with the decision which in our
view is based on a misconception of the risks
and value creation in our business model
for developing, constructing, and operating
offshore wind farms and have appealed it to
the Danish Tax Appeals Agency. Furthermore,
we have taken steps to ensure that the Danish
and UK tax authorities initiate negotiations
to avoid Ørsted being subjected to double
taxation, if necessary, by referring the case to
an independent arbitration panel.
under the leadership of Martin Neubert who
will become CCO, Deputy CEO, and member
of the Executive Board.
Employees
Our talented people remain the most impor-
tant assets in Ørsted, and on behalf of the
Executive Committee, I would like to take this
opportunity to acknowledge and thank all our
employees for the great job they have been
doing throughout the year, including how they
have all adapted to the new challenges in the
wake of the COVID-19 pandemic.
It is very important for us to attract, develop,
and retain the best talent, and we strongly
believe in the value of a diverse workforce.
We aspire to create an environment where
everyone, whatever their personal back-
ground, can thrive, perform, and grow.
Therefore, we were also pleased to see that
the 2020 employee satisfaction survey,
People Matter, showed a record-high satis-
faction and motivation score of 78 out of 100,
placing Ørsted in the top 10 % of our external
benchmark.
New corporate structure
On 28 January, we announced a change to our
organisational structure which will take effect
from 4 February.
The change entails moving from a business
unit structure to a more functional structure
where the commercially focused functions
from the current business units Offshore and
Markets & Bioenergy will be brought together
The operationally focused functions will
be brought together under a new COO as
Anders Lindberg has decided to take on a new
position outside Ørsted. The COO will report
to Mads Nipper.
As a consequence of the new corporate struc-
ture, Morten H. Buchgreitz has decided to leave
the company. Both Anders and Morten have
done a tremendous job during their tenure in
Ørsted, and we owe them great gratitude.
Onshore will remain a separate business unit.
The Onshore business differs from the rest
of Ørsted when it comes to technological
maturity and business model, and we believe
that Onshore will be best positioned to realise
its full potential as a separate business unit.
We are making these changes in our
organisation to establish an even stronger
customer and market focus, to further
strengthen the focus on EPC and operations,
and to support the scaling of our organisation
as we continue our strong growth trajectory
in the years to come.
Externally, we will continue to report Offshore
and Onshore financials as we do today.
This means that Offshore will continue to
include our hydrogen activities. Bioenergy,
our legacy gas activities, and Renescience
will be reported in a separate segment called
Bioenergy & Other.
Concluding remarks from the new CEO
We are very satisfied with our strategic pro-
gress and results in 2020, and I am grateful for
the support and professionalism of our custom-
ers and partners. I am keenly aware that only
together, we can do great things and live up
to our high ambitions. We maintain a leading
position in a global high-growth market and
have built a strong and financially sustainable
pipeline, laying the path for future growth.
I am proud of and humbled by the Board of
Directors’ trust in me to succeed Henrik
Poulsen as CEO of Ørsted. Creating a world
that runs entirely on green energy is a vision
close to my heart. I also want to thank the
Executive Committee and all Ørsted
employees for a warm welcome.
I am deeply impressed and inspired by the
passion and motivation I have encountered
throughout the entire company, and it makes
me excited for what we can achieve. I am con-
fident that Ørsted can stay a globally leading
renewable energy producer, both offshore and
onshore. I am convinced that Ørsted, as the
world’s most sustainable energy company, has
the potential to be a global catalyst for sys-
temic change, accelerating the green energy
transition and how companies operate.
Mads Nipper
Group President and CEO
11 / 193
Ørsted Annual report 2020
Management’s review
Overview
Contents
Performance highlights
Profits and returns
Operating profit (EBITDA)
DKKbn
New partnerships
30.0
Follow-up on outlook
announced for 2020
Return on capital employed (ROCE)
%
32
EBITDA, excl. new partnerships,
realised versus guidance, DKKbn
16.7
New partnerships
30 January
Profit for the year (continuing operations)
DKKbn
New partnerships
RBC divestment
19.5
18.1
17.5
18.1
2018 2019 2020
16.7
6.1
2018
2019 2020
10
11
10
4 March
2018
2019 2020
Realised
In 2020, we maintained stable operations despite the
pandemic and achieved an underlying EBITDA exceeding
our expectations at the beginning of the year. This was
mainly driven by an increase in generation from our
offshore and onshore wind farms.
Profit for the year was DKK 16.7 billion. The significant
increase compared to 2019 was due to the divestment
of our Danish power distribution, residential customer,
and city light businesses (RBC), resulting in a gain of
DKK 10.9 billion.
ROCE was 10 % for the year, which was in line with
our target of an average ROCE of approx. 10 % for
the Group in the period 2019-2025. In 2018, ROCE
was significantly impacted by the 50 % farm-down
of Hornsea 1.
Cash flow and balance sheet
Gross investments
DKKbn
27.0
24.5
23.3
Interest-bearing net debt
DKKbn
17.2
Credit metric (FFO/adjusted net debt1)
%
69
12.3
48
31
27.0
2018
2019
2020
12.3
-2.2
2018
2019
2020
48
2018 2019 2020
The gross investments reached DKK 27.0 billion,
a record-high level, driven by an increase in our
construction activity, both offshore and onshore.
Gross investments are slightly below our guidance,
mainly due to timing across years.
Our net debt decreased to DKK 12.3 billion, mainly
due to the divestment of our Danish power distribu-
tion, residential customer, and city light businesses,
resulting in proceeds of DKK 20.5 billion.
The credit metric ‘funds from operations’ (FFO)
relative to adjusted net debt amounted to 48 %
in 2020, well above our target of around 30 %.
Investments, realised versus guidance
DKKbn
30 January
28 August
Realised
30-32
28-30
27.0
In the outlook announced in our annual report
for 2019, we expected EBITDA excluding new
partnerships of DKK 15-16 billion and gross
investments of DKK 30-32 billion for 2020.
With EBITDA excluding new partnerships of
DKK 18.1 billion, we exeeded our expectations.
Gross investments amounted to DKK 27.0 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.
12 / 193
15-16
16-17
18.1
Ørsted Annual report 2020
Management’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, scopes 1 and 2
Million tonnes, CO2e
86
90
75
90
2018 2019 2020
The green share of our heat and power generation
continued to increase to a new high of 90 %, following
continued ramp-up of our offshore and onshore wind
capacity and lower heat and power generation based
on fossil fuels.
11.3
11.3
9.9
8.3
2018
2019 2020
13.1
13.1
11.3
8.1
2018
2019 2020
Installed green capacity increased by 14 % to 11.3 GW
in 2020 due to the commissioning of the offshore
wind farm Borssele 1 & 2 and the three onshore wind
farms Sage Draw, Plum Creek, and Willow Creek.
Avoided emissions from our green heat and power
generation relative to fossil-fuelled generation
increased by 16 %, mainly due to increased wind-
based power generation.
Greenhouse gas emissions, scope 3
Million tonnes, CO2e
Safety
Total recordable injury rate (TRIR)
Employee satisfaction
Index 1-100
Social
36.2
34.6
25.3
1.9
3.5
1.9
1.9
2018
2019 2020
The scopes 1 and 2 greenhouse gas emissions were
at the same level as in 2019 despite lower fossil-
fuelled heat and power generation. This was due to
an increase from ancillary services from our coal-
fuelled units as we are legally obliged to deliver
these services with the lowest marginal costs.
Governance
Board of Directors and the Executive
Committee
Nationality and gender diversity
25.3
2018
2019
2020
3.6
4.7
4.9
3.6
2018
2019
2020
78
76
77
78
9
6
6
7
11
4
6
7
9
4
9
4
2018 2019 2020
2018
2019
2020
Our scope 3 greenhouse gas emissions were reduced
by 27 %, mainly due to reduced sales of natural gas.
We continue to have a strong focus on the safety
and well-being of our employees. We are progress-
ing satisfactorily towards our target of 2.9 by 2025.
The 2020 employee satisfaction survey, People
Matter, showed a record-high satisfaction and
motivation score of 78.
We continue to have strong focus on increasing
diversity at all management levels.
Danish
Non-Danish
Male
Female
13 / 193
Ørsted Annual report 2020
Contents
Contents
Financial outlook
15 Financial outlook 2021
17 Financial estimates and policies
We made history in North America
in 2020 when we built the first-ever
offshore wind farm in US federal
waters as EPC contractor. The two
wind turbines form the offshore wind
farm Coastal Virginia Wind, a pilot
project located 43 miles off the coast
of Virginia Beach. The experience
gained here paves the way for
an expansion in the offshore wind
industry in the US.
Ørsted Annual report 2020
Management’s review
Financial outlook
Contents
Financial outlook 2021
Group EBITDA guidance
As in previous years, our EBITDA guidance
does not include earnings from new partner-
ship agreements as it is difficult to predict the
exact timing of potential farm-downs as well
as the distribution of income between years
if the partnership includes a construction
agreement.
In terms of new partnerships in 2021, we
expect to close the 50 % farm-down of
Greater Changhua 1 following the agreement
announced in December 2020. Furthermore,
we plan to farm-down a 50 % share of
Borssele 1 & 2 around summer. Finally, we will
explore the possibility of a farm-down of our
solar PV portfolio following the commissioning
of Muscle Shoals in Q3. While we have not
included any gains from these farm-downs
in our guidance, we have assumed a derived
reduction in site earnings.
We had no earnings from new partner-
ship agreements in 2020, while EBITDA
from existing partnerships amounted to
DKK 1.6 billion. In 2021, EBITDA from existing
partnerships is expected to be close to zero.
In 2020, we divested our Danish power
distribution, residential customer, and city
light businesses. These contributed with
DKK 0.9 billion to our EBITDA in 2020.
Operating profit (EBITDA), excluding new
partnership agreements, is expected to be
DKK 15-16 billion in 2021. The outlook is based
on the expected development in the business
units compared to 2020, as described below.
Offshore (excluding new partnership
agreements) – lower
Earnings in Offshore (excluding new partner-
ship agreements) are expected to be lower
EBITDA development 2020-2021
DKKbn
18.1
-0.9
-1.6
15.6
1.1
15-16
2020
realised
(business
performance)
Danish power
distribution,
residential
customer,
and city light
businesses
Existing
Offshore
partnerships
2020
comparable
(business
performance)
Offshore
Onshore
Markets &
Bioenergy
IFRS 9
one-off
effects
2021
guidance
(IFRS)
Excl. IFRS 9 one-off effects
Outlook 2021, DKKbn
EBITDA
Offshore
Onshore
Markets & Bioenergy
Gross investments
2020 realised1
2020 realised
excl. RBC1 2
2021
guidance3
18.1
14.8
1.1
2.1
27.0
17.2
14.8
1.1
1.2
15-16
Lower
Higher
Lower
32-34
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 and lower indicates the
direction of the business unit’s earnings relative to the results for 2020.
1 Business performance principle.
2 Excluding the Danish power distribution, residential customer, and city light businesses (RBC).
3 Excluding new partnerships, relative to 2020, excluding RBC.
than in 2020. Earnings are also expected to be
lower than in 2020 adjusted for the net effect
of the non-repetition of earnings from existing
partnerships in 2020 (DKK 1.6 billion) and the
positive effect (DKK 1.1 billion) of ceasing to
report according to the business performance
principle in 2021 (see page 16). We do not
expect any further adverse COVID-19-related
impacts on earnings relative to 2020.
The positive impact on operational earnings
in 2021 driven by the last 400 MW of Hornsea 1
receiving CfDs from April and full-year effects
from Borssele 1 & 2 net of the reduction in site
earnings from the assumed farm-down will be
more than offset by a number of adverse effects:
– In 2020, earnings from sites were
positively affected by high winds speeds
where the year ended at 9.7 m/s, above
a normal level of 9.3 m/s and above our
expectations for 2021 of 9.3 m/s.
– TNUoS tariffs are expected to increase
following the divestment
of the offshore transmission assets
at Walney Extension in mid-2020
and Hornsea 1, expectedly in H1 2021.
– Earnings from Horns Rev 2 will de-
crease as the subsidy period ended
in October 2020.
– We are in the construction phase of
the two large offshore wind farms
Hornsea 2 and Greater Changhua 1 & 2a,
both of which are expected to be
commissioned in 2022. In 2021, we will
incur OPEX on these sites as they are
preparing for operations, but we do
not expect any ramp-up generation.
15 / 193
Ørsted Annual report 2020
Management’s review
Financial outlook
Contents
Expensed project development costs amount-
ed to DKK 1.7 billion in 2020. For 2021, we
expect expensed project development costs
to be approx. DKK 2.0 billion as a natural
consequence of our continued expansion of
our footprint.
Onshore – higher
Earnings from onshore wind and solar farms
in operation are expected to increase from
ramp-up of generation at Sage Draw, Plum
Creek, and Willow Creek (commissioned
during 2020) and due to expected commis-
sioning of the new wind farms Western Trail
and Haystack, and the solar farms Permian
Energy Center and Muscle Shoals during 2021.
The latter being net of the assumed reduction
in site earnings from the possible farm-down
of our solar PV portfolio.
The increased operational earnings will be
partly offset by higher costs related to the
strategic expansion of the business and an
adverse year-on-year impact from recognition
of derivatives.
Markets & Bioenergy – lower
Our directional guidance for Markets &
Bioenergy for 2021 is based on earnings in
2020, excluding the divested Danish power
distribution, residential customer, and city
light businesses. These contributed with
DKK 0.9 billion to our EBITDA in 2020.
Earnings in ‘Gas Markets & Infrastructure’
are expected to be lower than 2020, mainly
because the positive effects from revaluation
of gas at storage caused by the increasing gas
prices, especially during Q4 2020, is expected
to partly reverse in 2021.
Earnings from our CHP plants (including
ancillary services) are expected to be in line
with 2020.
Gross investments
Gross investments for 2021 are expected to
amount to DKK 32-34 billion. The outlook
reflects a high level of activity in Offshore
(Hornsea 2, Greater Changhua 1 & 2a, and
our US activities), and Onshore (Western Trail,
Haystack, Permian Energy Center, and Old
300 Solar Center).
At the end of 2020, the value of our business
performance hedges deferred to a future
period amounted to DKK -2.7 billion. This
net loss has already been recognised in the
income statement under IFRS, as we have
not previously applied hedge accounting for
these. Consequently, for the period 2021-2025,
EBITDA (according to IFRS) will be higher with
a similar amount compared to what the busi-
ness performance EBITDA would have been in
the same period if we had continued to report
based on this principle.
In addition to gross investments, significant
funds are temporarily tied up in the construction
of transmission assets for offshore 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 2020, funds tied up in work
in progress totalled DKK 9.8 billion. During H1
2021, we expect to divest the Hornsea 1 offshore
transmission asset, but we still expect to see a
high level of funds tied up in work in progress in
2021 as a result of the continued construction of
the transmission assets at Hornsea 2. We expect
to divest the Hornsea 2 offshore transmission
assets in 2023.
For 2021, EBITDA according to IFRS is expected
to be DKK 1.1 billion higher than what we
would have expected if we had kept reporting
according to the business performance princi-
ple. The main part of the amount is related to
site EBITDA in Offshore. This effect is included
in our directional guidance described above.
In the management’s review, part of our
interim and annual reports in 2021, we will use
business performance as comparable numbers
for 2020 for a better like-for-like comparison,
while our consolidated financial statements
will be reported after IFRS only.
Ceasing the use of business
performance in 2021
With the implementation of IFRS 9 in 2018, it
has become significantly easier to apply IFRS
hedge accounting to our commodity hedges.
We have concluded that IFRS 9 can replace
our business performance principle, and
therefore, we will be reporting based on IFRS
only from 1 January 2021. This will simplify our
reporting and avoid potential conflicts with
future reporting requirements for alternative
performance measures.
Read more in notes 1.4 and 1.6 on pages 88
and 90, 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 farms in Denmark and Germany, our
first Dutch wind farm 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
and onshore farms and power plants which
is exposed to market prices has to a large
extent been hedged for 2021. The same ap-
plies to our currency risks. The market value
of financial hedging instruments relating to
our operations and divestments of assets
deferred for recognition in EBITDA amounted
to DKK 0.1 billion at the end of 2020. This
effect is included in the outlook for 2021 (see
note 1.6).
The most significant uncertainty about the
operating profit from existing activities in
2021 relates to the size of our power gen-
eration which depends on wind conditions,
ramp-up of new wind farms, and asset
availability.
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, regulations, 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.
16 / 193
Ørsted Annual report 2020
Management’s review
Financial outlook
Contents
Financial estimates and policies
Financial estimates
We remain well on track to deliver on our
long-term financial targets.
For the period 2019-2025, we expect total
gross investments of approx. DKK 200 billion,
of which DKK 50 billion was spent in 2019
and 2020.
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
power purchase agreements) of 20 % annually,
reaching a level of DKK 25-26 billion in 2023.
The largest share of Ørsted’s operating profit
(EBITDA) will 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 11.5 per share be paid for 2020,
equating an increase of 9.5 % and a total
of DKK 4.8 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.
Capital Markets Day 2021
On 2 June 2021, we will host a Capital
Markets Day. Together with the Executive
Committee, CEO Mads Nipper will present
an update to our long-term strategy and
financial targets.
Financial estimates
Total CAPEX spend
Target
Year
DKK 200 bn
2019-2025
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 in our
update in October 2019
on our long-term targets
here.
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
Coastal Virginia Wind,
off the coast of Virginia
Beach, the US.
17 / 193
Ørsted Annual report 2020
Contents
Our business
19
22
23
29
30
32
33
35
A catalyst for change
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
Our East Coast Hub in Grimsby,
the UK, is the world’s largest offshore
operations and maintenance centre.
It serves our four operational wind
farms in the area, along with the
construction of a fifth. Aarron is based
there as a wind turbine technician
on Hornsea 1 Offshore Wind Farm.
He is one of hundreds working in
a job generated by Ørsted, whose
investment here has reinvigorated the
former fishing town’s economy.
Ørsted Annual report 2020
Management’s review
Our business
Contents
A catalyst for change
2020 demonstrated the vulnerability of global society.
In the past year, the world was shaken by a global pandemic
with more than 80 million cases of COVID-19 and more than
1.8 million lives lost, disrupting all parts of the global economy.
In parallel with the unprecedented pandemic,
2020 ended as another record-breaking year
for climate change as it became the joint
hottest year on record and by far the warmest
year ever recorded in Europe, while the
frequency and severity of extreme weather
events continued to increase. In February,
the Antarctic hit 20 °C for the first time ever,
and its ice cap shrank to the second-smallest
ever. Record-breaking wildfires raged through
Australia and the US West Coast, fuelled by
longer dry seasons and extreme events like
heatwaves. We saw the most active Atlantic
hurricane season on record, and an unusually
heavy monsoon flooding in India and in South
and East Asia ruined millions of homes.
The unprecedented events of 2020 have
clearly reinforced the urgency to change the
way humanity treats our planet and accounts
for environmental and social risks. Climate
change threatens to fundamentally change
the conditions for life on our planet. The impor-
tance of collective action, decision-making
based on facts and guided by science, and
decisive reactions are more evident than ever.
And while it is of essence that the transition to
a global green economy happens in balance
with our natural environment and societies,
it is critical that we keep momentum. This
is a moment for the world to take bold and
necessary action. The need to build a more
sustainable world has never been stronger.
How to stay below 1.5 °C
The science is clear: We are heading towards
an increasingly vulnerable world with com-
plex environmental, health, and economic
crises if we do not act now. To meet the 1.5 °C
Paris Agreement goals, humanity must at
least halve global carbon emissions during
the next ten years.
The first important stones have been laid
to ensure the right conditions for this to
happen. Wind and solar PV are today the
cheapest sources of new-built generation in
at least two-thirds of the world. Since 2012,
the cost of electricity from offshore wind has
decreased by 66 % and is now lower than
electricity generated by nuclear power, coal,
or natural gas. So far, 121 countries have com-
mitted to net zero emissions by 2050, along
with 454 cities and almost 1,400 businesses.
Through the Net-Zero Asset Owner Alliance,
33 of the world’s largest investors with
USD 5.1 trillion of assets under management
have agreed on portfolio decarbonisation
targets to align portfolios with a 1.5 °C
scenario. With the Green Deal, the EU has
increased its green ambitions towards 2030,
which can help drive further deployment
of renewable technologies in the EU.
Still, progress is not happening remotely fast
enough to reduce emissions at the necessary
pace. Although we saw global carbon emis-
sions fall temporarily in 2020 due to COVID-19
lockdowns and the resulting slowdown of
the global economy, these reductions were
neither systemic nor sustainable. In fact,
supply chain disruptions from COVID-19
temporarily delayed the build-out of renew-
able energy in the EU energy sector.
The EU is defining ‘green’
Sustainable finance is a critical enabler of the
green transformation of industries across the
EU and globally. For the energy industry alone,
the IPCC estimates a USD 2.4 trillion annual
shortfall in clean energy investment through
2035 to meet the 1.5 °C Paris Agreement goal.
Mobilisation and reallocation of institutional
and private capital will be necessary to meet
this challenge. The global economy remains
far from operating at a net-zero level, and
emissions are not being reduced by the required
volume and pace. At the same time, countries
and businesses need to prepare better for a
changing climate.
environmental objectives. Upcoming taxonomy
regulation will determine when an economic
activity can be considered sustainable.
In 2018, The European Commission established
a technical expert group on sustainable
finance which was assigned with developing
recommendations on the taxonomy’s technical
screening criteria for the objectives of climate
change mitigation and adaptation. The group’s
recommendations were presented to the
European Commission in March 2020 and gener-
ally formed the basis for draft legislation put
forward by the Commission in November 2020.
The EU is preparing a taxonomy to be used as
a tool to help plan and report on the transition
to an economy that is consistent with the EU’s
At Ørsted, we plan to align with the taxonomy
after the final version is launched by the EU,
expectedly in 2021.
19 / 193
Ørsted Annual report 2020
Management’s review
Our business
Contents
Limiting global warming to 1.5 °C will require
a structural change of the global energy
system as 73 % of global greenhouse gas
emissions come from the use of energy,
mainly due to the burning of fossil fuels.
The 1.5 °C pathway requires a significant
increase in electrification, acceleration
of green energy build-out, phasing out of
fossil fuels, and increased energy efficiency.
The share of electricity in overall energy
consumption must increase from about
20 % today to at least 50 % by 2050. The
projected rate of the green energy build-out
must be more than doubled towards 2030,
and coal-fired power generation needs to be
phased-out at least three times faster than
the projected rate of retirement.
By a wide margin, climate change is humani-
ty’s greatest challenge. Although renewable
energy build-out has the risk of impacting
land-use and biodiversity, it is critical we
keep momentum. The global energy industry
has the technologies and capabilities need-
ed to undertake the transformation. Now, it
is time to act. It is time to deliver on commit-
ments, to deploy and scale technologies at
hand, and to accelerate the transformation
to a sustainable society.
Ørsted wants to be a catalyst for change
Our vision is a world that runs entirely on
green energy. Every day, we act as a catalyst
for the change needed to build a sustainable
energy supply. Over the past decade, we have
transformed our business fundamentally,
from being one of the most carbon-intensive
utilities in Europe to becoming a renewable
energy major and one of the most sustainable
companies in the world. We are committed to
taking a leading role in the global green ener-
gy transformation, and we have set ambitious
targets for reducing our carbon footprint.
By 2025, we aim to be a carbon-neutral
company (emission scopes 1 - 2), which we
plan to achieve by at least a 98 % reduction
in carbon emissions from our energy genera-
tion and operations compared to 2006. The
remaining less than 2 % will be either elimi-
nated or covered by certified carbon offsets.
By 2040, we aim to reach net-zero emissions
across our entire value chain (scopes 1 - 3),
having a midway target to reduce our scope 3
emissions by 50 % by 2032. Our carbon reduc-
tion targets are confirmed by the Science
Based Targets initiative to be consistent with
the reductions required by energy companies
to keep global warming below 1.5 °C and are
the most ambitious science-based targets in
our sector.
In 2020, we made significant progress to-
wards these targets with green energy
build-out and scaling-up of new technolo-
gies, including renewable hydrogen. During
the year, we added 1.4 GW of installed
renewable energy capacity in onshore
and offshore wind, adding up to our total
of 11.3 GW. Our carbon emissions intensity
We are on track to becoming carbon-neutral already in 2025
Carbon intensity of energy generation and operations (scopes 1 and 2)
g CO2e/kWh
500
450
400
350
300
250
200
150
100
50
0
Science Based Targets
initiative’s 1.5 °C path-
way for greenhouse
gas reductions in the
energy sector
Ørsted’s carbon
intensity of energy
generation
2010
2015
2020
2025
2030
2035
2040
2045
2050
Climate-related financial disclosures
At Ørsted, we are aware of the transitional
and physical impacts of climate change on
the resilience of our business as recommend-
ed by the Task Force on Climate-related
Financial Disclosures (TCFD). By endorsing and
aligning our practices and reporting with the
TCFD recommendations over the past three
years, we have crystallised our understanding
and disclosure of climate-related risks and
opportunities.
Our TCFD disclosure is integrated throughout
the strategy, risk, and governance sections
of this annual report. This year, we expanded
our ESG performance report to include a one-
page overview with references to our TCFD
alignment: orsted.com/ESGperformance2020
20 / 193
Ørsted Annual report 2020
Management’s review
Our business
Contents
Our contribution to the Sustainable Development Goals
The year 2020 reinforced the global
realisation of people, businesses, and nature
being interconnected and interdependent.
Experiences of the past year clarified the
need to deliver on the United Nations’ 17
Sustainable Development Goals (SDGs)
which address the key economic, social, and
environmental challenges the world faces
and acts as a global framework for achieving
a more sustainable future.
We acknowledge that the resilience and
long-term success of Ørsted’s business
directly depend on us supporting a global
society that is in balance with the resources
of our planet, protecting natural habitats
and local communities as much as economic
growth. To sustain our long-term value
creation, we ensure that our green energy
build-out is executed sustainably through
a systematic and programmatic approach
to sustainability. We seek to strengthen the
positive impacts and to mitigate and avoid
potential negative impacts derived from
our core business activities and a global
green transition.
With our core business, we aspire to have
a transformative impact on SDG 7 on afforda-
ble and clean energy and SDG 13 on climate
action. Moreover, we indirectly impact several
other SDGs, especially those listed to the right.
Catalysing the green energy transformation
Addressing the sustainability impacts
of the green energy transformation
We report on our SDG contributions and
impacts and all our 20 sustainability
programmes in our sustainability report,
orsted.com/sustainability2020. A full ESG
data overview and our accounting policies
are available in our annual ESG performance
report, orsted.com/ESGperformance2020.
Together, the two reports constitute our
annual Communication on Progress to the
UN Global Compact and comply with the re-
quirements for corporate social responsibility
reporting set out in section 99 a of the Danish
Financial Statements Act as well as section
99 b on gender distribution and section 107 d
on diversity at management levels.
(scopes 1 and 2) decreased in 2020 by 11 %.
However, 2020 showed an increase in
Ørsted’s absolute carbon emissions due to
a temporary increase in our use of coal of
13 % at our Danish power plants. Our service
obligations in Denmark require us to provide
ancillary services that help grid operators
maintain a reliable electricity system.
This sometimes requires the use of coal
to ensure a stable supply of energy. Our
commitment to end our use of coal by 2023
remains unchanged, and we are on track
towards this goal. Until then, however, we
may see fluctuations in coal consumption,
driven by market and weather conditions.
The next frontier in our journey towards
net-zero emissions in our total carbon
footprint by 2040 is to gradually phase
out our supply of gas from long-term gas
contracts and to decarbonise our supply
chain. Therefore, we allow existing long-term
gas contracts to expire gradually and do not
enter into new contracts. Across our supply
chain, we are committed to reaching beyond
our own emissions and to working with
our suppliers to gradually remove carbon
emissions. Thus, we encourage our strategic
suppliers to: 1) disclose their emissions and
set science-based targets aligned with a
1.5 °C scenario, 2) use 100 % green electricity
in the manufacturing of wind turbines, foun-
dations, cables, and substations by 2025,
3) optimise their vessel fleets and develop
a roadmap towards powering vessels with
renewable energy.
We launched our supply chain decarbonisa-
tion programme a year ago. During this first
year, we have focused on building the foun-
dation and management structure to drive
our programme and have begun to engage
with our strategic offshore wind suppliers
on the decarbonisation journey ahead. The
offshore wind supply chain today includes
carbon intensive activities, particularly the
use of energy-intensive construction materi-
als, such as steel, aluminium, and copper, as
well as fuel for offshore construction vessels.
As part of our dialogue with our top strategic
suppliers, including wind turbine, foundation,
and cable manufacturers, we support them
in building solid and uniform carbon account-
ing policies and data capture by utilising the
CDP reporting framework. Based on this
solid foundation, we will work with our
suppliers over the coming years to establish
emission reduction roadmaps and targets
supporting our overall strategic targets.
21 / 193
Ørsted Annual report 2020
Management’s review
Our business
Contents
Our strategic aspiration and growth platform
Our global leadership position in
offshore wind and strong North
American position in onshore
wind and solar photovoltaics
(PV) provide a solid foundation
for tapping into the significant
growth opportunities in renew-
able energy and for realising
our aspiration of becoming a
global green energy major.
Ørsted develops, constructs, owns, and
operates wind farms, solar farms, and energy
storage facilities, and we own and operate
bioenergy plants. In addition to our generation
activities, Ørsted engages in partnerships and
develops projects related to the production
of renewable hydrogen. Finally, we bring our
power and heat to market and engage in
trading activities to secure offtake and
provide energy solutions to our customers.
We are the largest offshore wind constructor
in the world, and we are market leader in each
of the four regions where we operate: the UK,
Continental Europe, North America, and Asia
Pacific, excluding mainland China. Our strate-
gic ambition is to maintain a market-leading
position in all regions where we operate.
Our onshore wind and solar PV business is
expanding rapidly, and we are now among
Our growth
platform
Offshore
wind
Europe
North America
Asia Pacific
Maintain leadership
Onshore wind
and solar PV
Explore growth
opportunities
Build strong
position
Explore growth
opportunities
Renewable
hydrogen
Execute projects and pursue
scale-up opportunities
the five largest US constructors in terms of
new capacity additions in 2020. Our strategic
ambition is to further strengthen our position
in North America by building a diverse onshore
wind and solar PV portfolio. In addition, we
continue to monitor onshore growth opportu-
nities in Europe and Asia Pacific.
heavy transport where direct electrification
is difficult or impossible. However, renewable
hydrogen is currently not cost-competitive
with fossil-based alternatives. Significant
challenges must be overcome to create and
scale a hydrogen market, requiring action
from both policymakers and companies.
We see increasing political support in Europe
for the development of renewable hydrogen.
When produced with renewable power,
hydrogen offers a solution for decarbonising
industries such as ammonia, steel, refining, and
Ørsted has established a pipeline of eight
renewable hydrogen projects in Denmark,
Germany, the UK, and the Netherlands. In
January 2021, we took FID on our first renew-
able hydrogen project, marking the beginning
of a new phase in Ørsted’s green transfor-
mation journey. We see growth potential in
renewable hydrogen and are pursuing scale-up
opportunities as we execute on our pipeline.
Our growth platform in offshore wind,
onshore wind, and solar PV, and our growth
potential in renewable hydrogen provide a
solid foundation for realising our aspiration
of becoming a global green energy major.
22 / 193
Ørsted Annual report 2020
Management’s review
Our business
Contents
Our markets and strategy
Global demand for renewable energy is increasing. We are well-
positioned to tap into this growth and are on track to maintain our
undisputed leadership position in offshore wind as we continue
to strengthen our position in onshore wind and solar PV.
Global installed renewable capacity is expected
to exceed 4 TW in 2030, more than double
today’s capacity. Offshore wind, onshore wind,
and large-scale solar PV are expected to grow
towards 2030 by 19 %, 11 %, and 9 % per year,
respectively. This reflects increasing demand
for electricity worldwide, ambitious govern-
ment decarbonisation programmes, and the
cost-competitiveness of renewable technologies
– many of which still have not fully matured.
So far, renewables have proved resilient to
the impacts of COVID-19 compared to other
sectors, and long-term capacity forecasts
have remained stable. Bloomberg New Energy
Finance’s (BNEF) post-COVID-19 2030 forecast
for renewable capacity fell by just 1 % relative
to last year’s forecast. In the short term, some
delays to renewable energy projects are antici-
pated; however, growth is expected to resume in
2021 as delayed projects come online. We also
see COVID-19 recovery packages adding new
impetus to green transitions in some markets.
Most notable is the European Commission’s
EUR 750 billion package which focuses on
decarbonising buildings, supporting growth in
renewable power, and accelerating investment
into renewable hydrogen and clean transport.
However, it is currently not possible to know the
long-term impact of COVID-19.
Across our markets, we are experiencing
growing demand from companies for corporate
power purchase agreements (CPPAs). CPPAs
Global renewable energy capacity by technology1
GW installed
CAGR
19 % offshore wind
9 % onshore wind
11 % large-scale PV
13 % small-scale PV
2 % biomass
+10 % / year
4,392
-1 %
160
922
4,342
183
823
1,518
1,559
have long been an important part of doing
business in onshore wind and solar PV, and in
2020, we signed over 700 MW of CPPAs with
five different customers across four US projects.
Ørsted is also playing a key role in developing
the global CPPA market for offshore wind,
with several landmark agreements in 2020.
In July, Ørsted and Taiwan-based TSMC signed
a 20-year contract, under which TSMC will
offtake the full production of Ørsted’s 920 MW
offshore wind farm Greater Changhua 2b & 4,
making it the world’s largest renewables CPPA.
In December, we signed a 10-year CPPA with
Amazon who will offtake 250 MW of Borkum
Riffgrund 3 Offshore Wind Farm’s total capacity
of 900 MW. This is Europe’s largest CPPA to date.
1,630
143
236
536
679
36
1,604
1,571
188
206
2020
2030
(Pre-
COVID-19)
2030
(Post-
COVID-19)
1
Excludes solar thermal, geothermal, marine,
tidal, and others which combined account for
less than 1 % of capacity.
Source: BNEF New Energy Outlook 2019 for
pre-COVID-19 2030 forecast and BNEF New
Energy Outlook 2020 for 2020 capacity and
post-COVID-19 2030 forecast for all technologies
except offshore wind. Offshore wind figures from
BNEF Offshore Wind Market Outlook H2 2019 for
pre-COVID-19 2030 forecast and BNEF Offshore
Wind Market Outlook H2 2020 for 2020 capacity
and post-COVID-19 2030 forecast.
Competition within the renewables industry is
intensifying due to the significant growth oppor-
tunities ahead. New competitors have entered
the market, oil majors have announced signifi-
cant renewable energy ambitions, and leading
utilities are reshaping and expanding their re-
newable portfolios. We welcome the increasing
involvement of new and existing players as the
build-out of renewable energy must accelerate
if we are to halve global emissions by 2030 in
line with the Paris Agreement. We continue to
see many profitable growth opportunities and
remain confident that we will meet the strategic
ambition set in November 2018 of installing more
than 30 GW of renewable capacity by 2030.
Ørsted is organised into three business units.
Offshore includes our offshore wind portfolio
and our emerging renewable hydrogen business,
and Onshore is responsible for our onshore wind
and solar PV portfolio. Markets & Bioenergy
plays an important role in supporting our
generation portfolio by providing services that
help offtake Ørsted’s energy production and
manage our risk exposure. It is also responsible
for our portfolio of combined heat and power
(CHP) plants which provide green heat and
power as well as ancillary services to Denmark’s
energy system, making a significant contribution
to the Danish decarbonisation efforts.
23 / 193
Ørsted Annual report 2020
Management’s review
Our business
Contents
Offshore
The global offshore wind market
In 2020, global installed offshore wind
capacity reached 24 GW, excluding mainland
China. Significant market growth is expected
towards 2030, driven by offshore wind’s large
technical potential (i.e. the achievable energy
production given environmental, land-use,
and system constraints) and rapidly declining
LCoE, combined with supportive policy targets
and regulatory frameworks. BNEF estimates
that approx. 7 GW of offshore wind will be
built annually from 2020 to 2025, and that
annual installations will almost triple to an
average of 20 GW per year from 2025 to 2030
as growth in North America and Asia Pacific
accelerates.
farms worldwide than any other company.
By the end of 2020, Ørsted had 7.6 GW
of capacity installed, 2.3 GW of capacity
under construction, and a further 5.0 GW
of capacity awarded.
Our ambition and strategic focus
in offshore wind
Ørsted is the world leader in offshore wind,
with a market share of approx. 30 % of global
capacity installed, excluding mainland China.
We have played a key role in maturing the
industry, and we have built more offshore wind
Competition is intensifying as growth oppor-
tunities in offshore wind increase. This means
that Ørsted cannot and should not win all the
auctions and tenders in which we participate.
We remain financially disciplined in our bidding
and final investment decisions to make sure we
build a healthy, sustainable business and, over
time, secure enough wins to fulfil the strategic
ambition set in November 2018 of maintaining
our market leadership position in offshore
wind and of reaching 15 GW of installed off-
shore wind capacity by 2025. With our current
portfolio of projects under construction and
awarded, we have nearly reached this target.
Global offshore wind capacity, excl. mainland China
GW installed
Offshore capacity build-out towards 2025,
MW
North America
Asia Pacific
Europe
Capacity awarded
Capacity under construction
Capacity installed
+20 GW/year
+7 GW/year
161
23
36
102
+3 GW/year
61
11
24
0
0
24
7
10
44
2015
2020
2025
2030
7,572
1,386
900
9,858
1,220
1,142
1,714
920
14,854
~15,000
2020 capacity
installed
Hornsea 2
Greater
Changhua
1 & 2a
Capacity installed
and under
construction
US
North-East
cluster1
US
Mid-Atlantic
cluster2
German
portfolio3
Greater
Changhua
2b & 4
Capacity installed,
under construction,
and awarded
2025
ambition
Source: BNEF Offshore Wind Market Outlook
H2 2020.
1 US North-East cluster: South Fork (130 MW), Revolution Wind (704 MW), and Sunrise Wind (880 MW).
2 US Mid-Atlantic cluster: Skipjack Wind (120 MW) and Ocean Wind 1 (1,100 MW).
3 German portfolio: Gode Wind 3 (242 MW) and Borkum Riffgrund 3 (900 MW).
24 / 193
Ørsted Annual report 2020
Management’s review
Our business
Contents
Selected government offshore wind and renewable energy targets
Region
Europe
UK
Germany
Netherlands
Poland
France
Denmark
Belgium
Ireland
Total capacity
GW†
Target
19.7
40 GW by 2030
10.8
20 GW by 2030, 40 GW by 2040
5.3
11.5 GW by 2030
Region
North America
New York
New Jersey
Virginia
n.a.
10.9 GW awarded by 2027
Massachusetts
3.5
2.7
2.3
0.0
8.75 GW tendered by 2028
7 GW tendered by 2030
4 GW by 2030
3.5 GW by 2030
Baltic States
n.a.
1.7 GW tendered by 20301
Italy
Sweden
0.0
0.2
0.9 GW by 2030
100 % renewable energy by 2040*
Connecticut
Maryland
Rhode Island
California
Asia Pacific
Japan
Taiwan
South Korea
Total capacity
GW†
Target
4.4
1.1
0.0
1.6
1.1
0.1
0.4
9 GW by 2035
7.5 GW by 2035
2.5 GW by 2026, 5.2 GW by 2034
3.2 GW by 2030
2 GW by 2030
1.6 GW by 2030
100 % renewable energy by 2030*
n.a.
100 % clean power by 2045*2
0.2
5.7
0.1
10 GW by 2030, 30-45 GW by 2040
15.5 GW by 20353
12 GW by 2040
Our offshore regions and
renewable hydrogen
The UK
The UK is an attractive, advanced market with
sophisticated regulatory schemes supporting
an efficient and competitive deployment of
offshore wind. With over 10 GW in operation
today, the UK is the largest offshore wind
market in the world. It also has one of the most
ambitious national build-out programmes
and is targeting 40 GW by 2030. With a visible
pipeline of over 50 GW, the region is well-
positioned to achieve this target.
Ørsted is market leader in the UK with a
market share of 42 % of installed capacity.
Our portfolio includes 5.8 GW of capacity
installed and under construction and up
to 5 GW of capacity under development in
the Hornsea zone, more specifically our
Hornsea 3 and 4 projects. The UK is our
largest market, and we currently operate
15 offshore wind farms in British waters.
At the country level, ambitions are also
growing. Denmark, Germany, and Poland
raised their renewable and offshore wind
targets in 2020. BNEF estimates that Euro-
pean offshore wind capacity will grow from
14 GW today to 64 GW by 2030, exeeding the
EU’s goal.
Continental Europe
Offshore wind build-out is expected to ac-
celerate in Continental Europe, driven by the
European Commission’s European Green Deal
and offshore renewable energy strategy. In the
latter, the commission has set an objective of
installing 60 GW of offshore wind by 2030 and
300 GW by 2050 within the EU 27 to meet the
climate goals of the Paris Agreement.
Ørsted has a strong position in Continental
Europe. We are the largest offshore wind
player with a market share of 23 % of installed
capacity. Our operating portfolio totals 3.1 GW,
and we have been awarded 1.1 GW in Germany.
We have a strong market position in all major
offshore wind markets in addition to significant
partnership experience and an extensive indus-
try network across Continental Europe.
Targets are subject to change and indicate installed
capacity, unless otherwise noted.
¹
²
³
Lithuania has drafted a law to tender 700 MW of
offshore wind by 2023. Latvia and Estonia have
signed a memorandum of understanding for a joint
offshore wind tender of 1 GW to be commissioned
by 2030.
State modelling shows approx. 10 GW of offshore
wind is needed to meet clean power target.
Taiwan has met its target of 5.5 GW commissioned
by 2025. It has set a goal of adding an additional
10 GW of offshore wind capacity between 2026
and 2035.
* Clean energy target, technology not specified.
†
Total capacity includes capacity in operation,
under construction, and awarded capacity.
North America
US states are driving demand for offshore
wind in North America, as state policymakers
expand renewable energy programmes to
meet decarbonisation goals. The US has less
than 0.1 GW of offshore wind installed today,
but is forecast to reach 7 GW by 2025 and
23 GW by 2030.
Ørsted operates Block Island, the US’s first
offshore wind farm, and we were the engi-
neering, procurement, and construction lead
for the pilot project Coastal Virginia Wind,
the first offshore wind project in US federal
waters, commissioned in October 2020. We
have gained strong market traction as well as
built partnerships in the emerging US market
25 / 193
Ørsted Annual report 2020
Management’s review
Our business
Contents
with approx. 2.9 GW of capacity awarded and
4.5 GW of capacity under development along
the East Coast.
Asia Pacific
Robust and favourable regulatory regimes
position Asia Pacific as an important region
for offshore wind. Asia Pacific has 0.4 GW
of installed capacity today, but is expected
to reach 36 GW by 2030, mostly driven by
build-out in Taiwan, Japan, and South Korea.
Taiwan has met its target of awarding 5.5 GW
to be commissioned by 2025 and has released
a draft auction guideline for the next 10 GW
planned for construction between 2026 and
2035. Japan set new offshore wind targets in
December 2020 and is now aiming for 10 GW
by 2030 and 30 to 45 GW by 2040. Achieving
these goals would make Japan one of the
largest offshore wind markets in the world.
South Korea has announced it plans to build
12 GW of offshore wind to reach its aim of
20 % renewables in its energy mix by 2030
and up to 35 % by 2040.
Ørsted is well-positioned to expand in Asia
Pacific. We are the number one offshore wind
player, excluding mainland China, with 0.1 GW
of capacity in operation, 0.9 GW of capacity
under construction, and 0.9 GW of capacity
awarded. We have a strong pipeline of project
opportunities in Taiwan, Japan, and South
Korea, supported locally through offices in
Taipei, Tokyo, and Seoul.
Renewable hydrogen
In addition to offshore wind, we are pursuing
opportunities in renewable hydrogen in
Europe. In July, the European Commission
launched the European Clean Hydrogen
Alliance with the target of building 6 GW
of electrolyser capacity by 2024 and up to
40 GW by 2030. The commission has an
ambition of making Europe a global front-
runner within renewable hydrogen, and we
expect this ambition to create additional
growth opportunities for Ørsted, if policies
and regulatory incentives make projects
economically viable.
Our pipeline focuses on the application of
renewable hydrogen in refinery processes,
ammonia production, and fuel production
for trucks, buses, vessels, and planes. With
the FID on the H2RES project in January,
Ørsted has 2 MW of electrolyser capacity
under construction. The facility will produce
renewable hydrogen to be used as fuel in
road transport and will provide important
learnings to help turn Europe’s ambitious
targets into reality.
Expected offshore wind auctions and tenders in 20211
Award in 2021
H1 2021
H2 2021
Timing not yet announced
2021 / 2022
Award in H2 2021
Maryland 2
~400 MW
Award in Q2 2021
New Jersey 2
up to 2,400 MW
Japanese round 1
~1,500 MW
UK round 4
up to 12,000 MW
Massachusetts 3
1,600 MW
German tender
900 MW
Polish award
5,900 MW
Rhode Island
up to 600 MW
Maryland 3
~ 400 MW
Connecticut 4
~ 1,000 MW
French tender 4
1,000 MW
Danish tender
800-1,000 MW
1 All auction and tender timelines and capacities are based on current expectations and are subject to change.
Q4 2021 / Q1 2022
Holland Coast West
1,520 MW
H2 2021 / H1 2022
Taiwan auction
TBA
26 / 193
Ørsted Annual report 2020
Management’s review
Our business
Contents
Onshore
The North American onshore wind
and solar PV markets
Onshore renewable energy is the largest
non-fossil energy source in the world. Onshore
wind and large-scale solar PV accounted for
75 % of installed renewable capacity and 77 %
of new capacity additions worldwide in 2020.
In North America, onshore wind is the leading
renewable technology. It reached 134 GW
of installed capacity by the end of 2020 and
is expected to continue growing by 5 % per
year towards 2030. Large-scale solar PV
comes in second at 57 GW and is expected
to accelerate towards 2030 at an annual
rate of 10 %. The strong growth in solar PV
is fuelled by its ability to cost-effectively
replace retiring fossil-fuelled power stations
across much of the western, central, and
south-eastern US. In addition, companies
are signing more solar CPPAs as they look to
procure energy from different technologies
in order to supply their operations 24/7 with
clean energy.
Our ambition and strategic focus
in onshore wind and solar PV
Our Onshore business gained strong traction
in 2020. Ørsted is now among the five largest
constructors in the US when measured by new
capacity additions. Last year, we commis-
sioned the onshore wind farms Sage Draw,
Plum Creek, and Willow Creek and took
final investment decisions on the onshore
wind farms Western Trail and Haystack. This
makes our onshore wind portfolio one of the
fastest growing in the US, and we rank fourth
in annual MW installed last year. Furthermore,
the acquisition of Muscle Shoals and the final
investment decision on Old 300 Solar Center
strengthened our North American solar PV
platform. Ørsted is currently ranked second in
the US in terms of large-scale solar PV under
construction. Our Onshore portfolio of assets
installed and under construction now totals
3.4 GW, of which 2.3 GW is onshore wind and
1.1 GW is solar PV.
We also have 40 MWac of battery storage under
construction in connection with the Permian
Energy Center. We view energy storage as a
complement to our renewables portfolio, and
we continue to pursue storage projects that
allow us to optimise our generation assets.
We are well on track to meet our target of
5 GW of installed capacity by 2025. When
the Permian Energy Center comes online this
year, we will have established a full-spectrum
renewable portfolio in the US, spanning solar
PV, onshore wind, offshore wind, and battery
storage. Our strategic ambition is to build a
strong North American position in onshore
wind and solar PV. Onshore expansion is also
part of our strategy, and we are actively
seeking growth opportunities outside
North America. Our initial focus is on Europe,
but we continue to monitor opportunities in
Asia Pacific.
