nord pool spot as · finland’s authorities, aimed at a possi-ble finnish link-up with the nordic...

NORD POOL SPOT AS ANNUAL REVIEW 2003

Contents

● This is Nord Pool Spot .................................................... 4 Vision and mission

A brief history

Key figures

The Spot Market

● CEO's statement .......................................................... 10

● Annual Report from the Board of Directors ..................... 12

● Annual accounts ........................................................... 17 Profit and loss account Balance sheet Cash flow analysis Accounting principles

A brief history1993 Statnett Marked AS (now Nord Pool ASA) is established as an inde-pendent company.

1995 Sweden decides to deregulate its power market. Nordic energy minis-ters agree to expand Nordic electric power cooperation.

1996 Start-up of joint Norwegian-Swedish power exchange, the world’s first multi national exchange for trade in power contracts. Svenska Kraftnät and Statnett own 50% each of the power exchange, which is renamed Nord Pool ASA.

1997 Dialogue is initiated with Finland’s authorities, aimed at a possi-ble Finnish link-up with the Nordic Power Exchange.

1998 Finland becomes a separate Elspot Area, and the EL-EX power exchange in Helsinki enters into an agreement to represent Nord Pool in Finland. Nord Pool opens an office in Denmark.

1999 Elbas is launched as a separate market for power balance adjustment in Finland and Sweden. Western Denmark (Jutland/Funen) Elspot area trade begins 1 July.

2000 The Nordic power market becomes fully integrated when Eastern Denmark becomes an Elspot Area.

2001 The first French power exchange, Powernext chooses Sapri as trading system for physical trade. Sapri is developed by Nord Pool, and is in use both by the Nordic and German power exchanges.

2002 Nord Pool Spot AS is established as a separate company and given a Market Place Concession according to Norwegian Energy Law. In July 2002 the ownership was extended to include all the Nordic TSOs and Nord Pool ASA.

2003 Jørn Limann appointed as new CEO from 1 April and new organization was put into operation during the autumn. EL-EX Oy was renamed Nord Pool Finland Oy. A new settlement system was ordered.

Our vision: To be the leading power spot exchange in Europe

Our mission: To provide price transparency and quote reliable prices at the Nordic power market.

Nord Pool Spot

This is Nord Pool Spot n

4 Nord Pool Spot 2003

This is Nord Pool Spot

5Nord Pool Spot 2003

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Key figures

Nord Pool Spot 2003 2002

Financial performanceOperating profit (NOK 1 000) 15 491 8 099Profit for the year (NOK 1 000) 21 765 14 102Operating margin (in %) 20.9% 11.7% Profit margin (in %) 29.3% 20.4% Return on equity (in %) 25.3% 20.7%

Percent change Nord Pool Spot 2003 2002 2003–2002 2001 2000 1999 1998 1997 1996

Physical marketVolume traded (TWh) 119 124 (4.7%) 112 97 76 57 44 41 Value of volume traded (NOK billion) 36 27 33.7% 21 11 9 7 6 10

Average system price 2003 2002 2003–2002 2001 2000 1999 1998 1997 1996

Average systemprice pr year NOK/MWh 291 201 44.8% 186 103 112 116 136 254Highest systemprice NOK/MWh (hourly) 981 686 43.1% 633 388 226 266 262 Lowest systemprice NOK/MWh (hourly) 37 81 (54.1%) 119 32 50 21 58

Percent changeHighest volume 2003 2002 2002–2003

Volume, Elspot 1-hour contracts(MWh/h) Hour 9, 7 January 23 224 21 926 5.9% Highest daily volume 7 Jan. 2003 31 Dec. 2002 Elspot (GWh) 502.9 478.2 5.2%

Highest weekly volume week 2 2003 week 51 2002 Elspot (GWh) 3324.2 3150.4 5.5%

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n This is Nord Pool Spot

Nord Pool Spot 2003

Elspot 117.9 TWh

Elbas 0.7 TWhOnly Swedish and Finnish participants can trade at Elbas. Finnish participants increased their share of Elbas trade in 2003, compared with 2002.

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nThis is Nord Pool Spot

Nord Pool Spot 2003

The Spot MarketOperated by Nord Pool Spot

Nordic market participants trade power contracts for next-day physical delivery at Nord Pool Spot’s market; hence the market is referred to as a day-ahead mar-ket. Trading is based on an auction trade system. The spot concept is based on bids for purchase and sale of power contracts of one-hour duration that cover all 24 hours of the next day. Three bidding types are available, namely hourly bids, block bids, and flexible hourly bids.