Going forward, we aim to further diversify
our onshore investments across markets
and across our portfolio of technologies.
This will allow us to offer new, global
solutions to customers by taking advantage
of complementary generation profiles,
while reducing our risk exposure. In addition,
we continue driving operational excellence,
Onshore capacity build-out towards 2025, MW
Capacity under construction
Capacity installed
~5,000
1,658
420
227
367
298
400
3,370
2020
capacity
installed
Permian
Energy
Center1
Muscle
Shoals
Western
Trail
Haystack
Old 300
Solar
Center
Capacity
installed
and under
construction
2025
ambition
1
Permian Energy Center consists of 420 MWac solar PV capacity
and 40 MWac of battery storage.
reducing LCoE, and working to secure
tax equity financing for our projects in
the medium term.
Long-term, we are focused on securing
power purchase agreements to ensure
solid economics after the phase out of the
production tax credit and the investment
tax credit for wind and solar PV projects,
respectively. We will also continue
developing the capabilities of our US-based
trading unit which manages risk and protects
the value of our US generation portfolio.
1
North America includes the US and Canada.
Excludes solar thermal, geothermal, marine,
and tidal which combined account for less
than 1 % of capacity.
Source: BNEF New Energy Outlook 2020 for all tech-
nologies except offshore wind. Offshore wind figures
from BNEF H2 2020 Offshore Wind Market Outlook.
North American renewable capacity by technology1
GW installed
Offshore wind
Onshore wind
Large-scale PV
Small-scale PV
Biomass
+8 % / year
512
16
94
152
227
408
16
66
120
199
7
23
240
16
33
57
134
132
17
12
17
86
2015
2020
2025
2030
27 / 193
Ørsted Annual report 2020
Management’s review
Our business
Contents
Asnæs Power Station,
Kalundborg, Denmark.
Markets & Bioenergy
Markets & Bioenergy contributes to Ørsted´s
business in five ways. It provides an efficient
route-to-market for commodities, including
power and green certificates, for Ørsted and for
third parties. Furthermore, it manages market
risks for Ørsted’s generation portfolio. The
business unit is also responsible for operating,
optimising, and decarbonising our portfolio of
CHP plants and for optimising our gas portfolio.
Finally, Markets & Bioenergy is responsible for
the operation of our waste-recycling plant,
Renescience Northwich, which was commis-
sioned in October 2020.
Our portfolio of CHP plants continues to play
a critical role in Denmark’s heat and power
systems and supports the green transforma-
tion by providing dispatchable power with a
low carbon footprint. We have completed the
planned conversions of our coal-fired units to
renewable biomass and continue to source
third-party certified sustainable biomass in line
with Denmark’s newly announced regulations.
We are targeting full carbon neutrality in our
CHP operations by 2025. This includes the
planned closure of our last coal-fired power
station in Esbjerg, Denmark, in 2023 and the
implementation of offset projects for our CHP
portfolio’s remaining carbon footprint.
The variable generation profiles of renewable
assets do not always match short-term fore-
casts, and the difference needs to be balanced
as power enters the market. Markets & Bioen-
ergy supports Ørsted’s generation activities by
providing an efficient route-to-market, including
balancing services, and seeks out opportunities
to offer these services to third parties.
Natural gas is a fossil fuel and should be
gradually phased out of the energy mix.
Consequently, we neither enter into new long-
term gas sourcing contracts nor prolong
expiring contracts. Our focus is on maximising
the value of our legacy natural gas portfolio
through trading, contract negotiations, and
portfolio optimisation.
Constantly fluctuating commodity prices and
changing market conditions require strong risk
management capabilities to protect the value
of Ørsted’s generation portfolio. Markets &
Bioenergy meets this challenge through the
development and deployment of state-of-
the-art risk monitoring and management
tools for an expanding set of market risks.
28 / 193
Ørsted Annual report 2020
Management’s review
Our business
Contents
Our capital allocation and funding
Our strategy is backed by a DKK 200 billion investment
programme for the period 2019 to 2025 and is entirely funded
by green capital.
the crisis, and we completed our scheduled
funding activities as planned. In November,
we issued 15 billion in NTD-denominated
bonds. Furthermore, we completed the
divestment of our Danish power distribution,
residential customer, and city light businesses
in August 2020, freeing up DKK 20.5 billion for
investment in our growth platform.
Since 2017, all new capital has been issued in
a green format in accordance with our Green
Finance Framework. With this year’s debt issu-
ances, our total outstanding debt, excluding
hybrids, amounted to DKK 37.1 billion, of which
more than 51 % was issued in a green format.
In November 2018, we announced our strate-
gic plan to invest DKK 200 billion from 2019
to 2025, with more than 95 % earmarked for
our growth platform in offshore wind, onshore
wind, and solar PV, the balance being dedicat-
ed to our Markets & Bioenergy activities. We
have invested DKK 50 billion over the course
of 2019 and 2020, primarily in Offshore and
Onshore construction activities which total
DKK 35 billion and DKK 13 billion, respectively.
We allocate capital according to the following
principles in order of priority. First, we adhere
to our strong commitment to our credit
ratings (BBB+/Baa1). Second, we intend to
increase our dividend by a high single-digit
rate annually until 2025. Third, we invest in
value-creating growth opportunities. Finally,
potential excess capital will be returned to
our shareholders in the form of additional
dividends and/or share buy-backs.
The uncertainty concerning the economic
impact of COVID-19 caused turbulence in
financial markets in the spring of 2020.
However, Ørsted’s conservative approach to
liquidity management allowed us to weather
Burbo Bank Extension,
Liverpool Bay, the UK.
29 / 193
Ørsted Annual report 2020
Management’s review
Our business
Contents
Our strategic enablers
Achieving our aspiration of becoming a global green energy
major requires continuously strengthening our organisation
in three key areas: talent, digitalisation, and innovation.
Talent
Talent has been the cornerstone of Ørsted’s
transformation, and we will continue needing
exceptional people with the right values as we
grow our business and expand our geograph-
ical footprint. We want to be a global green
energy major – powered by talent. Thus, we
have a strong focus on employer branding,
talent acquisition, inclusion, and well-being as
well as the identification, development, and
deployment of diverse talent around the world.
In 2020, we made significant progress on our
talent ambition. We improved our positioning
in the Universum employer branding rankings
for Denmark. For example, Ørsted moved from
25th place in 2018 to seventh place in 2020 for
experienced business professionals, with com-
parable changes in other candidate segments.
We were also listed in FastCompany’s Best
Workplaces for Innovators for the first time –
the only company with a European HQ in the
top 20. As a result of such branding, and with
increased focus on recruiting best-in-class,
diverse talent, we hired and onboarded over
1,300 new employees around the world.
In addition, we launched our first Global
Learning Week which was accessed by
thousands of employees. Usage of digital
learning content in our learning management
system has increased more than tenfold
since 2018. We also delivered virtual learning
programmes for all managers to enable them
to support career development in their teams.
Finally, to ensure our culture is inclusive of
diversity and supports our global growth, we
surveyed all employees to understand their
sense of opportunities and challenges in this
area. The data gathered informs our focus on
ensuring equal opportunities, cultivating psy-
chological safety, and building inclusive virtual
workplaces. Ørsted’s Executive Committee has
set targets for gender balance in all levels of
the organisation and for the multicultural mix
in our leadership team.
Digitalisation
Digitalisation is a key enabler of value
creation at Ørsted. We systematically deploy
a variety of digital technologies to streamline
business processes to develop data-driven
business cases, to drive state-of-the-art energy
market and risk management, and to improve
the design, construction, operations, and
maintenance of our assets.
For example, Ørsted is using advanced data
analytics and machine learning to achieve
operations and maintenance cost reductions
as well as annual energy production uplift.
Calendar-based maintenance schedules are
being substituted for a data-driven approach.
This way, if an asset does not require
physical maintenance at the scheduled time
and can be inspected remotely, we avoid
unnecessary costs.
We also utilise wind turbine data to contin-
uously correct wind turbine yaw and pitch
alignment. When aligned correctly into the
wind, a wind turbine produces more electricity
and is subject to less wear and tear over time.
This increases the lifetime of the asset and
reduces the lifetime maintenance cost.
Finally, we utilise algorithm-assisted power
market trading in Continental Europe and
the UK. Recent years have seen a significant
increase in the frequency of trades and a
decrease in the average tick size, leading to
power trading at super-human speed. Digital
capabilities enable us to create value in
fast-moving commodity markets by securing
good prices for the inherently long position
Ørsted has within power generation.
East Coast Hub at the Port
of Grimsby, Lincolnshire,
the UK.
30 / 193
Ørsted Annual report 2020
Management’s review
Our business
Contents
Humberside Airport,
near Grimsby, Lincolnshire,
the UK.
Innovation
Innovation is part of our DNA. The willingness
to challenge the notion of what is possible
and the ability to identify opportunities and
to innovate our way around challenges were
instrumental in our strategic transformation.
These competences are also what allow us to
maintain our leadership position in the rapidly
growing renewables market.
For example, we spearheaded the first
commercial deployment of 66 kV array cables
for an offshore asset project in 2020 at our
Borssele 1 & 2 Offshore Wind Farm. Previously,
33 kV array cables were considered state-of-
the-art. Ørsted challenged this idea, and we
succeeded in marshalling support from our
peers and supply chain for the development
and implementation of the new cables, reduc-
ing losses and ensuring optimal substation
design. The next step is the development of
132 kV array cables which will be needed to
maximise the potential of the next generation
of wind turbines with ratings of 15 MW or more.
In addition to pushing the boundaries of what
is technically feasible, we are rethinking the
deployment of renewable generation and
transmission assets to support the green
transition of Europe’s energy system. The
Danish parliament has decided to develop
an offshore wind hub of 2 GW by 2030 off
the coast of Bornholm, a Danish island in the
Baltic Sea, with the potential of connecting
Denmark, Poland, Sweden, and Germany
and of supporting the large-scale production
of renewable hydrogen. We are engaged in
ongoing dialogues with all stakeholders on
how to expand the hub’s potential and how to
ensure timely progress. This new energy hub
represents the next step in technological scale
and innovation and is key to unlocking the
enormous potential of offshore wind.
Finally, we continue to explore new products
and technologies, focusing on the develop-
ment and launch of combined technologies
for Power-to-X. In 2020, we joined forces with a
group of leading Danish companies, represent-
ing both suppliers and buyers of sustainable
fuels, in the Green Fuels for Denmark partner-
ship which aims to develop a ground-breaking
hydrogen and e-fuels production facility with
the first phase in operation as soon as 2023.
When fully scaled up by 2030, the project
will deliver more than 250,000 tonnes of
sustainable fuel every year for buses, trucks,
vessels, and planes. Production will be based
on a total electrolyser capacity of 1.3 GW,
which will likely make it one of the largest
facilities in the world of its kind.
31 / 193
Ørsted Annual report 2020
Management’s review
Our business
Contents
Our business model
Key resources
Business units
Core activities
Partly outsourced activities
Value created
Financial capital
We finance our investments
through cash flow from op-
erations, debt, farm-downs,
and divestments.
Natural resources
We depend on the availabil-
ity of natural resources such
as wind, solar irradiation,
sustainable biomass, and
seabed and land suitable for
construction.
Human resources
We rely on a highly skilled
workforce to operate our
business.
Innovative culture
We innovate to continuously
improve the competitive-
ness of our energy solutions.
Relational capital
We depend on strong
relations with key stake-
holders to ensure supportive
framework conditions for
our business.
Develop
Construct
Operate
Own
Offshore
Capital employed 83 %
Develop offshore
wind farms.
Construct offshore
wind farms.
Operate and maintain
offshore wind farms.
2 offshore wind farms
under construction.
27 offshore wind farms in
operation.
Projects under develop-
ment in the UK, US,
Germany, Poland, South
Korea, Japan, and Taiwan.
Pursue opportunities
in renewable hydrogen.
Raise capital through
partnerships and
farm-downs.
27 offshore wind farms
under full or partial
ownership.
Onshore
Capital employed 12 %
Develop onshore wind
and solar PV projects
and secure tax equity
financing.
Projects under
development primarily
in ERCOT, SPP, and the
South-East.
Select best-in-class
contractors to construct
our onshore wind and
solar farms.
2 onshore wind farms
and 3 solar farms under
construction.
Select top-tier OEMs to
operate and maintain
our onshore wind and
solar farms, with asset
management performed
in house.
7 onshore wind farms
in operation.
Raise capital through
tax equity partnerships.
7 onshore wind farms
under ownership.
Markets & Bioenergy
Capital employed 5 %
6 biomass CHP plants,
3 heat and ancillary
service plants, and 1 coal-
fired CHP plant under
ownership.
Operate and maintain
CHP plants.
Provide a route-to-market
for Ørsted’s and third
parties’ electricity, power
certificates, and gas.
Manage Ørsted’s energy
portfolio risks.
Optimise our legacy gas
portfolio.
Society
We address profound soci-
etal challenges by devel-
oping green, independent,
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
creating a safe working
environment where all
our employees can thrive,
perform, and grow.
Shareholders
We create value for our
shareholders in the form of
competitive total returns.
32 / 193
Ørsted Annual report 2020
Management’s review
Our business
Our strategic targets
Contents
Target
1. EBITDA from operating offshore and onshore sites, %
3. Installed green capacity, GW
Our target is 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 2020, we averaged an annual growth rate
of 26 % in line with our objective.
In 2018, we set an ambition to install more than 30 GW of green capacity by 2030. Of this, we aim
to install 15 GW of offshore wind and 5 GW of onshore wind and solar PV by 2025. We are making
good progress on our ambitions with 11.3 GW installed, 4.0 GW under construction, and 5.0 GW
awarded at the end of 2020.
CAGR +20 %
CAGR +26 %
~25-26 bn
14.8 bn
16.9 bn
11.4 bn
8.5 bn
Offshore wind
Onshore wind and solar PV
Biomass
Total installed green capacity
8.3
9.9
11.3
+30
+20
5
15
2017
2018
2019
2020
2023
2018
2019
2020
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 2018, ROCE was positively impacted by substantial profits from new partnership agreements,
particularly divestment gains.
In 2020, we increased the green share of generation to 90 %, up four 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. gains from new partnership agreements
32.1 %
86
90
75
95
99
10.6 %
9.7 %
Target
ROCE
~10 %
17
2018
2019
2020
2006
2018
2019
2020
2023
2025
33 / 193
Ørsted Annual report 2020
Management’s review
Our business
5. Greenhouse gas emission intensity (scopes 1 and 2), g CO2e/kWh
7. Employee satisfaction, index 1-100
Contents
Target
We are well on track to meet our scopes 1 and 2 greenhouse gas (GHG) emission intensity target
of less than 10 g CO2e/kWh in 2025. In addition, we aim to be carbon-neutral in 2025 and will
neutralise the remaining 10 g CO2e/kWh or less with carbon offsets. We reduced our GHG intensity
to 58 g CO2e/kWh in 2020.
We believe that employee satisfaction and strong results go hand in hand. Therefore, we are
continuously working to improve the well-being of our employees. In 2020, we reached a
record-high score of 78, placing Ørsted in the top 10 % of our external benchmark group, just as
in 2018 and 2019. In 2019, we set a target to stay in the top 10 % from 2020 to 2025 and are proud
to have met our goal this year.
462
-87 %
-98 %
131
65
58
20
10
Ørsted
Ennova benchmark top 10 %
Ennova benchmark
76
76
70
77
76
72
78
78
73
Target
employee
satisfaction
in top 10 %
2006
2018
2019
2020
2023
2025
2018
2019
2020
1
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.
6. Greenhouse gas emissions (scope 3), million tonnes CO2e
8. Safety, TRIR
We aim to reduce our scope 3 emissions by 50 % between 2018 and 2032. This year, our historical
figures for scope 3 emissions have been rebased due to the divestment of our LNG business.
The primary source of our scope 3 emissions is indirect emissions related to wholesale buying
and selling of natural gas and fossil-based power in our Markets & Bioenergy business and 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.
36.2
-50 %
34.6
29.2
25.3
14.6
4.7
4.9
3.6
2.9
2018
2019
2020
2032
2018
2019
2020
2025
Adjusted
base year
2018
34 / 193
Ørsted Annual report 2020
Management’s review
Our business
Contents
Our global
footprint
United Kingdom
In operation: 4,939 MW
Under construction: 1,386 MW
Under development: 4,000-5,000 MW
In operation:
Renescience Northwich
In operation: 20 MW
Sales of energy
United States
of America
In operation: 30 MW
Awarded: 2,934 MW
Under development: up to 4,500 MW
In operation: 1,658 MW
Under construction: 665 MW
Under construction: 1,077 MW
Under construction: 40 MW
Activities
Status
Offshore wind
Onshore wind
Solar
In operation
Under construction (FID)
Awarded
Biomass-fired power plant
Under development
Fossil-fuelled power plant
Waste-recycling plant
Storage
Sales of energy
MW: Total gross capacity (even if Ørsted’s
share is < 100 %). The MW for the wind farms in
operation illustrates the operational capacity.
The map shows selected Ørsted assets.
South Korea
Under development:
up to 1,600 MW
Sweden
Sales of energy
Denmark
In operation: 945 MW
In operation: our CHP plants,
2,850 MW power and 3,487 MW heat
Sales of energy
Germany
In operation: 1,384 MW
Awarded: 1,142 MW
Sales of energy
The Netherlands
In operation: 752 MW
Taiwan
In operation: (Formosa 1) 128 MW
Under construction: (Greater
Changhua 1 & 2a) 900 MW
Awarded: (Greater Changhua 2b &4) 920 MW
35 / 193
Ørsted Annual report 2020
Management’s review
Our business
Our footprint in
Northern Europe
Contents
Sweden
Sales of energy
Denmark
Sales of energy
Anholt (400 MW)
Herning
Studstrup
Skærbæk
Esbjerg
Kyndby
Asnæs
Svanemøllen
H.C. Ørsted
Avedøre 1 & 2
Horns Rev 1 (158 MW)
Horns Rev 2 (209 MW)
Walney Extension (659 MW)
Walney 1 & 2 (367 MW)
West of Duddon Sands (389 MW)
Westermost Rough (210 MW)
Barrow (90 MW)
Burbo Bank Extension (259 MW)
Burbo Bank (90 MW)
Renescience Northwich
Carnegie Road (20 MW)
Hornsea 1 (1,218 MW)
Hornsea 2 (1,386 MW)
Hornsea 3
Hornsea 4
Combined (4,000-
5,000 MW)
Lincs (270 MW)
Race Bank (573 MW)
Nysted (166 MW)
Gode Wind 1 (345 MW)
Gode Wind 2 (263 MW)
Gode Wind 3 (242 MW)
Borkum Riffgrund 3 (900 MW)
Borkum Riffgrund 1 (312 MW)
Borkum Riffgrund 2 (465 MW)
The Netherlands
Borssele 1 & 2 (752 MW)
Germany
Sales of energy
Gunfleet Sands 1 & 2 (173 MW)
London Array 1 (630 MW)
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
Waste-recycling plant
Storage
Sales of energy
MW: Total gross capacity (even if Ørsted’s
share is < 100 %). The MW for the wind farms in
operation illustrates the operational capacity.
The map shows selected Ørsted assets.
36 / 193
Ørsted Annual report 2020
Management’s review
Our business
Contents
Our footprint
in North America
Willow Creek (103 MW)
South Dakota
Nebraska
Haystack (298 MW)
Plum Creek (230 MW)
United States of America
Sage Draw (338 MW)
Tahoka (300 MW)
Permian Energy Center (420/40 MW)
Texas
Lockett (184 MW)
Western Trail (367 MW)
Willow Springs (250 MW)
Muscle Shoals (227 MW)
Amazon (253 MW)
Alabama
Old 300 Solar Center (430 MW)
Massachusetts
Connecticut
Rhode Island
New Jersey
New York
Bay State Wind (~2,000 MW)
Revolution Wind (704 MW)
Block Island Wind Farm (30 MW)
South Fork (130 MW)
Sunrise Wind (880 MW)
Virginia
Maryland
Delaware
Ocean Wind 2
Ocean Wind 1 (1,100 MW)
Garden State Wind
Skipjack Wind (120 MW)
Coastal Virginia Wind
(12 MW) (EPC contract)
Mid-Atlantic cluster
development capacity
in total (~2,500 MW)
Activities
Status
Offshore wind
In operation
Onshore wind
Under construction (FID)
Solar
Storage
Awarded
Under development
MW: Total gross capacity (even if Ørsted’s share is
< 100 %). The MW for the wind farms in operation
illustrates the operational capacity. The map shows
selected Ørsted assets.
37 / 193
Ørsted Annual report 2020
Contents
Results
39 Results
43 Five-year summary
44 Fourth quarter
46 Quarterly summary, 2019-2020
Plum Creek, one of our new onshore
wind farms, has brought more than
just clean, reliable, low-cost energy to
Nebraska’s Wayne County. Since June,
the project has been helping fund the
Norfolk and Winside school districts,
local emergency services, a hospital,
and the community college. It will
continue to do so for the lifetime of
the project.
Ørsted Annual report 2020
Management’s review
Results
Contents
Results
Financial results
Revenue
Power generation from offshore and onshore
wind increased by 35 % and totalled 20.9 TWh
in 2020, mainly due to ramp-up of generation
from Hornsea 1, Borssele 1 & 2, Lockett, Sage
Draw, Plum Creek, and Willow Creek as well as
higher wind speeds, mainly in Q1 2020. This was
partly offset by periods with negative prices
due to a lower demand for electricity driven
by the COVID-19 pandemic, which led us to
temporarily shut down generation.
Thermal power generation amounted to
4.4 TWh, a 4 % decrease compared to last year
due to slightly warmer weather and less favour-
able market conditions for power generation,
partly offset by a higher volume from ancillary
services. Heat generation amounted to 6.7 TWh,
down 20 % compared to last year, mainly due to
a warm first quarter in 2020.
Offshore and onshore wind accounted for 83 %
of our total power generation, up 6 percentage
points from last year.
Revenue amounted to DKK 52.6 billion. The
decrease of 22 % relative to 2019 was primarily
due to limited construction works on wind
farms for partners, significantly lower gas and
power prices relative to last year, lower sales
of gas, and lower thermal heat and power
generation, partly offset by the increase in
wind-based power generation.
EBITDA
Operating profit (EBITDA) totalled DKK 18.1 billion
compared to DKK 17.5 billion in 2019.
Earnings from offshore and onshore wind farms
in operation amounted to DKK 16.9 billion.
The 14 % increase relative to 2019 was due to
the above-mentioned ramp-up of new wind
farms in operation, receipt of CfDs of another
400 MW of Hornsea 1 from April, and higher
wind speeds. This was partly offset by adverse
COVID-19 impacts of approx. DKK 400 million
on especially the UK power market due to
a lower demand for electricity, which led to
hours with negative prices from April to July,
lower ROC recycle prices, and higher balanc-
ing tariffs (BSUoS) from National Grid in 2020,
and by lower earnings from trading related
to hedging of our power exposures which
achieved very high results in 2019.
Earnings from construction agreements for
partners totalled DKK 1.6 billion compared to
DKK 3.8 billion in 2019. In 2020, our earnings
from construction agreements mainly related
to the lowered assumptions regarding the
preferred bidder’s expected return requirement
on the Hornsea 1 transmission asset, the
construction of Coastal Virginia Wind, and
minor updates regarding finalised construction
projects. In 2019, earnings from construction
agreements primarily concerned Hornsea 1.
EBITDA from CHP plants amounted to
DKK 1.1 billion, slightly below last year.
The decrease was mainly due to lower
thermal heat and power generation and lower
power spreads as well as the reversal of a
provision in 2019 of DKK 0.3 billion following
the acquittal in the Elsam case. This was
partly offset by higher earnings from sale
of ancillary services in 2020.
EBITDA from our gas activities were in line with
last year. Higher earnings from revaluation of
our gas at storage and a positive impact from
storage hedges were offset by lower trans-
ported and sold volumes due to the shutdown
of the Tyra gas field from late 2019 until 2022
as well as a provision for bad debt in our B2B
business to cover the extraordinary COVID-19-
related default risks among our customers.
Business performance versus IFRS, DKKm
EBITDA – business performance
Adjustments
EBITDA – IFRS
2020
18,124
(1,526)
16,598
2019
17,484
1,536
19,020
Business performance versus IFRS
We use business performance as an alternative
to the results prepared in accordance with IFRS.
Business performance represents the underlying
financial performance of the Group in the reporting
period as results are adjusted for temporary
fluctuations in the market value of contracts
(including hedging transactions) relating to other
periods. The difference between the two principles
will be eliminated as the contracts expire. Apart
from this, there is no difference between business
performance and the IFRS results.
EBITDA in accordance with IFRS amounted to
DKK 16.6 billion in 2020 against DKK 19.0 billion in
2019. In accordance with the business performance
principle, EBITDA was DKK 18.1 billion and
DKK 17.5 billion, respectively. The difference between
the two principles was thus DKK -1.5 billion in 2020
against DKK 1.5 billion in 2019.
In the presentation of the results according to
IFRS, we have elected not to apply the provisions
on hedge accounting of commodities and related
currency exposures. The market value 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, com-
ments are made on business performance only. Read
more in note 1.6 and in note 7.
39 / 193
Ørsted Annual report 2020
Management’s review
Results
Contents
EBIT
EBIT increased by 5 % to DKK 10.5 billion,
primarily as a result of the higher EBITDA and
no impairment losses in 2020. Depreciation
increased due to more wind farms in opera-
tion. Impairment losses in 2019 were related
to a write-down of our Renescience plant and
our 20 MW battery storage project Carnegie
Road, both in the UK.
Gain (loss) on divestment of enterprises
Gain on divestment of enterprises primarily
concerned the divestment of our Danish power
distribution, residential customer, and city light
businesses to SEAS-NVE (now Andel). The trans-
action resulted in a gain of DKK 10.9 billion.
Financial income and expenses
Net financial income and expenses
amounted to DKK 2.5 billion compared
to DKK 1.1 billion in 2019. The increase was
mainly due to a loss on interest rate swaps
in June in connection with early termination
of local project financing in the US, negative
effects from exchange rate adjustments due
to a weakening of GBP, and capital losses
on the bond portfolio due to the increasing
interest rates.
Tax and tax rate
Tax on profit for the year amounted to
DKK 2.1 billion, which was DKK 0.6 billion
lower than in 2019. The decrease was mainly
due to higher net financial expenses, partly
offset by initial recognition of deferred taxes
of DKK 1.1 billion related to tax equity at
Sage Draw in April, Plum Creek in June,
and Willow Creek in September.
The effective tax rate was 11 %, and it was
significantly impacted by the non-taxable
gain on the divestment of our Danish power
Financial results, DKKm
Revenue
EBITDA
Depreciation
Impairment reversals (losses)
Operating profit (loss) (EBIT)
Gain (loss) on divestment of enterprises
Profit (loss) from associates and joint ventures
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
2020
52,601
18,124
(7,588)
-
10,536
10,831
7
(2,524)
(2,123)
11 %
16,727
(11)
16,716
2019
67,842
17,484
(6,864)
(568)
10,052
(63)
2
(1,135)
(2,756)
31 %
6,100
(56)
6,044
%
(22 %)
4 %
11 %
n.a.
5 %
n.a.
250 %
122 %
(23 %)
(20 %p)
174 %
(80 %)
177 %
distribution, residential customer, and city
light businesses mentioned above.
Profit for the year from
continuing operations
Profit for the year from continuing operations
totalled DKK 16.7 billion, DKK 10.6 billion
higher than in 2019. The increase was primarily
due to the divestment of our Danish power
distribution, residential customer, and city
light businesses.
EBITDA, %
Offshore
Onshore
Markets & Bioenergy
12 %
6 %
DKK 18.1 bn
82 %
EBITDA, DKKbn
17.5
18.1
In 2020, regulated and quasi-regulated
activities and contracted activities
accounted for 71 % and 19 % of our
EBITDA, respectively, whereas market-
exposed activities accounted for 10 %.
Read more about profit for the year from
discontinued operations in note 3.7.
2019
2020
EBITDA increased by 4 %. No new
partnerships in 2019 and 2020.
40 / 193
Ørsted Annual report 2020
Management’s review
Results
Contents
Cash flows and net debt
Cash flows from operating activities
Cash flows from operating activities totalled
DKK 16.5 billion in 2020 compared to
DKK 13.1 billion in 2019. The increase of
DKK 3.4 billion was mainly due to lower paid
taxes in Denmark, tax equity contributions
from our partners in the onshore wind farms
Sage Draw, Plum Creek, and Willow Creek,
lower trade receivables due to lower revenue,
and the divestment of the offshore transmis-
sion assets at Walney Extension. This was part-
ly offset by 2019 being positively affected by
received milestone payments related to the
construction of Hornsea 1 and the divestment
of the Race Bank transmission assets.
In 2020, we had a net cash outflow from
work in progress of DKK 1.6 billion. This was
mainly due to supplier payments related to
the construction of Hornsea 1 for partners
and construction of the offshore transmission
asset at Hornsea 2, partly offset by the divest-
ment of the offshore transmission assets at
Walney Extension.
Investments and divestments
Gross investments amounted to DKK 27.0 billion
against DKK 23.3 billion in 2019. The main
investments in 2020 were:
– offshore wind farms (DKK 19.5 billion),
including Borssele 1 & 2 in the Netherlands,
Greater Changhua 1 & 2a in Taiwan, Hornsea 2
in the UK, and Ocean Wind 1 in the US
– onshore wind and solar farms (DKK 6.6 billion),
including Permian Energy Center, Muscle
Shoals, Western Trail, Sage Draw, Plum
Creek, Willow Creek, and Haystack in the US
– Markets & Bioenergy (DKK 0.7 billion),
mainly related to maintenance of the
power distribution grid.
Cash flow from divestments in 2020 related
mainly to the divestment of our Danish power
distribution, residential customer, and city
light businesses. The transaction resulted in
proceeds of DKK 20.5 billion. Furthermore,
we received minor proceeds regarding the
divestment of our 10 MW Oak Solar Farm in
New Jersey and our Inbicon production facili-
ties. This was partly offset by a cash outflow
in connection with the divestment of the LNG
activities of DKK 1.5 billion and compensations
paid under our partnership agreements.
Cash flow from divestments in 2019 related
to the receipt of deferred proceeds from the
farm-down of 50 % of Hornsea 1 in 2018
(DKK 1.7 billion) and to the strengthening of
our strategic partnership with Eversource, as
they became a 50 % partner in our activities
in the New England area in February 2019
(DKK 1.4 billion).
Interest-bearing net debt
Interest-bearing net debt totalled
DKK 12.3 billion at the end of 2020 against
DKK 17.2 billion at the end of 2019. The
DKK 4.9 billion decrease was mainly due to
a positive free cash flow of DKK 8.5 billion
from continuing operations and a positive
cash flow from discontinued operations
where we have received deferred proceeds
of USD 150 million from INEOS regarding the
Oil & Gas divestment in 2017. These positive
cash flow effects were only partly offset by
dividends and hybrid coupon payments of
DKK 5.2 billion.
Cash flows and net debt, DKKm
Cash flows from operating activities
EBITDA
Change in derivatives
Change in provisions
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.
Net debt at 31 December
Key ratios, DKKm, %
ROCE
Adjusted net debt
FFO/adjusted net debt
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.
2020
16,466
18,124
411
(772)
(805)
(42)
(1,830)
(1,118)
(1,613)
2,958
1,153
2019
13,079
17,484
(1,040)
727
101
86
(1,049)
(4,800)
1,417
630
(477)
(26,967)
(23,305)
19,039
8,538
17,230
3,329
(6,897)
(2,219)
(8,538)
6,897
%
26 %
4 %
n.a.
n.a.
n.a.
n.a.
74 %
(77 %)
n.a.
370 %
n.a.
16 %
472 %
n.a.
n.a.
n.a.
(966)
(174)
455 %
342
5,239
934
(1,898)
12,343
2020
9.7 %
26,308
48.3 %
340
5,016
5,873
1,497
1 %
4 %
(84 %)
n.a.
17,230
(28 %)
2019
10.6 %
30,575
31.0 %
%
(1 %p)
(14 %)
17 %p
ROCE and FFO/adjusted
net debt is specified in
notes 2.1 and 6.1.
41 / 193
Ørsted Annual report 2020
Management’s review
Results
Contents
Equity and capital employed
ESG results
Equity
Equity was DKK 97.3 billion at the end of
the year against DKK 89.6 billion at the end
of 2019.
Capital employed
Capital employed was DKK 109.7 billion at
31 December 2020 against DKK 106.8 billion
at the end of 2019. The increase was mainly
due to investments, partly offset by the divested
capital employed regarding the Danish power
distribution, residential customer, and city
light businesses.
Financial ratios
Return on capital employed (ROCE)
Return on capital employed was 9.7 % in 2020
against 10.6 % in 2019. The slight decrease
was mainly attributable to the higher average
capital employed, only partly offset by
higher EBIT.
Credit metric (FFO/adjusted net debt)
The funds from operations (FFO)/adjusted net
debt credit metric was 48 % at the end of
2020 against 31 % in 2019.
Green share of heat and power generation
The green share of heat and power generation
amounted to 90 % in 2020, up 4 percentage
points compared to last year. The increase
mainly came from higher generation from
offshore and onshore wind farms due to
additional capacity and higher wind speeds.
This was partly offset by an increase from
ancillary services from our coal-fuelled units
as we are legally obliged to deliver these
services with the lowest marginal costs.
Greenhouse gas emissions
The greenhouse gas intensity from our heat
and power generation and other operating
activities (scopes 1 and 2) decreased to 58 g
CO2e/kWh in 2020 against 65 g CO2e/kWh in
2019. The emissions per kWh decreased for the
same reasons as mentioned above.
Greenhouse gas emissions from our supply
chain and sales activities (scope 3) decreased
by 27 % to 25.3 million tonnes in 2020, driven
by a 28 % decrease in gas sales.
Safety
In 2020, we have had 77 total recordable
injuries (TRIs), of which 58 injuries were related
to our contractors’ employees. This was a
decrease of 29 injuries compared to 2019,
equalling a 27 % reduction. The number of
hours worked was 21.5 million hours, 1 %
more than in 2019. Consequently, the total
recordable injury rate (TRIR) over the last year
decreased from 4.9 in 2019 to 3.6 in 2020.
Capital employed, %
Offshore
Onshore
Markets & Bioenergy
5 %
12 %
DKK
109.7 bn
83 %
Amazon Wind Farm,
Scurry County, Texas,
the US.
42 / 193
Ørsted Annual report 2020
Management’s review
Results
Contents
Five-year summary
Income statement (business performance), DKKm
Revenue
EBITDA
Offshore
Sites, O&M, and PPAs
Construction agreements and divestment gains
Other, incl. project development
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
2020
52,601
18,124
14,750
15,476
1,593
(2,319)
1,131
2,136
107
(7,588)
-
10,536
10,831
(2,524)
18,850
(2,123)
16,727
16,716
196,719
97,329
81,376
2,721
13,232
12,343
109,672
28,442
16,466
(26,967)
19,039
8,538
9.7
48.3
420,068
1,244
522
38.8
0.9
2019
67,842
17,484
15,161
13,750
3,765
(2,354)
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
290
12.7
1.5
2018
76,946
30,029
28,046
11,279
18,765
(1,998)
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
436
183
45.3
2.2
2017
59,504
22,519
20,595
8,529
13,667
(1,601)
-
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
339
142
46.4
2.7
2016
61,201
19,109
11,867
5,869
7,012
(1,014)
-
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
268
113
30.6
2.2
50,151
16,598
15,548
70,398
19,020
7,291
75,520
28,491
18,266
59,709
22,574
13,321
57,393
16,939
10,467
Business drivers
2020
2019
2018
2017
2016
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 (scopes 1 & 2)
Carbon emissions, Mtonnes (scope 3)
Business performance versus 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 1.6.
The EBITDA split between business units in the
comparative years 2016-2017 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).
9.9
7.6
4.4
9.7
45
94
15.2
29.2
3.4
1.7
7.6
45
96
5.7
2,432
6.7
4.4
11.6
90.3
6,179
3.6
0
90
58
25.3
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
125.0
6,526
4.9
1
86
65
34.6
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
131.1
6,080
4.7
0
75
131
36.2
8.9
3.9
2.5
9.3
44
93
8.5
-
-
-
-
-
-
-
2,705
9.0
8.2
31.7
129.0
5,638
6.4
0
64
151
n.a.
7.4
3.6
2.0
8.9
41
92
6.0
-
-
-
-
-
-
-
2,715
9.2
8.4
32.9
143.4
5,775
6.8
0
50
224
n.a.
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
(2016-2018), and decommissioning obligations less
deferred tax.
See definition on page 192 and in the ESG statements.
The figures indicate values from the latest regulatory
financial statements (updated in June).
3
4
43 / 193
Ørsted Annual report 2020
Management’s review
Results
Contents
Fourth quarter
Financial performance
– Group
from the divested Danish power distribution,
residential customer, and city light businesses.
Revenue
Revenue in Q4 2020 decreased by 17 % relative
to Q4 2019 and amounted to DKK 15.6 billion.
The lower revenue was mainly driven by
significantly lower gas volumes sold and by
construction agreements due to divestment
of the transmission assets at Race Bank in
Q4 2019, partly offset by increase in our wind-
based power generation.
EBITDA
Operating profit (EBITDA) totalled DKK 5.0 billion
compared to DKK 4.6 billion in Q4 2019. The
increase was mainly driven by ramp-up from
new offshore and onshore wind farms in oper-
ation, which increased by 9 %, and higher wind
speeds. In addition, the divested LNG activities
contributed positively year on year as the
provision in Q4 2019 was not repeated.
This was partly offset by lower earnings
from trading related to hedging of our power
exposure and power portfolio optimisation
activities, which had high earnings in Q4 2019,
and from our gas portfolio where the net
positive effect from revaluation of our gas at
storage and storage hedges was higher in Q4
2019 than Q4 2020. Furthermore, EBITDA from
partnerships contributed negatively, due to
minor updates regarding finalised construction
projects. In addition, we had lower earnings
We also saw adverse COVID-19 impacts on
especially the UK power market due to a lower
demand for electricity, which led to lower ROC
recycle prices and higher balancing tariffs
(BSUoS) from National Grid.
Profit from continuing operations
Profit from continuing operations increased by
DKK 1.2 billion to DKK 2.2 billion. The increase
was mainly due to the higher EBITDA and
impairment losses in Q4 2019.
Cash flows from operating activities
Cash flows from operating activities totalled
DKK 6.8 billion in Q4 2020 compared to
DKK 4.8 billion in Q4 2019. The increase of
DKK 1.9 billion was mainly due to lower
receivables at the end of 2020 compared to
2019 and an early repayment related to our
oil pipe facilities in Q4 2020.
Investments and divestments
Gross investments amounted to DKK 8.6 billion
in Q4 2020. The main investments related to
Hornsea 2, Greater Changhua 1 & 2a, Permian
Energy Center, Muscle Shoals, Western Trail,
and Haystack.
Cash flow from divestments was a cash
outflow of DKK 1.5 billion and mainly related
to the divestment of the LNG activities.
Financial performance, DKKm
Revenue
EBITDA
Operating profit (loss) (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
Q4 2020
Q4 2019
%
15,559
18,679
(17 %)
5,003
3,091
2,343
(169)
2,174
15
2,189
4,613
2,169
1,515
(590)
925
(29)
896
Q4 2020
Q4 2019
6,756
5,003
703
(288)
451
(31)
(237)
239
486
(310)
740
(8,639)
(1,519)
(3,402)
8,216
3,402
(40)
-
208
695
(138)
12,343
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
8 %
43 %
55 %
(71 %)
135 %
n.a.
144 %
%
40 %
8 %
n.a.
n.a.
8 %
210 %
(10 %)
319 %
106 %
57 %
n.a.
(2 %)
n.a.
(5 %)
(32 %)
(5 %)
n.a.
n.a.
(27 %)
379 %
n.a.
(28 %)
44 / 193
Ørsted Annual report 2020
Management’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
to minor updates regarding finalised
construction projects.
Offshore
Power generation increased by 23 % relative
to Q4 2019. The increase was primarily due
to ramp-up of generation from Hornsea 1 and
Borssele 1 & 2. Wind speeds amounted to a
portfolio average of 10.4 m/s which was higher
than in Q4 2019, but slightly lower than nor-
mal wind speeds (10.5 m/s). Availability ended
at 94 %, which was 1 percentage point higher
than in Q4 2019.
Revenue from offshore wind farms in
operation increased by 8 % due to the above-
mentioned ramp-up from new wind farms.
Revenue from power sales increased by
DKK 1.2 billion due to higher power prices
and higher volumes sold during the quarter.
Revenue from construction agreements was
limited in Q4 2020 and mainly related to the
construction of Coastal Virginia Wind. In Q4
2019, it primarily related to the divestment of
the transmission assets at Race Bank.
EBITDA increased by DKK 0.1 billion relative
to Q4 2019 and amounted to DKK 4.1 billion.
EBITDA from sites, O&M, and PPAs amounted
to DKK 5.0 billion, up 7 % compared to Q4
2019, driven by higher generation. The increase
was partly offset by adverse COVID-19
impacts and lower earnings from trading
related to hedging of our UK energy exposure,
which had very high earnings in Q4 2019.
EBITDA from partnerships amounted to
DKK -0.1 billion in Q4 2020, mainly due
Onshore
Power generation increased by 84 % relative
to Q4 2019. The increase was primarily due to
new onshore wind farms in operation (Sage
Draw, Plum Creek, and Willow Creek). Wind
speeds across the portfolio amounted to 8.0 m/s,
which was higher than in the same period last
year and a normal fourth quarter (7.7 m/s).
Revenue from wind farms in operation in-
creased by 41 % due to the above-mentioned
factors, partly offset by lower prices for the
part of the portfolio not covered by PPAs and
a lower positive effect from derivate run-offs
related to the acquisition of LCE back in 2018.
EBITDA almost doubled to DKK 0.3 billion,
primarily due to more wind farms in operation.
Markets & Bioenergy
Revenue decreased by 40 % and amounted
to DKK 5.8 billion compared to Q4 2019. The
decrease was mainly due to significantly lower
gas and power volumes sold.
EBITDA totalled DKK 0.6 billion in Q4 2020,
which was DKK 0.2 billion higher than in Q4 2019.
EBITDA from CHP plants was in line with last
year and amounted to DKK 0.3 billion.
EBITDA from Gas Markets & Infrastructure
decreased by DKK 0.2 billion and amounted to
DKK 0.4 billion. The lower earnings were related
to our gas portfolio where the net positive effect
from revaluation of our gas at storage and stor-
age hedges was higher in Q4 2019 than Q4 2020.
Offshore’s results, DKKm
Q4 2020
Q4 2019
Revenue
10,799
10,913
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
5,891
4,603
122
183
4,128
4,950
(149)
(673)
7,111
1,329
5,437
3,397
2,012
67
4,048
4,626
51
(629)
Onshore’s results, DKKm
Q4 2020
Q4 2019
Revenue
EBITDA
Sites
Production tax credits and tax
attributes
Other, incl. project development
Cash flows from operating
activities
173
324
99
314
(89)
134
123
165
73
201
(109)
(160)
Free cash flow
(2,556)
(2,822)
%
(1 %)
8 %
36 %
(94 %)
173 %
2 %
7 %
n.a.
7 %
n.a.
%
41 %
96 %
36 %
56 %
(18 %)
n.a.
(9 %)
3,545
101 %
(1,697)
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
Q4 2020
Q4 2019
%
5,755
9,569
(40 %)
643
346
389
-
-
(92)
(401)
(2,090)
490
354
620
(691)
257
(50)
(280)
(739)
31 %
(2 %)
(37 %)
n.a.
n.a.
84 %
43 %
183 %
45 / 193
Ørsted Annual report 2020
Management’s review
Results
Contents
Quarterly summary, 2019-2020
Income statement
(business performance), DKKm
Revenue
EBITDA
Offshore
Sites, O&M, and PPAs
Construction agreements and
divestment gains
Other, incl. project development
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 2020 Q3 2020 Q2 2020 Q1 2020 Q4 2019 Q3 2019 Q2 2019 Q1 2019
Business drivers
Q4 2020 Q3 2020 Q2 2020 Q1 2020 Q4 2019 Q3 2019 Q2 2019 Q1 2019
15,559
5,003
4,128
4,950
(149)
(673)
324
643
(92)
(1,912)
-
3,091
(291)
(456)
2,343
(169)
10,041
3,360
2,629
3,012
247
(630)
308
375
48
(2,095)
-
1,265
11,139
(282)
12,124
(108)
11,625
2,956
2,361
2,578
396
(613)
312
185
98
(1,827)
-
1,129
(3)
(1,010)
119
(928)
15,376
6,805
5,632
4,936
1099
(403)
187
933
53
(1,754)
-
5,051
(14)
(776)
4,264
(918)
18,679
4,613
4,048
4,626
51
(629)
165
490
(90)
(1,876)
(568)
2,169
(13)
(644)
1,515
(590)
15,481
4,116
3,223
2,612
1188
(577)
308
436
149
(1,681)
-
2,435
(15)
(47)
2,368
(925)
16,443
3,625
3,572
2,552
1638
(618)
162
(115)
6
(1,689)
-
1,936
(18)
(545)
1,376
(283)
17,239
5,130
4,318
3,960
888
(530)
151
684
(23)
(1,618)
-
3,512
(17)
101
3,597
(958)
2,174
2,189
12,016
12,034
(809)
(825)
3,346
3,318
925
896
1,443
1,477
1,093
1,075
2,639
2,596
196,719 194,567 193,124 193,636 192,860 194,521 185,949 182,783
85,843
69,193
3,411
13,239
9,111
94,954
89,562
85,930
73,082
69,789
3,248
2,909
13,232
13,232
17,230
22,272
109,672 104,688 108,203 116,098 106,792
86,446
69,960
3,247
13,239
4,980
91,426
87,369
70,977
3,153
13,239
12,082
99,451
96,472
80,450
2,790
13,232
8,216
97,329
81,376
2,721
13,232
12,343
89,015
72,728
3,055
13,232
27,084
8,121
5,477
10,011
4,833
6,560
8,449
3,755
3,676
6,756
(8,639)
(1,519)
(3,402)
1,941
(9,263)
20,506
13,184
8,197
(3,757)
45
4,485
(428)
(5,308)
7
(5,729)
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)
9.7
48.3
9.4
35.6
10.8
23.1
11.0
21.3
10.6
31.0
29.3
47.4
29.3
57.5
28.2
46.2
420,068 420,066 420,066 419,985 419,985 419,985 419,985 420,045
504
1,244
875
765
666
689
637
533
522
4.9
368
28.6
321
(2.7)
280
8.0
290
1.1
267
3.5
224
1.9
212
6.2
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
(scopes 1 & 2)
Carbon emissions, Mtonnes (scope 3)
9.9
7.6
4.4
10.4
53
94
4.8
8.6
3.4
1.7
8.0
50
95
1.8
825
2.3
1.3
2.6
20.3
9.9
6.8
4.1
8.2
35
94
3.2
6.3
2.7
1.7
6.7
36
97
1.2
106
0.3
0.6
2.4
23.2
9.9
6.8
3.8
8.0
32
95
2.6
5.5
2.1
1.6
8.0
49
96
1.6
436
1.0
0.9
3.0
20.1
6,179
3.6
0
6,120
3.8
0
6,731
3.7
0
93
34
5.9
90
83
6.3
86
84
5.5
9.9
6.8
3.6
12.1
60
93
4.6
8.8
2.1
1.3
7.5
44
95
1.1
1,065
3.1
1.6
3.6
26.7
6,608
3.6
0
90
53
7.6
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
36.7
6,526
4.9
0
90
44
10.7
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
30.8
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
31.7
6,454
4.7
0
6,312
4.0
1
87
62
8.2
85
71
8.4
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
25.8
6,176
4.4
0
80
85
7.3
Business performance versus 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 1.6.