Nord Pool Spot’s System Price is the reference price for futures and forward contracts traded on the Nordic Power Exchange, and is also the reference price for the Nordic OTC/bilateral wholesale market.

Nord Pool’s spot market is the pri-mary Nordic marketplace for handling potential grid congestion (called grid bottlenecks).

The Nordic Power Exchange’s spot market is known in the Nordic power industry as Elspot.

The spot market at Nord Pool has played an important role since its estab-lishment:■ It provides a neutral, transparent refer-

ence price for both the wholesale and retail markets.

■ It is the reference price for power derivatives listed at the Nordic Power Exchange, and for bilateral contracts cleared by Nord Pool Clearing.

■ It serves as a reliable counterparty in spot trading (among other things through automatic clearing and security requirements).

■ It provides easy access to a physical market at low transaction costs.

■ It serves as an efficient grid congestion management tool.

■ It serves as a tool to reach planned physical balance day-ahead.

■ It contributes to enhanced trans-parency by distributing relevant and neutral market information.

■ It is voluntary to trade in the Elspot market and it thereby contributes to enhanced competition.

The Elbas Market for Finland and SwedenNord Pool Finland Oy is a fully owned subsidiary of Nord Pool Spot AS. The main tasks of the company are to take care of customers in Finland and to maintain and develop the Elbas-market.

The time span between the daily Elspot auction and the actual delivery hour of the concluded contracts is quite long (36 hours at the most). As consump-tion and sales situations change, a market player may find a need for trading during these 36 hours. To meet this need, Nord Pool Finland Oy opened the Elbas market in March 1999.

The Elbas Market is a physical market for power trading in hourly con-tracts for delivery today and tomorrow. It enables continuous trading around the clock every day of the year, covering individual hours up to one hour before delivery. Participants can trade on all market areas within the limits of cross-border transmission capacity.

Development of the Elbas market began in the fall of 1997, when repre-sentatives of the Nordic grid companies and electricity exchanges began to ana-lyse and implement more effective elec-tricity balance markets within the Nordic countries. Finnish and Swedish market

participants, in particular, emphasised the value of creating an electric power market where producers and distribu-tors could trade individual-hour con-tracts as near as possible to the delivery hour.

Today the member countries of the Elbas-market are Finland and Sweden. Expansion is under consideration to include further coverage of Nordic countries in the Elbas market area.

Hornsrev windmill parkPhoto: Eltra

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Nord Pool Spot 2003

This is Nord Pool Spot

“ More than 30 percent of all power consumption in the Nordic region is traded at Nord Pool, but it is our target to increase our market share. My responsibility is to contribute on developing our product mix and increasing our customer focus in order to attract new customers and to encourage existing customers to trade even more at

Nord Pool Spot.”

Urban Hammarstedt, Manager Developmentand Markets, General Manager Sweden


This is Nord Pool Spot n

New exchanges are emerging in Europe following the liberalisation of the energy markets. To become a market leader, we are committed to steadily improving our services.

It is our objective to have the high-est market share among non-mandatory exchanges and to be best in class on fees, price calculation tools and cus-tomer service.

Price transparencyThe price transparency experienced at the Nordic power market is unique in Europe. Information on grid capacities and power plant outages is available on short notice at Nord Pools homepage, thereby securing that all relevant market information is available to all market par-ticipants at the same time.

Our Market Surveillance department constantly monitors the information and the market behaviour to ensure that no participants abuse their position in the market.

We are constantly developing the information tools to improve the price transparency in the market in order to secure equal trading possibilities for all market participants.

Confidence in the integrity of the market and the professionals serving the market participants is essential to the success of the market. Nord Pool Spot is committed to maintaining a high level of skill in our organisation and we demand high ethical standards amongst our employees. Integrity is a key word for us and we continuously evaluate and develop best practice rules for trading and constantly seek improvements to the regulatory framework to achieve that integrity.

Reliable pricesAt present, our day-ahead power prices are the preferred price reference for all forward power contracts in the Nordic market. With a market share of more than 30 percent of the total Nordic physical power market, we provide a price reference which reflects the mar-ket conditions at all times.

It is our aim to increase the volume to create even more trust in the prices quoted by Nord Pool Spot.

Therefore, we remain committed to developing our product mix and increas-ing our customer focus to attract new customers and encourage existing cus-tomers to trade even more at Nord Pool Spot.

Connecting the marketsThrough our owners – all the Nordic TSO’s – we are responsible for optimis-ing the power flow between the Nordic countries. The concept of price areas and market coupling developed by Nord Pool is recognised as the preferred model for integration of European energy markets:

“Ultimately, it is clear that within pre-defined regional market areas, the preferred model is the integration of the markets for capacity and power exchanges (market splitting). There are a number of advantages to this approach over the alternatives”. (Ref: The EU-commision)

We will continue to improve the tools used for cross border optimisation with the objective to minimise price differences between price areas within the Nordic countries and to our neigh-bours. In cooperation with the German power exchange (EEX) we are working

to improve the cross border flow between Denmark and Germany.

Expansion of the Elbas intra-day marketToday Elbas is recognized by its cus-tomers in Finland and Sweden as a val-uable and efficient tool in adjusting their electricity balance. We are committed to expand the knowledge and liquidity

CEO's statementNord Pool has proven its value to the market in the past ten years. Now it is time to focus on the future and how we achieve the objectives related to our vision.

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n CEO's statement

Nord Pool Spot 2003

of Elbas and to promote this tool also to other Nordic countries. A common balance adjustment model in our elec-tricity market area is a vision for the future.

The Elbas market is open for trade around the clock – continuous trading at its best. This concept requires reliable trading systems. Our unique trading system has proven that it meets the requirements and we therefore

look forward to expanding our Elbas market.

Building a better marketWe are dedicated to building a better market for the benefit of our customers and we highly value the proposals we receive from the market. We are looking forward to continue the dialogue with our customers and a challenging 2004.

Jørn LimannCEO Nord Pool Spot AS

CEO's statement n

Nord Pool Spot 2003 11

Annual Report from theBoard of DirectorsNord Pool Spot consisting of Nord Pool Spot AS and its wholly owned subsidiary Nord Pool Finland OY organizes the physical day-ahead market – Elspot – in the Nordic countries. In addition Nord Pool Spot operates the intra day market – Elbas – in Finland and Sweden. Traded volumes in 2003 amounted to 119 TWh (2002: 124 TWh) in Elspot and 0.7 TWh (2002: 0.8 TWh) in Elbas. The Nord Pool Spot Group profit after tax was NOK 21.8 mill. (2002: NOK 14.1 mill.).

Nord Pool Spot AS is licensed by the Norwegian Water Resources and Energy Directorate (NVE) to organize and operate a marketplace for trade in physical power contracts. Nord Pool Spot AS is also licensed by Norway’s Ministry of Petroleum and Energy to facilitate power exchange with foreign countries.

The ownership of Nord Pool Spot is shared by the Nordic transmission sys-tem operators (TSOs) and Nord Pool ASA. Statnett SF, Affärsverket svenska kraftnät, Fingrid Oyj and Nord Pool ASA

each own 20 percent of Nord Pool Spot AS and Eltra amba and Elkraft System amba each own 10 percent of the shares.

Slightly lower volumes in 2003 The Elspot volume in 2003 was 4.6 per-cent lower than in 2002. Through April the volume was 10 percent higher in 2003 than in 2002, while since May the volume was about 12 percent lower. The decrease in volumes in the second half of 2003 was due to the very different

fundamental power balance combined with lower Nordic consumption. In addi-tion, the cross-border flow within the Nordic region was lower.

Elspot’s share of the total consump-tion in 2003 was 31.3 percent, compared to 31.8 percent in 2002. Overall Nordic consumption was about two percent lower in 2003 compared with 2002.

The average System Price in 2003 was NOK 291 per MWh (2002: NOK 201 per MWh). During 2003 area price differ-ences, with the exception of the consist-ently lower prices in Finland and Denmark West (DK1), were within two percent annual deviation from the System Price. The off-peak prices in the DK1 area have been low due to high wind power output and forced production on district heating units. In some hours the result has been that the prices have been calculated to zero or less causing pro-rata shortage of sales bids.

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Annual Report from the Board of Directors

Nord Pool Spot 2003

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The hydro inflow for the whole year ended about two percent lower in 2003 compared with 2002, but from August to December (weeks 31-52) inflows were clearly stronger (+26 TWh) compared to the very low levels recorded in 2002. The Exchange Area reservoir level was 54.7 percent at the end of 2003, compared with 47.6 percent in the previous year.