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), and decommissioning obliga-
tions less deferred tax.
See definition on page 192 and in the ESG statements.
The figures indicate values from the latest regulatory
financial statements (updated in June).
Year to date.
13,195
3,102
8,762
2,455
9,962
1,592
18,232
9,449
19,815
5,260
14,543
3,328
17,277
4,425
18,763
6,007
ROCE is calculated for continuing operations.
700
11,311
(1,870)
5,407
1,429
822
1,718
3,322
46 / 193
Ørsted Annual report 2020
Contents
Business units
48 Our business units
49 Offshore
54 Onshore
57 Markets & Bioenergy
Trading power and commodities
means we can actively manage
market risk for our generating assets
and for contracts. For instance, our
energy traders like Tom, who works in
Gentofte, buy and sell energy at just
the right moment to manage price
fluctuations caused by, among other
things, wind, snow, rain, and sun.
Ørsted Annual report 2020
Management’s review
Business units
Contents
Our business units
Ørsted
EBITDA1
2019
2020
Offshore
EBITDA1
2019
Onshore
EBITDA1
2019
DKK 17.5 bn
DKK 15.2 bn
DKK 0.8 bn
2020
2020
DKK 18.1 bn
DKK 14.8 bn
DKK 1.1 bn
Markets & Bioenergy
EBITDA1
2019
DKK 1.5 bn
2020
DKK 2.1 bn
From operating wind farms
Key figures 2020
Revenue
Gross investments
Capital employed
TRIR
Number of employees
ROCE
DKK 52.6 bn
DKK 27.0 bn
DKK 109.7 bn
3.6
6,179
9.7 %
Financial target
ROCE
10 % (avg. 2019-2025)
Key figures 2020
Revenue
Gross investments
Capital employed
TRIR
Number of employees
DKK 34.5 bn
DKK 19.5 bn
DKK 90.6 bn
3.5
3,078
Key figures 2020
Revenue
Gross investments
Capital employed
TRIR
Number of employees
DKK 0.7 bn
DKK 6.6 bn
DKK 12.9 bn
2.2
140
Key figures 2020
Revenue
Gross investments
Capital employed
TRIR
Number of employees
DKK 21.4 bn
DKK 0.7 bn
DKK 5.2 bn
7.5
1,009
1 The sum of the business units’ key figures for 2020 does not equal the consolidated key figures due to other activities and eliminations. Read more in note 2.1.
48 / 193
Ørsted Annual report 2020
Management’s review
Business units
Contents
Offshore
Highlights 2020
Introduction to Offshore
Operations
We commissioned Borssele 1 & 2 and com-
pleted the construction of the demonstration
project Coastal Virginia Wind.
We have kept availability high across our
operating portfolio during the COVID-19
pandemic.
Business development
We installed our offshore wind turbine
number 1,500.
We selected Siemens Gamesa Renewable
Energy (SGRE) as the preferred wind turbine
supplier for our offshore wind farms Borkum
Riffgrund 3 and Gode Wind 3.
We entered into the world’s largest renewables
CPPA with Taiwan-based TSMC who will buy
electricity from our offshore wind farm Greater
Changhua 2b & 4.
We signed CPPAs with Nestlé UK and Amazon
who will buy electricity from our offshore wind
farms Race Bank and Borkum Riffgrund 3,
respectively.
Walney Extension, off the coast
of Cumbria, the UK.
Ørsted develops, constructs, owns,
and operates offshore wind farms
in the UK, Germany, Denmark, the
Netherlands, the US, Taiwan, Japan,
and South Korea.
Since we built the world’s first off-
shore wind farm in 1991, we have been
pioneers of offshore wind, and with
almost 30 years of experience, we
have constructed more offshore wind
farms than any other company.
We are market leader in all regions
where we operate, with a total
installed capacity of 7.6 GW. Ørsted
has 28 offshore wind farms in operation
that supply carbon-free power to more
than 18 million people worldwide.
Our integrated EPC organisation has
a strong track record of delivering
projects on time and within budget
and manages multiple large-scale
offshore construction projects in
parallel across the globe.
We are pursuing growth opportunities
in renewable hydrogen in the UK and
Continental Europe.
49 / 193
Ørsted Annual report 2020
Management’s review
Business units
Contents
We entered into agreements to divest 25 %
of Ocean Wind 1 to Public Service Enterprise
Group (PSEG) and 50 % of the project Greater
Changhua 1 to CDPQ and Cathay PE.
winds in Q1 2020. Availability was 94 %,
which was 1 percentage point higher than
in 2019.
EBITDA from ‘Sites,
O&M, and PPAs’
increased by 13 %.
We divested the transmission assets of our
offshore wind farm Walney Extension.
We established a joint venture with TEPCO
to develop projects on the eastern coast
of Japan.
We have started developing a project in
South Korea with a capacity of up to 1.6 GW.
In renewable hydrogen, we took FID on
the H2RES project and secured funding
for the OYSTER, Gigastack, and Westküste
100 projects.
We launched three new renewable hydrogen
projects: Green Fuels for Denmark and our
partnerships with Yara and bp.
Financial performance 2020
Power generation increased by 27 % relative
to 2019, primarily due to ramp-up of gen-
eration from Hornsea 1 and Borssele 1 & 2
(in total 1.6 TWh) and higher wind speeds,
mainly in Q1 2020. This was partly offset by
hours with negative prices from April to July
due to a lower demand for electricity driven
by the COVID-19 pandemic, which led us to
temporarily shut down generation.
Wind speeds were above last year and
amounted to a portfolio average of 9.7 m/s,
up from 9.2 m/s in 2019 and above a normal
wind year (9.3 m/s), mainly due to very strong
Revenue decreased by 14 % to DKK 34.5 billion.
The decrease compared to 2019 was driven
by revenue from construction agreements
decreasing by DKK 9.0 billion, primarily due
to high activity in 2019 related to the con-
struction of the offshore wind farm Hornsea 1
for partners and the divestment of the
offshore transmission assets at Race Bank.
In 2020, revenue from construction agree-
ments primarily related to the divestment
of the offshore transmission assets at
Walney Extension, construction of Coastal
Virginia Wind, and the finalisation of Hornsea 1.
This was partly offset by revenue from off-
shore wind farms in operation increasing by
17 % to DKK 19.4 billion, mainly due to higher
generation.
EBITDA decreased by 3 % relative to 2019
and amounted to DKK 14.8 billion.
EBITDA from Sites, O&M, and PPAs amounted
to DKK 15.5 billion in 2020. The 13 % increase
was primarily due to the above-mentioned
ramp-up of Hornsea 1 and Borssele 1 & 2,
receipt of CfDs of another 400 MW of
Hornsea 1 from April, and higher wind speeds.
The increase was partly offset by adverse
COVID-19 impacts on especially the UK
power market due to a lower demand for
electricity, which led to hours with negative
prices from April to July, lower ROC recycle
prices, and higher balancing tariffs (BSUoS)
from National Grid in 2020. Furthermore, we
saw lower earnings from trading related to
hedging of our UK energy exposure, which
Performance highlights
2020
2019
%
Business drivers
Decided (FID) and installed
capacity
Installed capacity
Generation capacity
Wind speed
Load factor
Availability
GW
GW
GW
m/s
%
%
9.9
7.6
4.4
9.7
45
94
9.9
6.8
3.6
9.2
42
93
Power generation
TWh
15.2
12.0
0 %
11 %
21 %
5 %
3 %p
1 %p
27 %
0 %
27 %
5 %
n.a.
(50 %)
6 %
(16 %)
(1 %)
(14 %)
17 %
2 %
(73 %)
151 %
(3 %)
13 %
2.2
9.4
2.3
1.2
0.1
29.2
36.8
8.4
34,533
19,427
11,255
3,371
480
14,750
15,476
2.2
7.4
2.2
-
0.2
27.6
43.6
8.5
40,216
16,602
11,037
12,386
191
15,161
13,750
1,593
3,765
(58 %)
(2,319)
(6,106)
8,644
(2,354)
(5,494)
9,667
9,985
9,283
(19,525)
(15,121)
(149)
(9,689)
90,613
3,052
(2,786)
79,447
(1 %)
11 %
(11 %)
8 %
29 %
n.a.
248 %
14 %
50 / 193
Denmark
United Kingdom
Germany
The Netherlands
Other
Power sales
Power price, LEBA UK
British pounds
Financial performance
TWh
GBP/MWh
DKK/GBP
Revenue
DKKm
Sites, O&M, and PPAs
Power sales
Construction agreements
Other
EBITDA
Sites, O&M, and PPA
Construction agreements
and divestment gains
Other, incl. project
development
Depreciation
EBIT
Cash flows from operating
activities
Gross investments
Divestments
Free cash flow
Capital employed
DKKm
DKKm
DKKm
DKKm
DKKm
DKKm
DKKm
DKKm
Ørsted Annual report 2020
Management’s review
Business units
Contents
the construction of Hornsea 1 for partners
and construction of the offshore transmis-
sion assets at Hornsea 2, partly offset by
the divestment of the offshore transmission
assets at Walney Extension.
Gross investments amounted to DKK 19.5 billion
and mainly related to the construction of
Borssele 1 & 2, Greater Changhua 1 & 2a,
Hornsea 2, and Ocean Wind 1.
Cash flow from divestments in 2020 related
to compensations paid under partnership
agreements. In 2019, cash flow from divest-
ments 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 activities in the New England
area in the US in 2019 (DKK 1.4 billion).
Strategic and operational
performance 2020
Our Offshore business delivered a strong
performance in 2020, despite the challenges
presented by the COVID-19 pandemic. We
commissioned our construction projects on
schedule and within budget and achieved a
park availability of 93.7 % across the portfolio,
with Borssele 1 & 2 delivering a park availabili-
ty of 97.4 % since May 2020.
had very high earnings in 2019. Excluding
earnings previously reported as part of
Markets & Bioenergy, EBITDA from Sites,
O&M, and PPAs increased by 17 %.
EBITDA from partnerships decreased
by DKK 2.2 billion and amounted to
DKK 1.6 billion. In 2020, our earnings
from construction agreements mainly
related to the lowered assumptions
regarding the preferred bidder’s expected
return requirement on the Hornsea 1
transmission asset, the construction of
Coastal Virginia Wind, and minor updates
regarding finalised construction projects.
In 2019, earnings from construction agree-
ments primarily concerned Hornsea 1.
EBITDA from other activities, including project
development, amounted to DKK -2.3 billion,
in line with last year, and mainly related to
our project development activities in the US.
Total expensed project development costs
amounted to DKK 1.7 billion.
Depreciation increased 11 % and amounted to
DKK 6.1 billion. The increase was mainly due
to completion of Hornsea 1 and Borssele 1 & 2.
Cash flow from operating activities amounted
to DKK 10.0 billion, which was DKK 0.7 billion
higher than in 2019. The increase was primari-
ly due to less paid tax in 2020 relative to
2019. This was partly offset by funds tied up
in work in progress in 2020 versus a release
in 2019.
In 2020, we had a net cash outflow from
work in progress of DKK 1.6 billion. This was
mainly due to supplier payments related to
Quarterly and annual wind speeds for our offshore wind farms, m/s
2017
Normal wind year
2018
2019
2020
12.1
10.4
8.0
8.0
8.5
8.2
10.0
10.4
9.3
9.1
9.2
9.7
Q1
Q2
Q3
Q4
FY
The wind speeds
indicate 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.
our strategic ambition of 15 GW of installed off-
shore wind capacity by 2025. With our current
portfolio of projects under construction and
awarded, we have nearly reached this target.
The UK
In the UK, we are building the offshore wind
farm Hornsea 2, which is our construction
project most affected by COVID-19. However,
we do not expect this to delay commission-
ing, and we anticipate the project to stay
within the budget set at FID. Currently, we are
installing foundations and array cables, and
we expect the project to be completed in the
first half of 2022.
In December, we were granted consent to
move into the final development phase of the
offshore wind farm Hornsea 3 by the UK Secre-
tary of State for the Department for Business,
Energy & Industrial Strategy. The offshore wind
farm has a potential capacity of more than
2.4 GW and is adjacent to our offshore wind
farms Hornsea 1 and Hornsea 2, off the east
coast of the UK. With the consent granted,
the offshore wind farm Hornsea 3 will be
able to enter the next UK auction round for
a contract for difference (CfD).
Finally, we divested the offshore transmission
assets of Walney Extension to Diamond
Transmission Partners. The transmission assets
were sold for GBP 447 million 100 % basis and
included the onshore substation, the export
cables, and the offshore substations. In the
first half of 2021, we expect to divest the
transmission assets of Hornsea 1.
51 / 193
In June, we reached a significant milestone
with the installation of Ørsted’s offshore wind
turbine number 1,500. We are set to more than
double our offshore wind capacity in the com-
ing five years, and we are well on track to meet
In April, we signed a 15-year CPPA with Nestlé
UK who will buy 31 MW of the output of our
offshore wind farm Race Bank which has a to-
tal capacity of 573 MW. This is Ørsted’s largest,
long-term, fixed-price CPPA in the UK.
Ørsted Annual report 2020
Management’s review
Business units
Contents
Continental Europe
In Continental Europe, we commissioned the
offshore wind farm Borssele 1 & 2 on time
and on budget. Borssele 1 & 2 is currently the
largest offshore wind farm in the Netherlands
and added 752 MW to our installed capacity.
In addition, we signed a 10-year CPPA with
Amazon who will offtake 250 MW of Borkum
Riffgrund 3 Offshore Wind Farm’s total capacity
of 900 MW. This was our first offshore wind
CPPA with a global tech company and the larg-
est offshore wind CPPA in Europe. Furthermore,
we selected SGRE as the preferred wind turbine
supplier for our projects Borkum Riffgrund 3
and Gode Wind 3. Subject to final investment
decisions, which we expect by the end of 2021,
assuming the necessary consents are received,
the projects will deploy SGRE’s 11 MW wind
turbine with a 200-metre rotor.
North America
In the US, we completed construction of the
12 MW demonstration project Coastal Virginia
Wind where we were contracted for EPC by
Dominion Energy. The two-wind turbine off-
shore wind farm was the first to be federally
permitted for installation in US waters.
In the north-eastern US, Ørsted and our part-
ners Eversource and the State of Connecticut
reached a final agreement on a harbour de-
velopment plan for State Pier in New London
that will transform the pier into a world-class
offshore wind centre.
In December, we signed an agreement with
PSEG which acquired 25 % of the offshore
wind farm Ocean Wind 1.
Our offshore wind development pipeline in
the US is progressing, but we are still waiting
for the US Bureau of Ocean Energy Man-
agement (BOEM) to decide on key aspects
related to the permitting process. As a result,
the construction start dates for Revolution
Wind, Ocean Wind 1, Skipjack Wind, and
Sunrise Wind will likely be delayed beyond
the expected 2023 or 2024. We have sched-
ule flexibility in all four projects and have
been able to make good progress on other
project milestones in the meantime. However,
until there is a clear timeline from BOEM, we
cannot modify the projects’ construction
schedules. For our project South Fork Wind, we
do not expect changes to the timeline or COD,
currently scheduled for late 2023.
Despite these permitting delays, we remain
confident that we can deliver our US project
portfolio with satisfactory returns. This is
reinforced by the commitment of the incoming
Joe Biden Administration to rapid clean energy
deployment as well as the US Treasury’s
recent announcement of a ten-year continuity
safe harbour for offshore wind in addition to a
new five-year, 30 % investment tax credit.
Asia Pacific
Our construction activities at the offshore
wind farm Greater Changhua 1 & 2a are
moving forward as planned. Currently, we are
preparing for the installation of foundations
which will commence in the first quarter of
2021, and we expect commissioning in 2022.
In December 2020, we entered into an agree-
ment to divest 50 % of Greater Changhua 1
to Canadian pension fund Caisse de Dépôt et
Placement du Québec (CDPQ) and Taiwanese
private equity fund Cathay PE. The agreement
marks a milestone in successfully applying our
partnership farm-down model in Asia Pacific.
In July, we signed a CPPA with Taiwan-based
TSMC, the world’s largest semiconductor
foundry. TSMC will offtake the full production
of our 920 MW offshore wind farm Greater
Changhua 2b & 4, making it the largest-ever
renewable energy CPPA. The 20-year fixed-
price contract period will go into effect once
Greater Changhua 2b & 4 reaches commercial
operation, expected in 2025 or 2026, subject
to grid availability and FID by Ørsted.
Furthermore, we signed a 20-year lease with
the Port of Taichung and a long-term vessel
contract with Ta San Shang Marine Co. Ltd
for our offshore wind farms off the coast of
Changhua County, enabling construction of
the first Taiwan-flagged service operation
vessel (SOV). The SOV will use the Port of
Taichung as its base where Ørsted’s O&M
facilities will also be located.
We also achieved significant progress in Japan
in 2020. We entered into an agreement with
TEPCO to establish a joint venture company
for offshore wind in Japan, with the intention
of working towards a joint bid in the first
Japanese auction, expectedly in the first half
of 2021.
In 2020, we achieved an important milestone
by deploying four floating LiDARs and secur-
ing site exclusivity off the coast of Incheon in
South Korea. We have begun to collect data
for the site, an area with a potential capacity
of 1.6 GW of offshore wind.
Renewable hydrogen
We have made significant progress on our
renewable hydrogen pipeline over the past
18 months. In 2020 alone, we secured funding
for two of the projects and launched three
new projects together with different consortia.
Ørsted’s renewable hydrogen pipeline now
includes eight projects in Denmark, Germany,
the UK, and the Netherlands, of which half
have received funding.
In January 2021, Ørsted took FID on the
demonstration project H2RES which will
produce renewable hydrogen for road transport
from power generated by Ørsted’s two 3.6 MW
offshore wind turbines at Avedøre Holme,
Denmark. H2RES will have an electrolyser
capacity of 2 MW and is expected to begin pro-
duction in late 2021, which will make it our first
renewable hydrogen project to reach operation.
Also in January, the OYSTER project consortium,
of which Ørsted is a member, was awarded five
million euros from the European Commission’s
private-public partnership Fuel Cells and Hydro-
gen 2 Joint Undertaking (FCH2-JU) to develop a
combined wind turbine and electrolyser system
to produce renewable hydrogen offshore. The
project is planned to run from 2021 to 2024, and
we will lead the offshore deployment analysis
and feasibility study and contribute to the
design of the electrolyser system.
In August 2020, we secured funding for another
two projects. Phase two of the Gigastack
project received funds from the UK govern-
ment, enabling Ørsted and our partners to
conduct a front-end engineering design (FEED)
study for a 100 MW electrolysis plant which
will use electricity from the Hornsea 2 Offshore
Wind Farm. The Westküste 100 project was
52 / 193
Ørsted Annual report 2020
Management’s review
Business units
Contents
“We have made significant
progress on our renewable
hydrogen pipeline over the
past 18 months.
also granted funding by the German Federal
Ministry of Economic Affairs and Energy as the
first large-scale renewable hydrogen project
within the Reallabor (real-world laboratory)
framework. Westküste 100 is being developed
by a cross-industry consortium of ten compa-
nies, including Ørsted, and seeks to decarbonise
industrial processes, aviation, construction, and
heating through renewable hydrogen. The first
phase includes the construction of a 30 MW
electrolysis plant and the development of a
plan to scale the facility to 700 MW.
Last year also saw the launch of three new
renewable hydrogen projects.
In May, Ørsted and a group of leading
Danish companies partnered up to develop
an industrial-scale facility in the Greater
Copenhagen area to produce e-fuels for road,
maritime, and air transport. The partnership,
Green Fuels for Denmark, brings together the
demand and supply side of sustainable fuels
under a vision of building one of the world’s
largest electrolyser and e-fuels production
facilities. Ørsted is part of the Europa Seaways
consortium led by DFDS, one of our partners
in Green Fuels for Denmark, which aims to
develop the world’s first 100 % hydrogen-
powered ferry for DFDS’ Oslo-Copenhagen
route. In November, we applied for support
from the EU Innovation Fund to further
progress this project.
Lingen Refinery in Emsland, Germany.
The project includes a 50 MW electrolysis
system with the aim of replacing fossil-based
hydrogen at the Lingen Refinery. This is the
first step towards the project’s long-term
ambition of building more than 500 MW of
electrolyser capacity which could meet the
refinery’s entire hydrogen demand and provide
feedstock for future e-fuel production.
In October, we launched a renewable hydro-
gen project in the Netherlands together with
Yara, the world’s leading fertilizer company.
The project will include a 100 MW electrolysis
plant, producing renewable hydrogen from
electricity from Ørsted’s offshore wind farms.
The renewable hydrogen will replace fossil-
based hydrogen in the production of ammonia
at Yara’s facility in Sluiskil, with the potential
of displacing more than 100,000 tonnes of
carbon emissions per year.
Finally, Ørsted and bp agreed in November to
develop a renewable hydrogen project at bp’s
53 / 193
Ørsted Annual report 2020
Management’s review
Business units
Contents
Onshore
Highlights 2020
Operations
We commissioned the 338 MW onshore wind
farm Sage Draw in Texas and expanded our
operational footprint in the SPP with the
onshore wind farms Plum Creek (230 MW) and
Willow Creek (103 MW), with all three projects
completed on time and within budget.
Business development
We received tax equity financing for our
onshore wind farms Sage Draw, Plum Creek,
and Willow Creek.
We signed 745 MW of long-term CPPAs with
five different customers across four projects in
both wind and solar.
We took FID on the 367 MW onshore wind
project Western Trail and on the 430 MWac
Old 300 Solar Center.
We acquired and took FID on the 227 MWac
solar farm Muscle Shoals and on the 298 MW
onshore wind farm Haystack.
Willow Creek, Butte County,
South Dakota, the US.
Introduction to Onshore
We develop, operate, and own onshore
wind, solar PV, and storage projects
across the southern and midwestern
US, primarily in ERCOT, SPP, and the
South-East.
We own and operate seven onshore
wind farms with a capacity of 1.7 GW.
Furthermore, we have 0.7 GW of
onshore wind, 1.1 GWac of solar PV, and
40 MWac of storage under construction.
Our established execution model
allows us to manage key interfaces
together with top-tier suppliers and
contractors to deliver flexible energy
solutions in response to the dynamic
needs of the diverse North American
customer base.
54 / 193
Ørsted Annual report 2020
Management’s review
Business units
Contents
Financial performance 2020
Power generation amounted to 5.7 TWh in 2020,
which was a 64 % increase relative to 2019.
The increase was due to new wind farms in
operation (Sage Draw, Plum Creek, and Willow
Creek) and a full year of generation from
Lockett. Wind speeds amounted to a portfolio
average of 7.6 m/s, up from 7.3 m/s in 2019 and
slightly above a normal wind year (7.5 m/s).
Revenue amounted to DKK 0.7 billion, up 9 %
from 2019 due to higher generation, partly
offset by lower prices for the part of the port-
folio not covered by PPAs and a lower positive
effect from derivate run-offs related to the
acquisition of LCE back in 2018.
EBITDA increased by 44 % and amounted to
DKK 1.1 billion, driven by higher generation and
related PTCs.
Cash flows from operating activities
amounted to DKK 3.9 billion, which primarily
comprised tax equity contributions from
our partners at Sage Draw, Plum Creek, and
Willow Creek. In 2019, it primarily comprised a
tax equity contribution related to the onshore
wind farm Lockett.
Gross investments amounted to DKK 6.6 billion
in 2020 and was related to the construction
of Permian Energy Center, Muscle Shoals,
Western Trail, Sage Draw, Plum Creek, Willow
Creek, and Haystack.
Divestments comprised the sale of Oak Solar
Farm in June 2020. In 2019, it primarily com-
prised a sale and lease-back arrangement for
land related to Permian Energy Center.
Strategic and operational
performance 2020
Our Onshore business made significant
progress in 2020, taking FID on four projects
and commissioning three projects on schedule
and within budget, despite adverse COVID-19
impacts across the industry. Operations
remained stable throughout the year with high
asset availability across our portfolio. A strong
pipeline of onshore wind and solar PV projects
is being developed and will be matured further
in 2021, putting us well on track to achieve our
strategic ambition of 5 GW of installed onshore
wind and solar PV capacity by 2025.
Onshore wind
In April, we commissioned the 338 MW onshore
wind farm Sage Draw, our fifth in Texas. With
the completion of the 230 MW Plum Creek in
Nebraska in June and the 103 MW Willow Creek
in South Dakota in September, we expanded
our footprint in the Southwest Power Pool
(SPP), a market which plays an important
part of our growth in North America. The
commissioning of these wind farms brought
our operating portfolio to a total of 1.7 GW.
We have received tax equity financing for all
three projects which are eligible for the full
value of the Renewable Electricity Production
Tax Credit (PTC).
In addition, we supplemented our development
activities with the acquisition of Haystack,
a 298 MW onshore wind project in Nebraska.
The project is adjacent to Plum Creek and will
use the same interconnection infrastructure.
Haystack is expected to be commissioned in
2021 and is thus expected to be eligible for the
full value of the PTC.
EBITDA increased
by 44 %.
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
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
GW
GW
m/s
%
%
TWh
DKK/USD
DKKm
DKKm
DKKm
DKKm
DKKm
DKKm
DKKm
DKKm
DKKm
DKKm
2020
2019
%
3.4
1.7
7.6
45
96
5.7
6.5
733
1,131
451
2.1
63 %
1.0
7.3
45
98
3.5
6.7
670
786
466
67 %
4 %
0 %p
(2 %p)
64 %
(2 %)
9 %
44 %
(3 %)
1,004
628
60 %
(324)
(482)
-
649
(308)
(351)
(68)
367
5 %
37 %
n.a.
77 %
3,921
1,007
289 %
(6,633)
(6,158)
114
255
(2,598)
(4,896)
12,921
11,734
8 %
(55 %)
(47 %)
10 %
Quarterly and annual wind speeds for our onshore wind farms
m/s
2018
Normal wind year
2019
2020
7.8
7.5
7.7
8.0
6.6
6.7
8.0
7.3
7.3
7.3
7.6
Q1
Q2
Q3
Q4
FY
55 / 193
Ørsted Annual report 2020
Management’s review
Business units
Contents
“Our Onshore business
made significant progress
in 2020.
Non-RTO
West
California
ISO
Willow Creek
Midcontinent
ISO (MISO)
Haystack
Plum Creek
Southern
Power Pool
(SPP)
ISO New
England
New York
ISO
PJM
Interconnection
We also strengthened our asset base in the
Electric Reliability Council of Texas (ERCOT)
by taking FID on Western Trail, our largest
onshore wind project to date. Located near
our onshore wind farm Lockett, the 367 MW
project is expected to reach commercial
operation in 2021.
In line with our strategy, we have transferred
the asset management of Willow Springs,
Amazon, and Tahoka to Ørsted’s asset man-
agement team. Since Lockett was completed,
asset management has been performed
inhouse for all new onshore wind projects and
will be going forward. This improves our ability
to optimise operational performance across
the portfolio.
our 227 MWac solar PV project in Alabama.
Muscle Shoals is fully contracted under a long-
term power purchase agreement with the
Tennessee Value Authority (TVA), and we have
secured tax equity financing for the project.
The solar farm is expected to be operational in
2021 and will thus be eligible for the full value
of the Business Energy Investment Tax Credit
(ITC). Muscle Shoals is our first project in the
South East where we have a strong pipeline of
projects under development.
In November, we took FID on the Old 300
Solar Center located near Houston, Texas.
The 430 MWac project is expected to be
commissioned in 2022 and will thus be eligible
for the full value of the ITC.
Solar PV
2020 also saw the continued expansion of our
solar PV portfolio with the acquisition of and
final investment decision on Muscle Shoals,
As our strategic focus being large-scale solar
farms, we divested the 10 MWac solar farm
Oak Solar in June.
Sage Draw
Lockett
Tahoka
Permian Energy Center
Western Trail
Willow Springs
Amazon
Muscle Shoals
Non-RTO
South-East
Old 300 Solar Center
Electric Reliability
Council of Texas (ERCOT)
US competitive wholesale
electricity markets
Power sector governance in the US is complex
and fragmented. Approximately two thirds of
the nation’s electricity load are served by seven
competitive wholesale markets managed by
regional transmission organisations (RTOs).
ERCOT and SPP are two of these seven
markets. The remaining load is served by
traditional wholesale electricity markets where
vertically integrated utilities act as regulated
monopolies and are responsible for all activities
related to the generation, transmission, and
distribution of electricity. The South-East is a
region with this market structure.
56 / 193
Ørsted Annual report 2020
Management’s review
Business units
Contents
Markets & Bioenergy
Highlights 2020
Introduction to Markets & Bioenergy
Operations
Our US trading office began commercial opera-
tions, supporting our US renewables portfolio.
We achieved our target of sourcing 100 %
third-party certified sustainable biomass for
our biomass-fuelled CHP plants.
We increased our provision of ancillary servic-
es vital to the stable operation of the Danish
grid and, in a first for Denmark, began offering
some of these services as green products.
We inaugurated the sustainable biomass-fired
unit 6 of our Asnæs Power Station in August.
We began commercial operations at our
Renescience plant in Northwich, UK, marking
a major milestone for our development of this
technology.
We contributed to Denmark’s public health
response to the COVID-19 outbreak by helping
restart and operate our former bioethanol plant
in Kalundborg for the emergency production of
ethanol for disinfectants.
Asnæs Power Station,
Kalundborg, Denmark.
We serve as an efficient route-to-
market for both Ørsted and third
parties, 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 spearhead market risk manage-
ment for our generation assets and
contracts by trading power, green
certificates, and other commodities.
We provide around one quarter of
Denmark’s district heating and around
one third of Denmark’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 manage Renescience, our patented
waste-to-energy technology.
57 / 193
Ørsted Annual report 2020
Management’s review
Business units
Contents
Business development
We won significant new third-party power
balancing contracts with renewable assets
in the UK and the Netherlands.
We entered into an agreement to resell some
of the natural gas Ørsted receives under our
legacy gas purchasing contracts to PGNiG
Supply and Trading (PST).
We completed the divestment of our
power distribution, residential, and city light
businesses, our LNG activities, and our Danish
energy efficiency consulting business.
We entered into an agreement to divest
our UK B2B gas and power portfolios to Total
Gas & Power.
Financial performance 2020
Revenue decreased by 35 % compared to
2019 and amounted to DKK 21.4 billion. The
decrease was mainly driven by a significant
drop in average gas and power prices relative
to last year as well as lower gas and power
volumes sold.
Thermal power generation amounted to
4.4 TWh, a 4 % decrease compared to last year
due to slightly warmer weather and less favour-
able market conditions for power generation,
partly offset by a higher volume from ancillary
services. Heat generation amounted to 6.7 TWh,
down 20 % compared to last year, mainly due to
a warm first quarter in 2020.
EBITDA amounted to DKK 2.1 billion compared
to DKK 1.5 billion in 2019.
EBITDA from CHP plants totalled DKK 1.1 billion
in 2020, a slight decrease compared to last
year. The decrease was mainly due to lower
thermal heat and power generation and lower
power spreads as well as the reversal of a pro-
vision in 2019 of DKK 0.3 billion following the
acquittal in the Elsam case. This was partly
offset by higher earnings from sale of ancillary
services in 2020.
EBITDA from Gas Markets & Infrastructure
amounted to DKK 0.4 billion, in line with last
year. Higher earnings from revaluation of our
gas at storage and a positive impact from stor-
age hedges was offset by lower transported
and sold volumes due to the shutdown of the
Tyra gas field from late 2019 until 2023 as well
as a provision for bad debt in our B2B business
to cover the extraordinary COVID-19-related
default risks among our customers.
EBITDA from LNG amounted to DKK 0 billion
compared to a loss of DKK 1.0 billion in 2019.
Due to the agreement to divest our LNG activ-
ities in 2019, we made provisions to offset the
negative earnings until the divestment in 2020.
EBITDA from our Danish power distribution,
residential customer, and city light businesses
amounted to DKK 0.9 billion in 2020 versus
DKK 1.3 billion in 2019. As a result of the divest-
ment in August, earnings in 2020 only included
eight months of operations.
We had no impairment losses in 2020, whereas
impairment losses amounted to DKK 0.5 billion
in 2019 and were 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.
Performance highlights
2020
2019
%
EBITDA increased
by 43 %.
Business drivers
Degree days
Heat generation
Power generation
Gas sales
Power sales
Gas price, TTF
Power price, DK
Power price, LEBA UK
number
2,432
2,399
1 %
TWh
TWh
TWh
TWh
EUR/MWh
EUR/MWh
GBP/MWh
6.7
4.4
90.3
11.6
9.3
26.7
36.8
8.3
4.6
(20 %)
(4 %)
125.0
(28 %)
14.7
13.5
39.2
43.6
(2.6)
2.0
(21 %)
(31 %)
(32 %)
(16 %)
341 %
n.a.
Green dark spread, DK
EUR/MWh
(11.2)
Green spark spread, DK
EUR/MWh
(1.4)
Financial results
Revenue
EBITDA
CHP plants
Gas Markets & Infrastructure
LNG
DKKm 21,420
32,816
(35 %)
DKKm
2,136
1,495
1,111
1,152
411
-
390
(957)
43 %
(4 %)
5 %
n.a.
Distribution, B2C, and city light
926
1,280
(28 %)
Other, incl. project development
Depreciation
Impairment losses
EBIT
Cash flows from operating
activities
DKKm
DKKm
(312)
(796)
-
(370)
(798)
(500)
(16 %)
0 %
n.a.
DKKm
1,340
197
580 %
DKKm
2,855
1,218
134 %
Gross investments
DKKm
(715)
(1,898)
(62 %)
Divestments
Free cash flow
DKKm 19,060
25
DKKm 21,200
(655)
n.a.
n.a.
Capital employed
DKKm
5,229
15,789
(67 %)
58 / 193
Ørsted Annual report 2020
Management’s review
Business units
Contents
Cash flow from operating activities amounted
to DKK 2.9 billion in 2020. The increase of
DKK 1.6 billion was mainly due to lower paid
taxes (receipt of on account taxes in 2020
versus payment of taxes on account in 2019),
lower trade receivables due to lower revenue,
an early repayment related to our oil pipe
facilities, and changes in the value of deriva-
tives. This was partly offset by a change in the
value of gas at storage.
Gross investments amounted to DKK 0.7 billion
in 2020 and were mainly related to main-
tenance of the power distribution grid and
concluding works related to the bioconversion
of Asnæs Power Station up until inauguration
in August.
Cash flow from divestments amounted to
DKK 19.1 billion in 2020, of which the
above-mentioned divestment of our Danish
power distribution, residential customer,
and city light businesses contributed with
We run our business on an end-to-end val-
ue chain thinking. All activities and earn-
ings that relate to Offshore and Onshore
are reported in these segments, even if
the daily activities are performed on be-
half of the group in Markets & Bioenergy.
Therefore, earnings from trading related
to hedging of our power exposures and
power portfolio optimisation activities
in relation to Offshore and Onshore are
presented in these business units.
In 2020, EBITDA of DKK 236 million
and DKK 48 million were transferred
to Offshore and Onshore, respectively
(DKK 725 million and DKK -18 million,
respectively, in 2019).
proceeds of DKK 20.5 billion. This was partly
offset by a cash outflow in connection with
the divestment of the LNG activities of
DKK 1.5 billion.
Strategic and operational
performance 2020
In 2020, we made great strides in the devel-
opment of our core activities, while continuing
to streamline Markets & Bioenergy through
divestments.
Provide and develop a
competitive route-to-market
Having consistently reduced balancing
costs over the last few years, we provide an
increasingly efficient route-to-market for
Ørsted’s generation portfolio. In 2020, with
the addition of our asset Borssele 1, we grew
the portfolio of Ørsted projects under our
management to 5.6 GW.
Our balancing services are also an increasingly
competitive option for third-party renewable
operators. We currently provide balancing
services for nearly 600 MW of third-party ca-
pacity, and in 2020, we won a major contract
with the Dogger Bank Wind Farm, which is
currently under construction. We will provide
balancing for 40 % of the volume from
phases A and B of this project, amounting to
960 MW when fully completed. We also made
successful balancing-service bids for onshore
third-party renewable projects in the
Netherlands and Denmark.
Spearhead market risk management
Our market trading activities had another
strong year in 2020, stemming from the
successful hedging and trading of our energy
exposures. We have especially benefitted
from the flexibility embedded in the contract
structures of our north-western European
energy portfolio which we leverage to protect
and extract value for Ørsted.
As part of our digital strategy for short-term
trading, we rolled out a smart bidding tool
which uses a parametric algorithm to auto-
matically trade volumes in small increments
and improve the speed of our trade execution.
The tool enhances our ability to capture
stronger market prices in the UK, Germany,
and the Netherlands.
Our Chicago-based US trading organisation
began commercial operations in early 2020,
managing market risk for our US portfolio.
The organisation contributes to our ongoing
capacity build-out in the US by providing the
same risk management and route-to-market
services as for our European portfolio.
Optimise and decarbonise our CHP plants
2020 was a milestone year for our biomass
conversion programme. The Crown Prince of
Denmark inaugurated the sustainable bio-
mass-fired unit 6 of our Asnæs Power Station
in August, marking the completion of our con-
version programme and another step towards
the full decarbonisation of our CHP operations
in Denmark. Furthermore, we reached our
target of sourcing 100 % of our biomass from
third-party certified sustainable suppliers. In
2020, Denmark passed new biomass sustain-
ability legislation that is in line with the strict
standards we already require from our biomass
suppliers on replanting of trees, protection of
forest biodiversity, and supply chain emissions.
In addition, we are exploring the potential
of carbon capture technology at our bio-
mass-fired CHP plants. Carbon captured from
biomass combustion is biogenic and can
contribute to negative emissions when stored
permanently, or it can be used as a feedstock
to produce carbon-neutral products.
This year saw a temporary increase in our
use of coal as a proportion of our overall fuel
inputs, stemming from statutory requirements
as part of our provision of ancillary services to
the Danish power system. Our commitment to
phase out coal by 2023 remains unchanged.
By combining our dispatchable CHP capacity
with our offshore wind portfolio in Denmark,
we were for the first time able to offer some
of our ancillary services as green products.
Our offshore wind farm Horns Rev 2 was the
first intermittent renewable source to qualify
for providing automatic frequency restoration
reserve (aFRR) services in Denmark.
Optimise our gas portfolio
With the Danish Undergrund Consortium-
owned Tyra gas field in the North Sea shut
down for redevelopment until June 2023, we
have ensured continuous supply for our Danish
and Swedish gas customers by importing
piped volumes from Germany. When Tyra
reopens, and as domestic biogas production
increases, the dependence on imported gas to
Denmark will decrease.
59 / 193
Ørsted Annual report 2020
Management’s review
Business units
Contents
In October 2020, we entered into a contract
with the Polish natural gas company PST to
sell approx. 70 TWh of natural gas over the
period from 2023 to 2028. Under the agree-
ment, Ørsted will resell some of the natural
gas received from the Danish North Sea as
part of our legacy gas purchasing contracts.
The agreement reduces our exposure to
long-term financial risk in our gas portfolio
and supports Poland’s decarbonisation agenda.
Poland aims to reduce the share of coal in its
energy mix from 75 % today to 11-28 % by
2040 by substituting it with renewables
and natural gas.
Deliver on divestments
In 2020, we continued streamlining Markets
& Bioenergy to focus on our growth platform.
At the end of July, we divested our energy
efficiency consulting business to EBAS. In
August, we completed the divestment of our
Danish power distribution, residential custom-
er, and city light businesses to SEAS-NVE (now
Andel), and in December, we completed the
divestment of our LNG business to Glencore.
Finally, we signed an agreement with Total
Gas & Power in September to divest our UK
B2B gas and power portfolios. This transaction
is expected to close in Q1 2021.
We developed and launched a first-of-its-kind
trading contract for renewable hydrogen
certificates in the UK. Specifically targeting
the decarbonisation of the transport sector,
this contract builds on our other partnerships
on renewable hydrogen technology.
Commercialise Renescience
In October, we successfully completed the final
performance tests and began commercial op-
erations at our Renescience plant in Northwich,
the UK. The technology has the potential to
significantly increase recycling rates of unsort-
ed household waste and reduce the volumes
of waste sent to landfills or incineration. The
commissioning of our Northwich plant marks
a major milestone, and we continue to explore
the broader commercial potential of this
technology.
Asnæs Power Station, unit 6,
Kalundborg, Denmark.
60 / 193
Ørsted Annual report 2020
Contents
Governance
62 Message from the Chairman
63 Corporate governance
65 Board of Directors
69 The Executive Committee
70 Risk and risk management
74 Shareholder information
Taiwan has set ambitious targets for
renewable energy. It is an important
market for Ørsted. We reached a
significant milestone in the country
in 2020 when we signed the world’s
largest-ever renewable energy
corporate power purchase agreement.
The agreement, which will provide
TSMC, a Taiwanese semiconductor
manufacturing company, with green
power for 20 years, underlines our
pioneering role in the development
of renewable energy in the Asia-
Pacific region.
Ørsted Annual report 2020
Management’s review
Governance
Contents
Message from the Chairman
In the Board of Directors, we firmly believe that good
corporate governance and high standards of integrity
are fundamental as we continue to develop Ørsted
as one of the global leaders in renewable energy.
We have designed our corporate governance
model to support transparency and com-
pliance with regulation and best practice
and to support business conduct and
decision-making that is agile, efficient, and
of high quality. Our corporate governance
is supported by a company culture based
on high ethical standards and clear values
throughout the organisation. It is built on
three pillars that are embedded throughout
the organisation, from the Board to the
individual employee.
First, we have designed our management
structure to enable the right decision-making
power in the right places throughout the
organisation. Therefore, we have defined
clear roles, responsibilities, and key perfor-
mance indicators at all levels of the organi-
sation. In the Board, we oversee the overall
strategic decision-making in Ørsted, while
the Executive Board undertakes the day-to-
day management of the company through
the Executive Committee. Our Management
Team of approx. 20 senior executives drives
the strategic execution of our business plans
and promotes a common culture across the
company, supported by our wider manage-
ment system of more than 1,000 managers
across the company. Each employee across
the company has clear targets for how to
contribute, including personal development
targets and success criteria that link back to
our business strategy.
Second, we want to ensure the right com-
petences to successfully drive our business
forward. We spend considerable amounts of
time assessing and ensuring that we have the
right competences at executive and board
levels and attach importance to the members
having extensive knowledge and experience
covering a wide range of geographies and
fields of expertise. Climate action is particu-
larly fundamental to our business strategy of
deploying renewable energy, so climate-
related issues are an integral part of board
and executive agendas. Therefore, a key set
of competences for the Board includes envi-
ronment, social, and governance (ESG) as this
is fundamental for Ørsted’s business. For the
Executive Board, we have also integrated ESG
into their individual incentive schemes.
To reinforce diversity, we have equal gender
representation in the Board as defined by
Danish law, and throughout the organisation,
we continuously work to promote diversity
through the representation of different nation-
alities, genders, age distribution, and mindsets.
Individual development is a key driver in
helping to ensure that we have the right
competences in place. That is why we have
built a systematic approach to and culture
of continuous development. Our approach
warrants personal development, enables nu-
anced, constructive feedback, and enhances
growth opportunities for individuals at all
levels of the organisation.
We keep our governance principles under
regular review, and we promote compliance
internally and with our business partners
through our code of conduct and due
diligence, training, and reporting of miscon-
duct to support the highest levels of good
governance and integrity.
On the following pages, you can read more
about our corporate governance, and how
we work with it. I look forward to continuing
serving the Board in the coming year.
Third, we want to maintain and further cul-
tivate a company culture based on integrity.
Integrity is our root and is the first of our five
guiding principles. Our culture and focus on
integrity are also supported by our policy on
good business conduct and a set of internal
controls aimed at protecting Ørsted’s integrity.
We have clear policies, procedures, and guide-
lines in place to prevent and address potential
violations of our policy on good business con-
duct. We have an Internal Audit function and
a whistle-blower scheme where internal and
external stakeholders can easily and anony-
mously report concerns about inappropriate
and illegal conduct in the company through
an independent third party.
Thomas Thune Andersen
Chairman
62 / 193
Ørsted Annual report 2020
Management’s review
Governance
Contents
Corporate governance
Our overall and strategic management of the
company is anchored in a board of independent non-
executive directors appointed by the shareholders.
The Board of Directors appoints the Executive
Board, consisting of the CEO and CFO who
undertake the day-to-day management of
Ørsted through the Executive Committee.
None of our executives are members of the
Board of Directors. A Management Team con-
sisting of the Executive Committee and senior
vice presidents drives strategic development
and cultural alignment across the company.
Our governance model
Shareholders and general meeting
Board of Directors
Nomination &
Remuneration
Committee
Audit & Risk
Committee
Executive Committee
Shareholders and general meeting
Ørsted is a publicly listed company with the
Danish State as majority shareholder with
50.1 % ownership. The Danish State exercises
its ownership interest in Ørsted in accordance
with the ordinary governance set-up in Danish
companies where the Board of Directors and
the Executive Board are responsible for the
management of the company. The Danish
State exercises its interest at the general
meeting, including through the appointment
of professional board members. The Danish
State’s ownership policy is available here
(only in Danish): fm.dk/udgivelser/2015/april/
statens-ejerskabspolitik/.
All our shareholders may exercise their rights
and vote at the general meeting through a
one-share-one-vote principle. The general
meeting adopts decisions, such as the election
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
general 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 is responsible for the
overall management of the company. The
Board of Directors lays down the company’s
strategy and makes decisions concerning ma-
jor 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 2020 on the next page.
The Board monitors and oversees progress
related to Ørsted’s climate change strategy,
including our ambitious net-zero carbon reduc-
tion targets for scope 1-3 emissions. We rou-
tinely integrate climate change considerations
when setting our strategic direction, reviewing
sustainability risks, setting performance
objectives, deciding on our capital allocation,
and when approving and overseeing major
investments, acquisitions, and divestments.
The Board of Directors conducted its annual
board evaluation in November 2020. The basis
for the evaluation was a questionnaire that the
individual members of the Board of Directors
and Executive Committee had been asked to
complete, and individual interviews conducted
by an external advisor. At the evaluation, all
members of the Board of Directors and the
Executive Board expressed that the board is
strong, aligned, well-functioning, and possesses
the right competencies to govern the company.
Moreover, all members found board discussions
inclusive and open to the viewpoints of all
members. As the company expands to new
markets and technologies, there are some devel-
opment areas that need to be further explored
and evaluated, e.g. ensuring that the Board of
Directors has the right competency coverage
in the long-term and prioritizing succession as a
more important part of the board agenda.
The Board of Directors has prepared an
overview of the competences required on the
board. The list of required competences can be
found at orsted.com/competences-overview.
63 / 193
Ørsted Annual report 2020
Management’s review
Governance
Contents
Important tasks managed by the Board of Directors in 2020
Other tasks
Appoint Mads Nipper as our new CEO
following Henrik Poulsen’s resignation.
Assess the claim made by the Danish Tax
Agency, requiring Danish taxation of our
British offshore wind farms Walney Extension
and Hornsea 1 in the years 2015 and 2016.
Issue green senior bonds in Taiwan to finance
our green growth ambition towards 2025.
Enter into multi-year agreement to resell
some of the natural gas received from the
Danish part of the North Sea to PGNiG
Supply & Trading.
Oversee the court case concerning the
Ørsted name.