The break down of a transformer at the Skagerak cable resulted in a lack of transfer capacity of 450 MW in the sec-ond half of 2003. The cable was available again in December. Since mid-November, the so-called “West Coast Corridor” in Sweden has caused reductions in import capacity from the south and export via Hasle to Norway. Likewise, export limita-tions have been present from Finland to Sweden.

The yearly average for the German Spot Auction price, EEX Phelix, ended considerably lower than the Nordic Elspot System price in 2003 (29.49 €/MWh compared with 36.69 €/MWh in the Nordic area) reflecting the fundamental difference in the power production mix.

Stress test for the marketThe market experienced its most turbu-lent period ever in the winter 2002/2003. A System Price of 831 NOK/MWh was reached the 6 January 2003. After this time the situation eased and prices stabilised.

This showed that the market is able to handle a very difficult situation, caused by the unusually low hydro energy bal-ance. The price signals eventually resulted in economically sensible actions from the market participants. It has also shown that further incentives for consum-ers to react promptly to price signals are required. Nord Pool Spot is working closely with organisations and customers to improve the market situation based on the experiences from last winter.

Increased consolidation amongst the market participants can eventually lead to decreased liquidity in the spot market . We are confident, however, that the participants understand the impor-tance of a liquid spotmarket as the underlying price signal for all electricity contracts in the Nordic area.

2003 AccountsThe operating profit for Nord Pool Spot was NOK 15.5 million (2002: NOK 8.1

million), and the Total Profit after Tax was NOK 21.8 million (2002: NOK 14.1 million).

At the end of 2003 the total assets were NOK 2.3 billion (2002: NOK 6.5 bil-lion). The reduced balance sheet, com-pared with year-end 2002, is mainly attributable to lower spot prices at year end 2003 than in 2002, consequently leading to reduced accounts receivable and accounts payable.

The physical trading is invoiced on a weekly basis; invoices and credit notices are dispatched at the beginning of the week following each trading week. Participants must post collaterals for their spot market trade. Collaterals generally are equal to participants’ average net purchases during the last three weeks. At the end of 2003, accounts receivable was NOK 1.6 billion (2002: NOK 4.6 billion) equivalent to the collaterals posted by the participants per 31 December 2003.

The equity capital of Nord Pool Spot as of 31 December 2003 was NOK 96.9 million (31 December 2002: NOK 75.2 million). Seen in connection with the col-laterals posted by participants, the equity capital is assessed by the board as ade-quate. The company does not have dis-tributable equity.

The annual accounts are prepared based on the assumption of a going concern.

Organization and working environmentJørn Limann started as CEO of Nord Pool Spot as of 1 April 2003. He succeeded Morten Johnsrud, who was temporary CEO for the company from 1 December 2002.

At the end of 2003, Nord Pool Spot had 19 employees: Seven women and 12 men. The gender ratio is thus 37 percent female and 63 percent male employees. The corporate management consists of six men and there is no middle manage-ment. There are female employees in all departments of Nord Pool Spot AS.

The company’s board of directors comprises three women and seven men. The chairman of the board of directors is female.

Absence due to illness was 8.2 per-cent (336 day’s work) a considerable increase compared to 2002. In 2002 absence due to illness averaged 4.1 per-cent. The increase is attributable to employees with extended absence.

Nord Pool Spot’s human resources policy is based on equal wage for equal work, meaning women and men with the same job receive the same wage, given that their qualifications, experience and other conditions are the same. Statistics for 2003 show that the annual wage for male employees (top managers not included) was on average 35 percent higher than for the company’s female employees.

The company wishes to encourage employees of both sexes to take meas-ures to combine work and family life. At the end of 2003 one female employee was on maternity leave. The company had 3 part-time employees at the end of 2003, all of them women.

Nord Pool Spot’s activities do not pollute either the interior or the external environment.

New settlement system for spot trades During the autumn and winter 2002/03, high price levels caused a rapid increase in the collaterals for trade in the spot market. In order to decrease the collateral requirement, the settlement period had to be shortened, which was impossible under the previous settlement system.

Nord Pool Spot is in the process of launching a new settlement system, which is based on daily settlement. The introduction of the new settlement proce-dures will have a significant reducing effect on Nord Pool Spot balance sheets and reduce the participants’ collaterals to seven days net purchases.

The settlement procedure will be fully automated with electronic invoicing and settlement on a daily basis, instead of a weekly basis, as called for under cur-rent procedures.

Continuous product developmentOne of Nord Pool Spot’s key objectives is to have a fee structure that reflects costs and promotes market liquidity. The fee structure is continuously evaluated to secure this objective. From 1 January 2004, two new options were introduced, a netting option for participants that want to place gross bids in Elspot and an option aimed at smaller participants.

The current fixed annual trading fee has been an obstacle to direct trading on Elspot for smaller customers. The intro-duction of a variable fee offer with no

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Annual Report from the Board of Directors n

Nord Pool Spot 2003

fixed annual fee is designed to remove this obstacle. The objective is to attract a number of smaller customers to the mar-ket, and thereby secure diversity in the market, a crucial tool to help building market trust.

The volume-dependent fee for spot trade was NOK 0.25 per MWh in 2003.

For customers with integrated trading of production and sales portfolios, the new EU accounting rules (IAS) impose new administrative burdens. Some of these can be accommodated by separat-ing portfolios and bidding both in the spot market. Nord Pool Spot has therefore introduced a netting service where gross bidding is accepted but only normal trad-ing fees for netted volumes are charged.

The optimisation method for cross-border allocations has been improved after thorough discussions and feed-back from the market. The result will be a better utilisation of the available grid capacities.

The market players have expressed a wish to submit block bids with variable timing as opposed to the current proce-dure where block bids are restricted to predefined time periods. From the begin-ning of 2004 Nord Pool Spot introduces block bids with full flexibility on the time period, however still restricted to at least a four hour window.

Information to the market has been improved through improved versions of the Urgent Market Messages system, introduction of new features in the inter-net based informations system ElView and a new monthly newsletter to all customers.

Lysaker, 3 March 2004

Eva Granly FredriksenChairman of the Board

Cecilia Hellner Lene Sonne Bo Krantz Juha Kekkonen

Ivar Glende Tom Pippingsköld Torger Lien Peter Jørgensen Morten Johnsrud

Jørn LimannCEO

Market surveillance The main objective for the market sur-veillance at Nord Pool is to monitor the trading activities at the spot and deriva-tives markets at Nord Pool, and to ensure that operations are performed in accord-ance with the Energy Act, the Exchange Act, other established laws and regula-tions, and Nord Pool Spot AS’ rulebook for physical market and Nord Pool ASA’s rulebook for the financial electricity market.

In the beginning of 2003 the market surveillance department had special focus on the development of the trading activity in the physical market. Special attention was made to the water reser-voirs, utilization of the power production system and the power flow within and directly connected to the Nordic electricity exchange area.

Furthermore, the market surveillance department has had a special focus on the trading activity in Eastern and Western Denmark in July, August and September 2003, especially the facts leading to the high spot prices in Western Denmark the 2 September 2003. Nord Pool Spot remains concerned about the competition situation within Western Denmark, especially connected to situa-tions with lack of capacity between Denmark and Norway/Sweden. Further-more, the current model (explicit auction) for usage of capacity between Germany and Western Denmark does not ensure that the power always flows in the direc-tion from a low price area to a high price area with reference to the German and Nordic Exchanges. A full report of the

matter has been dispatched to the Danish Competition Authority and the Norwegian Directorate of Energy.

In addition, the market surveillance department has studied the information given in connection with the finalisation of maintenance of the nuclear power plants in Sweden. An improved handling of price sensitive information from the Nuclear Power Inspectorate (SKI) in Sweden has been agreed with SKI.

In 2003 Nord Pool Spot AS imposed one written warning in connection with breach of the disclosure rules.

Outlook for 2004The board has approved the company’s business plan for the coming three years. The plan focuses on further strenghtening the position in the nordic market with increased customer services, new prod-ucts and improved administrative sys-tems.

It is expected that the profit in the coming years will give a reasonable return on capital.

Allocation of profitThe accounts show after tax profits for the 2003 operating year as follows: NOK 22.1 million (2002: NOK 15.4 million) for the parent company, and NOK 21.8 mil-lion (2002: NOK 14.1 million) for the Group. No dividend will be paid for the 2003 accounting year. Profit for the year will be transferred to equity capital.