Oversee the impacts of COVID-19.
Oversee the results from the 2020 employee
satisfaction survey, with a strong focus on
the well-being of the employees, including
discussions regarding inclusion, diversity,
bullying, stress, and harassment.
Oversee and discuss the development
of our consolidated environmental, social,
and governance (ESG) statements.
Investments, acquisitions,
and divestments
Build out our offshore wind project portfolio
after 2021, including bids into auctions and
tenders in the Netherlands and US and entry
into a corporate power purchase agreement
with TSMC related to the Greater Changhua
2b & 4 offshore wind project in Taiwan
and a virtual corporate power purchase
agreement with Amazon related to the
Borkum Riffground 3 offshore wind project
in Germany.
Enter into agreement to divest 50 % of the
Changhua 1 project in Taiwan to a consor-
tium of Caisse de dépôt et placement du
Québec and Cathay Private Equity.
Enter into agreement to divest 25 % of
the US offshore wind project Ocean Wind 1
to PSEG.
Build out our onshore portfolio in the US,
including final investment decisions on the
onshore wind farm Western Trail and the
solar farm Old 300 Solar Center and the
acquisition of and final investment decisions
on the onshore wind farm Haystack and the
Muscle Shoals solar farm.
Enter into agreement to divest the majority
of our B2B portfolio of natural gas and
power customers in the UK.
Complete the agreements to divest our
Danish power distribution, residential
customer, and city light businesses and our
LNG business.
Meeting attendance
Member of the board
Board of Directors
Ordinary
Extraordinary
Thomas Thune Andersen
Lene Skole
Lynda Armstrong
Jørgen Kildahl
Peter Korsholm
Dieter Wemmer
Hanne Sten Andersen1
Poul Dreyer1
Benny Gøbel1
Ole Henriksen1
Daniel Tas Sandermann1
7/0
7/0
7/0
7/0
7/0
7/0
5/0
5/0
7/0
2/0
2/0
10/0
9/1
10/0
10/0
10/0
10/0
7/0
7/0
10/0
3/0
3/0
Audit & Risk
Committee
Nomination
& Remuneration
Committee
5/0
5/0
5/0
8/0
8/0
8/0
A description of the individual board mem-
bers, including their other executive positions,
independence, and how the individual board
members contribute to the required compe-
tences can be found on pages 65-67. Their
meeting attendance during 2020 can be
found in the table above.
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, you can read more about
the remuneration of the Board of Directors.
Furthermore, we have incorporated and follow
all the recommendations prepared by the
Danish Committee on Corporate Governance.
See links to both reports to the right.
The numbers indicate how many meetings in 2020
the members have attended or not attended,
respectively, during the year.
1
Employee representative. During 2020, there have
been changes in the employee representatives.
As a result of this, meeting attendance varies.
Ørsted
Remuneration
report 2020
Download
Statutory corporate governance report
Remuneration report
64 / 193
Ørsted Annual report 2020
Management’s review
Governance
Contents
Board of Directors
Thomas Thune Andersen
* 1955, Denmark
Chairman since 2014
Independent
Joined in 2014
Re-elected in 2020
Term of office expires in 2021
Lene Skole
* 1959, Denmark
Deputy Chairman since 2015
Independent
Joined in 2015
Re-elected in 2020
Term of office expires in 2021
Experience
Positions
Extensive international leadership experience
from leading positions in A.P. Møller-Mærsk
and non-executive directorships in listed and
privately held companies within the energy,
critical infrastructure, and other sectors.
Chairman: VKR Holding A/S, Lloyds Register
Group Limited, and Lloyds Register
Foundation
Member: BW Group ltd, IMI plc., Green
Hydrogen Systems A/S, and the Danish
Committee on Corporate Governance1
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.
CEO: Lundbeckfonden and Lundbeckfond
Invest A/S
Chairman: LFI Equity A/S
Deputy Chairman: ALK-Abelló A/S,
H. Lundbeck A/S and Falck A/S.
Member: Tryg A/S, Tryg Forsikring A/S2
Competences
Management
√ General
√ Safety
Financial
√ Risk
√ Project
√ Stakeholder
Human resources
Other
√ Energy sector
It, technology,
and digitalisation
Investor and capital
market relationships
√ ESG
Management
√ General
Safety
√ Financial
√ Risk
Project
√ Stakeholder
√ Human resources
Other
Energy sector
It, technology,
and digitalisation
Investor and capital
market relationships
√
√ ESG
Lynda Armstrong
* 1950, Great Britain
Independent
Joined in 2015
Re-elected in 2020
Term of office expires in 2021
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.
Chairman: The Engineering Construction
Industry Training Board (ECITB)
Non-Executive Director: KAZ Minerals plc. 3
Management
√ General
√ Safety
Financial
√ Risk
√ Project
√ Stakeholder
√ Human resources
Other
√ Energy sector
It, technology,
and digitalisation
Investor and capital
market relationships
√ ESG
1
2
3
Board committees: Remuneration Committee of Lloyds Register Group Limited, Nomination Committee of Lloyds Register Foundation, Nomination
Committee and Remuneration Committee of IMI plc, and Nomination Committee of VKR Holding A/S.
Board committees: Audit & Risk Committee of Tryg A/S and Tryg Forsikring A/S, chairman of the Audit Committee and member of the Remuneration
Committee of Falck A/S, Nomination & Remuneration Committee, Audit Committee and Scientific Committee of ALK-Abelló A/S, and Nomination &
Remuneration Committee and Scientific Committee of H. Lundbeck A/S.
Chairman of the Remuneration Committee, member of the HSE Committee, and member of the Project Assurance Committee of KAZ Minerals plc.
65 / 193
Ørsted Annual report 2020
Management’s review
Governance
Contents
Experience
Positions
Jørgen Kildahl
* 1963, Norway
Independent
Joined in 2018
Re-elected in 2020
Term of office expires in 2021
Strong international background in
renewable energy and a profound
knowledge of how the energy ecosystems
work from positions as Executive Vice
President of Statkraft and member of the
board of management of E.ON.
Deputy Chairman: Telenor ASA.
Member: Höegh LNG Holding Ltd and
Alpiq AG. Other: Senior Advisor for Energy
Infrastructure Partners1
Competences
Management
√ General
√ Safety
Financial
√ Risk
√ Project
√ Stakeholder
Human resources
Other
√ Energy sector
√
It, technology,
and digitalisation
Investor and capital
market relationships
√
√ ESG
Peter Korsholm
* 1971, Denmark
Independent
Joined in 2017
Re-elected in 2020
Term of office expires in 2021
Extensive M&A experience from his time
as Partner and Head of EQT Partners
Denmark and from private investments.
Also experience with financial reporting,
risk management, and capital markets
from CFO position at AAK AB.
CEO: DSVM Invest A/S, DSV Miljø Group A/S,
Togu ApS, and Totalleveranser Sverige AB.
Chairman: Nymølle Stenindustrier A/S, GDL
Transport Holding AB, Lion Danmark I ApS,
and Totalleveranser Sverige AB.
Member: DSVM Invest A/S, A/S United
Shipping and Trading Company, and DANX
Holding I ApS2
Management
√ General
Safety
√ Financial
√ Risk
Project
√ Stakeholder
Human resources
Other
Energy sector
It, technology,
and digitalisation
Investor and capital
market relationships
√
√ ESG
Dieter Wemmer
* 1957, Switzerland
Independent
Joined in 2018
Re-elected in 2020
Term of office expires in 2021
Highly experienced in capital markets, invest-
ments, and risk management from leading
positions within the finance sector. Before
focusing solely on non-executive director-
ships, he was the CFO of Allianz.
Chairman: Marco Holding, Plc.
Member: UBS Group AG and UBS AG3
Management
√ General
Safety
√ Financial
√ Risk
Project
√ Stakeholder
Human resources
Other
√
√
Energy sector
It, technology,
and digitalisation
Investor and capital
market relationships
√ ESG
1
2
3
Member of the Audit & Risk Committee and the Sustainability & Compliance Committee of Telenor ASA, member of the Audit Committee of Höegh
LNG Holdings Ltd, member of the Governance Committee and the Strategy Committee of Alpiq AG.
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.
Chairman of the Board of Directors of one wholly-owned subsidiary of Marco Holding Plc. Member of the Audit Committee, Governance and Nomina-
tion Committee, and Compensation Committee of UBS Group AG and UBS AG.
66 / 193
Ørsted Annual report 2020
Management’s review
Governance
Contents
Experience
Positions
Benny Gøbel
* 1967, Denmark
Benny Gøbel has worked in Ørsted
since 2005.
Engineer, Markets & Bioenergy.
Employee representative
Not independent
Joined in 2011
Re-elected in 2018
Term of office expires in 2022
Ole Henriksen
* 1972, Denmark
Ole Henriksen has worked in Ørsted
since 2007.
Operations Engineer, Markets & Bioenergy.
Employee representative.
Not independent
Joined in 2020
Term of office expires in 2022
Daniel Tas Sandermann
* 1984, Denmark
Daniel Tas Sandermann has worked in
Ørsted since 2015.
Head of Commercial & Strategy Execution,
Markets & Bioenergy
Employee representative
Not independent
Joined in 2020
Term of office expires in 2022
Competences
Management
General
Safety
Financial
Risk
Project
Stakeholder
Human resources
Other
√ Energy sector
It, technology,
and digitalisation
Investor and capital
market relationships
ESG
Management
General
Safety
Financial
Risk
Project
Stakeholder
Human resources
Other
√ Energy sector
It, technology,
and digitalisation
Investor and capital
market relationships
ESG
Management
√ General
Safety
Financial
Risk
√ Project
√ Stakeholder
Human resources
Other
√ Energy sector
√
It, technology,
and digitalisation
Investor and capital
market relationships
√ ESG
67 / 193
Ørsted Annual report 2020
Management’s review
Governance
Contents
Committees of the Board of Directors
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.
Audit & Risk Committee
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, internal
controls as well as IT security in operational and
administrative areas as well as cybersecurity.
Moreover, the committee approves the frame-
work governing the work of the company’s
external and internal auditors (including limits
for non-audit services), evaluates the external
auditors’ independence and qualifications, and
monitors the company’s whistle-blower scheme.
In 2020, the committee approved an update
of the internal control and WACC frameworks.
The committee also reviewed the financial
impact of COVID-19 and the divestments of
our Danish power distribution, residential cus-
tomer, and city light businesses, and our LNG
activities. Furthermore, it assessed the claim
made by the Danish Tax Agency requiring
Danish taxation of our British offshore wind
farms Walney Extension and Hornsea 1, and it
reviewed the progress in IT security.
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 focus for Internal Audit is auditing and
advising on our core processes, governance,
risk management, control processes, and IT
security.
The Chairman of the Audit & Risk Committee
is responsible for managing our whistle-blower
scheme. Internal Audit receives and handles
any 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 whistle-
blower scheme or through our management
system. In 2020, four substantiated cases
of inappropriate or unlawful behaviour
were reported through our whistle-blower
scheme. Three cases concerned violation
of good business conduct policies and one
case concerned violation of administrative
procedures. The four cases had consequences
for the individuals involved. None of the
reported cases were critical to our business
and caused no adjustments to our financial
results. Whistle-blower 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 refer-
ence 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.
Finally, the committee has been engaged in
the recruitment of Mads Nipper as new CEO
as of 1 January 2021, following Henrik Poulsen’s
resignation in June 2020.
The committee assists the Board of Directors in
matters regarding the composition, remunera-
tion, and performance of the Board of Directors
and the Executive Committee.
You can read more about the Nomination &
Remuneration Committee and the terms of
reference for the committee at orsted.com/
nomination-remuneration-committee.
In 2020, the committee discussed, among other
matters, our increasing global footprint and
the impact on our pay mix. It was decided to
introduce a higher level of variance within pay-
mix on different markets to be more in line with
local market terms.
Following the implementation of the EU
Shareholder Rights Directive II in Danish leg-
islation, the committee reviewed the remu-
neration policy for the Board of Directors and
the Executive Board, and an updated version
of the remuneration policy was subsequently
approved by the annual general meeting in
March 2020. The committee also spent time
on the separate 2019 remuneration report
covering the Board of Directors and the
Executive Board as the company decided
to reflect the new regulatory requirements,
which apply from 2020, already in the 2019
reporting.
Additionally, the committee has reviewed
changes in the peer group used for benchmark-
ing Ørsted’s relative TSR in the share-based
long-term incentive programme. The changes
were made to better match Ørsted’s current
global footprint and business mix and to ad-
dress the changes in the peer group’s business
mix and footprint.
68 / 193
Ørsted Annual report 2020
Management’s review
Governance
Contents
Executive Committee
Mads Nipper
CEO, Executive Board
Marianne Wiinholt
CFO, Executive Board
Martin Neubert
Offshore
Declan Flanagan
Onshore
Morten
Hultberg Buchgreitz
Markets & Bioenergy
Henriette
Fenger Ellekrog
CHRO
Anders Lindberg
Offshore EPC and QHSE
The seven members of the Executive Committee
undertake the day-to-day management.
Mads Nipper (CEO) and Marianne Wiinholt
(CFO) are members of the Executive Board of
Ørsted A/S.
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.
In addition to Mads Nipper and Marianne
Wiinholt, the Executive Committee comprises
the executive vice presidents (EVP) of our
three business units: Martin Neubert (Off-
shore), 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 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, see link on page 64. You can also find
information about the members of the
Executive Board to the right.
Mads Nipper
*1966, Denmark
Marianne Wiinholt
*1965, Norway
Registered as CEO. Group President and Chief
Executive Officer (CEO) since January 2021.
Registered as CFO. Chief Financial Officer
(CFO) since October 2013.
Education & Career
MSc in International Business,
University of Aarhus 1991
2021 –
Ørsted A/S, President and
Chief Executive Officer
2014 – 20’
Grundfos A/S, Group President and
Chief Executive Officer
1991 – 14’
Lego A/S, EVP, Chief Marketing Officer
(2011-2014). EVP, Markets & Products
(2006-2011), SVP, Global Innovation &
Marketing (2004-2006), Managing Director
and SVP, Lego Central Europe (2001-2004),
SVP, Global Segment 8+ (1999-2001), and
various manager positions (1992-1999).
Other positions
Axcel: Advisory board member. DI Dansk
Industri: Board member. Danish Crown A/S:
Deputy Chairman.
Education & Career
MSc in Business Administration & Auditing,
Copenhagen Business School 1990, State-
Authorised Public Accountant 1992.
2004 –
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).
1997 – 03’
Borealis A/S, Head of Group Finance & Auditing
(2001-2003), Head of Group Accounting & Tax
(1997-2001).
1987 – 97’
Arthur Andersen, Auditor.
Other positions
Coloplast AS: Member of the Board of
Directors and Chairman of the Audit Com-
mittee. Hempel A/S: Member of the Board of
Directors and Chairman of the Audit Com-
mittee (stepping down in 2021). Norsk Hydro
ASA: Member of the Board of Directors and
Chairman of the Audit Committee.
69 / 193
Ørsted Annual report 2020
Management’s review
Governance
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 through 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 interest rates,
inflation, exchange rates, 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.
A large part of our earnings is generated from
offshore wind, with Continental Europe and the
UK being the key contributors. However, with
our expansions into the US and Asia Pacific,
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 consolidat-
ed risks associated with our portfolio changes.
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
Executive Committee. As for business risks,
similar processes are in place for identifying
and prioritising risks related to sustainability
and legal compliance.
The top five business risks identified during
2020 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.
Brexit is not in itself part of our top five busi-
ness risks as we do not believe the UK leaving
the EU will result in fundamental changes to
the UK’s energy policy. Announcements by the
UK government show that the UK is commit-
ted to a clean, renewable energy future, and
offshore wind is the backbone of this green
vision. As we have entered 2021 with a signed
Brexit agreement, the immediate short-term
risk of a sharp GBP depreciation has vanished.
However, given the uncertainty surrounding
the remaining negotiations, GBP weakness
cannot be ruled out over the coming years.
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. These
effects are embedded in our second-largest
risk in our top five business risks, namely
currencies and commodity prices.
Top 5 business risks
Effect on our value and credit metric
High
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 identifying and measuring the accom-
panying portfolio risks.
e
u
l
a
v
n
o
t
c
a
p
m
I
(#1 2019)
Inflation and interest rates
(part of #1 and #2 in 2019)
Currencies and commodity prices
(#5 in 2019)
Increased competition leading to price
pressure
(#3 in 2019)
US offshore development and construction
Low
High
Impact on FFO/adjusted net debt
(New in top 5)
Cybersecurity
70 / 193
Ørsted Annual report 2020
Management’s review
Governance
Contents
The risks related to sustainability and legal
compliance are assessed using different pa-
rameters. Hence, we do not show a consolidat-
ed picture of our combined risks.
both our transitional and physical climate-
related risks in the short, medium, and long
term. We do that by, among other things:
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:
– fatal injuries
– 1,000-year storms, hurricanes, typhoons,
or earthquakes, especially in 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 per-
sonal injury and damage to the environment
– breakdowns at power plants that may lead
to personal injury and loss of assets.
After risk-reducing measures are implemented,
the Executive Committee assess whether the
level of each risk is appropriate, or if it is 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
– encouraging regulators and other public
authorities to set ambitious targets for the
build-out of renewable capacity and regula-
tory 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-
ment 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 as-
sess 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.
A description of the most significant sustain-
ability risks can be found in our sustainability
report.
In 2019, we concluded a climate scenario
analysis, assessing the resilience of our
offshore business in two potential scenarios
of climate change: a 1.5-2 °C and 3-4 °C
temperature rise by 2100, respectively. The
study was conducted through research,
interviews, and workshops and concluded
that our offshore business is well positioned to
manage climate-related risks of both transi-
tional and physical nature. Please refer to our
CDP climate change disclosure for detailed
descriptions here.
Development in risks in 2020
This year, cybersecurity risks have been ele-
vated into our top five business risks, which
means that construction risks have been
excluded as a top risk for Ørsted. Additionally,
we have seen relative changes between the
risks compared to last year’s annual report.
Inflation and interest rates are considered
our number one risk. We have carved out
currencies from inflation and interest rates
and incorporated it into our second-largest
risk alongside commodity prices. The change
is motivated by the overlapping mitigation
efforts in hedging currency and commodity
price risks.
As the offshore market continues to grow
and mature, an increasing number of players
have entered the market of renewable ener-
gy generation. This has put pressure on prices
in auctions and tenders in excess of what
can be explained by the LCoE development.
Therefore, the risk has been elevated to our
third-largest risk.
We continue to see increased development
and construction risks in our US offshore
projects compared to projects in more ma-
ture markets. In 2020, the continued delays
in the permitting process from the Bureau of
Energy Management (BOEM), the US federal
regulator, had an adverse impact on our
portfolio. The risk is our fourth-largest.
In this year’s annual report, cybersecurity
risks have entered our top five business risks.
Major cyberattacks are becoming more
frequent, and we see an increasing number
of cybercriminals looking to financially harm
companies. As we grow into an ever-larger
global renewable energy player, the threat of
cyberattacks has increased.
COVID-19
The ongoing COVID-19 pandemic has affected
lives, livelihoods, and economies around the
world. At Ørsted, we activated our Corporate
Crisis Management Organisation (CCMO) on
12 March 2020 to closely monitor develop-
ments in the pandemic, enabling us to
respond in a timely manner, thereby mini-
mising health and safety risks and ensuring
business continuity.
Despite an agile pandemic response system,
we have seen adverse impacts of the pan-
demic, mainly related to our supply chain and
the power prices in the markets where we
operate. COVID-19-related lockdowns during
spring and summer led to risks of delays at
some of our offshore construction sites. Due to
our experience and the flexibility in our time-
lines, we have been able to progress on some
other project milestones. Therefore, we assess
the probability of COVID-19-related risks
materialising and causing significant negative
impact on Ørsted to be low.
71 / 193
Ørsted Annual report 2020
Management’s review
Governance
Contents
1
Inflation and interest rates
2
Currencies and commodity prices
Description
Our main currency exposure relates to GBP due
to our substantial investments in offshore wind
farms in the UK. However, our recent interna-
tional expansion has increased our USD and
NTD exposure.
We are primarily exposed to power price risks
from the sale of our wind-based power genera-
tion 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 to 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 at our 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 and commodity
prices may adversely impact our earnings.
Mitigating actions
We hedge currencies and commodity prices for
up to five years, and in some cases longer, to
reduce cash flow fluctuations. We hedge more
of the risk in the first years and less in the later
years. This is due to decreasing market liquidity
and increasing uncertainty about generated
volumes.
On the medium- to long-term horizon, the
currency 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 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.
As an alternative to hedging power, 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 10-15 years are often a pre-
requisite for obtaining tax equity partnerships
in the US. In addition, CPPAs will be a means to
mitigate merchant risk for offshore wind farms
to be built without subsidies. Our awarded off-
shore wind farms situated off the US East Coast
are guaranteed a fixed price for a period of
approximately 20 years and thus, no additional
merchant risk has been introduced.
Description
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 pur-
chase agreements (PPAs) from assets in the US
and Taiwan are exceptions to this, as are fixed
nominal cash flows related to debt. We are ex-
posed to inflation risks in these markets where
an increase in inflation will adversely impact
the expected real value of the revenue.
Our farm-down model of funding future
wind farms through divestments is exposed
to interest rate risks as wind assets are more
attractive to buyers when interest rates are
low compared to other financial assets with
similar risk profiles.
Potential impact
Fluctuations in interest rates and inflation may
adversely impact our earnings and farm-down
model, thereby affecting the value of our
assets.
Mitigating actions
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.
3
Increased competition
leading to price pressure
Description
As the offshore industry has become more
mature and established, 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.
In offshore wind, the competitive auction and
tender mechanics being implemented across
the various regions and markets are also
becoming more diversified. While the mature
European markets increasingly look to include
innovation and system integration (e.g. storage
and renewable hydrogen) to play an increas-
ingly important role in auctions and tenders,
developing markets in both Europe, the US,
and Asia Pacific often emphasise costs and job
creation as determination criteria. For offshore
wind, this necessitates a flexible approach
to remain competitive across the different
markets and implies the need to retain strong
supplier engagement and cost standardisation.
Potential impact
There is a risk that we will not win the targeted
capacity in the auctions and tenders in which
we participate, or that our value creation from
the projects we win ends up being lower than
targeted.
Mitigating actions
We will continue to utilise portfolio-scale ad-
vantages and knowhow gained from previously
executed projects to develop supply chain
solutions and reduce costs and risks in order
to maximise our ability to win future projects.
Furthermore, early commitments and both
global and regional framework agreements are
being made to secure capacity.
72 / 193
Ørsted Annual report 2020
Management’s review
Governance
Contents
4
US offshore development
and construction
Description
Our expanding pipeline of US offshore
projects entails risks in the development and
construction phases caused by the relatively
immature US offshore wind market, including
the federal permitting process, for which we are
still awaiting clarification from BOEM. Contrary
to the EU markets, it is possible in the US to
participate in auctions and be awarded pro-
jects 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).
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 reduce 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
an approach of having multiple points of
interconnections 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.
5
Cybersecurity
Legal compliance
Description
In recent years, several major cyberattacks
have been launched against companies around
the world, and we see growth in serious cyber
operations in closer proximity to our business
presence.
We assess cybersecurity risks by identifying:
1) protection level and possible residual
exploitation scenarios for our systems and
processes, 2) threat intelligence on main types
of actors and characteristics for intention and
capabilities, and 3) financial impact.
Correspondingly, we have a strong focus
on IT security. As we possess critical energy
generation capacity and own various types of
intellectual property rights, we are a potential
target 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 as-
set 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
Our mitigation effort towards cyberattacks is
twofold. First, we continually improve our resil-
ience against cyberattacks and other threats
across Ørsted through our security programme.
This is carried out through workshops across
business units to assess the cyber risks. This is
combined with an advanced security architec-
ture, spanning the entire company. Second, we
are participating in relevant forums across the
energy sector to harvest ideas and contribute
with information and experience.
Description
Risks associated with legal compliance are
assessed based on financial and reputational
significance and probability. Our most signif-
icant risks are tax law, financial regulations,
and tender law. 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. Lastly, many of our
purchases of goods, services, and work in the
EU are subject to EU and local tender rules.
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, but also in delays in sourcing
processes and subsequent risk of delay of
projects.
Mitigating initiatives
We are well under way with the implementa-
tion of a comprehensive tax control framework
and mandatory compliance, including transfer
pricing documentation, in line with OECD
recommendations and local requirements. This
is being prepared on a contemporaneous basis
to mitigate our tax risks. We have implemented
comprehensive policies, procedures, training,
and controls for relevant parts of our business
to ensure compliance with financial regula-
tions. To ensure compliance with tender laws,
our legal team carries out training courses for
procurement teams in basic tender law and
practical courses on how to apply the standard
tender documents and works closely together
with Procurement on major tenders.
73 / 193
Ørsted Annual report 2020
Management’s review
Governance
Contents
Shareholder information
The Ørsted share yielded a total
return of 82 % in 2020, an increase
in the share price of 80 % and
dividends of DKK 10.5 per share.
Price development for the Ørsted share
The Ørsted share closed 2019 at a price of
DKK 689 and closed 2020 at DKK 1,244. Prices
of comparable European utility companies de-
creased by 5 %, and the OMX C25 cap increased
by 34 % in 2020. The market value of Ørsted
was DKK 523 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 444 %.
The year’s highest traded price of DKK 1,273
was on 29 December. The year’s lowest traded
price of DKK 574 was on 19 March.
The average daily turnover on Nasdaq Copen-
hagen was 516,919 shares. The trading volume
increased by 16 % compared to 2019.
In connection with SEAS-NVE’s (now Andel)
acquisition of our Danish power distribution,
residential customer, and city light businesses,
Andel sold shares equivalent to 2.27 % of the
shares in Ørsted in January 2020, bringing their
shareholding to 5.01 %.
Share price development in 2020
Ørsted share price compared to peers
DKK
1300
1200
1100
1000
900
800
700
600
500
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 2020. At the end of 2020,
the company held a total of 313 thousand
treasury shares which will be used to cover
incentive schemes.
Selected company announcements in 2020
4 Mar.
Ørsted increases its full-year
EBITDA guidance
25 Mar. Ørsted provides COVID-19 update
3 Apr.
Ørsted postpones Capital Markets Day
15 June Henrik Poulsen has resigned and steps down
as CEO of Ørsted no later than 31 January
2021. The Board of Directors has initiated a
process to identify Ørsted’s next CEO
Composition of shareholders
At the end of the year, the number of share-
holders had increased by 67 % to 71,807, and
the majority (63 %) lies with Danish owners.
The figure on the next page shows the compo-
sition of our shareholders by country, specify-
ing 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 1 March 2021. Dividends for the year are
expected to amount to DKK 11.5 per share,
corresponding to DKK 4.8 billion and a yield
of 0.9 % compared to the share price of
DKK 1,244 at the end of 2020.
8 July
Ørsted and TSMC sign the world’s largest
renewables corporate power purchase
agreement
31 Aug. Ørsted completes the divestment of its
Danish power distribution, residential
customer, and city light businesses
9 Sep.
Ørsted appoints Mads Nipper the next
CEO of Ørsted
4 Nov. Ørsted successfully issues green bonds
in Taiwan
1 Dec.
Ørsted appeals against decision from the
Danish Tax Agency on Danish taxation of
two offshore wind farms in the UK
4 Dec. Ørsted divests 25 % of Ocean Wind 1 to
PSEG
10 Dec. Ørsted and Amazon sign Europe’s largest
offshore wind corporate power purchase
agreement
28 Dec. Ørsted brings in CDPQ and Cathay PE
as investors in the Greater Changhua 1
Offshore Wind Farm
In 2020, dividends of DKK 10.5 per share were
paid for the 2019 financial year, corresponding
to a dividend yield of 1.5 %.
Financial calendar 2021
3 Feb.
Annual report 2020
1 Mar.
Annual general meeting
29 Apr.
Interim report for the first quarter of 2021
12 Aug.
Interim report for the first half-year of 2021
3 Nov.
Interim report for the first nine months
of 2021
74 / 193
Ørsted Annual report 2020
Management’s review
Governance
Contents
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 30 equity analysts
and 11 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
remuneration report, our ESG performance
report, and our sustainability report as well
as investor presentations and a wide range of
other data.
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
Shareholders at 31 December 2020,
share capital and/or voting share %*
Danish State (majority shareholder)
Andel A.M.B.A, Denmark
The Capital Group, United States
Retail investors, Denmark
North America
United Kingdom
Danish institutional investors
Others
8-13 %
6 %
8 %
11 %
2 %
5-10 %
5 %
* See note 16 in the parent company
financial statements.
Share information
ISIN
DK 0060094928220
Share classes
1
50.1 %
Nominal value
DKK 10 per share
Average daily volume
516,919
Exchange
Ticker
Year high
Year low
Nasdaq OMX
Copenhagen
ORSTED
DKK 1,273 (29 Dec.)
DKK 574 (19 Mar.)
Registered share
99.6 %
Number of shares
420,381,080 shares
Number of treasury shares 312,844 shares
Formosa 1, off the coast
of Miaoli County, Taiwan.
75 / 193
Ørsted Annual report 2020
Notes
Contents
Consolidated
financial statements
2020
1 January – 31 December
Ørsted Annual report 2020
Financial statements
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
2.7, 2.8
Employee costs
2.6
2.6
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, 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:
2020
2019
Business
performance
Adjustments
52,601
(26,708)
(5,774)
(4,283)
71
2,620
(403)
(2,450)
924
-
-
-
-
-
IFRS
50,151
(25,784)
(5,774)
(4,283)
71
2,620
(403)
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)
18,124
(1,526)
16,598
17,484
1,536
19,020
(7,588)
10,536
10,831
7
5,779
(8,303)
18,850
(2,123)
16,727
(11)
16,716
-
(1,526)
-
-
-
-
(1,526)
347
(1,179)
-
(1,179)
(7,588)
9,010
10,831
7
5,779
(8,303)
17,324
(1,776)
15,548
(11)
15,537
(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
Shareholders in Ørsted A/S
16,289
(1,179)
15,110
5,315
1,191
6,506
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
488
(61)
38.8
0.0
38.8
488
(61)
36.0
0.0
36.0
675
54
12.8
(0.1)
12.7
675
54
15.6
(0.1)
15.5
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 ‘Adjust-
ments’ column. Read more about the business per-
formance principle in note 1.6 ‘Business performance’.
77 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements
Notes
Contents
Statement of comprehensive income
1 January - 31 December
2020
2019
Business
performance
Adjustments
16,716
(1,179)
(1,249)
(246)
(5,104)
2,163
-
257
520
3
(3,656)
13,060
979
547
-
-
-
(347)
-
-
1,179
-
Note
DKKm
Profit (loss) for the year
Other comprehensive income:
Cash flow hedging:
1.6, 7.2
Value adjustments for the year
6.2
Value adjustments transferred to income statement
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 from
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
Business
performance
Adjustments
6,044
1,191
1,598
1,751
(141)
(1,395)
2,722
(1,907)
-
(504)
(35)
(17)
3,608
9,652
-
-
-
345
-
-
(1,191)
-
IFRS
15,537
(270)
301
(5,104)
2,163
-
(90)
520
3
(2,477)
13,060
12,744
488
(172)
13,060
Statement of comprehensive income
All items in ‘Other comprehensive income’ may be
recycled to the income statement.
Cash flow hedging:
Value adjustments for the year for cash flow hedging
according to IFRS amounting to DKK -270 million
mainly consist of losses related to hedging of power
partly countered by gains related to hedging of UK
inflation. The loss of DKK 301 million transferred
to the income statement mainly consist of early
termination of interests rate swaps related to the
termination of the project financing of Block Island.
Value adjustments transferred to the income
statement according to the adjustment column
amounting to DKK 547 million mainly consist of
losses on gas hedges that are recognised in the
income statement under business performance, but
where the losses under IFRS were recognised in
previous periods, as the gains and losses under
business performance are deferred to the period to
which the hedged exposure relates.
Exchange rate adjustments:
Foreign exchange losses relating to net investments
in foreign enterprises amounting to DKK -5,104
million were in 2020 primarily attributable to an
decrease of 6 % in the GBP exchange rate and a
decrease of 9 % in the USD exchange rate. A large
part of the net investments were hedged.
IFRS
7,235
1,457
356
2,722
(1,907)
-
(159)
(35)
(17)
2,417
9,652
8,729
675
248
9,652
78 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements
Notes
Contents
Balance sheet
31 December
Note
Assets, DKKm
3.1
3.1
3.1
3.1
3.1
5.3
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
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
196,719
192,860
Assets and related liabilities held for sale
In August, we completed the divestment of our
Danish power distribution, residential customer,
and city light businesses to SEAS-NVE (now Andel).
In December, we completed the divestment of our
LNG business to Glencore.
At 31 December 2020, assets and related
liabilities held for sale comprised our oil pipe
system in Denmark.
2020
639
5,574
86,184
507
29,345
121,610
555
209
6,784
1,925
9,473
131,722
14,739
6,109
30
6,732
3,720
852
25,173
6,178
63,533
1,464
2019
Note
Equity and liabilities, DKKm
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
6.2
6.2
6.3
3.8
5.3
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
Proposed dividends
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
3.6
Liabilities relating to assets classified as held for sale
2020
4,204
(1,956)
74,294
4,834
81,376
13,232
2,721
97,329
2,187
12,475
4,455
34,374
3,650
6,780
374
2019
4,204
413
64,051
4,414
73,082
13,232
3,248
89,562
3,371
12,063
4,728
36,039
3,762
4,563
469
64,295
64,995
1,388
599
2,392
6,318
480
9,742
1,187
6,082
6,220
34,408
98,703
687
538
604
801
6,958
784
10,832
632
4,247
4,075
29,471
94,466
8,832
Equity and liabilities
196,719
192,860
79 / 193
Ørsted Annual report 2020
Financial 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
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
2020
2019
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
Coupon payments, hybrid capital
Tax, hybrid capital
Additions, hybrid capital
Disposals, hybrid capital
Proposed dividends
Dividends paid
Purchase of treasury shares
Other changes
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
15,110
31
(2,830)
430
-
-
-
-
3
(2,369)
15,113
-
-
-
-
-
-
-
-
-
-
-
-
15,110
488
(61)
15,537
6,506
675
54
7,235
-
-
-
-
-
-
-
-
-
-
31
(2,830)
430
3
12,744
-
-
-
-
-
-
-
-
-
488
(488)
-
-
-
-
-
-
-
-
31
(111)
(2,941)
-
-
430
3
(172)
13,060
-
-
-
-
-
(488)
-
-
-
-
(361)
(4,771)
-
6
(58)
24
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,506
1,813
621
(194)
-
-
-
-
(17)
2,240
6,489
-
-
-
-
-
-
-
-
-
-
-
-
(4,414)
4,414
3
(4,099)
(4,096)
(99)
60
-
-
(99)
60
1,813
621
(194)
(17)
8,729
-
-
-
-
-
-
-
-
-
675
(556)
34
4,416
(4,576)
-
-
-
-
-
1,813
194
-
-
815
(194)
(17)
248
9,652
-
-
-
-
-
(556)
34
4,416
(4,576)
-
(388)
(4,484)
-
-
(99)
60
(4,834)
4,834
4
(4,414)
(4,410)
(58)
18
-
-
(58)
18
Equity at 31 December
4,204
(1,956)
74,294
4,834
81,376
13,232
2,721
97,329
4,204
413
64,051
4,414
73,082
13,232
3,248
89,562
* See note 6.2 ‘Equity’ for more information about reserves.
80 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements
Notes
Contents
Statement of cash flows
1 January - 31 December
Note
DKKm
2020
2019
Note
DKKm
Operating profit (loss) before depreciation, amortisation, and
impairment losses (EBITDA), IFRS
1.6
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
5.4
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
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’.
16,598
1,526
411
(772)
(805)
(42)
(1,613)
2,958
1,153
3,032
(4,862)
(1,118)
16,466
19,020
(1,536)
(1,040)
727
101
86
1,417
630
(477)
4,094
(5,143)
(4,800)
13,079
(26,957)
(22,445)
123
-
18,914
(6)
(19,862)
11,212
15
(19)
18
3,424
(764)
(89)
(5)
(20,503)
29,452
-
(88)
21
(16,562)
(10,997)
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
3.7
6.4
Exchange rate adjustments of cash and cash equivalents
6.4
Cash and cash equivalents at 31 December
2020
3,406
(2,398)
(541)
(488)
-
-
(4,410)
(58)
(428)
101
2,691
(2,125)
(2,221)
966
(1,255)
6,459
(1,255)
6
5,210
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
206
6,459
Accounting policies
‘Cash flows from operating activities’ are determined
using the indirect method as operating profit (loss)
before 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 repayment
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, including 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.
81 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements
Notes
Contents
Notes
Consolidated financial statements
1. Basis of reporting
83
5. Tax
1.1 Significant changes in the current reporting period 84
85
1.2 Basis of preparation
1.3 Key accounting estimates and judgements
87
1.4 Implementation of new or changed accounting
5.1 Approach to taxes
5.2 Tax on profit (loss) for the year
5.3 Deferred tax
5.4 Our tax footprint
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
standards and interpretations
1.5 Alternative performance measures
1.6 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 Research and develop ment expenditures
2.6 Other operating income and expenses
2.7 Employee costs
2.8 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
88
89
90
93
95
98
101
102
102
103
104
105
107
109
112
114
115
115
116
116
117
118
120
120
121
121
122
123
123
124
126
128
130
132
135
137
139
141
142
144
145
147
149
152
153
154
155
156
158
159
160
161
161
162
82 / 193
Ørsted Annual report 2020
Notes
Contents
1.
Basis of reporting
84 Significant changes in the current reporting period
85 Basis of preparation
87 Key accounting estimates and judgements
88
Implementation of new or changed accounting
standards and interpretations
89 Alternative performance measures
90 Business performance
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 1. Basis of reporting
Notes
Contents
1.1 Significant changes in the current reporting period
The financial position and performance of
the Ørsted Group was particularly affected
by the following events and transactions
during 2020.
For a detailed discussion about the Ørsted
Group’s performance and financial position,
please refer to our management’s review on
pages 4 to 60.
IFRS
2020
COVID-19
Divestments/discontinued operations
Accounting policy
COVID-19
We have analysed the impacts that
COVID-19 had on our financial reporting.
Our operations and financial performance
remains very solid despite the COVID-19
pandemic, and we identified no significant
impact on our financial reporting in 2020.
We did not receive any governmental
support in relation to COVID-19.
Danish power distribution, residential
customers, and city light businesses
In August, we completed the divestment of
our Danish power distribution, residential
customer, and city light businesses to
SEAS-NVE (now Andel). The divestment
marks an important strategic milestone
for Ørsted and completes our portfolio
transformation into a global renewable
energy company. The transaction resulted
in proceeds of DKK 20.5 billion and a gain
of DKK 10.9 billion. See note 3.4 ‘Divestment
of enterprises’.
LNG
In December, we completed the divestment
of our LNG business to Glencore, resulting in
a cash outflow of DKK 1.5 billion. See note
3.4 ‘Divestment of enterprises’.
UK B2B gas and power portfolio
In September, we signed an agreement
to divest the vast majority of our UK B2B
customer portfolio to Total Gas & Power.
We will keep some of our strategic long-term
partners and customers to whom we deliver
risk management products. We expect the
transaction to close in Q1 2021.
Discontinued operations
As the remaining selling price regarding
the divestment of our Oil & Gas business
back in 2017 was received in 2020 from
INEOS, we decided to end the reporting
on discontinued operations as per
31 December 2020. Remaining provisions
regarding tax indemnifications and payments
related to the Fredericia stabilisation
plant has been transferred to continuing
operations at 31 December 2020. See note
3.7 ‘Discontinued operations’.
Cease the use of business performance
as of 1 January 2021
With the implementation of IFRS 9 in 2018,
it has become significantly easier to apply
IFRS hedge accounting to our commodity
hedges. We have concluded that IFRS 9
can replace our business performance
principle, and therefore, we will only be
reporting based on IFRS from 1 January
2021. Thus, the business performance and
adjustment columns will not be included in
our financial reporting any more. This will
simplify our reporting and avoid potential
confilicts with future reporting requirements
for alternative performance measures.
See notes 1.4 ‘ Implementation of new
standards or changed accounting standards
and interpretations’ and 1.6 ‘Business
performance’ for more information.
84 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 1. Basis of reporting
Notes
Contents
1.2 Basis of preparation
This section provides an overall description of
the accounting policies applied in our consoli-
dated financial statements as well as the Euro-
pean Single Electronic Format (ESEF) reporting
requirements. We provide a more detailed
description of the accounting policies applied
in the specific notes. Key accounting estimates
and judgements and new and amended IFRS
standards and interpretations are discussed in
detail in notes 1.3 ‘Key accounting estimates
and judgements’ and 1.4 ‘Implementation of
new or changed accounting standards and
interpretations’, respectively.
Basis of preparation
The financial statements for the period
1 January - 31 December 2020 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 178 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 historical cost basis, except
for derivatives, gas in non-Danish storage
facilities, 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.
Principles for consolidation
The consolidated financial statements
comprise 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’.
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, expenses, shareholdings,
balances, and dividends as well as realised
and unrealised gains and losses arising from
intra-group transactions 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 invest-
ments in joint ventures, unless the nature of
the joint arrangement is considered a joint
operation, see our key accounting judgement
for ‘Consolidation method for partnerships’ in
the next column.
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 judgement
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 to 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.
85 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 1. Basis of reporting
Notes
Contents
Foreign currency translation
For each reporting enterprise in the Group,
items are determined in the currency of the
primary economic environment in which
the individual reporting enterprise operates
(functional currency). Transactions in curren-
cies other than the functional currency of
each enterprise are accounted for as trans-
actions in foreign currencies and translated on
initial recognition at the exchange rate on the
transaction date. Exchange differences arising
between the exchange rate on the transaction
date and on the date of payment are recog-
nised in profit (loss) for the year as financial
income or expenses.
Receivables, payables, and other monetary
items in foreign currencies are translated at
the exchange rates 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 insofar 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.
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.
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.
– 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.
European Single Electronic Format (ESEF)
As we are a Group with securities listed on a
regulated market within the EU, we are from
2021 required to prepare our annual report
using the XHTML format and to tag the primary
consolidated financial statements using Inline
eXtensible Business Reporting Language
(iXBRL). This iXBRL format makes the annual
report readable for both human and machines.
The annual report we submitted to the Danish
Financial Supervisory Authority consists of
the XHTML document together with some
technical files, all included in a ZIP file named
ORST-2020-12-31.zip. For convenience, a PDF
version of the annual report is published in line
with previous years.
Key definitions:
– XHTML (eXtensible HyperText Markup
Language) is a text-based markup language
used to structure and mark up content such
as text, images, and hyperlinks in documents
that are displayed as Web pages.
– iXBRL tags (or Inline XBRL tags) are hidden
meta-information embedded in the source
code of an XHTML document in accordance
with the Inline XBRL 1.1 specification, which
enables the conversion of XHTML-formatted
information into a machine-readable XBRL
data record by appropriate software. iXBRL
tags shall comply with the ESEF taxonomy,
which is included in the ESEF Regulation
and developed based on the IFRS taxonomy
published by the IFRS Foundation.
– The tagging process is a process where
iXBRL tags are applied to financial state-
ment line items, etc. If a financial statement
line item is not defined in the ESEF taxono-
my, an extension to the taxonomy is created.
Extensions have to be anchored to elements
in the ESEF taxonomy, except for extensions
which are subtotals.
– Taxonomy is an electronic dictionary of
business reporting elements used to report
business data. A taxonomy element is an
element defined in a taxonomy that is
used for the machine-readable labeling of
information in an XBRL data record.
86 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 1. Basis of reporting
Notes
Contents
1.3 Key accounting estimates and judgements
Hornsea 1, off the
Yorkshire coast, the UK.
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
material 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.
Note
1.2
2.2
2.6
3.1
3.2
5.2
Basis of preparation
Consolidation method for partnerships
Key accounting estimates and judgements
Revenue
Assessment of assumptions for recognition of revenue from the
construction of offshore wind farms over time1
Assumptions for the determination of the expected selling pice
and costs1
Other operating income and
expenses
Estimates for variable selling price related to divestments of offshore
wind farms and offshore transmission assets
Estimate/
judgement
Judgement
Judgement
Estimate
Estimate
Intangible assets, and property,
plant, and equipment
Assumptions used in value-in-use calculations for impairment testing
Estimate
Provisions
Assumptions for provisions
Tax on profit (loss) for the year
Estimates regarding recognition of income taxes
Estimate
Estimate
1 Only relevant for comparatives.
Impact of accounting
estimates and judgements
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
87 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 1. Basis of reporting
Notes
Contents
1.4 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.
Effective from 1 January 2020, we have
implemented the following amendments to
standards (IAS and IFRS) and interpretations:
– Amendments to IAS 1 and IAS 8: Definition
of Material.
– Amendments to IFRS 3: Definition of a
Business.
– Amendments to IFRS 9 and IFRS 7:
Interest Rate Benchmark Reform.
The adoption of the new and amended
standards has not impacted our consolidated
financial statements for 2020.
Cease the use of business performance
as of 1 January 2021
With the implementation of IFRS 9 in 2018, it has
become significantly easier to apply IFRS hedge
accounting to our commodity hedges. We have
concluded that IFRS 9 can replace our business
performance principle, for which reason we only
will be reporting based on IFRS from 1 January
2021. Thus, the business performance and adjust-
ment columns will no longer be included. This
will simplify our reporting and avoid potential
conflicts with future reporting requirements for
alternative performance measures.
Among other things, IFRS 9 has made it easier
to apply hedge accounting by the removal of
the 80-125 % effectiveness requirement which
can be difficult to comply with at all times
when we engage in proxy hedging. An example
of proxy hedging is when we hedge our power
exposure 4-5 years into the future with gas
hedges due to illiquidity in the market for
power hedges with this time horison.
At the end of 2020, the value of our business
performance hedges deferred to a future
period amounted to a loss of DKK 2,685 million.
This loss has already been recognised in the
income statement under IFRS, as we have
not previously applied hedge accounting for
these. Consequently, for the period 2021-2025,
EBITDA (according to IFRS) will be higher with a
similar amount compared to what the business
performance EBITDA would have been in the
same period, if we had continued to report
based on this principle. See also note 1.6.
New standards and interpretations
IASB has issued amended standards which
have not yet entered into force, and which
have consequently not been incorporated
into the consolidated financial statements
for 2020. None of these amended standards
and interpretations are expected to have any
significant impact on our financial statements.
Installation of the two
wind turbines that form
Coastal Virginia Wind,
off the coast of
Virginia Beach, the US.
88 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 1. Basis of reporting
Notes
Contents
1.5 Alternative performance measures
Performance measures are calculated in accordance with the business performance principle.
Business performance
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 1.6 ‘Business performance’.
Gross investments
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
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
(FFO)
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 assets, 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 debt
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
FFO
Adjusted interest-bearing net debt
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 at year-end
2
EBIT
Average capital employed
Total proposed dividend
Number of shares at year-end
Dividend per share (proposed)
Share price on the last trading day of the year
1
×
Number of
days
Number of
days
∑
i=1
=
X1
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
Free cash flow (FCF)
Free cash flows are cash flows from operating activities less gross investments and
plus divestments.
Profit (loss) per share
Shareholders’ share of the profit (loss) for the period
Average number of shares
Capital employed
Capital employed are all assets and liabilities, except for equity and interest-
bearing net debt.
Diluted profit (loss)
per share
Shareholders’ share of the profit (loss) for the period
Average number of shares, including dilutive effect of free shares
89 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 1. Basis of reporting
Notes
Contents
1.6 Business performance
Cease the use of business performance
as of 1 January 2021
The reason for abolishing business performance
is described in note 1.4 section ‘Cease the use
of business performance as of 1 January 2021’.