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Annual Report from the Board of Directors

Nord Pool Spot 2003

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Jørn LimannCEO

Torger Lien

Peter Jørgensen

Bo Krantz

Juha Kekkonen

Ivar GlendeEva Granly FredriksenChairman of the Board

Cecilia Hellner

Morten Johnsrud

Lene Sonne

Tom Pippingsköld

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Annual Report from the Board of Directors n

Nord Pool Spot 2003

Annual accountsn


Profit andloss account Nord Pool Spot AS Nord Pool Spot Group 2002 2003 Amounts in NOK 1 000 2003 2002

26 741 057 35 881 457 Power sales 35 881 457 26 741 057 26 741 057 35 881 457 Power purchases 35 881 457 26 741 057

0 0 Net power settlement 0 0

15 173 15 327 Fixed fee revenues 19 071 15 173 49 628 48 478 Volume-dependent fees 49 423 52 321 1 409 5 374 Other operating income 5 799 1 616

66 210 69 179 Total operating income 74 293 69 110

40 435 32 481 Services purchased 27 261 40 435 343 809 Depreciation 3 944 1 903 5 905 9 679 Payroll expenses 13 372 7 765 9 930 9 950 Other operating expenses 14 225 10 908

56 613 52 919 Total operating expenses 58 802 61 011

9 597 16 260 Operating profit 15 491 8 099

11 844 14 559 Net financial items 15 359 11 832 21 441 30 819 Profit before taxes 30 850 19 931 6 034 8 671 Taxes 9 085 5 829

15 407 22 148 Profit for the year 21 765 14 102

A complete annual report including notes can be found at www.nordpool.com

Profit and loss account


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Nord Pool Spot AS Nord Pool Spot Group 31 Dec. 2002 31 Dec. 2003 Amounts in NOK 1 000 31 Dec. 2003 31 Dec. 2002

FIXED ASSETS Intangibles – 5 670 Intangible assets 7 484 2 271 – – Goodwill 7 215 9 277 287 895 Deferred tax benefit 895 268

287 6 565 Total intangibles 15 594 11 816

1 383 2 428 Tangible fixed assets 3 195 2 411 Financial assets – – 17 742 17 742 Investment in Nord Pool Finland Oy – –

17 742 17 742 Total financial assets – –

19 412 26 735 TOTAL FIXED ASSETS 18 789 14 227

CURRENT ASSETS Receivables 4 569 113 1 629 838 Accounts receivable 1 630 020 4 569 144 183 638 163 982 Other receivables 164 057 184 668

4 752 751 1 793 820 Total receivables 1 794 077 4 753 812

1 690 560 467 885 Bank deposits 474 902 1 694 091

6 443 311 2 261 705 TOTAL CURRENT ASSETS 2 268 979 6 447 903

6 462 723 2 288 440 TOTAL ASSETS 2 287 768 6 462 130

Balance sheetAssets

Balance sheetn


Balance sheetEquity and liabilities

Nord Pool Spot AS Nord Pool Spot Group 31 Dec. 2002 31 Dec. 2003 Amounts in NOK 1 000 31 Dec. 2003 31 Dec. 2002

EQUITY Paid-in equity 50 400 50 400 Share capital 50 400 50 400 10 681 10 681 Share premium reserve 10 681 10 681

61 081 61 081 Total paid-in equity 61 081 61 081

Earned equity 15 407 37 554 Other equity 35 865 14 102

15 407 37 554 Total earned equity 35 865 14 102

76 488 98 635 TOTAL EQUITY 96 946 75 183 LIABILITIES Allocations for liabilities 1 047 2 914 Pension liabilities 2 914 1 047

1 047 2 914 Total allocations for liabilities 2 914 1 047

Current liabilities 6 310 179 2 076 377 Accounts payable 2 076 427 6 310 179 5 877 9 279 Taxes payable 9 712 5 672 968 805 Fees payable to authorities 805 968 68 164 100 430 Other current liabilities 100 964 69 081

6 385 188 2 186 891 Total current liabilities 2 187 908 6 385 900

6 386 235 2 189 805 TOTAL LIABILITIES 2 190 822 6 386 947

6 462 723 2 288 440 TOTAL EQUITY AND LIABILITIES 2 287 768 6 462 130

Balance sheet


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Cash flow analysis

Nord Pool Spot AS Nord Pool Spot Group 2002 2003 Amounts in NOK 1 000 2003 2002

Cash flow from operating activities 15 407 22 148 Profit after taxes 21 765 14 102 343 809 Ordinary depreciation 3 944 1 903 – (17) Gain/loss on sale of operating assets (17) _ (2 998 534) 2 939 274 Change in accounts receivable 2 939 124 (2 998 565) 4 302 092 (4 233 802 ) Change in accounts payable (4 233 752) 4 302 092 (539) 1 867 Change in pension liabilities 1 867 (539) (195 642) 54 419 Change in other current receivables and liabilities 55 279 (208 521)