Consequently as of 1 January 2021, we will ap-
ply hedge accounting to all commodity hedges
and related currency hedges except for hedges
related to our gas portfolio which account for
approx. 14 % of our total commodity hedges.
Until we are ready to apply hedge accounting
to these hedges, the change in fair value will
be recognised through profit or loss. We expect
to implement hedge accounting to hedges in
our gas portfolio during the first half of 2021.
Description of business performance
In 2011, we introduced an alternative
performance measure, business performance,
as a supplement to the financial statements
prepared in accordance with IFRS. The
business performance results reflect our
internal risk management and show the
results for the period under review. Under the
business performance 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
– 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.
Type of hedging
IFRS
Business performance
Hedging of energy and associated
currency risks as well as fixed-price
physical gas and power contracts
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
Hedging of:
– proceeds from the divestment of
newly constructed offshore wind farms
Market value adjustments are deferred and
recognised in the period in which the exposure
materialises
– interest and inflation risks
Recognition is the same as under IFRS
Hedging of currency risks associated
with investments in foreign entities
Market value adjustments are recognised in other
comprehensive income
Recognition is the same as under IFRS
Trading portfolio
Market value adjustments are recognised in the
income statement
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.
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.
90 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 1. Basis of reporting
Notes
Contents
Expected impact on business performance
EBITDA from energy and currency hedging
At 31 December 2020, a loss of DKK 671 mil-
lion would have been deferred (2019: gain
of DKK 1,434 million) and affected business
performance EBITDA in subsequent years if we
had continued with the business performance
principle. Of this, a gain of DKK 68 million is
expected in EBITDA in 2021.
Power prices increased in 2020, which means
that the market value of the hedges has de-
creased as we are selling power. The decrease
in the deferred loss on currency hedging is
primarily attributable to a decrease in the GBP/
DKK rate causing a gain as we are selling GBP.
Power
Gas
Oil
Coal
Currency
Expected impact on EBITDA from energy and currency hedging, DKKm
Deferred for subsequent recognition
at 31 December 2020
Deferred for subsequent recognition
at 31 December 2019
2021
2022 After 2022
Total
2020
2021
After 2021
(1,052)
(790)
(320)
(2,162)
13
20
(8)
(85)
65
(205)
64
23
(5)
1
(166)
(937)
121
-
-
21
(31)
-
(306)
(636)
24
57
(16)
(7)
(557)
(2,685)
210
1,209
1,004
-
64
(30)
702
48
(33)
(188)
499
46
-
(45)
(382)
53
9
(3)
(374)
(697)
46
-
-
(50)
15
(1)
-
(886)
(922)
929
585
-
Total
(462)
770
56
(36)
(1,448)
(1,120)
1,021
585
(45)
144
100
492
736
187
157
649
993
68
221
1,725
2,014
188
203
2,163
2,554
(1,044)
(716)
1,089
(671)
687
(494)
1,241
1,434
Total business performance hedges
(1,112)
IFRS power hedges
IFRS inflation and interest hedges
IFRS currency hedges
Deferred gain/losses from US power
purchase agreements
Total IFRS hedges and US PPAs
impacting EBITDA
Total hedges, etc., impacting
business performance
The table shows when
the deferred value ad-
justments are expected
to be recognised in the
EBITDA. The business
performance hedges
does not impact the
IFRS numbers as they
have already been
recognised under IFRS as
they occurred. The IFRS
EBITDA for 2021 will
therefore be DKK 1,112
million higher than what
the business perfor-
mance EBITDA would
have been. In total,
business performance
hedges of DKK -2,685
million will not be recog-
nised in 2021 and after.
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
million. The income of GBP 52 million con-
sists of a gain from the hedging contract
of GBP 7 million and GBP 45 million from
the sale of 1,000 GWh 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.
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.
91 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 1. Basis of reporting
Notes
Contents
Difference between IFRS and business
performance for the year
The value adjustment in respect of future
periods totalled a loss of DKK 979 million
(2019: DKK +141 million), and reversal of
deferred gains (losses) recognised according
to business performance in 2020 totalled
DKK -547 million (2019: DKK 1,395 million).
Market value adjustments for the year
related to hedging contracts
2020 was mainly affected by losses on the
hedging of power as a result of an increase in
power prices combined with a selling position.
This was partly countered by gains on curren-
cy hedges, mainly related to a decrease in the
GBP/DKK rate as a result of a selling position.
Deferred gains (losses) from previous periods
In 2020, a gain of DKK 547 million was
recognised in business performance EBITDA,
but as the gain was recognised in IFRS EBITDA
in a previous period, the gain was reversed
in the ‘Adjustments’ column in the income
statement. The gain was primarily attributable
to the hedging of gas.
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:
2020
18,124
(2,450)
924
16,598
2019
17,484
2,556
(1,020)
19,020
Market value adjustments for the year of financial and physical hedging
contracts relating to a future period
(979)
141
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
(547)
(1,526)
1,395
1,536
Tugboat Rovan
McAllister working on
the construction of
Coastal Virginia Wind,
off the coast of
Virginia Beach, the US.
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.
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
2020
702
(1,669)
(13)
5
(4)
(979)
2020
188
10
(701)
(77)
33
(547)
2019
(1,916)
1,144
857
94
(38)
141
2019
(320)
1,249
327
144
(5)
1,395
92 / 193
Ørsted Annual report 2020
Notes
Contents
2.
Return on capital
employed
94 Return on capital employed
95 Segment information
98 Revenue
101 Cost of sales
102 Government grants
102 Research and development expenditures
103 Other operating income and expenses
104 Employee costs
105 Share-based payment
Ørsted Annual report 2020
Financial statements
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 approx. 10 % for the Group for the
2019-2025 period.
Return on capital employed
Return on capital employed was 9.7 % in
2020 compared to 10.6 % in 2019, which
was in line with our target of an average
ROCE of approx. 10 % for the Group in the
period 2019-2025. Reference is made to note
2.1 ‘Segment information’.
Offshore
Onshore
Markets & Bioenergy
6 %
13 %
0
EBIT by segment
percentage of DKK 10,633 million in 2020
EBIT, business performance
DKKbn
24.7
16.2
13.9
81 %
10.1
10.5
18.1 bn
EBITDA totalled DKK 18,124 million in 2020
against DKK 17,484 million in 2019.
10.5 bn
EBIT is stated according to the
business performance principle.
EBIT of DKK 10,633 million is
calculated as EBIT for reportable
segments.
2016
2017
2018
2019
2020
Operating profit (EBIT) totalled DKK 10,536 million
in 2020 against DKK 10,052 million in 2019.
Return on capital employed (ROCE)
%
32.1
24.4
25.2
9.7 %
Return on capital employed totalled
9.7 % in 2020 against 10.6 % in 2019.
10.6
9.7
2016
2017
2018
2019
2020
94 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 2. Return on capital employed
Notes
Contents
2.1 Segment information
Offshore, DKKm
Revenue
EBITDA
Gross investments
Number of employees
34,533
14,750
19,525
3,078
Primary activities
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
733
1,131
6,633
140
Primary activities
Development, construction, ownership, and operation
of onshore wind and solar farms in the US.
Segment structure
We run our business on an end-to-end value
chain thinking. All activities and earnings that
relate to Offshore and Onshore are reported in
these segments, even if the daily activities are
performed on behalf of the Group in Markets &
Bioenergy. Therefore, revenue and earnings
from trading related to hedging of our power
exposures and power portfolio optimisation
activities in relation to Offshore and Onshore
are presented in these business units.
In 2020, EBITDA of DKK 236 million (2019:
DKK 725 million) and DKK 48 million (2019:
DKK -18 million) were transferred to Offshore
and Onshore, respectively.
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
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.
No single customer accounted for more than
10 % of our consolidated revenue in 2020. In
2019, one customer in Offshore had a revenue
of DKK 10,339 million, accounting for more
than 10 % of our consolidated revenue.
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, the Executive Committee.
We apply the business performance principle,
as described in note 1.6 ‘Business performance’,
in connection with our internal management.
Revenue
DKKm 2020 1 (2019)
Denmark (DK)
The UK
The US
Germany (DE)
Intangible assets, and property, plant, and
equipment, DKKm 2020 (2019)
The Netherlands (NL)
Other
Denmark (DK)
The UK
The US
Germany (DE)
The Netherlands (NL)
Taiwan (TW)
Other
The operating segments are managed primarily on
the basis of EBITDA and investments. Financial income,
financial expenses, depreciation, and amortisations
as well as tax are allocated to the operating segments,
while we manage them at Group level.
NL 3,871
(5,081)
OTHER 302
(935)
TW 8,190
(53)
OTHER 87
(2,576)
DK 11,360
(13,610)
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.
Markets & Bioenergy, DKKm
Revenue
EBITDA
Gross investments
Number of employees
21,420
2,136
715
1,009
DE 4,376
(7,060)
US 2,535
(1,317)
Primary activities (excluding divested activities)
Generation of heat and power at CHP plants in
Denmark, route-to-market activities for the Group
and external partners, such as balancing power in
the market, selling power and green certificates in
the market, selling power and gas in wholesale and
B2B markets, as well as optimisating and hedging
of Ørsted’s entire energy portfolio.
DKK 52,601
million
DK 13,153
(16,607)
NL 10,860
(4,685)
DE 11,444
(12,809)
US 31,757
(24,068)
UK 28,364
(36,842)
DKK 122,249
million
Revenue, intangible assets as well as property, plant,
and equipment are presented based on the locations
of our customers and assets.
UK 48,551
(48,884)
1
Revenue determined according to the business
performance principle.
95 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 2. Return on capital employed
Notes
Contents
2020
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
Return on capital employed (ROCE), %
Cash flows from operating activities
Gross investments
Divestments
Free cash flow (FCF)
Offshore
Onshore
Markets &
Bioenergy
Reportable
segments
29,903
4,630
34,533
(14,377)
(6,624)
735
412
71
14,750
(6,106)
-
-
743
(10)
733
-
(640)
34
1,004
-
1,131
(482)
-
-
21,733
(313)
21,420
(16,495)
(2,831)
36
6
-
2,136
(796)
-
-
52,379
4,307
56,686
(30,872)
(10,095)
805
1,422
71
18,017
(7,384)
-
-
Other
activities/
eliminations
Business
performance
Adjustments
222
52,601
(2,450)
(4,307)1
(4,085)
4,164
38
-
(10)
-
107
(204)
-
-
-
52,601
(26,708)
(10,057)
805
1,412
71
18,124
(7,588)
-
-
-
(2,450)
924
-
-
-
-
(1,526)
-
-
-
IFRS
50,151
-
50,151
(25,784)
(10,057)
805
1,412
71
16,598
(7,588)
-
-
8,644
649
1,340
10,633
(97)
10,536
(1,526)
9,010
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.
89,257
452
9,775
23,325
-
-
-
(7,246)
(3,516)
3,251
(941)
-
(5,069)
(3,826)
485
745
(499)
(160)
156
-
(659)
(102)
(1,894)
-
8,234
181
-
-
(25)
(895)
(274)
793
(1,275)
(1,990)
456
24
120,816
633
9,775
(7,246)
(4,040)
2,196
(1,059)
793
(7,003)
(5,918)
(953)
769
90,613
12,921
5,229
108,763
9,985
(19,525)
(149)
(9,689)
3,921
(6,633)
114
(2,598)
2,855
(715)
19,060
21,200
16,761
(26,873)
19,025
8,913
1,433
144
-
-
-
32
850
-
-
(942)
182
(790)
909
(295)
(94)
14
(375)
122,249
777
9,775
(7,246)
(4,040)
2,228
(209)
793
(7,003)
(6,860)
(771)
(21)
109,672
9.7
16,466
(26,967)
19,039
8,538
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
122,249
777
9,775
(7,246)
(4,040)
2,228
(209)
793
(7,003)
(6,860)
(771)
(21)
109,672
16,466
(26,967)
19,039
8,538
1
Including the elimin ation of other activities, the total elimination of intra-group revenue amounts to DKK -6,849 million which primarily relates to our Shared Functions services and B2B
business as well as our B2C and power distribution businesses up until divestment.
96 / 193
Ørsted Annual report 2020
Financial 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
-
-
-
IFRS
70,398
-
70,398
(42,836)
(10,043)
(101)
1,622
(20)
19,020
(6,864)
(568)
-
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.
10,231
(179)
10,052
1,536
11,588
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 elimination of other activities, the total elimination of intra-group revenue amounts to DKK -8,425 million which primarily relates to our Shared Functions services as well as our
B2B, B2C, and power distribution businesses.
97 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 2. Return on capital employed
Notes
Contents
2.2 Revenue
Revenue 2020, 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
Miscellaneous revenue
Total revenue, IFRS
Adjustments, see note 1.6
Total revenue, business performance
Timing of revenue recognition from
customers, IFRS
At a point in time
Over time
Total revenue from customers, IFRS
Revenue from sale of goods and services, IFRS
Revenue from sale of goods
Revenue from sale of services
Total revenue, IFRS
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 at farm-down.
‘Over time’ mainly comprises:
– construction agreements for offshore
wind farms and transmission assets
– long-term contracts with customers
to deliver gas, heat, or power.
(4,264)
12,417
Offshore
Onshore
Markets &
Bioenergy
Other
activities/
eliminations
-
4,969
10,970
3,371
-
-
2,433
21,743
12,122
337
33
34,235
298
34,533
12,775
8,968
21,743
-
465
-
-
-
-
7
472
28
139
75
714
19
733
472
-
472
8,619
1,866
5,711
-
2,761
1,559
198
20,714
401
(617)
(1,979)
18,519
2,901
21,420
3,999
16,715
20,714
-
-
-
-
(4)
169
(4,099)
-
640
142
(3,317)
(768)
(4,085)
(4,099)
-
(4,099)
34,235
714
18,519
(3,317)
2020
Total
8,619
7,300
3,371
2,761
1,555
2,807
38,830
12,551
499
(1,729)
50,151
2,450
52,601
13,147
25,683
38,830
46,088
4,063
50,151
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
12,839
16,656
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
11,099
20,323
31,422
(27)
-
(5,825)
-
-
(3)
(35)
(5,890)
-
(530)
77
(6,343)
483
(5,860)
(5,890)
-
(5,890)
39,558
684
36,499
(6,343)
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
18,475
36,979
55,454
65,914
4,484
70,398
Revenue for the year (business performance)
decreased by 22 % to DKK 52,601 million
in 2020. The decrease was mainly due to
significantly lower gas and power prices
relative to last year, lower gas volumes sold,
limited construction work on wind farms for
partners, and a decrease in thermal heat
generation. This was only partly offset by
the divestment of the Walney Extension
transmission asset and the increase in
government grants, mainly due to receipt of
CfDs of another 400 MW related to Hornsea
1 from April 2020, ramp-up of generation from
Hornsea 1 and Borssele 1 & 2 as well as higher
wind speeds across the portfolio.
Other revenue in Offshore primarily related to
operations and maintenance agreeements,
which increased due to ramp-up of generation
from Hornsea 1 and Borssele 1 & 2 in 2020.
98 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 2. Return on capital employed
Notes
Contents
Unsatisfied long-term contracts
with customers, DKKm
2020
2019
31 December
Within one year
In more than one year
0
1,345
0 %
100 %
0 %
0 %
Expected to be recognised
Accounting policies
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 per-
formance obligation (unsatisfied or partially satisfied).
In accordance with IFRS 15, the overview does not
include revenue from contracts with customers
to deliver gas, heat, and power, or our operations
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 estimate
Key accounting judgement
Assumptions for the determination of the expected
selling price and 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 farm and offshore transmission assets
– total expected costs for the individual contract
– the value of the 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 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 agreements at
the time of conclusion of the agreements.
In our view, our partner assumes control of the
offshore wind farm in step with construction.
This is supported by:
– the regular approval of part deliveries
– the approval or rejection of significant variations
to the construction
– the partner’s takeover of work from the 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
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 a partner.
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.
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
Types of goods and services
Revenue from the sale of gas includes the sale of gas
sourced from other producers.
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.
renegotiations are not included in revenue before we
know the outcome of the individual renegotiations.
In most cases, the consideration for the gas is due
when the gas is injected into the distribution system
or delivered to the customer. The delivery of gas is
invoiced on a monthly basis, and the payment is due
within 10-30 days.
Sale of power
Types of goods and services
Revenue from the sale of power includes the sale of
power sourced from other producers.
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.
Significant terms of payment and associated
estimates and judgements
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
plant 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.
99 / 193
Therefore, our determination of profit and the
recognition of revenue and related contract assets
are subject to significant uncertainty. We believe that
our estimates are the likely outcome of future events.
– the milestone payments from the partner.
Therefore, revenue is recognised over time during the
construction of the offshore wind farms.
Some long-term gas sales contracts include
clauses which give the right to renegotiate the
fixed sales prices. Expectations for the outcomes of
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 2. Return on capital employed
Notes
Contents
Significant terms of payment and associated
estimates and judgements
Revenue from ancillary services consists of fees for
having power plants on standby and/or immediately
ready to increase or decrease the generation of
power by an agreed amount to balance the demand
and supply in the system. Ancillary services are con-
sidered one performance obligation which is fulfilled
over time when the power plants are on standby
and/or immediately ready to increase or decrease
the generation of power.
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 assets, 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 construc-
tion agreement is measured at the transaction price
of the work performed less progress billings, based
on the percentage of completion of the contract 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 calcu-
lated 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 judgements
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.
Significant terms of payment and associated
estimates and judgements
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.
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.
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 judgements
Payment for the sale of heat consists of fixed costs
associated with operations and maintenance of a
CHP plant, 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.
Timing of satisfaction of delivery obligations
and significant estimates
Revenue from providing services is recognised in the
accounting period in which the services are rendered.
For fixed-priced contracts, revenue is 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 judgements
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 exist at the relevant
takeover 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’.
100 / 193
Ørsted Annual report 2020
Financial 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
-
10,871
-
-
1,163
2,340
3
14,377
-
14,377
-
-
-
-
-
-
-
-
-
-
Markets &
Bioenergy
6,023
3,358
2,182
559
2,517
-
266
14,905
1,590
16,495
Other
activities/
eliminations
-
2020
total
6,023
Offshore
Onshore
-
(4,089)
10,140
10,086
-
-
(28)
-
619
(3,498)
(666)
(4,164)
2,182
559
3,652
2,340
888
25,784
924
26,708
-
-
921
7,957
17
18,981
-
18,981
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
-
-
-
-
-
-
6
6
-
6
Cost of sales according to business perfor-
mance decreased by 36 % to DKK 26,708
million in 2020.
The decrease was mainly due to lower gas
prices relative to last year and lower gas
volumes sold. Furthermore, we had limited
construction work on wind farms for partners.
In 2020, ‘Costs from construction of offshore
wind farms and transmission assets’ primarily
related to Coastal Virginia Wind as well as
the the divestment of the Walney Extension
transmission asset.
Coastal Virginia Wind,
off the coast of
Virginia Beach, the US.
101 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 2. Return on capital employed
Notes
Contents
2.4 Government
grants
2.5 Research and develop-
ment expenditures
Energinet, the transmission system operator
in Denmark, administers subsidies for environ-
mentally 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
following 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 as well as our Renescience plant
are under the ROC regime. We treat the
payments from the ROC and CfD schemes
as government grants.
Fixed feed-in tariffs from our Dutch and
German wind farms are also recognised
as government grants.
Accounting policies
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
2020
12,551
4
(4)
2019
10,468
4
(4)
Government grants recognised for the year
12,551
10,468
Expensed
research and
development
expenditures
DKKm
Offshore Onshore
Markets &
Bioenergy
2020
total
Offshore Onshore
Markets &
Bioenergy
Research
80
Development
1,719
Total
1,799
-
123
123
-
13
13
80
120
1,855
1,935
1,815
1,935
-
117
117
-
8
8
2019
total
120
1,940
2,060
During the year, we expensed research and
development costs amounting to DKK 1,935
million (2019: DKK 2,060 million).
Accounting policies
Research costs are costs incurred to analyse and
optimise different aspects of offshore wind farm
technology (e.g. improving offshore foundations and
optimising blade stability and performance).
Research costs are recognised in the income
statement as incurred.
Development costs primarly comprise salaries as
well as internal and external costs which can be
directly or indirectly attributed to design and devel-
opment of new offshore and onshore wind farms and
the Renescience Northwich plant.
Development costs are expensed until the capitalisa-
tion criteria are met.
When the capitalisation criteria are met, devel-
opment costs are capitalised as ‘Assets under
construction’.
102 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 2. Return on capital employed
Notes
Contents
2.6 Other operating income and expenses
Other operating income, DKKm
Gain on divestment of assets
Other compensation
US tax credits and tax attributes
Miscellaneous operating income
Total other operating income
Other operating expenses, DKKm
Loss on divestment of assets
Miscellaneous operating expenses
Total other operating expenses
2020
1,017
335
1,004
264
2,620
2020
212
191
403
-
478
629
674
1,781
2019
101
159
260
The increase in ‘US tax credits and tax
attributes’ income was mainly due to the
commissioning of three onshore wind farms
in 2020.
Other operating expenses
‘Loss on divestment of assets’ was primarily
related to M&A transaction costs.
Other operating income
In 2020, other operating income was
DKK 2,620 million, which was 47 % higher
than in 2019. In 2020, ‘Gains on divestment
of assets’ mainly related to the Hornsea 1
transmission asset where we lowered our
assumption regarding the preferred bidder’s
expected return requirement. In 2019, we had
no gains related to divestment of assets.
‘Other compensation’ is primarily related
to compensations regarding outages and
curtailments, mainly from TenneT, the German
grid operator.
2019
Accounting policies
Key accounting estimate
In connection with the divestment of ownership in-
terests in offshore wind farms, the gain is recognised
on the divestment date as other operating income in
the income statement.
Gains for future construction of the partner’s share
of the offshore wind farm are recognised over time in
the income statement in step with the construction.
See notes 2.2 ‘Revenue’ and 4.2 ‘Contract assets and
liabilities’.
The accounting policies for ‘US tax credits and tax
attributes’ income is described in note 4.5 ‘Tax equity
liabilities’.
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.
Contracts in connection with a divestment are
typically agreements on:
– The sale of shares (divestment of assets) (SPA).
– The future construction of the offshore wind farm
(construction agreements).
– The future operation of the offshore wind farm
(O&M agreements).
Estimates for the variable selling price related to
divestments of offshore wind farms and offshore
transmission assets
When we divest an ownership interest in an offshore
wind farm and offshore transmission asset to a
partner, we consider all terms and activities in the
contracts in order to determine the transaction price.
If the consideration includes a variable amount, we
estimate the consideration to which we are entitled
in exchange for transferring the assets, the wind farm,
and the transmission assets to our partner.
The variable considerations are estimated at contract
inception based on future outcome of events, e.g.:
– the divestment price of offshore transmission
asset through competitive tender process
– the impact on production from future wind farms
– the winning bid of tender revenue stream through
a competitive tender process.
We consider ‘the most likely amount’ to provide the
most appropriate estimate of the expected variable
consideration.
103 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 2. Return on capital employed
Notes
Contents
2.7 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
the Executive Committee, and the
Board of Directors, DKK ’000
Fixed salary
Short-term cash-based incentive
scheme
Retention bonus, etc.
Share-based payment
Pension, incl. social security and
benefits
Short-term retention-dependent
purchase price related to the
acquisition of Lincoln Clean Energy
Salary in notice period
Termination payment
Total
2020
4,623
21
364
155
58
5,221
(938)
4,283
2019
4,376
57
362
146
103
5,044
(1,092)
3,952
Employee costs
‘Employee costs before transfer to assets’ were
3.5 % higher in 2020 compared to 2019, mainly
reflecting the increase in fixed salary and
slightly 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 2020, our average number of employees
was 6,429 (2019: 6,329). The average number
of employees in 2020 is impacted by the
divestment of our Danish power distribution,
residential customer, and the city light busi-
nesses at the end of August 2020.
Remuneration of the Executive Committee
The remuneration of the Executive Committee
is based on a fixed salary, including personal
benefits, such as a company car, free tele-
phone, etc., a variable salary, and share-based
payment. The other members of the Executive
Committee1 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.
Other members of the
Executive Committee1
Board of Directors
Total
Executive Board
2020
17,230
2019
16,810
2020
23,057
4,831
4,561
10,328
.
-
(519)3
4,046
959
3,910
2019
20,933
5,419
180
2,626
469
564
3,876
5,333
-
-
-
-
-
-
9,810
-
-
22,011
25,981
51,940
840
11,5602
4,4892
51,380
2020
4,593
2019
4,779
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,593
4,779
78,544
2020
44,880
15,159
959
3,391
2019
42,522
9,980
180
6,672
4,345
5,897
1
2
3
Other members of the Executive Committee in
2020 are: Morten Hultberg Buch greitz, Henriette
Fenger Ellekrog, Declan Flanagan, Anders
Lindberg, and Martin Neubert.
Relates to Thomas Dalsgaard and Ole Kjems
Sørensen.
Henrik Poulsen lost the right to the 2018, 2019,
and 2020 grant upon his resignation, causing prior
year costs to be reversed. This has reduced the
remuneration by DKK 4.6 million.
9,810
-
-
840
11,560
4,489
82,140
104 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 2. Return on capital employed
Notes
Contents
2.8 Share-based payment
Required number of locked-up shares relative to fixed salary
CEO
75 % of fixed salary
CFO and the other members of the Executive Committee
50 % of fixed salary
Senior vice presidents
Vice presidents and senior directors
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.
Market value of PSUs and key assumptions for
valuation in executive share programme
Market value of 1 PSU
Key assumptions:
Share price
Average volatility, peers
Volatility, Ørsted
Risk-free interest rate
Time of
granting
2020
794
666
24.1 %
24.6 %
-0.5 %
Time of
granting
2019
598
504
22.3 %
20.9 %
-0.4 %
Time of
granting
2018
461
392
24.5 %
19.7 %
-0.3 %
Expected term at time of granting
3 years
3 years
3 years
the grant, this would correspond to 0-30 % or
0-40 % (0-80 % in the US) 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.
Executive share programme
The Executive Committee and a number of
other senior executives participate in the share
programme (approx. 100). 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 category
and, for our CEO, makes up 75 % of the fixed
salary; see the table 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 % (15-40 % in
the US) 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
Retention share programme
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 retention share units (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.
105 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 2. Return on capital employed
Notes
Contents
Maximum number of outstanding shares at 31 December, ’000
Time of granting
1 April 2017
1 April 2018
1 April 2019
1 April 2020
Share retention programme
Maximum number of outstanding shares at 31 December 2020
Development in maximum number of outstanding shares, ’000
Maximum number of outstanding shares at 1 January
Compensation for dividends paid (2018 and 2019 programmes)
Exercised (2017 programme)
Exercised (2016 programme)
Granted (2020 programme)
Granted (2019 programme)
Cancelled (2020 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 at 31 December
Executive
Board
Other members
of the Execu-
tive Committee
Senior
executives
Other
employees
-
7
5
3
-
15
-
19
16
14
-
49
-
81
69
66
-
216
-
-
-
-
20
20
Executive
Board
Other members
of the Execu-
tive Committee
Senior
executives
Other
employees
57
-
(24)
-
9
-
(6)
(9)
(12)
-
-
15
4
19
49
1
(15)
-
14
-
-
-
-
-
-
49
15
61
281
2
(131)
-
66
-
-
(1)
(1)
-
-
216
65
269
21
-
-
-
-
-
-
-
-
-
(1)
20
5
25
2020
-
107
90
83
20
300
2020
408
3
(170)
-
89
-
(6)
(10)
(13)
-
(1)
300
90
374
2019
2020 in % of
share capital
Market value
of shares at
granting
DKK million
Years until
expiry as of
2020
-
25
27
33
5
90
-
0.3
1.3
2.3
-
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.
-
0.03 %
0.02 %
0.02 %
0.00 %
0.07 %
2020 in % of
share capital
0.10 %
0.00 %
(0.05) %
-
0.02 %
-
0.00 %
0.00 %
0.00 %
-
0.00 %
0.07 %
169
117
101
-
21
408
2019
466
9
-
(152)
-
105
-
(4)
(11)
(8)
3
408
89
280
106 / 193
Ørsted Annual report 2020
Notes
Contents
3.
Capital employed
108 Capital employed
109
Intangible assets, and property, plant, and equipment
112 Provisions and contingent assets and liabilities
114 Acquisition of enterprises
115
Divestment of enterprises
115 Gross and net investments
116
116
Assets classified as held for sale
Discontinued operations
117
Non-controlling interests
Ørsted Annual report 2020
Financial statements
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 2020
Our gross investments amounted to
DKK 27.0 billion in 2020, of which Offshore
accounted for 73 %.
Investments were primarily related to:
– offshore wind farms (DKK 19.5 billion),
including Borssele 1 & 2 in the Netherlands,
Greater Changhua 1 & 2a in Taiwan, Hornsea 2
in the UK, and Ocean Wind in the US.
– onshore wind and solar farms (DKK 6.6
billion), including Permian Energy Center,
Muscle Shoals, Western Trail, Sage Draw,
Plum Creek, Willow Creek, and Haystack in
the US.
– Markets & Bioenergy (DKK 0.7 billion),
mainly relating to the maintenance of the
power distribution grid.
Divestments amounted to DKK 19.0 billion
and were primarily related to the divestment
of our Danish power distribution, residential
customer, and city light businesses. The trans-
action resulted in proceeds of DKK 20.5 billion.
Furthermore, we received minor proceeds
regarding the divestment of our 10 MW solar
farm Oak Solar in New Jersey and our Inbicon
production facilities. This was partly offset
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
2020
2019
122,249
106,685
777
9,775
(7,246)
(4,040)
2,228
(209)
793
(7,003)
(6,860)
(771)
(21)
1,044
8,756
(4,587)
(3,304)
2,540
782
8,211
(6,158)
(6,443)
(253)
(481)
109,672
106,792
109.7 bn
Capital employed totalled DKK 109,672 million
on 31 December 2020 against DKK 106,792 million
in 2019.
27.0 bn
Gross investments amounted to DKK 26,967 million
in 2020 against DKK 23,305 million in 2019.
The increase in capital employed was due to
investments partly offset by the divested capital
employed regarding our Danish power distribution,
residential customer, and city light businesses.
Capital employed by segment, % 2020
Offshore
Onshore
Markets & Bioenergy
5 %
12 %
DKK 109,672
million
by a cash outflow in connection with the
divestment of the LNG activities of DKK 1.5
billion and compensations paid under our
partnership agreements.
The most significant assets under construction
at the end of 2020 were the offshore wind
farms Hornsea 2, Greater Changua 1 & 2a, and
Ocean Wind and the onshore wind and solar
farms Permian Energy Center, Old 300, Muscle
Shoals, Western Trail, and Haystack.
19.0 bn
Cash flows from divestments totalled DKK 19,039
million in 2020 against DKK 3,329 million in 2019.
83 %
Capital employed by segment is based on
capital employed for reportable segments of
DKK 108,763 million.
108 / 193
Ørsted Annual report 2020
Financial 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 2020
Exchange rate adjustments
Additions
Divestment of enterprises
Disposals
Adjustment of decommissioning obligations
Reclassified assets
Reclassified to assets classified as held for sale
Cost at 31 December 2020
Depreciation and amortisation at 1 January 2020
Exchange rate adjustments
Depreciation and amortisation
Divestment of enterprises
Disposals
Reclassified to assets classified as held for sale
Depreciation and amortisation at 31 December 2020
Impairment losses at 1 January 2020
Exchange rate adjustments
Disposals
Impairment losses at 31 December 2020
Carrying amount at 31 December 2020
3,979
6,628
116,121
1,453
(6)
245
(54)
(1,865)
-
-
(75)
2,224
(2,663)
-
(41)
54
1,665
44
(941)
(644)
-
-
(644)
639
(241)
911
(283)
(288)
-
527
-
7,254
(1,406)
16
(393)
44
59
-
(1,680)
(45)
45
-
(4,910)
601
-
(636)
293
19,514
-
130,983
(38,279)
944
(6,850)
-
313
-
(43,872)
(1,160)
5
228
(927)
(20)
164
-
(42)
-
19
-
1,574
(801)
10
(304)
-
28
-
(1,067)
-
-
-
-
5,574
86,184
507
24,174
(1,436)
26,766
-
-
551
(20,060)
(8)
29,987
-
-
-
-
-
-
-
(672)
30
-
(642)
29,345
148,376
(6,607)
28,442
(283)
(966)
844
-
(8)
169,798
(40,486)
970
(7,547)
44
400
-
(46,619)
(1,877)
35
273
(1,569)
121,610
Production assets by segment, % 2020
Offshore
Onshore
Markets & Bioenergy
8 %
17 %
DKK 86,184
million
75 %
Property, plant, and equipment
under construction by segment, % 2020
Offshore
Onshore
24 %
DKK 29,345
million
Intangible assets
Intangible assets consist of goodwill of
DKK 125 million (2019: DKK 125 million),
carbon emission allowances of DKK 324
million (2019: DKK 294 million), other rights
of DKK 64 million (2019: DKK 65 million),
completed development projects of
DKK 79 million (2019: DKK 119 million),
and development projects in progress of
DKK 47 million (2019: DKK 69 million).
76 %
109 / 193
Ørsted Annual report 2020
Financial 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 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
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)
Production assets by segment, % 2019
Offshore
Onshore
Markets & Bioenergy
8 %
14 %
DKK 76,682
million
78 %
Property, plant, and equipment
under construction by segment, % 2019
Offshore
Onshore
Markets & Bioenergy
7 %
652
23,502
106,013
27 %
DKK 23,502
million
66 %
110 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 3. Capital employed
Notes
Contents
Impairment losses
Impairment losses relating to goodwill
We have not impaired goodwill or other
intangible assets in 2020.
Useful lives
Buildings
Offshore wind farms
Onshore wind farms
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 independently
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, Hornsea 2, London Array,
Ocean Wind, Race Bank, Revolution Wind,
South Fork, Sunrise Wind, Westermost Rough,
Walney, Walney Extension, and West of Duddon Sands.
CGUs in Onshore
The CGUs are made up of individual onshore wind
and solar farms, each of which generates cash
flows for the segment independently of each other.
Significant CGUs
Amazon, Haystack, Lockett, Muscle Shoals, Permian
Energy Center, Plum Creek, Sage Draw, Tahoka,
Western Trail, Willow Creek, and Willow Springs.
CGUs in Markets & Bioenergy
The Danish power plants constitute a single
CGU, as overall production planning is for the
entire Danish portfolio of CHP plants. In addition,
the Renescience plant in Northwich in the UK is
deemed to constitute an independent CGU.
The infrastructure 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, and the offshore gas pipelines.
Impairment losses relating to property,
plant, and equipment
We have not impaired any property, plant,
and equipment in 2020.
In 2019, property, plant, and equipment under
construction related to the Renescience facility
which was impaired by DKK 500 million.
Renescience is part of our Markets & Bioenergy
segment.
The impairment losses in 2019 related to
Renescience were primarily due to delays in
commissioning, increases in CAPEX as we were
optimising the waste conversion technology,
and changes in cost and price estimates.
The recoverable amount of Renescience
was measured on the basis of its value in
use and was based on internal budgets
and forecasts. Significant assumptions in
the forecasts included the facility capacity,
the waste conversation ratios, and potential
revenue streams from increased recycling.
The estimated cash flows were 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.
Production assets, power (thermal)
and district heating
Gas transportation system
(marine pipelines)
Fixtures and fittings, tools, and
equipment
20-50 years
20-30 years
24-30 years
20-25 years
20-40 years
3-10 years
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 recoverable amount exceeds
the net book value of a CGU. 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,
estimated 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 material 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 our 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-construct-
ed 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 estimat-
ed 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. Any residual value
of the replaced parts is recognised in the income
statement as loss on disposal of non-current assets.
Other repair and maintenance expenses are recog-
nised in profit (loss) for the year as incurred.
111 / 193
Ørsted Annual report 2020
Financial 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 decommissioning and disposal of our
offshore wind, onshore wind, and solar
farms, restoration of seabeds, and the
decommissioning of our CHP plants.
As developers of offshore wind, onshore
wind, and solar farms, we are obliged to
decommission our wind and solar 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 decom-
missioning costs. Therefore, we have only
included the decommissioning obligations
associated with our ownership interest in
the offshore wind farms.
Decommissioning obligations increased
by DKK 845 million from 2019 to 2020,
primarily due to the construction of new
wind farms.
Onerous contracts
Onerous contracts comprise primarily:
– two contracts for gas storage capacity in
Germany amounting to DKK 699 million
(2019: DKK 814 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
Total provisions
Falling due as follows:
0-1 year
1-5 years
After 5 years
Other provisions
Other provisions comprise primarily:
– offshore partnership provisions, including
warranty obligations, wake-effect obliga-
tions and provisions related to offshore
transmission assets
– obligations in relation to the divestment
of our Oil & Gas business in 2017
– a contract for gas storage capacity in
– obligations in respect of our own carbon
Denmark amounting to DKK 96 million
(2019: DKK 164 million)
emissions
– provisions for revisions of prices related
to supply contracts
– other contractual obligations.
2020
2019
Decom-
missioning
obligations
Onerous
contracts
Other
provisions
Total
Decom-
missioning
obligations
Onerous
contracts
Other
provisions
Total
6,158
-
(216)
(6)
-
933
(93)
(11)
238
7,003
-
546
6,457
978
5,465
12,601
5,472
-
3
(215)
-
153
-
(69)
100
950
182
486
282
-
83
(640)
(213)
1,215
-
-
-
-
(130)
(861)
(213)
2,301
(93)
(80)
338
-
160
(3)
-
421
(93)
(11)
212
5,910
13,863
6,158
1,206
3,052
1,652
1,388
4,084
8,391
-
213
5,945
2,418
(25)
-
(380)
-
1,165
-
(2,277)
77
978
184
537
257
Decommissioning obligations by segment, DKKm
Offshore
Onshore
0-5 years
5-10 years
10-20 years
After 20 years
2020
2019
476
821
1,640
2,132
5,069
4,562
-
-
-
659
659
306
5,564
13,454
-
29
(636)
(596)
1,104
-
-
-
(25)
189
(1,019)
(596)
2,690
(93)
(2,288)
289
5,465
12,601
353
4,279
833
Markets &
Bioenergy
70
46
237
922
1,275
1,290
537
5,029
7,035
Total
546
867
1,877
3,713
7,003
6,158
112 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 3. Capital employed
Notes
Contents
Contingent liabilities
Liability to pay compensation
In case of any environmental accidents or
other types of damage caused by our gas and
oil 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 in 2017, we assumed a secondary
liability regarding the decommissioning of
offshore installations.
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.
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.
There are no longer any outstanding cases
with the competition authorities claiming
Elsam infringed competition law, but in
connection with the former cases, some
energy trading companies, some of their
customers, and others have filed claims
for damages which are still pending. The
biggest claim was filed in 2007 before the
Copenhagen Maritime & Commercial Court,
amounting to approx. DKK 4.4 billion with
addition of litigation interest. In a ruling from
March 2020, Elsam was acquitted from the
claim, but the plaintiffs have appealed the
ruling, and it is now pending before the High
Court of Western Denmark.
Ørsted is involved in ongoing transfer pricing
disputes. For further information, we refer to
section 5.1 ‘Approach to taxes’.
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’.
Monitoring and
coordinating all service
vessels and helicopters
in the North Sea, at
the East Coast Hub,
at the Port of Grimsby,
Lincolnshire, the UK.
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.
Estimates of provisions are based on our
expectations of, for example:
– timing and scope of obligation
– future cost level
– legal assessment.
If deemed material, non-current provisions are
discounted using either the structural risk-free interest
rate or the incremental borrowing rate. The structural
risk-free interest rate is used for decommissioning
liabilities and onerous contracts.
The outcome of our contractual obligations and
claims may depend on future events which are
uncertain by nature.
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.
113 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 3. Capital employed
Notes
Contents
3.3 Acquisition of enterprises
We have not acquired any enterprises in 2020.
In 2019, we have paid contingent consider-
ations of DKK 616 million in total related to
the acquisition of Deepwater Wind in 2018.
We also paid DKK 148 million for the acquis-
tion of Coronal Energy’s development business
(Onshore) and recognised a contingent
payment of DKK 50 million.
Cash flows used for acquisitions, DKKm
2020
2019
Fair value at time of acquisition:
Property, plant, and equipment
Other assets
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
Enterprise value
Accounting policies
-
-
-
-
-
-
-
-
-
-
-
-
86
115
(3)
198
-
198
-
(50)
616
764
764
764
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 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.
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 agree-
ments, and on income, such as production tax credits.
The fair value of derivatives is determined using our
normal approach for such items which is based on
market prices or expectations for prices over the term
of the derivatives.
An acquired enterprise is included in the consolidated
financial statements from the date of acquisition,
which is the date when we obtain control.
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.
Walney Extension, off
the coast of Cumbria,
the UK.
114 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 3. Capital employed
Notes
Contents
3.4 Divestment of
enterprises
3.5 Gross and net
investments
Selling price, DKKm
Payment
Reduction for payable tax and other receivables/payables transferred
Working capital adjustment
Selling price on divestment of enterprises
Transaction costs
Of which, selling price payable
Cash selling price on divestment of enterprises
Payments related to provisions for divestments in previous years
Total cash flows from divestment of enterprises
2019
Gross and net investments, DKKm
-
-
-
-
Cash flows from investing activities
Dividends received and capital reductions reversed
Purchase and sale of securities, reversed
Loans to associates and joint ventures, reversed
(63)
Sale of non-current assets, reversed
Gross investments
Transactions with non-controlling interests in connection with divestments
Sale of non-current assets
Divestments
Net investments
2020
2019
(16,562)
(10,997)
(18)
8,650
-
(19,037)
(26,967)
2
19,037
19,039
(7,928)
(21)
(8,949)
(3)
(3,335)
(23,305)
(6)
3,335
3,329
(19,976)
Gain (loss) on divestment of enterprises, DKKm
Selling price on divestment of enterprises
Net assets sold
Provisions as a result of the transactions
Transaction costs
Gain (loss) on divestment of enterprises
In 2020, we divested our Danish power
distribution, residental customer, and city
light businesses to SEAS-NVE (now Andel).
The gain on the divestment was DKK 10,900
million, and the total cash flows amounted to
DKK 20,447 million. Transferred cash and cash
equivalents totalled DKK 1,513 million.
Further, we divested our loss-making LNG
business to Glencore. The loss on the divest-
ment was DKK 42 million, and the cash flow
was DKK -1,499 million (payment from Ørsted).
No cash was transferred.
Gross investments totalled DKK 26,967 million
in 2020, which was 16 % more than in 2019.
Gross investments in Offshore amounted to
DKK 19,525 million and were primarily related
to the construction of Borssele 1 & 2 in the
Netherlands, Greater Changhua 1 & 2a in
Taiwan, Hornsea 2 in the UK, and Ocean Wind
in the US.
Accounting policies
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.
In Onshore, gross investments amounted to
DKK 6,633 million and were primarily related
to the construction of Permian Energy Center,
Muscle Shoals, Western Trail, Sage Draw, Plum
Creek, Willow Creek, and Haystack in the US.
Moreover, we deduct any provisions made for obli-
gations related to sales and purchase agreements
and the fees of advisers, etc., in connection with the
divestment or discontinuation of the enterprise.
In 2019, gross investments of DKK 15,121 million
in Offshore related to the construction of
Hornsea 1 and 2, Borssele 1 & 2, and
Changhua 1 & 2a. Gross investments of
DKK 6,158 million in Onshore related to the
construction of Sage Draw, Plum Creek, Lockett,
Willow Creek, and Permian Energy Center.
Divestments totalled DKK 19,039 million in
2020 and related to the divestment of our
Danish power distribution, residental customer,
and city light businesses as well as our
LNG business.
In 2019, divestments primarily related to the
divestment of 50 % of certain Deepwater
Wind assets and the receipt of deferred pro-
ceeds from the 50 % farm-down of Hornsea 1
in 2018.
115 / 193
2020
19,692
(535)
(307)
18,850
(101)
165
18,914
-
18,914
2020
18,850
(7,569)
(349)
(101)
10,831
-
(63)
(26)
(89)
2019
-
-
-
(63)
(63)
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 3. Capital employed
Notes
Contents
3.6 Assets classified
as held for sale
3.7 Discontinued
operations
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
2020
-
287
-
-
43
1,111
23
1,464
178
396
-
49
61
3
687
777
2019
Profit from discontinued operations, DKKm
2020
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
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
Cash flows, DKKm
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Total cash flows
-
45
(72)
(27)
16
(11)
2020
(76)
1,042
-
966
(7)
(43)
(8)
(58)
2
(56)
2019
(211)
385
-
174
At 31 December 2020, assets and related
liabilities held for sale comprised our oil pipe
system in Denmark which is an activity in
Markets & Bioenergy.
Assets classified as held for sale at
31 December 2019 comprised our Danish
power distribution, residental customer, and
city light businesses, our oil pipe system in
Denmark, and our LNG business. The power
distribution, residental customer, and city light
businesses as well as the LNG business were
all divested in 2020. See note 3.4.
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 accounting
policies. No depreciation or amortisation is effected
on intangible assets, and prop er ty, plant, and equip-
ment from the time of classification as ‘held for sale’.
When we divest an offshore wind farm, the retaining
interest typically represents a joint operation. Since
we retain a direct interest in the underlying assets and
liabilities after the disposal, the assets and liabilities
disposed off are not classified as held for sale.
Discontinued operations related to our Oil &
Gas business which was sold to INEOS in 2017.
As the remaining selling price was received in
2020, we ended the reporting on discontinued
operations per 31 December 2020. Provisions
regarding tax indemnifications and payments
related to the Fredericia stabilisation plant
(DKK 705 million) were transferred to
continuing operations at 31 December 2020.
Financial results
Profit (loss) in 2020 amounted to DKK -11
million (2019: DKK -56 million).
Total cash flows in 2020 amounted to
DKK 966 million (2019: DKK 174 million), of
which DKK -76 million were from operating
activities and primarily concerned payments
related to the Fredericia stabilisation plant.
Cash flows from investing activities amounted
to DKK 1,042 million and primarily comprised
the receipt of the remaining selling price
receivables of DKK 1,001 million in total.
DKK 342 million hereof was interest-bearing.
116 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 3. Capital employed
Notes
Contents
3.8 Non-controlling interests
Transactions with non-controlling interests, DKKm
2020
2019
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
(361)
(73)
6
(428)
(73)
(73)
(388)
(74)
-
(462)
(74)
(74)
Subsidiaries with significant
non-controlling interests
Gunfleet Sands Holding Ltd.
Non-controlling
interest
Registered
office
49.9 %
London, UK
Walney (UK) Offshore Windfarms Ltd.
49.9 %
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.
2020
2019
2020
2019
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 or 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.
444
247
15
(90)
7
448
275
60
168
30
1,151
590
54
(216)
27
1,170
616
104
384
52
1,795
2,121
4,883
5,681
174
406
68
746
241
-
(241)
(119)
187
423
62
910
293
-
(241)
(119)
211
920
286
247
982
303
1,960
2,330
553
1
(548)
(242)
647
(13)
(600)
(268)
117 / 193
Ørsted Annual report 2020
Notes
Contents
4.
Working capital
119 Working capital
120
Inventories
120
Contract assets and liabilities
121 Trade receivables
121
Other receivables
122
Tax equity liabilities
123 Other payables
123 Changes in net working capital
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 4. Working capital
Notes
Contents
4. Working capital
Our key working capital items consist of
inventories, net contract assets, trade
receivables and payables, and tax equity
liabilities.
Working capital items vary with the seasonal
variations in our generation and sales activities
during the year.
Our net contract assets primarily relate 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
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 2020
Offshore
Onshore
Markets & Bioenergy
Other
-7,407
-895
32
0
4.8 bn
Our net working capital, excluding trade payables
relating to capital expenditure, amounted to
DKK 4,757 million in 2020 against DKK 6,709 million
in 2019.
13,027
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.
‘Work in progress and related trade payables’
consists of inventories related to transmission assets,
construction agreements, and construction manage-
ment agreements in connection with the construc-
tion of transmission assets and offshore wind farms
for partners as well as related trade payables.
2020
14,739
(4,100)
6,732
3,298
(5,701)
(7,246)
(2,965)
4,757
9,775
2019
14,031
(3,807)
8,140
3,253
(7,529)
(4,587)
(2,793)
6,709
8,756
-2.0 bn
We reduced funds tied up in working capital by
DKK 1,952 million relative to 2019, of which
DKK -1,019 million pertained to work in progress
and related trade payables in Offshore.
119 / 193
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
(5,018)
(2,047)
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 4. Working capital
Notes
Contents
4.1 Inventories
Inventories, DKKm
Offshore transmission assets
2020
2019
10,669
10,114
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
446
1,287
242
96
1,546
449
4
445
1,057
242
106
1,717
345
5
14,739
14,031
10,616
16,871
4.2 Contract assets
and liabilities
Inventories measured at
fair value are disclosed
in note 7.7 ‘Fair value
measurement’.
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
2020
654
104
2019
771
128
2020
2019
30
30
3,650
480
4,130
739
739
3,762
784
4,546
We use biomass, coal, gas, and, to a limited
extent, oil as fuel at our CHP plants. 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 comprise 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 recognised 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 net realisable value,
if net realisable value is lower.
Inventories are written down to the lower of net
realisable value and cost price. For offshore trans-
mission 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.
Contract assets 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
– prepayments from heat customers.
The table shows the amount of our revenue relating
to contract liabilities carried forward (as prepayments
and deferred revenue) and the amount relating to
performance obligations satisfied in a prior year
(e.g. renegotiations or constraints on variable consider-
ations that are not recognised until they are highly
probable).
At the end of 2020, contract assets relates to
the Coastal Virginia Wind project in the US.
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
Wind project in the US.
Non-current contract liabilities primarily relate
to prepayments from heat customers.
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.
120 / 193
Ørsted Annual report 2020
Financial 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 2020, write-downs of
receivables and losses for the year were
DKK 185 million (2019: DKK 33 million).
2020
6,548
238
110
(164)
6,732
445
416
(74)
8,140
2019
Other receivables, DKKm
7,353
Receivables from the divestment of assets and enterprises
Receivables from the divestment of equity investments to non-controlling
interests
VAT and other indirect tax receivables
Collateral provided
Deposits
Prepayments
Other account receivables
Other receivables
Of which, working capital
Of which, other capital employed
Of which, interest-bearing net debt
2020
1,254
742
725
498
312
556
1,558
5,645
3,298
1,593
754
2019
1,456
717
574
1,940
411
556
1,312
6,966
3,253
1,216
2,497
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 2020, ‘Receivables from divestment of
assets and enterprises’ primarily concerned
the Hornsea 1 transmission asset.
The collateral provided by the Group is
receivables from banks in connection with
trading of derivatives.
In 2019, ‘Receivables from the divestment of
assets and enterprises’ primarily related to the
divestment of our Oil & Gas business.
The short-term portion of other receiv-
ables amounted to DKK 3,720 million
(2019: DKK 5,253 million).
‘Receivables from the divestment of equity
investments to non-controlling interests’
primarily relate to the divestment in 2011 of
our ownership interests in Gunfleet Sands.
121 / 193
Ørsted Annual report 2020
Financial 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 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
2020
5,195
4,091
(956)
(75)
486
(774)
7,967
7,246
721
2019
4,173
1,306
(622)
(73)
327
84
5,195
4,587
608
As at 31 December
2020, we have seven
onshore wind farms and
one offshore wind farm
in operation for which
we have received tax
equity contributions.
In the US, we have several wind farms with
tax equity partners. During 2020, we commis-
sioned the onshore wind farms Sage Draw,
Plum Creek, and Willow Creek and received
tax equity contributions from our partner.
In 2019, we commissioned the onshore wind
farm Lockett with a tax equity partner.
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
investment and does not have an operational
role in the project. The partner receives a
contractually agreed return on the contribu-
tion. 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 evalu-
ate 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 opera-
tional decisions impacting those returns. Due to the
operational and financial nature of the projects and
the influence normally given to tax equity partners
in such agreements, we normally have the influ-
ence 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 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 consid-
ered a non-controlling interest.
122 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 4. Working capital
Notes
Contents
4.6 Other
payables
Other payables, DKKm
Carbon rights
VAT and other indirect taxes payable
Salary-related items payable
Accrued interest
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
The collateral received by the Group is cash
received from banks in connection with
trading of derivatives.
In 2020, the short-term portion of other
payables amounted to DKK 6,082 million
(2019: DKK 4,247 million).
4.7 Changes in net
working capital
2020
2019
Change in net working capital, DKKm
43
359
867
1,527
1,862
48
1,750
6,456
2,965
1,601
1,890
90
686
793
Change in inventories
Change in contract assets and liabilities
Change in trade receivables
1,239
Change in other receivables
205
116
Change in trade payables
Change in tax equity liabilities
1,587
Change in other payables
Total change in net working capital
Of which, changes relating to work in progress
4,716
2,793
1,367
556
2020
(1,464)
229
1,265
897
2019
529
612
2,846
(250)
(1,795)
(2,371)
2,958
408
2,498
(1,613)
630
(427)
1,569
1,416
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 (inventories), and
related trade payables.
Of which, changes relating to tax equity liabilities
and other working capital
4,111
153
The change in funds tied up in work in pro-
gress and related trade payables was a cash
outflow of DKK -1,613 million in 2020 due to
supplier payments related to the construction
of offshore wind farms for partners (Hornsea 1)
as well as offshore transmission assets in the
UK (Hornsea 2), partly offset by the divestment
of the offshore transmission asset at Walney
Extension.
In 2019, the change in funds tied up in work
in progress was DKK 1,416 million due to
high activitiy related to the construction of
offshore wind farms for partners (Hornsea 1)
as well as offshore transmission assets in the
UK (mainly Hornsea 2), which was partly offset
by the receipt of milestone payments from
partners and the divestment of the Race Bank
transmission asset.
The change in tax equity liabilities in 2020
were due to contributions from our tax equity
partners in the onshore wind farms Sage Draw,
Plum Creek, and Willow Creek.
123 / 193
Ørsted Annual report 2020
Notes
Contents
5.
Tax
125 Tax
126 Approach to taxes
128 Tax on profit (loss) for the year
130 Deferred tax
132 Our tax footprint
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 5. Tax
Notes
Contents
5. Tax
Tax on profit (loss) for the year
The effective tax rate was 11 % for our
continuing operations and was primarily
affected by the largely tax-exempt divestment
of the Danish power distribution, residential
customer, and city light businesses as well
as recognition of tax liabilities in connection
with tax equity partnerships related to the
onshore wind farms Sage Draw, Plum Creek,
and Willow Creek.
Corporate income taxes paid
We have paid DKK 1,118 million in taxes in 2020,
of which DKK 412 million related to residual
tax for 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 for 2019. We expect to have
a residual tax of DKK 109 million regarding
2020, primarily due to movements in financial
instruments in the last quarter of 2020.
Corporate income tax paid by segment, 2020, DKKm
Development in current and deferred tax asset and liabilities (tax, net), 2020, 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
Corporate taxes paid
Other effects
2,123
-777
1,424
-1,118
-782
-1
0
477
253
2019
290
771
2020
Business performance
2020, DKKm
Profit (loss) before tax
New tax equity, deferred tax liability
Gain (loss) on divestment of enterprises
‘Other adjustments’ include changes in tax rates,
movements in uncertain tax positions, tax concerning
previous years, and other non-taxable income and
non-deductible costs.
Other adjustments
Remaining Ørsted business
Effective tax for the year
-
10,831
-
8,019
18,850
Tax
(1,070)
-
694
(1,747)
(2,123)
Tax in %
n.a.
0 %
n.a.
22 %
11 %
1.1 bn
Corporate income tax paid by the Group in 2020
totalled DKK 1,118 million against DKK 4,800 million
in 2019.
2.7 bn
Current corporate income tax in 2020 totalled
DKK 2,735 million against DKK 5,605 million in 2019.
125 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 5. Tax
Notes
Contents
5.1 Approach to taxes
In Ørsted, we wish to provide user-friendly
information about our tax positions. By
drawing inspiration from the standard GRI
207: Tax, we have increased the transparency
of our reporting in a standardised manner.
We believe that taxes are a core part of our
corporate social responsibility. At Ørsted, we
are committed to conducting our business in
a way that contributes to the UN Sustainable
Development Goals (SDGs). Taxes are a key
contribution to the SDGs, in particular target
16.6 on the development of effective, account-
able, and transparent institutions.
Taxes are overseen by the Board of Directors
who is accountable for the tax policy. The
responsibility for tax risk management lies
with the CFO and is overseen by the Audit &
Risk Committee. The day-to-day tax manage-
ment is handled by a centralised global tax
team who is involved in all significant business
developments.
We have a clear responsibility to comply with
the laws in the countries where we operate.
We choose to do this by aiming to comply not
only with the letter of the law, but also with
the underlying tax policy intent.
Amazon Wind Farm,
Scurry County,
Texas, the US.
In December 2019, the GRI 207: Tax standard
was adopted with effect for reports published
after 1 January 2021. We have drawn inspira-
tion from the standard when presenting our
approach to and reporting of tax.
in the corporate tax system. As an example,
feedback received in the Tax Dialogue project
aided our decision to update our 2020 tax
reporting by drawing inspiration from the
GRI 207: Tax standard.
Management has been provided with a state-
ment (ISRS 4400 - Agreed Upon Procedures) from
our auditors on our application of GRI 207: Tax.
Tax stakeholder engagement
In line with our tax policy, we engage construc-
tively in national and international dialogue
with governments, business groups, and civil
society to support the development of effec-
tive tax systems, legislation, and administration.
During 2020, our engagement consisted
mainly of the following: Participation in a
public hearing in the Danish Parliament on
CFC taxation, participation in the Tax Dialogue
Project, meetings with NGOs, submission of
responses to OECD’s public consultations on
CbC Reporting, Pillar I, and Pillar II, participa-
tion in the tax panel meetings of the Danish
Confederation of Enterprises, and participa-
tion in BIAC’s workgroup on OECD’s Pillar II.
The purpose of our engagement is to support
the development of robust and sustainable
tax legislation and practice by contributing to
an informed discussion. By engaging with civil
society and gathering input on, for example,
how we share information, we believe we can
contribute to rebuilding the public’s confidence
Tax risk management and controls
Complying with tax rules can be complex as
the interpretation of legislation and case law
may not always be clear cut and may change
over time, giving rise to tax risks. We manage
our tax risks by the prevention of unnecessary
disputes, which we strive to achieve through
strong technical positions, clear explanations
of our positions, thorough documentation, and
strong compliance procedures.
We define a tax risk as any consequence relat-
ing to: the application of our tax policy, day-
to-day operations, compliance, or external
reporting that impacts the business in form of
cash liabilities, financial statement errors or
misstatements, or reputational damage.
To ensure a coordinated assessment of tax
risks, Ørsted’s tax function is involved in the
planning and implementation as well as docu-
mentation of all significant new processes.
Our risk appetite is governed by the ‘more
likely than not’ approach.
For more details on our approach to taxes,
we refer to our tax policy which can be found
here: orsted.com/taxpolicy.
126 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 5. Tax
Notes
Contents
Uncertain tax positions
Our tax risk management work includes tak-
ing into account uncertain tax positions, e.g.
when we have taken a position where there is
an uncertainty created by a comparison of the
wording of the law, the expressed policy intent
or lack thereof, or fluctuating or divergent ap-
plication by tax authorities or judicial systems
in countries where we operate.
Tax controversies
In an administrative decision, The Danish Tax
Agency has concluded that Ørsted Wind Pow-
er A/S has not acted at arm’s length terms and
conditions when charging fees for technical
services provided to two project companies
for the Walney Extension and Hornsea 1
offshore wind farms in the UK during the
development phase.
The decision entails an additional tax payable
of DKK 5.1 billion for the income years 2015
and 2016 plus interest. We dispute the deci-
sion, and we have lodged an appeal with the
Danish National Tax Tribunal and also filed an
application for Mutual Agreement Procedure
between the Competent Authorities of the
Danish Tax Agency and Her Majesty’s Revenue
& Customs under both the EU Arbitration
Convention and the relevant Double Tax
Agreement, including the Multilateral Instru-
ment. We have further requested a deferral of
payment until the case is finally decided. Our
application for Mutual Agreement Procedure
under both instruments has been confirmed as
admissible by the Danish and UK Competent
Authorities. Our request for a deferral of pay-
ment until the case is finally decided has been
accepted by the Danish Tax Agency.
We seek to avoid unnecessary disputes, but
recognise that in our business, which involves
large amounts, cross-border payments, and
activities in highly regulated sectors, there will
inevitably be a number of claims from the na-
tional tax authorities in the markets where we
operate that cannot be avoided. In response
to these risks, including the current contro-
versy involving the development fees for the
Walney Extension and Hornsea 1 offshore wind
farms, we have made tax-related provisions in
accordance with IAS 12, IAS 37, and relevant
interpretations, such as IFRIC 23. The provi-
sions have been calculated on the basis of
differences in tax rates and statistical risks of
suffering economic or legal double taxation.
Tax controls
Within Ørsted, the main control is our four-eye
review principle. This means that all our work
is reviewed by a colleague. Tax decisions in
relation to matters which are subjected to
approval by management are approved by
the Head of Tax.
Tax planning and use of tax incentives
We only use business structures that are
driven by commercial considerations, aligned
with business activity. We do not use so-called
secrecy jurisdictions or tax havens to avoid
taxes. If we establish an entity in a low or nil-
rate jurisdiction, it will be for substantive and
commercial reasons. We pay tax on profits ac-
cording to where value is created. In order to
remain competitive, we make use of incentives
and tax relief implemented by governments
where we have commercial substance.
Danish CFC taxation
Denmark has proposed to introduce the CFC
rules in the EU Anti-Tax Avoidance Directive.
These rules have been proposed several times,
most recently in November 2020, but have
so far failed to secure a political majority in
the Danish Parliament. It was announced in
December 2020 that the latest draft bill would
not be passed before the end of 2020, and
that a public hearing will be conducted on the
rules during 2021. We expect the revised CFC
rules to enter into force during the course of
2021, but the exact timing is unknown.
The overarching purpose of the CFC rules is
to prevent companies from undermining the
domestic tax base by moving mobile income
to low-tax jurisdictions. In such scenarios, the
CFC rules will ensure that the income will still
be subject to domestic taxation.
Pursuant to the EU Anti-Tax Avoidance
Directive, a foreign subsidiary shall be
considered to be a CFC company if more than
one-third of its income consists of CFC income.
‘Other income from intangible property’ is now
considered CFC income, but as of yet, there
is very little guidance on how to calculate
such income.
The EU directive exempts subsidiaries from
the CFC rules if they have real commercial
activity, or if they are not situated in a low-tax
jurisdiction. In the latest published draft bill,
Denmark has chosen not to include any of
these exceptions. Unless such exemptions are
included in a revised draft bill, operational for-
eign subsidiaries which have been established
for commercial purposes can be considered to
be CFC companies regardless of whether the
corporate residential tax rate is lower, higher,
or the same as in Denmark. We see this as a
risk and have, in public consultations, proposed
that a substance exemption is included in the
Danish CFC rules in order to not place Danish
companies at a competitive disadvantage.
Plum Creek,
Wayne County,
Texas, the US.
127 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 5. Tax
Notes
Contents
5.2 Tax on profit (loss) for the year
Effective tax rate, DKKm/%
DKK million
%
DKK million
%
DKK million
%
DKK million
%
2020
2019
Business performance
IFRS
Business performance
IFRS
Tax on profit (loss) for the year can be explained as
follows:
Calculated 22 % tax on profit (loss) before tax
(4,147)
Adjustments of calculated tax in foreign
subsidiaries in relation to 22 %
Tax effect of:
Non-taxable income and non-deductible
costs, etc., net
Unrecognised tax assets
Tax equity
Movement in uncertain tax positions
Changes in tax rates
Adjustment of tax concerning previous years
Effective tax for the year
22
-
(3,811)
17
22
-
6
2,814
(15)
2,814
(16)
(13)
(903)
(101)
138
83
(2,123)
-
5
1
(1)
(1)
11
(13)
(903)
(101)
138
83
(1,776)
-
5
1
(1)
(1)
10
(1,948)
22
(2,286)
22
25
(540)
(32)
(123)
143
(83)
(198)
(2,756)
-
6
-
1
(1)
1
2
31
18
(540)
(32)
(123)
143
(83)
(198)
(3,101)
-
5
-
1
(1)
1
2
30
Income tax
Tax on business performance profit (loss) was
DKK 2,123 million in 2020 against DKK 2,756
million in 2019. The effective tax rate was 11 %
in 2020 against 31 % in 2019.
The effective tax rate for 2020 (11 %) was primar-
ily affected by the largely tax-exempt sale of our
Danish power distribution business and related
activities as well as recognition of a tax liability
in connection with tax equity partnerships relat-
ed to the onshore wind farms Sage Draw, Plum
Creek, and Willow Creek (see more regarding
tax equity partnerships in notes 4.5 ‘Tax equity
liabilities’ and 5.3 ‘Deferred tax’).
Non-taxable income and non-deductible
expenses primarily relate to the divestment
of the Danish power distribution, residential
customer, and city light businesses. See more
in note 3.4 ‘Divestment of enterprises’.
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 the tax equity partnership related to the
onshore wind farm Lockett.
The movement in uncertain tax positions is a
consequence of reassessment of a calculated
uncertain tax position.
The adjustment of tax concerning previous
years primarily relates to a realised discount
on payment for utilisation of tax losses in
the UK.
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.
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’ or
‘ Deferred tax’, depending on how the realisation of
the tax position will affect the financial statement.
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 wordwide
income taxes and income tax assets and liabilities,
including 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 the
provisions made are based on different scenarios of
possible outcomes. 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 ‘Income tax’ and
‘Deferred tax’. Estimates in respect of transfer pricing
cases include among others whether corresponding
adjustments can be obtained in the relevant juris-
dictions, and, in terms of disputes regarding project
companies with partners, whether compensation
can be obtained from these partners. Any expected
compensation from partners are included as part of
‘Other receivables’.
128 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 5. Tax
Notes
Contents
Tax on profit (loss) for the year and other
comprehensive income
In 2020, tax on IFRS profit (loss) for the year
amounted to DKK 1,776 million, consisting of
current tax expenses of DKK 2,735 million,
changes in deferred tax of DKK 1,635 million,
changes in tax rates of DKK 138 million, un-
certain tax positions of DKK 101 million, hybrid
capital tax of DKK 107 million, tax equity
of DKK 903 million, and adjustments of tax
concerning previous years of DKK 83 million.
Current tax
Current tax is the payable tax expense
incurred in Ørsted on profit for the year. This
differs from taxes paid as a result of payments
or refunds regarding prior years and residual
payments for the current year.
Because of the high level of investments and
the subsequent deferrals of payable tax as a
consequence of accelerated tax depreciation,
our current tax is generally lower than the
statutory corporate tax rates during construc-
tion and the initial years after first power from
a wind farm. The current tax for 2020 has
decreased compared to 2019 because there
was no tax related to construction agree-
ments in 2020.
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
Changes in tax rates
Uncertain tax positions
Tax on hybrid capital
Tax equity
Adjustment of tax concerning previous years
2020
2019
Business
performance
(2,123)
777
-
IFRS
(1,776)
430
-
(1,346)
(1,346)
(2,735)
1,288
138
(101)
107
(903)
83
(2,735)
1,635
138
(101)
107
(903)
83
Business
performance
(2,756)
(539)
34
(3,261)
(5,605)
3,110
(83)
143
-
(123)
(198)
IFRS
(3,101)
(194)
34
(3,261)
(5,605)
2,765
(83)
143
-
(123)
(198)
Tax on profit (loss) for the year
(2,123)
(1,776)
(2,756)
(3,101)
Tax on other comprehensive income can be broken down
as follows:
Current tax
Deferred tax
Tax on other comprehensive income
430
347
777
430
-
430
(194)
(345)
(539)
(194)
-
(194)
Effective current tax rate (IFRS), 2020, %
74.7
7.9
8.3
0.0
17.3
13.3
Denmark
The UK
The US
Germany
The
Netherlands
Taiwan
Income tax for the
year is calculated on
the basis of the profit
(loss) before tax from
continuing operations.
Tax on hybrid capital
was included in current
tax in 2019.
The figure shows the
effective current tax rates
based on business perfor-
mance in the main coun-
tries where we operate.
Current tax for the UK is
significantly impacted by
a prior year adjustment
regarding reclassification
between deferred tax
and current tax.
129 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 5. Tax
Notes
Contents
5.3 Deferred tax
Development in deferred tax
In 2020, net deferred tax assets increased.
The effect primarily related to the update of
the Hornsea 1 transmission asset divestment
assumptions, variance on long-term liabil-
ities, and financial instruments as well as
adjustments to previous years’ deferred tax
in the UK. The recognition of the deferred
tax liability was increased because of our tax
equity partnerships. In 2019, the net deferred
tax assets were also impacted by Hornsea
1 since current tax on the deferred gain was
triggered when construction was completed.
Deferred tax by segment
Net deferred tax in our segments primarily
concerned the following:
– Offshore: a deferred tax asset is recognised
related to tax loss carryforwards and
internal gains on construction agreements.
The deferred tax asset is partially offset
by a deferred tax liability as a result of
accelerated tax depreciation compared to
accounting depreciation regarding property,
plant, and equipment.
– Onshore: a deferred tax liability is recog-
nised related to wind farm assets in tax
equity structures.
– Markets & Bioenergy: a deferred tax liability
related to financial instruments and accel-
erated tax depreciation on property, plant,
and equipment is recognised.
– Other activities/eliminations comprised
intra-group eliminations in the joint taxation
across segments.
Accounting policies
Net deferred tax and accumulated investments, 2020, DKKbn
US tax equity partnerships
We have entered into several tax equity partnership
agreements in the US.
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
partner ship is established. The deferred tax liability
from existing tax equity partnerships will be gradu-
ally reduced based on accounting depreciation after
flip-date. See more regarding tax equity partnerships
in note 4.5 ‘Tax equity liabilities’.
Net deferred tax balance
Accumulated net investments
66.7
33.6
32.7
2.9
2.0
-2.1
17.2
11.2
8.2
1.4
0.0
0.4
Denmark
The UK
The US
Germany
The
Netherlands
Taiwan
The figure shows the
net deferred tax asset
(+) or liability (-) on
country level as well as
total net accumulated
investments in each
country. The distribution
of net investments are
affected by the sale
of assets constructed
by Ørsted in Denmark
for operations outside
Denmark where Ørsted
only has part ownership.
Deferred tax 2020, DKKm
Offshore
Onshore
Markets &
Bioenergy
Other activities/
eliminations
Deferred tax at
31 December
Deferred tax, assets
Deferred tax, liabilities
Unrecognised tax assets
Deferred tax 2019, DKKm
Deferred tax, assets
Deferred tax, liabilities
Unrecognised tax assets
6,250
238
140
6,441
1,611
7
-
1,923
9
-
1,422
-
529
8
31
189
338
25
5
18
20
217
-
-
6,784
2,187
200
6,847
3,371
32
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.
130 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 5. Tax
Notes
Contents
Development in deferred tax assets
and liabilities, 2020, DKKm
Deferred tax balances
at 1 January, net
Movements
Deferred tax balances
at 31 December, net
29
953
(73)
5
(866)
(844)
(97)
18
757
102
(3)
(272)
182
(91)
(2,583)
(1,814)
47
1,710
29
2
(1,138)
(662)
(188)
(4,397)
(3,476)
(1,121)
(4,597)
36
3,031
405
(25)
(757)
(1,386)
(614)
(1,253)
(7)
(2,078)
(478)
30
(109)
542
517
29
953
(73)
5
(866)
(844)
(97)
(1,330)
(2,583)
(563)
(2,913)
(3,476)
Assets
-
5,406
-
-
1,138
784
196
4,397
(5,137)
6,784
-
5,254
88
-
866
846
105
2,583
(2,895)
6,847
Intangible assets
Property, plant, and equipment
Other non-current assets
Current assets
Decommissioning obligations
Other non-current liabilities
Current liabilities
Tax loss carryforwards
Offset
Total
Development in deferred tax assets
and liabilities, 2019, DKKm
Intangible assets
Property, plant, and equipment
Other non-current assets
Current assets
Decommissioning obligations
Other non-current liabilities
Current liabilities
Tax loss carryforwards
Offset
Total
Significant movements in deferred tax
assets and liabilities
Movements for the year primarily consist of an
increase in tax loss carryforwards as a result of
accelerated depreciation for tax purposes, an
increase in deferred tax assets regarding the
Hornsea 1 transmission asset, and a prior year
adjustment regarding the reclassification of
losses in the UK in 2019.
For tax purposes, depreciation on fixed assets is
typically accelerated compared with accounting
purposes. As the accelerated depreciation is larger
than our taxable profits when we make large invest-
ments, our tax loss carryforwards increase when
more wind farms enter into operation. The tax loss
carryforwards are either offset against deferred tax
liabilities on the same wind farm or jurisdiction or
offset against expected future profits from the very
same wind farm or jurisdiction.
Liabilities
Accounting policies
47
7,116
29
2
-
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
122
licence interests
8
-
(5,137)
2,187
29
6,207
15
5
-
2
8
-
(2,895)
3,371
– 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. Due to timing differences in re-
alisation and utilisation of losses, the UK consortium
relief rules are not considered to be a joint taxation.
This means that tax losses resulting from acceler-
ated tax depreciation are accounted for as tax loss
carryforwards until they are used, instead of being
used to offset taxable income in the same year in
affiliated companies. The result is a disproportionate
current tax on the overall profits. Intra-group gains
and losses are eliminated. Tax losses carried forward
in jurisdictions where we have a history of losses are
recognised based on other convincing evidence of
future profits.
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.
131 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 5. Tax
Notes
Contents
5.4 Our tax footprint
Ørsted’s tax footprint is an effect of how and
where we conduct our business.
We have paid DKK 1,118 million in corporate in-
come taxes in 2020, of which DKK 412 million
related to residual tax for 2019. At the end of
the year, we expect to have a residual tax of
DKK 109 million regarding 2020, primarily due
to movement in financial instruments in the
last quarter of 2020.
Local taxes paid
We have made significant investments in
offshore wind farms in the UK, Germany, the
Netherlands, the US, and Taiwan, resulting in
the accumulation of large tax assets in recent
years. Accordingly, we have not paid signifi-
cant taxes in these countries historically. This is
changing as the offshore wind farms are being
commissioned and generating positive taxable
income, resulting currently in paid taxes in the
UK and Taiwan. We expect to start paying
corporate tax in the Netherlands in 2021 and in
Germany in 2022.
We are also continuously investing in the US;
however, we do expect to pay tax in the US in
2022-2024, due to the commercial structural
set-up in the US.
A wind farm life cycle
Ørsted operates in several countries (see our
global footprint in the management’s review).
The design of the individual tax regime in each
jurisdiction impacts the tax over the life cycle
of our investments and thereby the timing of
when we pay tax.
Furthermore, in many of the jurisdictions
where we operate, there are mandatory or
voluntary tax groupings. This means that we
will only pay tax on the consolidated result of
all of our activities in that country. As a result,
continued significant investments in such a
country may further defer the time at which
we pay taxes in that country.
Project phases, wind farm life cycle example
A wind farm life cycle begins with the
development phase. This includes opportu-
nity screening, if applicable, bid preparation,
obtaining land rights, grid connection, and
permits. The latter activities are further ma-
tured if an investment decision is made, and
the construction phase commences, which
includes construction of the wind farm. During
both phases, product, people, and property
taxes are borne or collected (see our total tax
contribution section).
0
When the wind farm is commissioned and put
into operation, income and positive cash flow
are generated. In many cases, the effect of tax
incentives results in a deferral of taxable income
compared to profit before tax for accounting
purposes. Conversely, once the deferral ends,
the taxable income related to the wind farm will
exceed the accounting profit. For this reason, the
applicable corporate tax rate and cash tax paid
will always differ, but accumulated over the
lifetime of the wind farm, they will be identical.
Profit (loss) before tax
Taxable income
Cash flow
Development Construction Operation
~2-6 years
~2-4 years
~25-35 years
Development activities results in negative cash
flow in the beginning of the project life cycle.
During construction, the capital employed
accelerates materially. Positive income begins
when the project enters operation.
132 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 5. Tax
Notes
Contents
Total tax contribution
According to the OECD classification, tax is a
compulsory unrequited payment to general
government. This means a payment paid by
Ørsted 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 borne by Ørsted are those that rep-
resent a direct cost and are reflected in the
financial result. Taxes borne are charged to
the profit and loss account.
Product
taxes
Total global taxes paid in 2020
Taxes borne – by tax type, 2020, DKKm
Taxes borne – by country, 2020, DKKm
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).
Profit taxes
People taxes
Product taxes
Property taxes
People
taxes
Taxes on employment, both borne
and collected (including income tax
and social security tax payments).
185
0
112
DKK 1,415
million
Indirect taxes on the production and
consumption of goods and services,
including net VAT and sales tax, custom
duties, and insurance premium tax. Net
VAT in countries in a net refund position
is excluded in the total tax contribution,
as it is considered a repayment of tax
already paid within the year.
Denmark
The UK
The US
Germany
The Netherlands
Taiwan
Malaysia
Poland
Sweden
66 2
0
55
4
24
0
245
DKK 1,415
million
1,118
1,019
Taxes collected are those which are generated
by Ørsted’s operations, but do not constitute
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 where we operate.
Total tax contribution is highly impacted by
collection of VAT, sales taxes, duties as well
as profit taxes.
12.0 bn
Our total tax contribution in 2020
totalled DKK 12,028 million.
Property
taxes
Taxes on the ownership, sale, transfer,
or occupancy of property.
Total tax contribution, 2020, DKKm
Taxes collected – by tax type, 2020, DKKm
Taxes collected – by country, 2020, DKKm
Profit taxes
People taxes
Product taxes
Property taxes
Profit taxes
People taxes
Product taxes
Property taxes
10,613
12,028
185
8,533
1,631
449
8,533
1,743
1,567
1,415
185
112
1,118
Borne
taxes
Collected
taxes
Total
Denmark
The UK
The US
Germany
The Netherlands
Taiwan
Malaysia
Poland
Sweden
162
33
12
13
10
8
106
1,130
0
449
1,631
DKK 10,613
million
DKK 10,613
million
The chart shows the distribution between borne
and collected taxes in 2020.
8,533
9,139
133 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 5. Tax
Notes
Contents
Country-by-country reporting
In order to increase transparency, we present
key figures on tax jurisdiction levels below.
Ørsted’s country-by-country reporting widely
follows the GRI 207: Tax standard. Corporate
income tax is based on IFRS reporting stan-
dards instead of GRI methodology to ensure
internal coherence throughout the annual
report. The tax incentives provided on green
investments defer our tax payments, resulting
in a difference between profit (loss) in the
accounts and taxable income during the life
cycle of a wind farm. This is applicable in most
of the countries where we operate.
Country-by-country key
figures – IFRS, 2020
Number of
employees
Total employee
remuneration2
Revenues from
third-party sales
DKKm
Revenues from intra-
group transactions
with other tax
jurisdictions, DKKm
Property, plant,
and equipment,
and inventory
DKKm
Balance of intra-
company debt
DKKm
Corporate income
tax paid on a
cash basis, DKKm
Denmark
The UK
The US
Germany
The Netherlands
Taiwan
Malaysia
Poland
Sweden
Other countries1
Total
3,854
1,057
314
219
45
126
274
233
4
53
3,509
811
378
176
35
121
57
80
2
52
31,108
12,962
2,526
2,968
381
7
-
-
199
-
10,398
7,960
2
685
348
21
101
122
-
167
14,103
60,144
31,702
11,264
10,860
8,190
3
5
2
76
19,679
65,959
7,540
17,161
8,379
1,732
-
-
-
-
The table shows reporting of financial, economic,
and tax-related information for each jurisdiction
where we operate. This information can be compared
with our total tax contribution. Our tax contributions
reflect that some of our development and construc-
tion activities have been based in Denmark, and that
our operations in the coming years are beginning to
ramp up in markets that have been developed. Also,
our presence and the corresponding tax position
is affected by hedging, which is primarily handled
centrally in Denmark
976
120
(33)
2
-
50
-
3
-
-
6,179
5,221
50,151
19,804
136,349
120,450
1,118
1 Other countries include Isle of Man, Japan, Singapore, and South Korea.
2
Including employee costs transferred to assets.
Current tax explanation on
country level, 2020, DKKm
Profit (loss)
before tax
Calculated local
corporate tax
on profit (loss)
before tax
Non-taxable
income and
non-deductible
costs, etc., net
Unrecognised tax
assets
Deferred tax
Denmark
The UK
The US
The Netherlands
Germany
Taiwan
Malaysia
Poland
Sweden
Other countries1
Total
15,298
1,850
(1,097)
162
930
196
22
15
14
(66)
(3,366)
(352)
247
(41)
(279)
(39)
(4)
(3)
(3)
29
2,862
(112)
(25)
25
64
-
-
-
-
-
17,324
(3,811)
2,814
1 Other countries include Isle of Man, Japan, Singapore, and South Korea.
-
-
-
-
(7)
-
-
-
-
(6)
(13)
(588)
(973)
(279)
(15)
223
(3)
-
2
-
(2)
(1,635)
Other
adjustments
(123)
55
57
3
(78)
16
4
1
3
(28)
(90)
Current tax
(1,215)
(1,382)
-
(28)
(77)
(26)
-
-
-
(7)
(2,735)
The table shows our profit (loss) before tax in tax
jurisdictions and the journey to current tax. Current
tax for the UK is significantly impacted by a prior
year adjustment regarding reclassification between
deferred tax and current tax (see more in accounting
policies in note 5.3 ‘Deferred tax’).
134 / 193
Ørsted Annual report 2020
Notes
Contents
6.
Capital structure
136 Capital structure
137
Interest-bearing debt and FFO
139 Equity
141 Hybrid capital
142 Financial resources
144 Financial income and expenses
Ørsted Annual report 2020
Financial statements
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 2020, we issued new green senior bonds
with a total proceed of DKK 3,277 million,
consisting of NTD 15 billion.
All new bonds were issued in accordance
with our Green Finance Framework.
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.
The borrowing activities are diversified among
various funding sources and maturities. In
addition, we have robust financial resources.
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.
In the coming years, we expect to raise new
debt to partly fund our DKK 200 billion
investment programme covering the period
2019-2025.
Our borrowing activities are primarily
consolidated in the parent company where
cash resources are available to the Group
companies via an internal bank.
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 %.
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
2020
Assets
DKK 32.1 billion
2019
Assets
DKK 26.2 billion
DKK 109.7 billion
Equity and liabilities
DKK 141.7 billion
DKK 106.8 billion
Equity and liabilities
DKK 132.6 billion
48.3 %
Funds from operations (FFO) relative to
adjusted interest-bearing net debt amounted
to 48.3 % at 31 December 2020 against 31 %
at 31 December 2019.
12.3 bn
Our interest-bearing net debt totalled
DKK 12,343 million at 31 December 2020 against
DKK 17,230 million at 31 December 2019.
45.6 bn
Our financial resources totalled DKK 45,642 million
at 31 December 2020 against DKK 38,244 million
at 31 December 2019.
136 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 6. Capital structure
Notes
Contents
6.1 Interest-bearing debt and FFO
Interest-bearing debt and interest-bearing assets
DKKm
2020
2019
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
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
Instalments on leases
Raising of lease debt, etc.
Change in other interest-bearing debt and tax
equity liability
Hybrid bonds reclassified to interest-bearing debt
Foreign exchange adjustments and amortisation
Interest-bearing debt at 31 December
1,942
34,824
36,766
721
5,054
1,906
3,466
33,373
36,839
608
5,332
649
44,447
43,428
25,173
6,178
11
742
32,104
12,343
16,552
7,148
1,781
717
26,198
17,230
2020
43,428
-
2019
28,320
5,224
(2,398)
(2,043)
3,406
(541)
263
1,371
-
(1,082)
44,447
10,174
(664)
772
231
570
844
43,428
The market value of
our bond and bank
debt amounted to
DKK 42,485 million
and DKK 1,971 million,
respectively, at
31 December 2020
(2019: DKK 39,281 million
and DKK 3,526 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.
Interest-bearing debt
increased by DKK 1,019
million in 2020.
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
50 % of coupon payments on hybrid capital
Adjusted interest expenses, net
Reversal of gain (loss) on divestment of assets
Total current tax
Funds from operations (FFO)
2020
18,124
(1,202)
(177)
(449)
(238)
(245)
(2,311)
(805)
(2,304)
12,704
2019
17,484
(1,312)
(171)
(344)
(212)
(279)
(2,318)
101
(5,799)
9,468
FFO is calculated for
continuing operations.
FFO has increased by
DKK 3,236 million in
2020, mainly due to
a decrease in current
tax level.
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
Decommissioning obligations
Deferred tax on decommissioning obligations
Total adjusted interest-bearing net debt
Funds from operations (FFO)/
adjusted interest-bearing net debt, %
Funds from operations (FFO)/
adjusted interest-bearing net debt
2020
12,343
6,616
1,485
7,002
(1,138)
26,308
2019
17,230
6,616
1,437
6,158
(866)
30,575
2020
2019
48.3 %
31.0 %
Total adjusted
interest-bearing net
debt decreased by
DKK 4,267 million in
2020, mainly due to
the decrease in
interest-bearing
net debt.
137 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 6. Capital structure
Notes
Contents
Interest-bearing net debt
Interest-bearing net debt totalled DKK 12,343
million at the end of 2020, a decrease of
DKK 4,887 million relative to 2019. The de-
crease in interest-bearing net debt consists
of a increase in interest-bearing debt of
DKK 1,020 million and an increase in interest -
bearing assets of DKK 5,907 million.
In November, we issued a total of NTD 15
billion (DKK 3,277 million) in new green bonds,
split on 3 separate issues:
– NTD 4 billion (DKK 874 million), 0.6 %
interest, maturing in November 2027.
– NTD 3 billion (DKK 655 million), 0.70 %
interest, maturing in November 2030.
– NTD 8 billion (DKK 1,748 million), 0.98 %
interest, maturing in November 2040.
Rating
We have a corporate credit rating of BBB+/
Baa1, stable outlook, from Standard & Poor’s,
Senior bonds issued at 31 December 2020
Million
Outstanding amount
Moody’s, and Fitch, which is in line with our
target. FFO/adjusted interest-bearing net debt
was 48.3 % in 2020, in line with our target.
downgrading our rating to Baa3, BBB- or below,
respectively.
Loan arrangements
At 31 December 2020, we had loan obligations
totalling DKK 1,642 million (2019: DKK 1,861 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 Standard & Poor’s
Credit facilities
Furthermore, we had non-cancellable credit
facilities of DKK 15,758 million at 31 December
2020 (2019: DKK 15,990 million) with a number
of Scandinavian, international, and local
Taiwanese banks. In connection with these
credit facilities, we may be met with demands
for cancellation and repayment of any drawn
amount in the event of shareholders 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 capital. 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).
Currency
Issued
DKK
Coupon (%)
Time of issue
Maturing
Quoted in
EUR
EUR
EUR
GBP
GBP
GBP
GBP
GBP
NTD
NTD
NTD
NTD
NTD
272
517
750
350
750
300
250
500
8,000
4,000
3,000
8,000
4,000
2,025
3,848
5,583
2,911
6,237
2,495
2,079
4,158
1,732
866
650
1,732
866
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
CPI+0.375
16 May 2019
16 May 2034
Luxembourg
5.750
1.500
0.600
0.700
0.980
0.920
9 Apr. 2010
9 Apr. 2040
London
19 Nov. 2019
19 Nov 2034
13 Nov. 2020
13 Nov. 2027
13 Nov. 2020
13 Nov. 2030
13 Nov. 2020
13 Nov. 2040
19 Nov. 2019
19 Nov 2026
Taipei
Taipei
Taipei
Taipei
Taipei
In addition to senior
bonds, we have issued a
number of hybrid bonds,
see note 6.3 ‘Hybrid
capital’.
Maturity profile of bond and bank debt , DKK billion
19.1
The majority of our debt
is to be repaid in 2030
and later.
4.7
2.1
5.6
3.8
1.4
0.1
0.1
0.1
0.0
2021
2022
2023
2024
2025
2026
2027
2028
2029 2030+
138 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 6. Capital structure
Notes
Contents
6.2 Equity
Share capital
Ørsted’s share capital is DKK 4,203,810,800
(2019: 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 2020.
The total portfolio of treasury shares consists
of 312,844 shares at 31 December 2020
(2019: 395,619), corresponding to less than 0.1 %
of the share capital.
Dividend yield, %
2.2
1.5
0.9
2018
2019
2020
The graph shows the proposed dividends in relation
to the closing price for an Ørsted share on the last
trading day of the year.
Dividends
The Board of Directors recommends that
dividends of DKK 4,834 million (2019:
DKK 4,414 million) be paid for the financial
year, corresponding to DKK 11.50 per share
(2019: DKK 10.50 per share). The proposed
dividends correspond to a dividend yield of
0.9 % (2019: 1.5 %), 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 addi-
tion, Andel and The Capital Group Companies,
Inc. have an ownership interest above 5 %.
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
2020
2019
Business
performance
IFRS
Business
performance
IFRS
16,727
15,548
6,100
7,291
(488)
61
(488)
61
(675)
(54)
(675)
(54)
16,300
15,121
5,371
6,562
(11)
(11)
(11)
(11)
(56)
(56)
(56)
(56)
420,056
420,056
420,080
420,080
Dilutive effect of share programme
300
300
408
408
Average number of outstanding
shares, diluted
420,356
420,356
420,488
420,488
(DKK)
Profit (loss) per share
From continuing operations
From discontinued operations
Total profit (loss) per share
38.8
0.0
38.8
36.0
0.0
36.0
12.8
(0.1)
12.7
15.6
(0.1)
15.5
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 only dilutive effect comes from the share programme
and equals 0.1 % of the share capital (2019: 0.1 % of the share capital).
139 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 6. Capital structure
Notes
Contents
Hedging reserve1
Hedging of net
investments
Hedging of
revenue
Hedging of
divestments
Hedging of
interest
Hedging of
production
assets
Reserves 2020, DKKm
Reserves at 1 January 2020
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
Total reserves at 31 December
Foreign currency
translation
reserve
168
(4,993)
-
-
-
-
996
(3,997)
(3,829)
(976)
-
2,163
-
-
-
(476)
1,687
711
1,459
-
(246)
69
-
-
(47)
(224)
1,235
(3)
-
67
(58)
(181)
-
42
(130)
(133)
(235)
-
(110)
-
-
471
(81)
280
45
1 Costs of hedging related to basis spread on currency swaps included in hedging reserve amount to DKK 55 million (2019: 94 million).
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
(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)
(296)
-
(12)
-
88
(15)
61
(235)
-
-
19
-
-
-
(4)
15
15
-
-
-
-
-
-
-
-
Total
reserves
413
(4,993)
1,893
11
(181)
471
430
(2,369)
(1,956)
(1,827)
2,528
(450)
268
88
(194)
2,240
413
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 (2019: 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.
140 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 6. Capital structure
Notes
Contents
6.3 Hybrid capital
Hybrid bonds
Type
Carrying amount
Financial classification
Notional amount
Issued
Maturing
Quoted in
First redemption date at par
Interest
Due in 3013
Due in 3017
Due in 3019
Subordinate to other creditors
Subordinate to other creditors
Subordinate to other creditors
DKK 5,148 million
Equity
DKK 3,668 million
Equity
DKK 4,416 million
Equity
EUR 700 million (DKK 5,210 million)
EUR 500 million (DKK 3,722 million)
EUR 600 million (DKK 4,466 million)
June 2013
June 3013
Luxembourg
26 June 2023
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
+5.5 percentage points after 2043
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
+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
+2.952 percentage points from 2047
Deferral of interest payment
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 1,800 million,
equivalent to DKK 13,398 million
(2019: EUR 1,876 million, equivalent to
DKK 14,019 million).
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.
In 2020, we have redeemed the remaining
outstanding EUR 76 million on our 3015 bond.
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
Accounting policies
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 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 re-
ceived 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.
141 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 6. Capital structure
Notes
Contents
6.4 Financial resources
Financial resources at 31 December 2020
amount to DKK 45,624 million
(2019: DKK 38,244 million). The change in
financial resources is due to an increase of
DKK 8,629 million in securities, partially offset
by a decrease in cash and undrawn credit
facilities of DKK 1,017 million and DKK 232
million, respectively.
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 393 million at 31 December 2020
(2019: DKK 397 million)
– trading in financial instruments:
DKK 356 million at 31 December 2020
(2019: DKK 360 million).
At 31 December 2020, we had received cash
collateral in the amount of DKK 12 million
(2019: DKK 1,439 million) concerning the
positive market value of derivatives.
Cash not available for use comprises:
– collateral for insurance-related provisions:
DKK 263 million (2019: DKK 277 million)
– collateral for US power purchase agreements:
DKK 426 million (2019: DKK 132 million)
– collateral for other transactions:
DKK 47 million (2019: DKK 280 million).
Cash and cash equivalents, securities, DKKm
Cash, available
Bank overdrafts that are part of the ongoing cash management
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.
2020
5,442
(232)
5,210
5,442
736
6,178
2019
6,459
-
6,459
6,459
689
7,148
24,424
15,795
749
757
25,173
16,552
Financial resources, DKK million
Overview of securities, DKKm
Cash, available
Securities, available
Undrawn, non-cancellable credit facilities
2020
DKK 45,624 million
Maturities
0-2 years
2-5 years
After 5 years
Total carrying amount
Fixed
rate
Floating
rate
1,304
2,010
5,597
8,911
3,067
9,738
3,457
2020
4,371
11,748
9,054
Fixed
rate
929
7,309
3,982
Floating
rate
932
2019
1,861
3,400
10,709
-
3,982
16,262
25,173
12,220
4,332
16,552
2019
DKK 38,244 million
The table shows our securities split into maturities
and fixed or floating interest rates. The overview
includes interest rate swaps used to manage the
interest rate risk on the securities.
142 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 6. Capital structure
Notes
Contents
Maturity analysis of financial liabilities 2020, DKKm
2021
2022
2023-2024
After 2024
2020
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
2,133
1,020
9,742
5,786
48
5,386
94
4,700
920
-
1,562
105
59
-
106
1,639
-
997
153
701
-
29,846
8,083
-
825
1,102
307
-
36,785
11,662
9,742
9,170
1,408
6,453
94
Total payment obligations
24,209
7,346
3,596
40,163
75,314
Maturity analysis of financial liabilities 2019, DKKm
2020
2021
2022-2023
After 2023
2019
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
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 recognised 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 purchase 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
above. 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 2020, we had
issued hybrid capital with a notional amount totalling
DKK 13,398 million due in 3013 (DKK 5,210 million),
3017 (DKK 3,722 million), and 3019 (DKK 4,466
million), respectively.
The maturity analysis for leasing is part of note
8.2 ‘Leases’.