1 123 127 (1 215 302) Net cash flow from operating activities (1 211 790) 1 110 472

Cash flow from investment activities – 291 Proceeds from sale of tangible fixed assets 291 – (1 726) (1 994) Payment for purchase of tangible fixed assets (2 020) (2 989) – (5 670) Payment for purchases of intangible assets (5 670) – (17 742) – Payment for shares and holdings in other companies – – – – Payment for other investments – (293)

(19 468) (7 373) Net cash flow from investment activities (7 399) (3 282)

Cash flow from financial activities 60 001 – Payment of equity – 60 001

60 001 – Net cash flow from financial activities – 60 001

1 163 660 (1 222 675) Net change in liquid assets for the year (1 219 189) 1 167 191 526 900 1 690 560 Liquid assets as of 1 January 1 694 091 526 900

1 690 560 467 885 Liquid assets as of 31 December 474 902 1 694 091

Cash flow analysisn


Accounting principles

The annual accounts have been pre-pared in accordance with the Norwegian Accounting Act of 1998 and generally accepted accounting principles.

Establishment of companyNord Pool Spot AS was established 1 January 2002 through a demerger of Nord Pool ASA’s spot-market activities. The demerger was carried out preserv-ing accounting and taxation continuity.

Consolidation principlesThe group accounts include the parent company, Nord Pool Spot AS, and the subsidiary, Nord Pool Finland Oy. The group accounts are prepared as if the group were a single financial entity. Transactions between companies in the group are eliminated, and the group accounts are prepared using similar principles, since the subsidiary uses the same accounting principles as the parent company.

A purchased subsidiary is recorded in the group accounts based on the parent company’s acquisition cost. The acquisition cost is allocated among identifiable assets and liabilities of the subsidiary; these assets and liabilities, in turn, are recorded in the group accounts at market value at the time of purchase. If the acquisition price exceeds (or is less than) amounts allo-cated to identifiable assets and liabili-ties, the excess is recorded in the bal-ance sheet as goodwill (or negative goodwill), and amortized on a straight-line basis over the purchased assets’ expected useful lives.

SubsidiaryThe company’s subsidiary is valued according to the cost method in the company accounts. Investments are valued at acquisition cost for the shares, unless a write-down has been neces-sary. Investments are written down to market value if the decline in value is

viewed as not transitory in nature and if deemed necessary according to com-monly accepted accounting principles. Write-downs are reversed if the condi-tions for the write-down are no longer present.

Power turnoverPurchases and sales of electrical power are settled at the same price. Conse-quently, the monetary value of trading has no effect on the level of Nord Pool Spot’s group profits.

Income from feesNord Pool Spot Group’s income base consists of: ■ set-up (entrance) fees■ annual fees■ volume-dependent fees

Entrance fees are recorded to income in full at the time of the signing of an agreement. Volume fees relate to power trade (MWh) and are invoiced with power trading following delivery.

Classification and valuation of balance sheet itemsCurrent assets and short-term liabilities include items that fall due within a year of their acquisition date. Other items are classified as operating assets/long-term liabilities.

Current assets are valued at the lowest of acquisition cost or market value. Short-term liabilities are recorded in the balance sheet at face value at the time of recording.

Operating assets are recorded at acquisition cost, but are written down to market value if the decline in value is viewed as not transitory in nature. Long-term liabilities are recorded in the bal-ance sheet at face amounts at the date they are assumed.

ReceivablesAccounts receivable and other receiv-ables are recorded in the balance sheet at face value after provision for expected loss. Provision for loss is based on assessments of individual accounts. In addition, there is a general loss provision covering assumed losses for accounts receivable.

Foreign currencyAccounts receivable and accounts payable in foreign currency are valued at the rate of exchange on 31 December 2003. Translations of assets and liabilities for the branch office in Sweden are made according to the exchange rate on 31 December 2003.

Tangible fixed assetsTangible fixed assets are recorded in the balance sheet and depreciated over the expected useful lives of the assets. Direct maintenance costs related to tan-gible assets are currently expensed as operating expenses, whereas upgrades and improvements are added to the cost bases of the operating assets and depreciated at the same rate as the assets they refer to.

Intangible assetsIntangible assets are recorded in the balance sheet to the extent future finan-cial benefits associated with them can be identified. If such is not the case costs are expensed as they occur.