143 / 193
Ørsted Annual report 2020
Financial 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
Capital losses on early repayment of loans and interest rate swaps
Exchange rate adjustments, net
Value adjustments of securities, net
Other financial income and expenses
Net financial income and expenses
2020
(1,202)
(177)
(452)
(486)
(112)
(373)
188
(12)
102
2019
(1,312)
(171)
(428)
(307)
(181)
-
1,038
147
79
(2,524)
(1,135)
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’.
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’.
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 partners´ contractual returns
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
2020
237
137
-
3,605
1,766
34
5,779
(2,026)
449
(177)
(352)
(486)
(12)
(3,623)
(2,012)
(64)
(8,303)
(2,524)
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)
Exchange rate adjust ments of currency hedging are
recognised in revenue and cost of sales with a gain of
DKK 1,059 million (2019: a loss of DKK 1,943 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 3.3 % in 2020
(2019: 4.0 %). The reduction is due to new bonds being
issued at a lower interest rate.
144 / 193
Ørsted Annual report 2020
Notes
Contents
7.
Risk management
146 Risk management
147 Market risks
149
Hedge accounting and economic hedging
152
Energy trading portfolio
153
Sensitivity analysis of financial instruments
154
Credit risks
Categories of financial instruments
155
156 Fair value measurement
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 7. Risk management
Notes
Contents
7. Risk management
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.
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.
The trading activities comply with the man-
dates approved by the Board of Directors.
Read more in note 7.3 ‘Energy trading portfolio’.
Currency exposure, GBP and NTD 2021-2025,
USD 2021-2036, DKKbn
Energy exposure 2021-2025
DKKbn
Before hedging
After hedging
60.2
Before hedging
After hedging
23.9
19.1
19.5
12.8
5.8
4.8
8.2
0.2
0.3
0.8 0.7
-2.7 bn
As of 1 January 2021, we will cease to use the
business performance principle and instead begin to
apply IFRS hedge accounting on all commodity and
related currency hedges. As of 31 December 2020,
we had a loss of DKK 2,685 million on our business
performance hedges deferred to a later period.
This amount will not impact the IFRS number, as we
have already recognised the loss under IFRS in the
income statement.
GBP
USD
NTD
Our currency exposures are significantly reduced
due to hedging.
For USD, we manage our risk as a natural time
spread between front-end capital expenditures
and long-end revenue between 2021-2036.
We do not deem EUR to constitute a risk, as we
expect Denmark to maintain its fixed exchange-
rate policy.
-2.0
-1.8
Oil
Gas
Outright
power
Spread
(power)
+1.3 bn
Our energy exposures are significantly reduced
due to hedging.
Our main energy exposure is towards UK power
as the UK is Offshore’s largest market.
The value of hedging instruments (mainly inflation,
power, and currency) that will impact the IFRS
EBITDA in the future amounts to a gain of
DKK 1,278 million at 31 December 2020.
+0.7 bn
The deferred gains from US power purchase
agreements (PPAs) amount to DKK 736 million that
will be recognised as revenue over the remaining life
of the PPAs.
146 / 193
Ørsted Annual report 2020
Financial 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 declines in subsequent years due to:
– reduced certainty about long-term
production volumes
– increasing hedging costs in the medium
to long term, both spread costs and costs
of collateral
– adverse impacts from collateral, potentially
tying up large amounts of capital if hedging
contracts become unfavourable.
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
(PPAs), and we use debt to manage currency,
interest rate, and inflation risks.
Energy price risks
Our consolidated energy exposure for the
years 2021-2025 after hedging can be summa-
rised as shown in the table.
Risk after hedging
DKKbn
Effect of price change
-10 %
+10 %
Power: 8.2 sales position
Gas: 0.3 sales position
Oil: 0.2 sales position
Spread: 0.7 sales position
+0.8
+0.0
+0.0
+0.1
-0.8
-0.0
-0.0
-0.1
Therefore, a 10 % increase in the power price in
2021-2025 will result in a gain of DKK 0.8 billion
in the period, all else remaining unchanged.
Currency risks
Our consolidated currency exposure after
hedging for the years 2021-2025 (USD 2021-
2036) can be summarised as shown in the
table.
Risk after hedging
DKKbn
Effect of price change
-10 %
+10 %
GBP: 19.1 sales position
NTD: 4.8 sales position
USD: 12.8 sales position
+1.9
+0.5
+1.3
-1.9
-0.5
-1.3
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 exposures.
In general, highly certain cash flows in a
foreign currency are hedged within the first
five years.
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.
Our GBP exposure amounted to DKK 19.1 billion
after hedging for the years 2021-2025. This
unhedged GBP exposure stems from subsidised
GBP income less operational expenditures.
The GBP exchange rate for hedges impacting
EBITDA in 2021 and 2022 is hedged at an
average exchange rate of GBP/DKK 8.3 and
8.1, respectively.
For our USD and NTD exposures from new
markets, we have limited existing portfolio
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.
GBP exposures, DKKbn
Before hedging
After hedging
18.5
10.6
9.5
9.5
10.9
6.2
10.7
7.9
-0.2
2021
-4.3
2022
2023
2024
2025
The graph shows our GBP
exposure before and after
hedges from:
– divestments and
investments
– green certificates
– hedged energy.
The divestment proceeds
from the Hornsea 2 transmis-
sion asset were previously
expected in 2022, but are
now expected in 2023. The
related hedges will remain in
2022 until we know the final
timing of the divestment.
147 / 193
Ørsted Annual report 2020
Financial 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
related to onshore wind assets in the US and
offshore wind assets in Europe and Taiwan.
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 retail price index (RPI) rate of 3.6 % for
the period 2024-2037 and an average consum-
er price index (CPI) rate of 2.7 % for the period
2030-2032. This will 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)
– long-term power purchase agreements
– sale of power at market price from our
wind farms with market price risk.
At the end of 2020, such fixed tariffs and
guaranteed minimum prices cover approx.
86 % of the expected income from offshore
wind farms for the period 2021-2025. The
remaining price exposure concerns sales of
power at market price in the UK, Denmark,
and the Netherlands.
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. 65 % of the expected generation,
spanning 12-15 years from the commissioning
of the wind farm. The PPAs are entered into
with large corporates or financial institutions.
Markets & Bioenergy
Our combined heat and power plants
consists of biomass- and fossil-fuelled plants
in Denmark. Heat generation accounts for a
larger share of the earnings and 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 simulta-
neously to a large extent. The profitability
of power generation is determined by the
difference between the selling price of power
and the purchase price of fuel and carbon
emission allowances. For our biomass-based
power generation, we secure profitability by
buying biomass at fixed prices and hedging the
associated power generation. At the end of
2020, 36 % of the expected power generation
from our power plants in 2021 was hedged.
The total net risk associated with the power
plants’ power generation for the 2021-2025
period is DKK 0.7 billion after hedging.
Our price risks in Markets arise from the
purchase and sale of power and gas. The price
risks associated with the purchase and sale
of gas result from differences in the indexing
of sales and purchase prices. Our largest gas
purchase contracts are mainly indexed to pure
gas prices and thus no longer constitute a
significant risk.
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.
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.
Offshore’s power price exposure, DKKbn
Before hedging
After hedging
4.2
3.0
3.0
3.2
4.7
3.7
1.9
0.1
0.3
0.6
2021
2022
2023
2024
2025
The table shows the exposure from Offshore’s
generation of power before and after hedges.
Expected value for recognition in EBITDA, DKKbn
Power
Currency
Inflation and interest
US PPAs
1.7
0.1
0.2
2021
2022
After 2022
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 gains from US
power purchase agreements (PPAs). See note
1.6 ‘Business performance’.
148 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 7. Risk management
Notes
Contents
7.2 Hedge accounting and economic hedging
2020
2019
2020
2019
Contractual
principal
amount
Market
value
Economic hedging and
commercial contracts, DKKm
Note
Overview of the Group’s
derivative positions, DKKm
1.6, 7.2
Recognised with EBITDA impact
Economic hedging, currency
1.6, 7.2
Economic hedging, energy
7.2
7.3
7.2
7.2
7.2
7.2
7.2
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
Hedging of fair value, interests
Other currency derivatives
Other interest derivatives
Total
Recognised in other line items
Hedging of cash flows, energy, and currency
(gain/loss on divestment of enterprises)
Hedging of fair value, currency (discontinued)
Production assets
Hedging of net investments (OCI)
Total
Contractual
principal
amount
30,403
18,740
19,709
11,857
-
12,995
93,704
Market
value
(575)
(1,641)
1,209
(73)
-
79
30,744
19,026
17,373
6,988
243
9,271
(1,001)
83,645
26,095
(1,166)
8,631
10,436
13,089
6,924
65,175
139
(13)
598
(156)
(598)
25,825
3,890
-
8,052
4,431
42,198
4,435
(126)
10,487
(1,509)
617
585
545
(108)
1,148
1,278
43
(130)
-
504
(85)
332
318
(50)
-
-
321
47,962
211,597
-
19
1,497
(209)
999
-
46,717
(1,096)
184,046
782
The table shows the Group’s derivatives and commer-
cial 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 accounting
in accordance with the business performance
principle (see note 1.6 ‘Business performance’ for a
detailed description).
– Hedging of cash flows includes hedging of interest
– 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.
rates, inflation, currencies, power prices, and market
risks related to the divestment of the LNG business.
The contractual principal amount has been deter-
mined as the net position per derivative type.
Energy
Oil swaps
Gas swaps
Power swaps
Power options
Coal
Total
Currency
Forward exchange contracts
Total
Economic hedging is accounted for under the
business performance principle, see description
above.
The market value of DKK -2,216 million (2019:
DKK -892 million) will be recognised in business
performance profit or loss in a future period.
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.
Contractual
principal
amount
604
2,012
9,008
7,111
5
Market
value
(13)
58
(1,795)
116
(7)
18,740
(1,641)
Contractual
principal
amount
Market
value
993
3,180
10,523
4,193
137
19,026
56
770
(490)
317
(36)
617
30,403
49,143
(575)
(2,216)
30,744
49,770
(1,509)
(892)
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 when the hedged transaction
affects results. See note 1.6 ‘Business performance’ for
further information.
The contractual principal amount has been
determined as net position per derivative type.
149 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 7. Risk management
Notes
Contents
Cash flow and fair value hedging
Our cash-flow hedges consist of inflation,
power, currency, interest rate, and oil hedges.
Our fair hedges consist of currency and interest
rate hedges.
Ineffectiveness
Ineffectiveness of cash flow and fair
value hedging totalled DKK 0 million
(2019: DKK 0 million). We do not experience
ineffectiveness on our cashflow or fair value
hedges as we are able to hedge the exposure
with a hedge that fully match the exposure.
However, ineffectiveness arise on our economic
and commercial contracts where we are
currently not applying IFRS hedge accounting.
Cash flow
hedge accounting
2020, DKKm
Contractual
principal
amount
Revenue (US+DE power)
Revenue (UK inflation)
Divestments (USD)
Divestments (fixed interest)
Production assets (oil)
Production assets (USD)
Interest payments (GBP)
Interest payments (fixed)
2019, DKKm
Revenue (US power)
Revenue (USD)
Revenue (UK inflation)
Divestments (GBP)
Divestments (USD)
Divestments (oil)
Divestments (gas)
Interest payments (GBP)
Interest payments (fixed)
11,857
19,709
1,098
3,337
238
83
1,635
6,996
6,988
116
17,373
127
3,518
3,442
3,527
2,310
1,580
Fair value hedge
accounting 2020, DKKm
Contractual
principal
amount
GBP (sell position)
EUR (sell position)
NTD (sell position)
Interest (fixed)
2019, DKKm
GBP (sell position)
EUR (sell position)
NTD (sell position)
USD (buy position)
17,359
4,466
4,270
10,436
18,688
4,483
2,654
999
Maturity analysis
Market value
2022 After 2022
Asset
Liability
2021
898
-
1,098
-
210
77
626
-
836
-
-
-
28
6
460
-
10,123
19,7091
-
3,337
-
-
549
6,996
2020
2021 After 2021
499
115
-
127
433
556
503
576
25
615
1
-
-
830
1,013
936
664
29
5,874
-
17,3731
-
2,255
1,873
2,088
1,070
1,526
583
1,231
98
-
27
23
34
147
824
120
585
96
158
74
534
37
-
(656)
(22)
(19)
(205)
(2)
(29)
(42)
-
(279)
(182)
-
(142)
(37)
(142)
(269)
(43)
124
Maturity analysis
Market value
2021
(520)
-
-
-
2020
(273)
-
-
999
2022 After 2022
Asset
Liability
-
4,466
-
-
17,879
-
4,270
10,436
2021 After 2021
-
-
-
-
18,961
4,483
2,654
-
93
-
-
-
33
17
1
-
(1,128)
-
(131)
(13)
(8)
-
-
(50)
Recognised in
comprehen-
sive income
210
1,209
29
(205)
25
(6)
24
33
1,021
(41)
585
(4)
-
-
-
43
(331)
Expected transfers to income statement
2021
65
-
29
(205)
23
(6)
(30)
(34)
2020
46
(41)
-
(4)
-
-
-
(42)
(59)
2022 After 2022
121
-
-
-
2
-
23
(25)
24
1,209
-
-
-
-
31
92
2021 After 2021
46
-
-
-
-
-
-
1
(55)
929
-
585
-
-
-
-
84
(217)
1
The hedge covers inflation risks for the period
2024-2037.
As of 1 January 2019, we have started to apply IFRS
cash flow hedge accounting on power purchase
agreements related to our Onshore business unit.
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,
interest, and inflation 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. Thus, there are 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.
150 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 7. Risk management
Notes
Contents
Hedging of net investments
in foreign subsidiaries
Our foreign activities entail currency risk. We
hedge this currency risk by raising loans in for-
eign currencies and by entering into forward ex-
change contracts, currency swaps and options.
On 31 December 2020, the accumulated
exchange rate adjustments totalled
DKK -3,869 million, divided between the
exchange rate adjustment of the net
investment of DKK -4,793 million and the
hedging thereof of DKK 924 million.
Accounting policies
Hedging of net investments in foreign subsidiaries
Changes in the market value of derivatives and loans
that are classified as net investment hedges in for-
eign subsidiaries or associates are recognised in the
consolidated financial statements directly in equity
within a separate foreign currency translation reserve.
Hedging of net investments in foreign subsidiaries, DKKm
Currency
2020
GBP
EUR
USD
NTD
Other
Total
2019
GBP
EUR
USD
NTD
Other
Total
Net
investment
Of which, non-
controlling
interests
Hedged
amount in
currency
Net position
Accumulated
exchange rate
adjustments in
equity
56,826
24,550
17,317
11,409
232
110,334
62,600
22,501
15,979
3,061
122
104,263
(2,705)
-
-
-
-
(2,705)
(3,292)
-
-
-
-
(3,292)
(33,949)
(4,466)
(5,277)
(4,270)
-
(47,962)
(35,284)
(4,483)
(4,296)
(2,654)
-
(46,717)
20,172
20,084
12,040
7,139
232
59,667
24,024
18,018
11,683
407
122
54,254
(3,014)
(33)
(899)
121
(44)
(3,869)
(1,165)
38
139
(3)
(66)
(1,057)
The net position
expresses the
accounting exposure.
If, for example, the GBP/
DKK exchange rate
increased by 10 %
on 31 December
2020, equity would
have increased by
DKK 2,017 million,
corresponding to 10 %
of DKK 20,172 million.
Net investment hedges
2020, DKKm
Contractual
principal
amount
GBP (sell position)
EUR (sell position)
USD (sell position)
NTD (sell position)
2019, DKKm
GBP (sell position)
EUR (sell position)
USD (sell position)
NTD (sell position)
33,949
4,466
5,277
4,270
35,284
4,483
4,296
2,654
Maturity analysis
Market value
2021
4,998
-
(4,122)
-
2020
2,950
-
(1,548)
-
2022 After 2022
Asset
Liability
5,830
4,466
4,807
-
23,121
-
4,593
4,270
2021 After 2021
3,104
-
2,429
-
29,230
4,483
3,415
2,654
1,054
-
401
131
(89)
-
-
-
149
4
36
-
(1,195)
(21)
(68)
(1)
Hornsea 1, off the
Yorkshire coast, the UK.
151 / 193
Ørsted Annual report 2020
Financial 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
– profit from short-term fluctuations in
energy prices.
The trading portfolio consists primarily of
positions in power and gas.
Other
Total
Power swaps
Power options
Gas swaps and options
Oil swaps and options
Overview of the Group’s trading
portfolio, DKKm
Contractual principal
amount
Market value
Contractual principal
amount
Market value
2020
2019
3,225
7,208
1,645
548
369
12,995
341
(80)
(24)
(150)
(8)
79
3,174
4,155
1,467
141
334
9,271
725
(339)
720
14
28
1,148
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.
Market trading mandates
VaR limit in 2020:
DKK 70 million
Stress limit in 2020:
DKK 400 million
Maximum open positions in trading portfolio
VaR indicates the largest loss in one
trading day at 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. 8 TWh of power
– Max. 15 TWh of gas
– Max. 4 million boe of oil
– Max. 2 million tonnes of coal
– Max. 3 million tonnes of carbon emissions
Accounting policies
Board of Directors mandate
Executive Committee mandate
VaR (value at risk)
Daily position in the trading portfolio, market trading mandates, DKKm
The contractual
principal amount has
been determined as
the net position per
derivative type.
The risk associated with
our options is smaller
than for our swaps.
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.).
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.
80
60
40
20
0
2019
2020
The graph shows the daily value-at-risk position for
the period 2019-2020. VaR reached DKK 56 million
on 8 January 2020, causing a passive breach of the
Executive Committee mandate of DKK 50 million.
This was due to increased volatility as a conse-
quence of the Russian/Ukraine conflict and the
Iranian attack on US bases on 8 January. The risk
was brought back within the limit the next day.
152 / 193
Ørsted Annual report 2020
Financial 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 2020.
Sensitivity analysis of
financial instruments
DKKm
31 December 2020
31 December 2019
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
USD
GBP
NTD
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 %
1 %
-1 %
(273)
273
(218)
217
247
(238)
(112)
112
118
(118)
74
(74)
(31)
31
(276)
-
12
(12)
(57)
57
(1,403)
1,396
50
(50)
(2,948)
2,948
64
(64)
(89)
89
-
-
26
(26)
-
-
(1,571)
1,114
(281)
281
155
(155)
-
-
(82)
82
1,281
(2,671)
(423)
423
(22)
22
540
(556)
(126)
126
68
(68)
-
-
(26)
26
(268)
-
106
(106)
(169)
169
(1,334)
1,350
81
(81)
(2,539)
2,539
53
(53)
(31)
31
-
-
335
(335)
(328)
328
(827)
827
135
(135)
119
(119)
-
-
(31)
31
159
(1,937)
Interest
100 basis points
Inflation
100 basis points
The illustrated sensitivities only comprise the
impacts 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 4,796 million
(2019: DKK 4,672 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.
153 / 193
Ørsted Annual report 2020
Financial 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
– 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 the
Executive Committee. 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 have not suffered losses from any single
major counterparty in 2019 or 2020.
The credit risks from our financial assets prima-
rily concern derivatives, cash, securities, and
receivables. 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
Accounting policies
Total credit exposure
We only offset positive and negative values if we
are entitled to and intend to settle several financial
instruments net.
2020
21,498
1,712
9,149
3,717
9,602
45,678
2019
9,221
4,000
11,593
5,284
12,246
42,344
The AAA/Aaa category
covers our position in
Danish AAA-rated gov-
ernment and mortgage
bonds. The non-rated
category primarily con-
sists of trade receivables
from customers, such as
end-users.
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
9,302
(4,467)
4,835
(1,859)
(12)
2,964
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
8,848
(4,467)
4,381
(1,859)
(2,295)
227
Trade
receivables
13,655
(11,842)
1,813
-
-
1,813
Trade
payables
13,898
(11,842)
2,056
-
-
2,056
2020
Derivatives
22,957
(16,309)
6,648
(1,859)
(12)
4,777
12,174
(6,917)
5,257
(2,044)
(1,438)
1,775
2020
Derivatives
22,746
(16,309)
6,437
(1,859)
(2,295)
2,283
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
29,393
(20,684)
8,709
(2,044)
(1,438)
5,227
2019
29,872
(20,684)
9,188
(2,044)
(331)
6,813
The table shows our
financial assets and
liabilities where a share
is offset and is therefore
presented net. Offset-
ting is typically limited
to specific products.
154 / 193
Ørsted Annual report 2020
Financial 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
2020
2,856
25,173
28,029
610
1,378
1,265
3,253
6,732
8,317
15,049
4,538
4,538
658
240
864
1,762
36,766
9,742
4,282
50,790
Drone delivery
of tools at
Borssele 1 & 2,
Vlissingen,
the Netherlands.
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
155 / 193
Ørsted Annual report 2020
Financial 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 Executive Committee.
Deferred gain/losses from US power
purchase agreements
The deferred gains from US PPAs consist of
the market value of PPAs recocognised in
the opening balance when Lincoln Clean
Energy was purchased in 2018. The PPAs
lock the power price of the expected power
in 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 2020,
we have recognised an income of DKK 184
million (2019: DKK 216 million) related to
the deferred fair value of PPAs not recog-
nised in profit or loss at initial recognition.
The total amount of deferred revenue as
of 31 December 2020 amounts to DKK 736
million (2019: DKK 995 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 short 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. As only a minor part of the
contract period is within the period where
power prices are non- observable, we classify
the contracts as based on observable input.
Fair value hierarchy, DKKm
Inventories
Derivatives Other receivables
Securities
Derivatives
Other payables
Assets
Liabilities
2020
Quoted prices
Observable input
Non-observable input
Total 2020
2019
Quoted prices
Observable input
Non-observable input
Total 2019
1,388
-
-
1,388
959
-
-
959
2,074
3,627
408
6,109
16
7,467
257
7,740
-
-
-
-
-
-
-
-
-
25,173
-
25,173
-
16,552
-
16,552
2,294
3,534
490
6,318
21
6,916
21
6,958
-
-
-
-
-
-
-
-
Significant non-observable inputs
Market values based on non-observable input
comprise primarily long-term contracts on
the purchase or sale of power and gas. Since
there are no active markets for the long-term
prices 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.
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.
156 / 193
Ørsted Annual report 2020
Financial 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
Transferred from quoted prices and observable input
Transferred to quoted prices and observable input
Market value at 31 December
Non-observable inputs per commodity price input, DKKm
German power prices
Other power prices
Gas prices
Total
The main non-observable input is German power
prices in the period 2025-2034. The average power
price for the period is estimated at EUR 54 per
MWh, based on an inflation-adjusted extrapolation
of the observable price. An increase or decrease
in the German power prices of 10 % would impact
the fair value by +/- DKK 400 million.
2020
236
(21)
(228)
(37)
56
15
(103)
(82)
2020
(228)
(21)
167
(82)
2019
(2,458)
289
955
20
97
-
1,333
236
2019
-
221
15
236
Borssele 1 & 2,
Vlissingen,
the Netherlands.
157 / 193
Ørsted Annual report 2020
Notes
Contents
8.
Other notes
159 Related-party transactions
160 Leases
161 Auditor’s fees
161 Contractual obligations
162 Company overview
Ørsted Annual report 2020
Financial statements
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.
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.
The remuneration and share programmes for
the Executive Committee and the Board of
Directors are described in notes 2.7 ‘ Employee
costs’ and 2.8 ‘Share-based payment’.
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.
Joint ventures, DKKm
Dividends received and capital reductions
Capital transactions, net
Sale of goods and services
Purchase of goods and services
Receivables
Payables
Associates, DKKm
Dividends received and capital reductions
Capital transactions, net
Sale of goods and services
Purchase of goods and services
There were no other related-party trans-
actions during the period.
Payables
Receivables
Board of Directors, DKKm
Purchase of goods and services
Payables
East Coast Hub, at
the Port of Grimsby,
Lincolnshire, the UK.
2020
6
65
-
-
-
(5)
14
(45)
11
(156)
(17)
-
(21)
-
2019
-
(118)
3
(6)
1
-
-
(46)
13
(130)
(18)
1
(107)
(11)
159 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 8. Other notes
Notes
Contents
Accounting policies
Carrying amount at 31 December 2020
8.2 Leases
Our lease liabilities decreased by DKK 278
million relative to 31 December 2019. Additions
primarily related to commenced leases of
plots of land related to development and
construction projects in Onshore.
We have entered into leases of DKK 368
million which are not commenced and
consequently not included in our lease
liabilities.
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 from 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 411 million in 2020
(2019: DKK 311 million). Interests on lease debt
expensed in profit (loss) were DKK 177 million
in 2020 (2019: DKK 171 million).
Total cash outflows for leases were DKK 1,129
million in 2020 (2019: DKK 1,147 million).
Our lease liabilities are initially measured at the net
present value of the in-substance fixed lease payments
for the use of a lease asset. If, at inception of the lease,
we are reasonably certain about exercising an option
to extend a lease, we will include the lease payments
in the option period when calculating the lease liability.
We measure the lease asset to the value of the lease
liability at initial recognition.
Our lease assets are classified alongside our owned
assets of similar type under property, plant, and
equipment. We depreciate our lease assets during
the lease term. The depreciation method used is the
straight-line method 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.
Land and
buildings
Production
assets
Fixtures and fittings,
tools, and equipment
Property,
plant, and
equipment
Lease assets, DKKm
Carrying amount at 1 January 2020
Exchange rate adjustments
Additions
Disposals
Divestment of enterprises
Depreciation
Lease assets, DKKm
Carrying amount at 1 January 2019
Exchange rate adjustments
Additions
Disposals
Depreciation
Carrying amount at 31 December 2019
4,407
(226)
775
(133)
(239)
(310)
4,274
4,165
131
535
(61)
(363)
4,407
476
(7)
-
(234)
-
(63)
172
440
1
109
-
(74)
476
308
(4)
79
-
-
(213)
170
460
5
5
-
(162)
308
Lease liabilities by segment 2020, 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 2020
Lease liabilities by segment 2019, DKKm
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
299
583
314
602
477
360
2,635
2,160
280
475
348
709
607
525
2,944
2,432
51
245
156
409
463
1,549
2,873
1,386
45
87
93
236
259
1,016
1,736
864
86
113
23
40
28
9
299
270
89
185
41
44
-
66
425
368
163
321
320
581
18
-
1,403
1,238
199
224
287
1,224
26
14
1,974
1,668
5,191
(237)
854
(367)
(239)
(586)
4,616
5,065
137
649
(61)
(599)
5,191
Total
599
1,262
813
1,632
986
1,918
7,210
5,054
613
971
769
2,213
892
1,621
7,079
5,332
160 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 8. Other notes
Notes
Contents
8.3 Auditor’s fees
8.4 Contractual
obligations
Tax and VAT advice primarily included advice
in connection with tax due diligence and
advice in connection with the preparation of
tax returns and employee taxation.
Other services included other consultancy
services from PwC, including advice in connec-
tion with accounting, GDPR, and due diligence.
Our contractual obligations at 31 December
2020 mainly related to offshore wind tur-
bines, foundations, and cables, etc., for the
construction of offshore wind farms (primarily
Greater Changhua 1 & 2a and Hornsea 2).
We have reduced the obligations significantly
relative to the last year due to the completion
of Borssele 1 & 2 and progress on wind farms
under construction.
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’.
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, assurance
services related to the issuance of bonds, and
reviews of regulatory financial statements.
Fees for services other than statutory audit
supplied by PwC Denmark to Ørsted amount-
ed to DKK 4 million (2019: DKK 6 million) and
consisted of assurance services related to the
issuance of bonds, reviews of regulatory finan-
cial statements, accounting and tax advice
in connection with divestment of assets and
enterprises, GDPR, due diligence, review of
ESG data, and other general accounting and
tax advice.
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
PwC Denmark non-audit service ratio
2020
2019
17
2
3
2
24
39 %
56 %
16
2
2
4
24
47 %
n.a.
Effective from
1 January 2020, the
non-audit services
provided by the Group
auditor in Denmark
cannot exceed 70 %.
Contractual obligations by segment, DKKm
Offshore
Onshore
0-1 year
1-5 years
2020
2019
1,761
40,311
42,072
50,815
1,689
-
1,689
1,327
Markets &
Bioenergy
29
40
69
209
Total
3,479
40,351
43,830
52,351
Overview of contracts entered into where delivery
had not taken place at 31 December 2020. The
obligations are measured at nominal value.
161 / 193
Ørsted Annual report 2020
Financial 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
AB Baltic Grid, Malmö, Sweden
Acceber B.V., ’s-Gravenhage, the Netherlands
Anholt Havvindmøllepark I/S2,3, Fredericia, Denmark
Barrow Offshore Wind Limited, London, the UK
Bay State HoldCo LLC, Delaware, the US
Bay State Wind LLC2, Delaware, the US
Bearsonville Investments sp. z o.o., soon Orsted Polska OF SPV 1 sp. z o.o., Warzaw, Poland
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, the UK
BSW Holdco LLC2, Delaware, the US
BSW Projectco LLC2, Delaware, the US
Burbo Extension Holding Ltd, London, the UK
Burbo Extension Ltd2, London, the UK
Calgary Flames B.V., ’s-Gravenhage, the Netherlands
Celtic Array Limited2, Berkshire, the UK
Cerulea Limited, London, the UK
Choshi Orsted HoldCo G.K., Tokyo, Japan
Type1
Ownership
interest
Segment/company/registered office
Choshi Offshore Wind Farm K.K., Toyko, Japan
-
S
S
JO
S
JO
JO
S
S
S
S
JO
S
JO
S
S
S
JO
JO
JO
JO
S
JV
S
S
-
CT Offshore A/S under frivillig likvidation, Fredericia, Denmark
Cygnus Wind Transmission Limited, London, the UK
Deepwater Wind, LLC2, Delaware, the US
Deepwater Wind Block Island, LLC, Delaware, the US
Deepwater Wind Block Island Holdings, LLC5, Delaware, the US
Deepwater Wind Block Island Transmission, LLC, Delaware, the US
Deepwater Wind New England2, LLC, Delaware, the US
Deepwater Wind New Jersey, LLC, Delaware, the US
Deepwater Wind New York2, LLC, Delaware, the US
Deepwater Wind Operating2, LLC, Delaware, the US
Deepwater Wind Rhode Island, LLC, Delaware, the US
DWBI Class B member, LLC, Delaware, the US
DWW MARI Holdings, LLC2, Delaware, the US
Euros B.V., ’s-Gravenhage, the Netherlands
Endalan Investments sp. z o.o., soon Orsted Polska OF SPV 2 sp. z o.o., Warzaw, Poland
Formosa I International Investment Co., Limited, Taipei City, Taiwan
Formosa I Wind Power Co.2, Ltd, Taipei City, Taiwan
Garden State Offshore Energy, LLC, Delaware, the US
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
Golden Melody B.V., ’s-Gravenhage, the Netherlands
Gotland Offshore Windfarm AB, Malmö, Sweden
Greater Changhua Offshore Wind Farm NW Ltd., Changhua County, Taiwan
Greater Changhua Offshore Wind Farm SE Ltd., Changhua County, Taiwan
100 %
100 %
50 %
100 %
50 %
50 %
100 %
100 %
100 %
100 %
50 %
100 %
50 %
100 %
100 %
100 %
50 %
50 %
50 %
50 %
100 %
50 %
100 %
100 %
Type1
Ownership
interest
S
S
S
JO
S
S
S
JO
S
JO
JO
S
S
JO
S
S
JV
JV
JV
S
JO
JO
S
S
S
S
S
100 %
100 %
100 %
50 %
100 %
100 %
100 %
50 %
100 %
50 %
50 %
100 %
100 %
50 %
100 %
100 %
35 %
35 %
50 %
100 %
50 %
50 %
100 %
100 %
100 %
100 %
100 %
162 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 8. Other notes
Notes
Contents
Segment/company/registered office
Greater Changhua SE Holdings Ltd., Changhua County, Taiwan
Greater Changhua Offshore Wind Farm SW Ltd., Changhua County, Taiwan
GSOE I, LLC2, Delaware, the US
Gunfleet Sands Holding Ltd., London, the UK
Gunfleet Sands II Limited2, London, the UK
Gunfleet Sands Limited2, London, the UK
Hocadio Investments sp. z o.o., soon Orsted Polska OF SPV 3 sp. z o.o., Warzaw, Poland
Horns Rev I Offshore Wind Farm6
Hornsea 1 Holdings Limited, London, the UK
Hornsea 1 Limited2, London, the UK
Lincs Wind Farm (Holding) Limited, London, the UK
Lincs Wind Farm Limited2, Aberdeen, the UK
London Array Limited, Kent, the UK
Merndale Investments sp. z o.o., soon Orsted Polska OF SPV 4 sp. z o.o.
Morecambe Wind Limited, London, the UK
Njord Limited2, London, the UK
North East Offshore, LLC, Delaware, the US
Northeast Wind Energy LLC, Delaware , the US
Notos B.V., ’s-Gravenhage, the Netherlands
Nysted I A/S, Fredericia, Denmark
Nördlicher Grund GmbH, Hamburg, Germany
Ocean Wind LLC, Delaware, the US
Ocean Wind II, LLC, Delaware, the US
Ocean Wind JV HoldCo, LLC, Delaware, the US
OFTRAC Limited, London, the UK
Optimus Wind Limited, London, the UK
Optimus Wind Transmission Limited, London, the UK
Orsted Baltica 2 Holding sp. z o.o., Warzaw, Poland
Orsted Baltica 3 Holding sp. z o.o., Warzaw, Poland
Orsted Borkum Riffgrund I GmbH, Hamburg, Germany
Orsted Borkum Riffgrund I HoldCo GmbH, Hamburg, Germany
Type1
Ownership
interest
Segment/company/registered office
Type1
Ownership
interest
S
S
JV
S
S
S
S
JO
JO
JO
JO
JO
JO
S
JO
S
JO
JO
S
S
S
S
S
S
S
S
S
S
S
S
S
100 %
Orsted Borssele 1 B.V., ’s-Gravenhage, the Netherlands
100 %
Orsted Borssele Holding B.V., ’s-Gravenhage, the Netherlands
50 %
50 %
50 %
50 %
Orsted Burbo (UK) Limited, London, the UK
Orsted Burbo Extension Holding Ltd, London, the UK
Orsted Gode Wind 1 Holding GmbH, Hamburg, Germany
Orsted Gode Wind 2 GmbH, Hamburg, Germany
100 %
Orsted Greater Changhua SE Holdings Ltd., Changhua County, Taiwan
40 %
50 %
50 %
25 %
25 %
25 %
Orsted Gunfleet Sands Demo (UK), Ltd, London, the UK
Orsted HKN Holding B.V., ’s-Gravenhage, the Netherlands
Orsted Hornsea 1 Holdings Limited, London, the UK
Orsted Hornsea Project Four Limited, London, the UK
Orsted Hornsea Project Three (UK) Limited, London, the UK
Orsted InvestCo Limited, Taipei City, Taiwan
100 %
Orsted Isle of Man (UK) Limited, Isle of Man
50 %
50 %
50 %
50 %
Orsted Japan K.K., Tokyo, Japan
Orsted Korea Limited, Seoul, South Korea
Orsted Lincs (UK) Ltd., London, the UK
Orsted London Array II Limited, London, the UK
100 %
Orsted London Array Limited, London, the UK
86 %
Orsted North America Inc., Delaware, the US
100 %
Orsted Ocean Wind HoldCo, LLC, Delaware, the US
100 %
Orsted Pipeline HoldCo G.K., Tokyo, Japan
100 %
Orsted Pipeline ProjectCo K.K., Tokyo, Japan
100 %
Orsted Polska OF Services sp. z o.o., Warzaw, Poland
100 %
Orsted Power (Gunfleet Sands) Ltd, London, the UK
100 %
Orsted Power (Participation) Ltd, London, the UK
100 %
Orsted Power (UK) Limited, London, the UK
100 %
Orsted Race Bank (Holding) Limited, London, the UK
100 %
Orsted Shell Flats (UK) Limited, London, the UK
100 %
Orsted Singapore Pte. Ltd., Singapore, Republic of Singapore
100 %
Orsted Speicher R GmbH, Hamburg, Germany
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 %
163 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 8. Other notes
Notes
Contents
Segment/company/registered office
Orsted Taiwan Ltd., Taipei City, Taiwan
Orsted UK III Limited, London, the UK
Orsted US East Coast Offshore Wind Holdco, LLC, Delaware, the US
Orsted Walney Extension Holdings Limited, London, the UK
Orsted West of Duddon Sands (UK) Limited, London, the UK
Orsted Westermost Rough Limited, London, the UK
Orsted Wind Power Germany GmbH, Hamburg, Germany
Orsted Wind Power Netherlands B.V., ’s-Gravenhage, the Netherlands
Orsted Wind Power Netherlands Holding B.V., ’s-Gravenhage, the Netherlands
Orsted Wind Power North America LLC, Delaware, the US
Preparatory Office of Greater Changhua Offshore Wind Farm NE Ltd.,
Changhua County, Taiwan
Preparatory Office of Wo Neng 1 Offshore Wind Farm Ltd.
Preparatory Office of Wo Neng 2 Offshore Wind Farm Ltd.
Preparatory Office of Wo Neng 3 Offshore Wind Farm Ltd.
Preparatory Office of Wo Neng 4 Offshore Wind Farm Ltd.
Preparatory Office of Xu Feng 1 Offshore Wind Farm Ltd.
Preparatory Office of Xu Feng 2 Offshore Wind Farm Ltd.
Preparatory Office of Xu Feng 3 Offshore Wind Farm Ltd.
Preparatory Office of Xu Feng 4 Offshore Wind Farm Ltd.
Race Bank Wind Farm (Holding) Limited2, London, the UK
Race Bank Wind Farm Limited2, London, the UK
Revolution Wind, LLC2, Delaware, the US
Rhiannon Wind Farm Limited2, Windsor, the UK
Scarweather Sands Limited, Coventry, the UK
Scranford Investments sp. z o.o., soon Orsted Polska OF SPV 5 sp. z o.o, Delaware, the US
Skipjack Offshore Energy, LLC, Delaware, the US
Skåne Offshore Windfarm AB
SMart Wind Limited, London, the UK
SMRT Line, LLC2, Delaware, the US
Sonningmay Wind Limited, London, the UK
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
JO
JO
JO
JV
JV
S
S
S
S
JO
S
100 %
Soundmark Wind Limited, London, the UK
100 %
South Fork Wind, LLC2, Delaware, the US
100 %
Sunrise Wind, LLC2, Delaware, the US
100 %
Tasalot Investments sp. z o.o., soon Orsted Polska OF SPV 6 sp. z o.o., Warzaw, Poland
100 %
UMBO GmbH, Hamburg, Germany
100 %
Valmarindo Investments sp. z o.o., soon Orsted Polska OF SPV 7 sp. z o.o., Warzaw, Poland
100 %
Varinas B.V., ’s-Gravenhage, the Netherlands
100 %
VI Aura Transmission Limited, London, the UK
100 %
Walney (UK) Offshore Windfarms Limited, London, the UK
100 %
Walney Extension Holdings Limited, London, the UK
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
50 %
50 %
50 %
50 %
50 %
100 %
100 %
100 %
100 %
50 %
100 %
Walney Extension Limited2 , London, the UK
West of Duddon Sands6 , London, the UK
Westermost Rough (Holding) Limited, London, the UK
Westermost Rough Limited2 , London, the UK
Zadivo Investments sp. z o.o., soon Orsted Polska OF SPV 8 sp. z o.o., Warzaw, Poland
Zephyrus B.V., ’s-Gravenhage, the Netherlands
Ørsted - Anholt Offshore A/S, Fredericia, Denmark
Ørsted Horns Rev I A/S, Fredericia, Denmark
Ørsted Horns Rev 2 A/S, Fredericia, Denmark
Ørsted Hydrogen Green Fuels DK A/S, Fredericia, Denmark
Ørsted Japan Holding 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 Denmark A/S, Fredericia, Denmark
Ørsted Wind Power Holding A/S, Fredericia, Denmark
Onshore
2W Permian Solar, LLC, Delaware, the US
2W Permian Class B Member, LLC, Delaware, the US
2W Permian Holdco, LLC, Delaware, the US
S
JO
JO
S
JV
S
S
S
S
JO
JO
JO
JO
JO
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
100 %
50 %
50 %
100 %
90 %
100 %
100 %
100 %
50 %
50 %
50 %
50 %
50 %
50 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
164 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 8. Other notes
Notes
Contents
Segment/company/registered office
Antelope Flats Wind, LLC, Delaware, the US
Armadillo Solar Center, LLC, Delaware, the US
Badger Wind, LLC, Delaware, the US
Barranca Wind Energy, LLC, Delaware, the US
Barranca Wind Energy II, LLC, Delaware, the US
Bauer Solar, LLC, Delaware, the US
Bedford Solar Center, LLC, Virginia, the US
Bowen Solar Center, LLC, Mississippi, the US
Cabin Point Solar Center, LLC, Virginia, the US
Camino Solar Center, LLC, New Mexico, the US
Canutillo Energy Center, LLC, Texas, the US
Casper Solar Center, LLC, Virginia, the US
Coolidge Solar Center, LLC, Arizona, the US
Dermott Wind Class B Holdco, LLC, Delaware, the US
Dermott Wind Class B Member, LLC, Delaware, the US
Dermott Wind, LLC5, Delaware, the US
Dunbar Solar, LLC, Delaware, the US
Emerick Wind, LLC, Delaware, the US
Eastern Trail Solar Center, LLC, Delaware, the US
Firefly Solar Center, LLC, Delaware, the US
Frog Solar Center, LLC, Virginia, the US
Garland Wind, LLC, Delaware, the US
Geranium Solar, LLC, Delaware, the US
Goose Solar Center, LLC, Texas, the US
Happy Hollow Solar Center, LLC, Georgia, the US
Haystack Owner, LLC, Delaware, the US
Haystack Wind Project, LLC, Delaware, the US
Helena Wind, LLC, Delaware, the US
Helena Wind Holdco, LLC, Delaware, the US
Holland Solar, LLC, Delaware, the US
Holloman Solar Center, LLC, North Carolina, the US
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
100 %
Jones Solar Center, LLC, Florida, the US
100 %
Live Oak Solar Center, LLC, Florida, the US
100 %
Lockett Windfarm Class B Member, LLC, Delaware, the US
100 %
Lockett Windfarm Project Holdings, LLC5, Delaware, the US
100 %
Lockett Windfarm LLC, Delaware, the US
100 %
Lux Solar Center, LLC, Nevada, the US
100 %
Madden Solar Center, LLC, Georgia, the US
100 %
Mastodon Solar Center, LLC, Delaware, the US
100 %
McAlpin Solar Center, LLC, Florida, the US
100 %
Michaux Solar Center, LLC, Virginia, the US
100 %
Mineola Wind, LLC, Delaware, the US
100 %
Mockingbird Solar Center, LLC, Delaware, the US
100 %
Muscle Shoals Land Holdings, LLC, Delaware, the US
100 %
Muscle Shoals Solar Class B Member, LLC, Delaware, the US
100 %
Muscle Shoals Solar Class B Parent, LLC, Delaware, the US
100 %
Muscle Shoals Solar Seller, LLC, Delaware, the US
100 %
Muscle Shoals Solar TE Partners, LLC, Delaware, the US
100 %
Muscle Shoals Solar, LLC, Delaware, the US
100 %
Napoleon Wind, LLC, Delaware, the US
100 %
Newlands Solar, LLC, Delaware, the US
100 %
NJ Oak Solar Finco, LLC, Delaware, the US
100 %
NJ Oak Solar Holdco, LLC, Delaware, the US
100 %
Old 300 Solar Center, LLC, Delaware, the US
100 %
OONA-SP Haystack Holdings, LLC, Delaware, the US
100 %
Orchard Solar Center, LLC, Delaware, the US
100 %
Orsted Energy Storage & Solar N.A. LLC, Delaware, the US
100 %
Orsted Helena Member, LLC, Delaware, the US
100 %
Orsted Onshore Asset Management Services, LLC, Delaware, the US
100 %
Orsted Onshore Dermott Holdings, Inc., Delaware, the US
100 %
Orsted Onshore DevCo, LLC, Delaware, the US
100 %
Orsted Onshore Development North America, LLC, Delaware, the US
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 %
165 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 8. Other notes
Notes
Contents
Type1
Ownership
interest
Segment/company/registered office
Type1
Ownership
interest
Segment/company/registered office
Orsted Onshore Equipment Company, LLC, Delaware, the US
Orsted Onshore Equipment Holdings, Inc., Delaware, the US
Orsted Onshore Equity Holdings, Inc., Delaware, the US
Orsted Onshore North America, LLC, Delaware, the US
Orsted Onshore North America Power, LLC, Delaware, the US
Orsted Onshore Real Estate Holdings, LLC, Delaware, the US
Orsted Onshore WS Holdings, Inc, Delaware, the US
Orsted Onshore Services, LLC, Delaware, the US
Orsted Renewables N.A. LLC, Delaware, the US
Palacios Wind, LLC, Delaware, the US
Piccadilly Solar Energy Center, LLC, Colorado, the US
Placid Solar, LLC, Delaware, the US
Placid Solar II, LLC, Delaware, the US
Plum Creek Wind, LLC5, Delaware, the US
Plum Creek and Willow Creek Class B Member, LLC, Delaware, the US
Plum Creek and Willow Creek Project Holdings, LLC, Delaware, the US
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
100 %
Tahoka Wind Project Holdings, LLC5, Delaware, the US
100 %
Tahoka Wind, LLC, Delaware, the US
100 %
Thalia Wind, LLC, Delaware, the US
100 %
Tovey Wind, LLC, Delaware, the US
100 %
Waukeenah Solar Center, LLC, Florida, the US
100 %
Webb East Solar Center, LLC, Virginia, the US
100 %
Western Trail Wind, LLC, Delaware, the US
100 %
Westwing Storage Center, LLC, Delaware, the US
100 %
Willow Creek Wind Power, LLC5, Delaware, the US
100 %
Willow Springs Class B Holdco, LLC, Delaware, the US
100 %
Willow Springs Class B Member, LLC, Delaware, the US
100 %
Willow Springs Project Holdings, LLC5, Delaware, the US
100 %
Willow Springs Windfarm, LLC, Delaware, the US
100 %
Wilson Battery Storage LLC, Delaware, the US
100 %
Ørsted Onshore A/S, Fredericia, Denmark
100 %
Ørsted Onshore Holding A/S4, Fredericia, Denmark
Pyramid Lake Solar Center, LLC, Delaware, the US
S
100 %
Markets & Bioenergy
Sage Draw Wind Class B Member, LLC, Delaware, the US
Sage Draw Wind, LLC5, Delaware, the US
Sage Draw Wind Project Holdings, LLC, Delaware, the US
SP Energy 1, LLC, Delaware, the US
SP Energy DM, LLC, Delaware, the US
SP Energy ET, LLC, Delaware, the US
SP Energy GL, LLC, Delaware, the US
SP Energy PV, LLC, Delaware, the US
SP Energy TL, LLC, Delaware, the US
Sparta Solar, LLC, Delaware, the US
Staked Plains Energy, LLC, Delaware, the US
Sundown Wind, LLC, Delaware, the US
Tahoka Wind Class B Holdco, LLC, Delaware, the US
Tahoka Wind Class B Member, LLC, Delaware, the US
S
S
S
S
S
S
S
S
S
S
S
S
S
S
100 %
Danish Offshore Gas Systems A/S, Fredericia, Denmark
100 %
Danish Oil Pipe A/S4, Fredericia, Denmark
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 %
Orsted AB, Malmö, Sweden
100 %
Orsted Customer Solutions Holding LLC, Delaware, the US
100 %
Orsted Energy Solutions (UK) Limited, London, the UK
100 %
Orsted ESS Mersey Limited, London, the UK
100 %
Orsted Holding Ludwigsau I GmbH, Hamburg, Germany
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
JV
A
A
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 %
50 %
33 %
33 %
100 %
100 %
70 %
100 %
100 %
100 %
100 %
100 %
166 / 193
Ørsted Annual report 2020
Financial statements
Consolidated financial statements – 8. Other notes
Notes
Contents
Type1
Ownership
interest
Segment/company/registered office
Type1
Ownership
interest
Segment/company/registered office
Orsted Infrastructure GmbH4, Hamburg, Germany
Orsted Kraftwerke Holding GmbH, Hamburg, Germany
Orsted Leitung E GmbH, Hamburg, Germany
Orsted Markets GmbH, Hamburg, Germany
Orsted Netherlands B.V., ’s-Gravenhage, the Netherlands
Orsted Power Sales (UK) Limited, London, the UK
Orsted Renescience Northwich Limited, London, the UK
Orsted Renescience Northwich O&M Limited, London, the UK
Orsted S&D (UK) Limited, London, the UK
Orsted Sales (UK) Limited, London, the UK
Orsted Sales GmbH, Hamburg, Germany
Orsted SP (UK) Limited, London, the UK
Orsted SP Holding (UK) Limited, London, the UK
Orsted Speicher E GmbH, Hamburg, Germany
Orsted US Trading LLC, Delaware, the US
Pyroneer A/S, Fredericia, Denmark
Renescience A/S, Fredericia, Denmark
Severn Power Funding Limited, London, the UK
Stigsnæs Vandindvinding I/S, Skælskør, Denmark
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
100 %
Other
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
EM El Holding A/S, Fredericia, Denmark
EnergiGruppen Jylland El A/S, Fredericia, Denmark
EnergiGruppen Jylland El Holding A/S, Fredericia, Denmark
Orsted (UK) Limited, London, the UK
Orsted Holdings N.A. Inc, Delaware, the US
Orsted Services Malaysia Sdn. Bhd., Kuala Lumpur, Malaysia
Orsted Venture N.A. LLC, Delaware, the US
Orsted Polska Sp. z o. o., Warsaw, Poland
Pict Offshore Limited, Inverkeithing, the 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/S4 , Fredericia, Denmark
Ørsted North America Holding A/S, Fredericia, Denmark
Ørsted Nr. 1 2014 A/S3,4 , Fredericia, Denmark
Ørsted Nr. 1 2020 A/S4 , Fredericia, Denmark
Ørsted Real Estate A/S4, Fredericia, Denmark
NC
64 %
Ørsted Services A/S4, Fredericia, Denmark
Vejen Kraftvarmeværk A/S in voluntary liquidation, Fredericia, Denmark
Ørsted Bioenergy & Thermal Power A/S4 , Fredericia, Denmark
Ørsted Commercial Commodities A/S, Fredericia, Denmark
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 Salg & Service A/S4, Fredericia, Denmark
S
S
S
S
S
S
S
100 %
100 %
100 %
100 %
100 %
100 %
100 %
Ørsted Ventures Europe A/S4, Fredericia, Denmark
Ørsted Wind Power TW Holding A/S, Fredericia, Denmark
1
2
S = subsidiary
A = associate
JO = joint operation
JV = joint venture
NC = non-consolidated entity
The company is owned through a
company which is not owned 100 %
by Ørsted. The disclosed ownership
interest is Ørsted’s ultimate ownership
interest in the company.
3
4
5
6
The company applies the provision in
section 5 or section 6 of the Danish
Financial Statements Act to omit
presenting a separate annual report.
Subsidiaries owned directly by Ørsted A/S.
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.
Unincorporated activity which is owned
jointly with partners.
S
S
S
S
S
S
S
S
A
S
S
S
S
S
S
S
S
S
S
S
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
22 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
167 / 193
Ørsted Annual report 2020
Contents
Consolidated
ESG statements
(additional information)
169 Basis of reporting
170 Environment
172 Social and governance
Surrounded by centuries of history,
our office in Warsaw is brand new.
Ørsted colleagues here play a vital role
in business services and in developing
and maintaining the digital systems
that keep our wind farms, trading
activities, construction projects,
and financial services up and running
around the world.
Ørsted Annual report 2020
Financial statements
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 2020’. 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 irrespective of our ownership
share, we 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 or excluded from the date of
acquisition or divestment.
In December 2020, we closed the divestment
of the liquefied natural gas (LNG) business.
Danish Financial Statements Act,
sections 99 a, 99 b, and 107 d
Pursuant to section 99 a of the Danish
Financial Statements Act (Årsregnskabsloven),
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 sustainability report
(orsted.com/sustainability2020), Ørsted
complies with section 99 a of the Danish
Financial Statements Act.
Ørsted’s work for increased gender diversity at
management level is reported in accordance
with section 99 b of the Danish Financial State-
ments Act in our ESG performance report 2020
(orsted.com/ESGperformance2020).
Discontinued ESG indicators in 2020
– Power distribution.
Discontinued ESG indicators in 2020
which can still be found in the full
ESG performance report 2020
– LTIF (lost-time injury frequency).
– People powered.
– Jobs created.
– Nationality diversity of the Board of
Directors and the Executive Committee.
Scope 3 target: update of the 2018 base
year emissions
We have updated our 2018 base year for
scope 3 emissions in accordance with our
policy for baseline adjustments for scope 3,
due to our divestment of the LNG business
in 2020.
Reporting of diversity in accordance with sec-
tion 107 d of the Danish Financial Statements
Act can be seen in our sustainability report
(orsted.com/sustainability2020).
Ørsted
ESG performance
report 2020
Business changes in 2020 affecting
ESG data
In August 2020, we closed the divestment
of the Danish power distribution, residential
customer, and city light businesses.
Our full ESG data set can be seen in the
ESG performance report 2020
(orsted.com/ESGperformance2020).
11.3 GW
Our installed renewable capacity increased
by 14 % from 2019 to 2020. We have a target of
+30 GW installed renewable capacity in 2030.
90 %
The green share of our heat and power
generation increased from 86 % in 2019 to 90 %
in 2020. We have a target of 99 % in 2025.
58 g CO2e/
kWh
Our greenhouse gas intensity was reduced by
11 % to 58 g CO2e/kWh in 2020. Our target is to
reach 10 g CO2e/kWh in 2025.
100 %
We reached our target for sourced certified sustainable
wooden biomass as the share of certified sustainable
biomass is now 100 %.
169 / 193
Ørsted Annual report 2020
Financial statements
Consolidated ESG statements (additional information)
Contents
Environment
Strategic
target
Business
driver
Indicator
Green energy share
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), location-based
Thousand tonnes CO2e
Indirect GHG emissions (scope 2), market-based
Thousand tonnes CO2e
Indirect GHG emissions (scope 3)
– Category 2: Capital goods3
– Category 3: Fuel- and energy-related activities4
– Category 11: Use of sold products5
– Other6
Scope 3 GHG reduction from adjusted base year 20187
Installed renewable capacity
– Offshore wind power
– Onshore wind power
– Onshore solar PV power
– Biogas, power
– Thermal heat, biomass
Decided (FID) renewable capacity (not installed yet)
– Offshore wind power
– Onshore wind power
– Onshore solar PV power
Awarded and contracted renewable capacity
(no FID yet)
– Offshore wind power
Sum of installed and FID renewable capacity
Sum of installed, FID, and awarded/contracted
renewable capacity
Installed storage capacity
Thousand tonnes CO2e
Thousand tonnes CO2e
Thousand tonnes CO2e
Thousand tonnes CO2e
Thousand tonnes CO2e
%
MW
MW
MW
MW
MW
MW
MW
MW
MW
MW
MW
MW
MW
MW
MWac
Target
2020
2019
99 (2025) 1
10 (2025) 2
50 % (2032)
+30 GW (2030)
15 GW (2025)
5 GW (2025)8
90
58
1,851
111
2
25,333
657
2,437
21,980
259
13
11,297
7,572
1,658
10
3
2,054
4,028
2,286
665
1,077
4,996
4,996
15,325
86
65
1,846
123
4
34,604
740
3,217
30,377
270
-
9,870
6,820
987
10
-
2,053
4,129
3,038
671
420
4,996
4,996
13,999
20,321
18,995
21
21
The green (renewable) share of our heat and power
generation amounted to 90 % in 2020, up 4 percent-
age points relative to 2019. The increase was primarily
due to higher generation from wind farms. Our target
is 99 % green energy generation in 2025.
Our greenhouse gas intensity was reduced by 11 % 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 10 g CO2e/kWh in 2025. We will continue
to investigate solutions for the remaining emissions,
which could include investing in certified carbon-
removal projects.
We have updated our 2018 base year scope 3
emissions in accordance with our policy for baseline
adjustments for scope 3. We divested the LNG busi-
ness in 2020. The LNG bussiness accounted for 20 %
of the 2018 base year scope 3 emissions. Therefore,
we have reduced the scope 3 base year emissions
and target emissions in 2032 by 20 %.
Our scope 3 greenhouse gas emissions were reduced
by 27 % from 2019 to 2020. The main driver for
this reduction was the 28 % decrease in gas sales
( category 11). Our second-largest source of scope 3
emissions (category 3) was reduced by 24 % from
2019 to 2020, primarily due to reduced sale of regular
power to end-customers. Our third-largest source of
scope 3 emissions (category 2) includes greenhouse
gas emissions from the supply chain and the instal-
lation of new assets, such as the offshore wind farm
Borssele 1 & 2 and the three onshore wind farms Sage
Draw, Plum Creek, and Willow Creek.
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: regular power sales.
5 Primary source of emission: natural gas sales.
6
7
Remaining categories of the 15 defined scope 3 GHG categories according
to the Greenhouse Gas Protocol.
We have adjusted the 2018 base year emissions after the divestement of the
LNG business which accounted for 20 % in 2018.
8 The 5 GW target (2025) is for onshore wind and solar PV combined.
The installed renewable capacity increased by 14 %
in 2020 due to the commisioning of the offshore wind
farm Borssele 1 & 2 (752 MW) and the onshore wind
farms Sage Draw (338 MW), Plum Creek (230 MW),
and Willow Creek (184 MW).
170 / 193
Ørsted Annual report 2020
Financial statements
Consolidated ESG statements (additional information)
Contents
Unit
GWh
GWh
GWh
GWh
GWh
GWh
GWh
MW
m/s
m/s
%
%
MW
m/s
m/s
%
%
MW
MW
Strategic
target
Business
driver
Indicator
Generation, heat and power total
Power generation
– Offshore wind
– Onshore wind
– Solar PV
– Thermal
Heat generation, thermal
Offshore wind
Generation capacity
Wind speed
Wind speed, normal wind year
Load factor
Availability
Onshore wind
Generation capacity
Wind speed
Wind speed, normal wind year
Load factor
Availability
Thermal heat and power generation
Power generation capacity
Heat generation capacity
Degree days, Denmark
Coal share of fuels
Certified sustainable wooden biomass sourced
Green share of generation, Markets & Bioenergy
Avoided carbon emissions
– From offshore wind generation
– From onshore wind generation
– From biomass-converted generation
Sales
Gas sales
Power sales
0 (2023)
100 % (2020)
Number
%
%
%
Million tonnes CO2e
Million tonnes CO2e
Million tonnes CO2e
Million tonnes CO2e
TWh
TWh
Target
2020
32,095
25,424
15,248
5,731
7
4,438
6,671
2019
28,430
20,118
11,965
3,498
15
4,640
8,312
4,379
3,627
9.7
9.3
45
94
1,658
7.6
7.5
45
96
2,847
3,487
2,432
29
100
71
13.1
8.1
3.5
1.5
90.3
29.2
9.2
9.2
42
93
987
7.3
7.5
45
98
2,865
3,560
2,399
24
96
68
11.3
7.6
2.3
1.4
125.0
27.6
The increase in offshore wind capacity contributed
to a 27 % increase in offshore wind-based generation
in 2020. The increase was primarily due to full-year
generation from Hornsea 1 (commissioned in Q4
2019), generation from Borssele 1 & 2 (commisioned in
Q4 2020), and higher wind speeds.
Onshore wind-based generation increased by 64 % in
2020 relative to 2019. The increase was primarily due
to additional generation from Lockett (commissioned
in Q3 2019), Sage Draw (commissioned in Q1 2020),
Plum Creek (commissioned in Q2 2020), and Willow
Creek (commissioned in Q3 2020).
Thermal power generation was 4 % lower in 2020
compared with 2019 due to lower combined heat
and power generation, partly offset by increased
power generation due to ancillary services.
Thermal heat generation decreased by 20 %,
primarily due to the warm weather in Q1 2020,
leading to a lower demand for heat, which was
partly offset by colder weather and higher heat
generation in H2 2020.
The coal share of fuels in our thermal heat and
power generation increased by 5 percentage points
due to generation at Esbjerg and Studstrup power
stations, associated with additional ancillary services.
The green share of energy in Markets & Bioenergy
increased by 3 percentage points in 2020, primarily
due to the bioconversion of Asnæs Power Station in
late 2019.
We reached our target 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 16 % from 2019 to 2020. In 2020, our renewable
energy generation avoided the emission of 13.1 million
tonnes carbon dioxide.
171 / 193
Ørsted Annual report 2020
Financial statements
Consolidated ESG statements (additional information)
Contents
Social and governance
Strategic
target
Business
driver
Indicator
Unit
Target
2020
2019
Employees
Total number of employees at 31 December
Average number of employees for the year
Employee satisfaction
Safety
TRIR (total recordable injury rate)
Fatalities
Board of Directors, Ørsted A/S
Independent board members
Gender diversity
Members, female
Members, male
Gender with lowest representation
Executive Committee
Gender diversity
Members, female
Members, male
Gender with lowest representation
Whistle-blower cases
Substantiated whistle-blower cases
– Cases transferred to the police
Number of FTEs
Number of FTEs
Scale 0-100
Top 10 % (2020)1
Per million working hours
2.9 (2025)
Number
%
Number
Number
%
Number
Number
%
Number
Number
1 Our target from 2020 and onward is an employee satisfaction survey result in the top 10 % compared with an external benchmark group.
6,179
6,429
78
3.6
0
100
2
4
33
2
5
29
4
1
6,526
6,329
77
4.9
1
100
2
4
33
2
5
29
3
0
The number of employees decreased by 5 % from
2019 to 2020, primarily due to the divestments of
the Danish power distribution, residential customer,
and city light businesses, partly offset by growth in
existing and new markets.
Employee satisfaction continued to be high. With
a satisfaction and motivation score of 78 in 2020,
our target of being in the top 10 % compared to our
external benchmark group was met.
Our total recordable injury rate (TRIR) decreased
from 4.9 in 2019 to 3.6 in 2020. We registered
77 total recordable injuries (TRIs), of which 58
involved employees working for our suppliers.
We continue to have a strong focus on safety.
Our target is a TRIR of 2.9 or below in 2025.
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 manage-
ment system. In 2020, four substantiated cases of
inappropriate or unlawful behaviour were reported
through our whistle-blower scheme. A total of three
cases concerned violation of our good business
conduct policy, and one case concerned violation
of administrative procedures. The four cases had
consequences for the individuals involved. None of
the reported cases were critical to our business or
impacted our financial results.
172 / 193
Ørsted Annual report 2020
Financial 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 PV-based generation is computed as
the input from the individual plant (wind and solar
PV), as there is only one source of power for each
plant. For combined heat and power (CHP) plants,
the share of the specific fuel (e.g. biomass) is calculated
relative to the total fuel consumption for a given
plant or 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.
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 con-
sidered renewable energy: wind, solar PV, biomass,
biogas, and power sourced with green certificates.
The following energy sources are considered fossil
energy sources: coal, natural gas, and oil.
Greenhouse gas (GHG) 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.
Scopes 1 and 2 greenhouse gas emissions
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 primarily calculated as
the power volumes purchased multiplied by
country-specific emission factors. Location-based
emissions are calculated based on average emission
factors for each country, whereas market-based
emissions take account for green power purchased
and assume the regular power is delivered as residu-
al power where the green part has been taken out.
Scope 3 greenhouse gas emissions
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 from the month where the wind farm has
achieved commercial operation date (COD).
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 sales (with certificates) and regular sales
(without certificates).
– business travel, calculated based on mileage allow-
ances for employee travel in own car. GHG emissions
from plane travel is provided by our travel agent
– employee commuting, calculated based on
estimates for distance travelled and travel type
(e.g. car and train)
– downstream transportation and distribution, calcu-
lated based on actual volumes of residual products
generated from our CHP plants multiplied by
relevant GHG emission factors for transportation.
Installed, decided (FID), and awarded or contracted
renewable energy capacity
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 or offtake are secured.
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, and biogas which have specific upstream and
downstream emission factors.
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.
‘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
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
measured as net output sold to heat customers.
Heat and power generation capacity
Power generation capacity from offshore wind farms
is included from the time when the individual wind
turbine has passed a 240-hour test. For onshore wind
and solar PV farms, the whole farm is included after
COD. The Gunfleet Sands and Walney 1 and 2 off-
shore wind farms have been consolidated according
to ownership interest. Other wind farms, solar farms,
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.
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. Total
availability is determined by weighting the individual
wind farm’s availability against the capacity of the
wind farm.
Load factor
The load factor is calculated as the ratio between
actual generation over a period relative to potential
generation, which is possible by continuously exploit-
ing 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
transmission 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. New wind turbines are included in the calcula-
tion of availability and load factor once they have
passed a 240-hour test for offshore wind turbines and
commercial operation date (COD) for onshore wind
turbines.
Wind speed
Wind speeds for the areas where Ørsted’s offshore
and onshore 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 wind farms and consolidated to an
Ørsted total for offshore and onshore, respectively.
‘Normal wind speed’ is a 20-year historical wind
speed average.
173 / 193
Ørsted Annual report 2020
Financial statements
Consolidated ESG statements (additional information)
Contents
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 statements.
Cases transferred to the police
Cases transferred to the police are defined as the
number of cases reported in accordance with the
above which have been transferred to the police.
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 (GJ) relative to the total fuel volume in
gigajoule.
Certified sustainable wooden biomass sourced
Certified biomass is defined as wooden biomass, i.e.
wood pellets and wood chips. Biomass is measured
as sourced wooden biomass delivered to individual
combined heat and power plants within the report-
ing 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.
Green share of generation, Markets & Bioenergy
This is calculated as the green share of heat and
power generation, but is only shown for the business
unit Markets & Bioenergy.
Avoided carbon emissions
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 from fossil fuels to biomass is calculated on
the basis of the energy content of the fuel used
at CHP plants. It is assumed that the use of 1 GJ of
biomass fuel avoids the use of 1 GJ of fossil fuels. The
upstream emissions (from production, manufacture,
and transport of biomass) are included.
Sales
Sales of power and gas are calculated as physical
sales to retail customers, wholesale customers, and
exchanges. Sales are based on readings from Ørsted’s
trading systems. Internal sales to Bioenergy are not
included in the statement.
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.
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 total recordable injury rate (TRIR) is calculated
as the number of total recordable 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.
Fatalities are the number of employees who lost
their lives as a result of a work-related incident.
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.
Executive Committee
The Executive Committee consists of the Executive
Board (our CEO and CFO) and five additional mem-
bers who undertake the day-to-day management of
Ørsted.
Substantiated whistle-blower cases
Ørsted’s whistle-blower hotline is available for
internal and external reporting of suspected cases
of inappropriate or illegal behaviour. Whistle-blower
cases are received and handled by the Internal Audit
function which also receives similar reports through
the management system and from compliance
officers.
In the survey, a number of questions are asked.
The answers are given on a scale from 1 to 10 and
are subsequently converted to index figures on a
scale from 0 to 100.
All reports are managed in accordance with the
guidelines for the handling of whistle-blower reports
approved by the Audit & Risk Committee, which is
ultimately responsible for the whistle-blower scheme.
174 / 193
Ørsted Annual report 2020
Contents
Parent company
financial
statements
176
Income statement
176 Balance sheet
177 Statement of changes in equity
178 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
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. The Changhua offshore
wind farms are expected to create
over 12,000 direct and indirect jobs.
Ørsted Annual report 2020
Financial statements
Parent company financial statements
Contents
Income statement
Balance sheet
1 January - 31 December
31 December
6
7
8
4
Note Income statement, DKKm
Revenue
2
Employee costs
External expenses
2020
359
(35)
(315)
173
(36)
(168)
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
9
(31)
(117)
(108)
9,110
(146)
(177)
(94)
21,690
18,743
(12,125)
(14,533)
18,567
611
19,178
3,939
(376)
3,563
2019
Note Assets, DKKm
2020
2019
Note Equity and liabilities, DKKm
Land and buildings
Property, plant, and equipment
894
894
1,352
1,352
Share capital
Reserves
Investments in subsidiaries
28,778
36,850
Retained earnings
38,152
24,350
Receivables from subsidiaries
80,893
91,839
Proposed dividends
4,834
4,414
Deferred tax
Financial assets
-
126
109,671
128,815
Equity attributable to
shareholders in Ørsted A/S
2020
4,204
43
2019
4,204
(81)
47,233
32,887
13,232
13,232
60,465
46,119
119
729
806
-
601
1,272
Non-current assets
110,565
130,167
Receivables from subsidiaries
29,950
20,771
9
Derivatives
Other receivables
Income tax
Receivables
10
Securities
Cash
Current assets
Assets
4,065
228
254
4,260
2,642
-
34,497
27,673
24,424
15,795
1,219
947
25,643
44,415
170,705
174,582
11
Hybrid capital
Equity
Deferred tax
Other provisions
Lease liabilities
4
12
11
11
Bond and bank debt
28,579
31,808
Non-current liabilities
30,233
33,681
12
Other provisions
Lease liabilities
Bond and bank debt
9
Derivatives
Trade payables
133
120
2,956
3,214
55
82
115
1,593
5,119
33
Payables to subsidiaries
70,615
85,695
Other payables
Income tax
2,914
-
1,084
1,061
Current liabilities
80,007
94,782
Liabilities
110,240
128,463
Equity and liabilities
170,705
174,582
176 / 193
Ørsted Annual report 2020
Financial 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 2020
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
Changes in equity in 2020
Equity at 31 December 2020
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
Share capital
4,204
Hedging
reserve
(81)
Retained
earnings
Proposed
dividends
Shareholders in
Ørsted A/S
Hybrid capital
-
-
-
-
-
-
-
-
-
4,204
4,204
-
-
-
-
-
-
-
-
-
-
-
-
-
4,204
-
-
-
-
72
89
(37)
-
124
43
(296)
-
-
-
-
185
90
(60)
-
-
-
-
-
24,350
18,690
4
(4,834)
(58)
-
-
-
-
13,802
38,152
25,968
2,888
3
(4,414)
(99)
-
-
-
-
-
4
-
-
4,414
-
(4,414)
4,834
-
-
-
-
-
420
4,834
4,099
-
(4,099)
4,414
-
-
-
-
-
-
-
-
-
32,887
18,690
(4,410)
-
(58)
72
89
(37)
-
14,346
47,233
33,975
2,888
(4,096)
-
(99)
185
90
(60)
-
-
4
-
-
215
(81)
(1,618)
24,350
315
4,414
(1,088)
32,887
13,232
488
-
-
-
-
-
-
(488)
-
13,232
13,239
675
-
-
-
-
-
-
(556)
34
-
4,416
(4,576)
(7)
13,232
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.
Total
46,119
19,178
(4,410)
-
(58)
72
89
(37)
(488)
14,346
60,465
47,214
3,563
(4,096)
-
(99)
185
90
(60)
(556)
34
4
4,416
(4,576)
(1,095)
46,119
177 / 193
Ørsted Annual report 2020
Financial statements
Parent company financial statements
Contents
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 2020 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 81.
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.
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 (‘Årsregnskabsloven’) (reporting class D).
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.
The Danish Financial Statements Act allows us
to use certain IFRS standards to interpret the
act. Previously, we have therefore implemented
IFRS 15 ‘Revenue’ and IFRS 16 ‘Leases’.
The accounting policies remain unchanged
from the previous year.
Unless otherwise stated, the financial
statements are presented in Danish kroner
(DKK) rounded to the nearest million.
The parent company accounting policies
are consistent with the accounting policies
described for the consolidated financial
statements, with the following exceptions.
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.
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 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
Formosa 1, off the
coast of Miaoli County,
Taiwan.
178 / 193
Ørsted Annual report 2020
Financial statements
Parent company financial statements
Contents
2. Employee costs
3. Financial income
and expenses
Employee costs, DKKm
Wages and salaries
Share-based payment
Pensions and social costs
Remuneration
Total employee costs
Salaries and remuneration of the Executive Board, DKK ’000
Fixed salary
Cash-based incentive scheme
Share-based payment
Pension, incl. social security and benefits
Total
2020
29
-
1
5
35
2020
17,230
4,831
(519)
469
2019
Financial income and expenses, DKKm
27
Interest income from cash, etc.
4
-
5
36
Interest income from subsidiaries
Interest income from securities at market value
Capital gains on securities at market value
Foreign exchange gains
Value adjustments of derivatives
Dividends received
2019
Other financial income
16,810
Total financial income
4,561
4,046
564
Interest expenses relating to loans and borrowings
Interest expenses, leases
Interest expenses to subsidiaries
22,011
25,981
Impairment of investments in subsidiaries
Capital losses on securities at market value
Notes 2.7 ‘Employee costs’ and 2.8 ‘Share-
based payment’ to the consoli dated financial
statements describe the remuneration of the
Executive Board and the Board of Directors as
well as the 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 2020 (2019: six employees).
Remuneration of the Board of Directors totals
DKK 4 million (2019: DKK 4 million).
Foreign exchange losses
Value adjustments of derivatives
Other financial expenses
Total financial expenses
Net financial income and expenses
2020
22
2,282
132
-
2,009
5,890
11,332
23
21,690
(1,641)
(27)
(28)
-
(11)
(5,587)
(4,795)
(36)
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)
(12,125)
(14,533)
9,565
4,210
179 / 193
Ørsted Annual report 2020
Financial 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
2020
611
(44)
567
747
(239)
109
(6)
611
2020
(126)
239
6
119
2020
119
-
119
2019
(376)
Distribution of net profit, DKKm
Profit (loss) for the year is attributable to:
(30)
Shareholders in Ørsted A/S, proposed dividends for the financial year
(406)
Shareholders in Ørsted A/S, retained earnings
Interest payments and costs, hybrid capital owners of Ørsted A/S
(704)
Profit (loss) for the year
2020
2019
4,834
13,856
488
19,178
4,414
(1,526)
675
3,563
226
105
(3)
(376)
2019
97
(226)
3
(126)
2019
126
126
-
180 / 193
Ørsted Annual report 2020
Financial statements
Parent company financial statements
Contents
6. Property, plant, and
equipment
7. Investments in
subsidiaries
We have entered into leases for office
premises, primarily in Gentofte, Denmark
(expiring in 2028).
We have entered into operating leases with
subsidiaries for sublease of office premises.
The disposal in 2020 concerns the lease in
Virum, Copenhagen. The lease was taken over
by SEAS-NVE (now Andel) on 1 September
2020 as part of the sale of our Danish power
distribution, residential customer, and city
light businesses.
In 2020, an amount of DKK 101 million was
recognised (2019: DKK 106 million) in profit
(loss) for the year in respect of rental income.
On 31 August 2020, we divested our Danish
power distribution, residential customer
and city light businesses to SEAS-NVE (now
Andel). The divestment resulted in a gain of
DKK 9,065 million in the parent company
income statement.
income from the individual subsidiaries with
their carrying amounts.
The impairment test in 2020 did not give
rise to any impairment of investments in
subsidiaries.
We have tested investments in subsidiaries for
impairment by comparing the expected future
Property. plant, and equipment: Land and buildings, DKKm
Cost at 1 January
Lease assets at 1 January
Disposals
Cost at 31 December
Depreciation and amortisation at 1 January
Depreciation and amortisation
Disposals
Depreciation and amortisation at 31 December
Carrying amount at 31 December
Value of leased assets
2020
1,498
-
(385)
1,113
(146)
(117)
44
(219)
894
894
2019
Investments in subsidiaries, DKKm
-
Cost at 1 January
1,498
Additions
-
Disposals
1,498
Cost at 31 December
-
Value adjustments at 1 January
(146)
Impairment losses
-
Value adjustments at 31 December
(146)
Carrying amount at 31 December
1,352
1,352
Note 8.5 of the consolidated financial statements
contains a complete overview of subsidiaries, etc.
2020
40,351
2
(8,074)
32,279
(3,501)
-
(3,501)
28,778
2019
41,825
27
(1,501)
40,351
(1,400)
(2,101)
(3,501)
36,850
181 / 193
Ørsted Annual report 2020
Financial 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
2020
91,839
39,518
2019
55,131
50,844
(50,464)
(14,136)
80,893
91,839
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 and EUR. The value
of the fair value hedge offset in the income
statement amounted to DKK -1,098 million
(2019: DKK 730 million).
Derivatives at the end of December 2020
mature as follows: 2021: DKK -115 million, 2022:
DKK 362 million, after 2022: DKK 604 million
(2019: 2020: DKK -459 million, 2021: DKK -175
million, after 2021: DKK -225 million).
All derivatives are classified as based on
observable inputs in the fair value hierarchy.
Overview of
derivative positions
DKKm
Interest derivatives
Currency derivatives
Total
Assets
Equity and liabilities
2020
2019
Contractual
principal amount
Market value
Contractual
principal amount
Market value
13,920
35,226
49,146
(10)
861
851
4,065
(3,214)
4,431
26,727
31,158
(85)
(774)
(859)
4,260
(5,119)
182 / 193
Burbo Bank Extension,
Liverpool Bay, the UK.
See note 7.1 to the consolidated financial statements
and the management’s review on pages 70-73 for
more details on risk and risk management.
Ørsted Annual report 2020
Financial 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’.
All securities are classified as based on
observable inputs in the fair value hierarchy.
We have made provisions for non-current liabil-
ities totalling DKK 862 million (2019: DKK 683
million), of which DKK 133 million fall due within
1 year, DKK 577 million fall due in 1-5 years, and
DKK 152 million fall due in more than 5 years.
The liabilities mainly concern the divestment
of our Oil & Gas business in 2017 and the sale
of our Danish power distribution, residential
customer, and city light businesses to SEAS-
NVE (now Andel) in 2020.
Securities, DKKm
Securities, available for use
Total securities
2020
24,424
24,424
2019
15,795
15,795
11. Loans and borrowings
On 31 December 2020, we had issued hybrid
capital with a total notional amount of
DKK 13,398 million (2019: DKK 14,019 million).
The hybrid bonds have a 1,000-year term and
expire as follows: DKK 5,210 million in 3013,
DKK 3,722 million in 3017, and DKK 4,466
million in 3019, respectively.
The long-term portion of bank loans and issued
bonds amounted to DKK 28,579 million at
31 December 2020 (2019: DKK 31,808 million),
of which DKK 24,029 million (2019: DKK 24,938
million) fall due in more than five years.
The long-term portion of lease debt amounted
to DKK 806 million at 31 December 2020
(2019: DKK 1,272 million) , of which DKK 440
million (2019: DKK 749 million) fall due in more
than five years.
13. 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,
farm-downs 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 acts as guarantor or surety provider
with primary liability for bank liabilities in cer-
tain subsidiaries, including guarantees 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 is involved in ongoing transfer pricing
disputes. For further information, we refer to sec-
tion 5.1 ‘Approach to taxes’ to the consolidated
financial statements. 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.
183 / 193
Ørsted Annual report 2020
Financial 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.
2.7 ‘Employee costs’ and 2.8 ‘Share-based
payment’ in the consolidated financial
statements.
Remuneration of the Board of Directors and
the Executive Board is disclosed in notes
Our related-party transactions are made
on arm’s length terms.
Ownership information 31 December 2020
Registered office
The Danish state represented by
the Danish Ministry of Finance
Andel A.M.B.A.
The Capital Group Companies, Inc.
Copenhagen K, Denmark
Svinninge, Denmark
Los Angeles, the US
1
Interval shown, as precise voting share is not publicly available.
Ownership
interests
50.12 %
5.01 %
-
Voting
share
50.74 %
5.07 %
5-10 %1
The table shows the shareholders with ownership
interests and voting shares of at least 5 %. The differ-
ence between ownership interests and voting shares
arises when power of attorney is issued.
15. Auditor’s fees
Auditor’s fees, DKKm
Statutory audit
Total fees to PwC
2020
2019
3
3
2
2
184 / 193
Ørsted Annual report 2020
Contents
Management’s statement,
auditor’s reports, and glossary
186
Statement by the Executive Board
and the Board of Directors
187
Independent auditor’s reports
190
Limited assurance report on the
consolidated ESG statements
191 Glossary
Our commitment to sustainability
goes beyond renewable energy.
In the area close to our offshore
wind farms Gode Wind 1 & 2 and
Borkum Riffgrund 1 & 2, the local seal
rescue centre, Seehundstation Norden,
has been looking after orphaned seals
since 1971. When deciding on local
institutions in Northern Germany to
support financially, Seehundstation
Norden was a natural choice for us.
Ørsted Annual report 2020
Financial statements
Management’s 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 adopted
the annual report of Ørsted A/S for the finan-
cial year 1 January - 31 December 2020.
facing the Group and the parent company.
The management’s review has been prepared
in accordance with the Danish Financial
Statements Act.
Skærbæk, 3 February 2021
Executive Board:
The consolidated financial statements
have been prepared in accordance with the
International Financial Reporting Standards
as adopted by the EU and futher requirements
in the Danish Financial Statements Act. The
financial statements of the parent company,
Ørsted A/S, have been prepared in accordance
with the Danish Financial Statements Act.
In our opinion, the consolidated financial
statements and the parent company finan-
cial statements provide a true and fair view
of the Group’s and the parent company’s
assets, liabilities, and financial position at
31 December 2020, 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 2020.
In our opinion, the management’s review pro-
vides a true and fair account of the develop-
ment in the Group’s and the parent company’s
operations and financial circumstances, 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
In our opinion, the annual report for the
financial year 1 January - 31 December 2020
with the name ORST-2020-12-31.zip is prepared,
in all material respects, in compliance with the
ESEF Regulation.
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 prepared
in accordance with the stated accounting
policies.
We recommend that the annual report be
adopted at the annual general meeting.
Mads Nipper
Group 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
Benny Gøbel*
Ole Henriksen*
Daniel Tas Sandermann*
* Employee representative
186 / 193
Ørsted Annual report 2020
Financial statements
Management’s statement, auditor’s reports and glossary
Contents
Independent auditor’s reports
To the shareholders of Ørsted A/S
Report on the audit of the
Financial Statements
Our opinion
In our opinion, the Consolidated Financial
Statements give a true and fair view of the
Group’s financial position at 31 December 2020
and of the results of the Group’s operations
and cash flows for the financial year 1 January
to 31 December 2020 in accordance with
International Financial Reporting Standards as
adopted by the EU (‘IFRS’) and further require-
ments in the Danish Financial Statements Act.
Moreover, in our opinion, the Parent Company
Financial Statements give a true and fair
view of the Parent Company’s financial posi-
tion at 31 December 2020 and of the results
of the Parent Company’s operations for the
financial year 1 January to 31 December 2020
in accordance with the Danish Financial
Statements Act.
Our opinion is consistent with our Auditor’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 2020, pp 76-167 and 185-186,
comprise the consolidated income statement,
the consolidated statement of comprehen-
sive income, the consolidated balance sheet,
the consolidated statement of changes in
equity, the consolidated cash flow statement
and the notes to the consolidated financial
statements, including summary of significant
accounting policies.
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 requirements applicable in Denmark.
We have also fulfilled our other ethical respon-
sibilities in accordance with the IESBA Code.
The Parent Company Financial Statements
of Ørsted A/S for the financial year 1 January
to 31 December 2020, pp 175-186, the income
statement, the balance sheet, the state-
ment of changes in equity and the notes to
the parent financial statements, including
summary of significant accounting policies.
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.
To the best of our knowledge and belief, prohib-
ited 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 and have been reappointed annually by
shareholder resolution for a total period of
engagement of 11 years including the financial
year 2020. We were reappointed following a
tendering procedure at the General Meeting
on 2 March 2020.
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 2020. 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.
187 / 193
Ørsted Annual report 2020
Financial statements
Management’s statement, auditor’s reports and glossary
Contents
Key audit matter
How our audit addressed the key audit matter
Key audit matter
How our audit addressed the key audit matter
During 2020, Ørsted did not perform any new
farm-downs, but completed the construction
agreements with partners from previous years’
farm-downs and divested the offshore transmission
asset related to the Walney Extension wind farm.
As part of our audit we read the sales agreements
and the construction agreements and challenged
the accounting treatment applied by Manage-
ment, including the consolidation method.
We furthermore obtained an understanding of the
compensation mechanisms and warranties agreed
in farm-downs from previous years. We challenged
the estimates prepared by Management for
recognition and measurement of these compen-
sation mechanisms and warranties, hereunder by
assessing and testing the data, assumptions and
models applied, and by evaluating the outcome of
previous estimates prepared by Management.
Partnership agreements
Divestment of ownership interests in an offshore
wind farm (farm-downs) to a partner in a joint
operation, including calculating the divestment
gains and subsequent recognition of construction
agreements and assessment of consolidation
method for the retained interests, are considered
non-routine transactions.
As part of farm-downs, compensation mechanisms
are often agreed with the partners, e.g. regarding
sales price, cost of subsequent use of the offshore
transmission asset constructed for the wind
farm, potential wake effect compensations and
warranties.
We focused on this area because farm-downs and
the related matters are considered non-routine
transactions and because the recognition and
measurement of the divestment gain, assessment
of consolidation method, subsequent construction
agreements with the partners, compensation
mechanisms and warranties are based on signifi-
cant judgements and estimates.
On this basis, partnership agreements were a
matter of most significance in our audit.
Refer to notes 1.2, 2.6, and 3.2 in the Consolidated
Financial Statements.
Income Taxes
Ørsted is subject to income taxes in all the coun-
tries where they operate. Significant judgements
and estimates are required in determining the
income taxes, and the measurement of income
tax assets and liabilities including uncertain
tax positions.
Management makes significant judgements and
estimates when calculating and assessing the
income taxes due to the complex nature of the tax
rules related to the business activities conducted
in different tax jurisdictions. Furthermore, Manage-
ment makes estimates, when measuring the tax
assets, including when and to which extent these
can be utilised in the future, and when measuring
tax liabilities including assessing deferred taxes in
tax equity partnerships.
Additionally, Ørsted is party in tax and transfer
pricing disputes, where Management assesses the
possible outcomes and consequently recognise
provisions to cover for these uncertain tax positions.
In 2020, Ørsted received an administrative decision
from the Danish Tax Agency entailing an additional
tax payable and related interests, which Manage-
ment disputes and has appealed to the relevant
authorities.
On this basis, income taxes were a matter of most
significance in our audit.
Refer to notes 1.2, 5.2, and 5.3 in the Consolidated
Financial Statements.
Our procedures in relation to income taxes, income
tax assets and liabilities included evaluating the
assumptions applied by Management in determin-
ing the recognition and measurement of income
taxes and deferred taxes, including those related to
tax equity partnerships, while taking into account
relevant correspondence with tax authorities and
external advisors. In our audit of income taxes, we
involved our tax specialists.
Our procedures covered assessing Management’s
judgements and estimates of tax balances and
carrying amounts as well as the related applied tax
rates when calculating these, including the deferred
tax liabilities in tax equity partnerships.
Our procedures also covered evaluating and
testing Ørsted’s processes for recording, assessing
and continually reassessing provisions for uncertain
tax positions.
In our audit of uncertain tax positions, we obtained
and reviewed the correspondence with relevant tax
authorities in order to consider the completeness
of the tax disputes and the related provisions.
When assessing the measurement of the provisions,
we challenged the assumptions used, including
the possibility of obtaining corresponding tax
adjustments, compensations from partners and the
likelihood of different outcomes. In addition, we as-
sessed relevant opinions obtained by Management
from third parties related to the tax disputes, and
we evaluated the disclosures provided by Manage-
ment in the consolidated financial statements.
188 / 193
Ørsted Annual report 2020
Financial statements
Management’s statement, auditor’s reports and glossary
Contents
Statement on Management’s Review
Management is responsible for the Manage-
ment’s Review, pp 4-75.
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
Statements Act. We did not identify any mate-
rial 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
applicable, matters related to going concern
and using the going concern basis of account-
ing 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 the 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 Parent Company’s
internal control.
– Evaluate the appropriateness of accounting
policies used and the reasonableness of
accounting 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 disclosures
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.
– Obtain sufficient appropriate audit evidence
regarding the financial information of the en-
tities 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 respon-
sible for our audit opinion.
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.
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.
189 / 193
Ørsted Annual report 2020
Financial statements
Management’s statement, auditor’s reports and glossary
Contents
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
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.
Report on compliance with the
ESEF Regulation
As part of our audit of the Financial State-
ments we performed procedures to express
an opinion on whether the annual report of
Ørsted A/S for the financial year 1 January
to 31 December 2020 with the file name
ORST-2020-12-31.zip is prepared, in all material
respects, in compliance with the Commission
Delegated Regulation (EU) 2019/815 on the
European Single Electronic Format (ESEF
Regulation) which includes requirements
related to the preparation of the annual
report in XHTML format and iXBRL tagging
of the Consolidated Financial Statements.
Management is responsible for preparing
an annual report that complies with the
ESEF Regulation. This responsibility includes:
– The preparing of the annual report in
XHTML format;
– The selection and application of appropriate
iXBRL tags, including extensions to the ESEF
taxonomy and the anchoring thereof to
elements in the taxonomy, for all financial
information required to be tagged using
judgement where necessary;
– Ensuring consistency between iXBRL tagged
data and the Consolidated Financial State-
ments presented in human-readable format;
and
– For such internal control as Management
determines necessary to enable the prepa-
ration of an annual report that is compliant
with the ESEF Regulation.
Our responsibility is to obtain reasonable assur-
ance on whether the annual report is prepared,
in all material respects, in compliance with
the ESEF Regulation based on the evidence
we have obtained, and to issue a report that
includes our opinion. The nature, timing and
extent of procedures selected depend on the
auditor’s judgement, including the assessment
of the risks of material departures from the
requirements set out in the ESEF Regulation,
whether due to fraud or error. The procedures
include:
– Testing whether the annual report is
prepared in XHTML format;
– Obtaining an understanding of the
company’s iXBRL tagging process and of
internal control over the tagging process;
– Evaluating the completeness of the iXBRL
tagging of the Consolidated Financial
Statements;
– Evaluating the appropriateness of the com-
pany’s use of iXBRL elements selected from
the ESEF taxonomy and the creation of exten-
sion elements where no suitable element in
the ESEF taxonomy has been identified;
– Evaluating the use of anchoring of extension
elements to elements in the ESEF taxonomy;
and
– Reconciling the iXBRL tagged data with the
audited Consolidated Financial Statements.
In our opinion, the annual report of Ørsted A/S
for the financial year 1 January to 31 December
2020 with the file name ORST-2020-12-31.zip
is prepared, in all material respects, in compli-
ance with the ESEF Regulation.
Hellerup, 3 February 2021
PricewaterhouseCoopers
Statsautoriseret Revisionspartnerselskab
CVR No 3377 1231
Lars Baungaard
State Authorised Public Accountant
mne23331
Rasmus Friis Jørgensen
State Authorised Public Accountant
mne28705
190 / 193
Ørsted Annual report 2020
Financial statements
Management’s 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 2020 (consolidated
ESG statements) as included on pages 168-174
in the Annual Report of Ørsted A/S for 2020.
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 168-174.
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 2020 on
pages 168-174.
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’,
and, in respect of the reported greenhouse gas
emissions, in accordance with International Stand-
ard on Assurance Engagements 3410 ‘Assurance
engagements on greenhouse gas statements’.
A limited assurance engagement is substantially
less in scope than a reasonable assurance
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 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 168-174, 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 ESG information allows for different,
but acceptable, measurement techniques and
can affect comparability between entities and
over time. The quantification of greenhouse gas
emissions is subject to inherent uncertainty be-
cause of incomplete scientific knowledge used to
determine the emissions factors and the values
needed to combine emissions of different gasses.
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 2020;
– conducted an analytical review of the data
and trend explanations submitted by all
business units for consolidation at Group level;
and
– 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 168-174 that are
free from material misstatement, whether
due to fraud or error;
– establishing objective accounting policies for
preparing data;
– measuring and reporting data in the con-
solidated ESG statements based on the
accounting policies; and
– the content of the consolidated
ESG statements for the period
1 January - 31 December 2020.
Our responsibility
We are responsible for:
– planning and performing the engagement to
obtain limited assurance about whether the
consolidated ESG statements for the period
1 January - 31 December 2020 on pages
168-174 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; and
– reporting our conclusion to the stakeholders
of Ørsted A/S.
Hellerup, 3 February 2021
PricewaterhouseCoopers
Statsautoriseret Revisionspartnerselskab
CVR no. 3377 1231
Lars Baungaard
State Authorised Public Accountant
mne23331
Rasmus Friis Jørgensen
State Authorised Public Accountant
mne28705
191 / 193
Ørsted Annual report 2020
Financial statements
Management’s statement, auditor’s reports and glossary
Contents
Glossary
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.
Avoided emissions: The amount other sources of
energy would have emitted, if we had not generated
energy from renewable sources.
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.
Blockage effect: The blockage effect arises from
the wind slowing down as it approaches the wind
turbines.
BSUoS tariffs: Costs related to the day-to-day
operation of the transmission system imposed on
generators and suppliers.
Carbon emission allowances: Carbon emission
allowances subject to the European Union Emissions
Trading Scheme (EU ETS).
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.
Contracted capacity: Onshore capacity where we
have signed a PPA, but where we have not yet taken
final investment decision.
Decided (FID) and installed capacity: Installed gener-
ation capacity plus capacity for assets where a final
investment decision has been made.
Degree days: Number of degrees in absolute figures in
difference between the average temperature and the
official Danish indoor temperature of 17 °C.
Direct current (DC): The type of power generated by
our solar panels.
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.
Generation capacity: Ørsted’s ownership of the
asset. Offshore wind turbines are included when
each turbine has passed the 240-hour test. Onshore
capacities are included after COD.
Green certificates: Certificate awarded to producers
of environment-friendly power as a supplement to the
market price of power in the given price area.
Green dark spread (GDS): 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 (including associated freight
costs) and carbon emission allowances used to
generate the power.
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.
Commissioning/COD: When our assets are in oper-
ation, and the legal liability has been transferred from
the supplier to us.
Installed capacity: Installed capacity where the as-
set has been completed and has passed a final test.
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.
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.
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.
Nord Pool: The Norwegian-based Nordic power
exchange which facilitates power trading in Norway,
Sweden, Finland, and Denmark.
Offshore transmission assets: Connect offshore gen-
eration to the onshore grid and typically include the
offshore power transmission infrastructure, an onshore
substation, and the electrical equipment relating to
the operation of the substation.
O&M: Operations and maintenance. The part of our
business that operates and maintains 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.
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.
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.
Tax equity: An arrangement where an investor obtains
rights to federal tax credits and other tax attributes in
exchange for a cash contribution.
TEC: Transmission entry capacity defines a generator’s
maximum contractual level of transmission access in MW.
Thermal generation: Heat and power generated
through the combustion of fossil fuels, biomass, or
waste.
FID: Final investment decision.
TNUoS tariffs: Costs related to the use of the trans-
mission networks in the UK based on TEC.
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 1 TW. 1 TWh is equivalent
to 1,000 GWh or 1,000,000 MWh.
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.
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 at 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.
192 / 193
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
3 February 2021