Pension costs and liabilitiesNord Pool Spot AS maintains pension plans that provide employees with the right to defined future pension benefits (defined benefit plans). Benefits are based on the number of years of employment and salary at retirement age.

Accrued pension rights are primarily secured through pension plans in

Accounting principles


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Statnett SF’s pension fund. In addition, Nord Pool Spot AS has early retirement plans (AFPs), which are financed by operations.

Contributions to pension funds are made in accordance with the actuarial method of calculation. Pension assets are primarily invested in securities. Pension liabilities are calculated in accordance with the Norwegian provi-sional accounting standards (NRS) for pension costs.

The group has a contribution-based pension plan for employees in Sweden. The current year’s pension costs corre-spond to the current year’s premium payment.

Pension obligations are valued at the present value of future pension obli-gations earned as of the balance sheet date, which are to be paid through the company’s own pension fund or financed by operations. Pension obligations, less the actual value of pension funds, are included in the balance sheet under Liabilities.

Regarding pension liabilities for 2003, the group applied a different accounting principle. Where previously it recorded in the profit and loss account the effect of estimate deviations that were due to changes in pension liabili-ties and pension assets, it now applies a threshold criteria in such reporting, called corridor reporting, as follows: Changes in pension liabilities and pen-sion assets that are due to changes and deviations in assumptions that are applied to calculations (changes in esti-mates) are distributed over the remain-ing expected average earnings period if the deviations at year-end exceed 10 percent of whichever is greater, gross pension liabilities or pension assets as of 1 January.

Net pension costs for the year are included in personnel expenses in the profit and loss account. Premiums paid are treated as investments in pension funds.

TaxesTax expenses consist of taxes payable and the change in deferred taxes. Deferred tax is calculated as 28 percent of the temporary differences between accounting and tax values, as well as the tax deficit at the end of the account-ing year. If the temporary differences that increase or decrease taxes are reversed or may be reversed in the same period, the differences have been eliminated. Net deferred tax benefit is recorded in the balance sheet to the extent it is expected to be utilized.

As of 31 December 2003, the group had net negative temporary differences between accounting and tax values. The associated deferred tax benefit is recorded in the balance sheet as an asset.

The tax treaty between Norway and Sweden is based on the credit method of taxing business activities that are tax-able in both Norway and Sweden. Thus, taxable profits are fully taxed in Norway in accordance with Norwegian taxation rules; taxes paid in Sweden are a tax credit against taxes payable in Norway.

Cash flowThe cash flow analysis has been pre-pared using the indirect method. Net cash flow from operating activities is arrived at by entering the after-tax profit for the year and the other operating items shown. The cash flows from investment and financial activities are presented gross.

Changes in accounting principlesThe Nord Pool Spot group changed accounting principles in 2003 regarding pension liabilities, from recording in the profit and loss account the effect of esti-mate deviations resulting from changes in pension liabilities and pension assets that are due to changes and deviations in assumptions that are applied to cal-culations (changes in estimates), to dis-tributing these over the remaining expected average earnings period if the deviations at year-end exceed 10 per-cent of whichever is greater, gross pen-sion liabilities or pension assets as of 1 January. The change in accounting principles regarding pension liabilities was made to apply the same principles as used by Statnett SF.

If the same principles used in the 2002 accounts were applied to the 2003 accounts, the parent company would have had a profit of NOK 21.5 million, and the group would have had a profit of NOK 21.2 million in 2003.

Comparative figuresEffective 1 January 2003, the group made certain changes associated with the classification principles used in recording profit and loss account and balance sheet items. Comparative fig-ures in accordance with the new princi-ples have been entered in the balance sheet but not in the profit and loss account.

Accounting principlesn


Auditor's report


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Norway Vollsveien 19 Postboks 373 NO-1326 Lysaker Tlf +47 67 52 80 00 Fax +47 67 52 80 01

Sweden Barnhusgatan 4 Box 3293 SE-103 65 Stockholm Tlf +46 8 555 166 00 Fax +46 8 555 166 02

Denmark Vesterballevej 5 DK–7000 Fredericia Tlf +45 63 11 23 00 Faks +45 63 11 23 09

Finland Nord Pool Finland Oy Aleksanterinkatu 19 A Postboks 915 FI-00101 Helsinki Tlf +358 9 6840 480 Fax +358 9 6840 4860

Design and consultancy: GCI Monsen as.

Photos: Bård Gudim.

nord pool spot as · finland’s authorities, aimed at a possi-ble finnish link-up with the nordic...

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