Q3 - London Stock Exchange · Page 4 | Statnett Report 3:2011 at all times. The map is available at Statnett.no.The Norwegian Water Resources and Energy Directorate (NVE) has granted

Page 1 | Statnett Report 3:2011

Interim Report03:11

Q3


Table ofcontents03:11

Directors' report

Statement of comprehensive income

Balance sheet

Statement of changes in equity

Cash flow statement

004

011

012

013

014


Total operating revenues for the Group in the third quarter of 2011 amounted to NOK 1 339 million (NOK 1 392 million in the third quarter of 2010). As of the third quarter of 2011, the Group's operating revenues amounted to NOK 4 180 million (NOK 5 235 million during the same period in 2010).

The Group reported a profit after tax of NOK 254 million in the third quarter of 2011 (NOK 344 million). Year to date, the result after tax was NOK 774 million (NOK 1 630 million). The reduction was due to a reduction in tariff revenues due to downward adjustment of tariffs. Congestion revenues were also lower than in 2010, but in September there have been considerable price differences, which increased congestion revenues. This is also reflected in the higher revenue which totalled NOK 373 million in the third quarter of 2011 (NOK 241 million) and NOK 863 million year-to-date in 2011 (NOK 1 550 million). The higher revenue will be returned to Statnett's customers over time through adjustment of tariffs.

The operation of Statnett's assets in the third quarter has been stable, characterised by high inflow and extensive upgrade activity. Statnett has a significant project portfolio and, in general, there has been steady progress in Statnett’s develop-ment projects throughout the quarter. This resulted in a high activity level and extensive utilisation of capacity.

4 November there was a tragic accident in one of Statnett’s development projects, where an employee of the general contractor died. The incident will be investigated by the police and the Labour Inspection. In addition Statnett has started a separate investigation of the accident.

Highlights

In short


The Norwegian Water Resources and Energy Directorate (NVE) has granted Statnett a licence to rebuild its cable between Kristiansand and Bamble from the current voltage level of 300 kilovolts (kV) to 420 kV, as well as modifications of the Arendal and Kristiansand transformer stations.

Statnett has conducted new analyses (Area study South-ern Norway ) which indicate a need for extensive grid upgrades to be able to receive renewable power and be-fore any further international interconnectors can be put into operation. This is based on the fact that the opera-ting margins are lower than what Statnett has previously assumed. Statnett is therefore planning to complete one interconnector in 2018 and one in 2021, to the UK and Germany. Prioritisation of the schedule for the intercon-nectors will take place at a later date.

On 4 October, Statnett started preparatory work on the sections of the Ørskog - Fardal project where Statnett has been granted a final licence.

Statnett has increased its ownership interest in NorGer from 50 percent to 100 percent. The company's activities will be integrated with the NORD.LINK project to ensure efficient progress on an interconnector to Germany.

Statnett, along with TenneT, APX-ENDEX and Nord Pool Spot, have decided to implement intraday trade on the NorNed cable between Norway and the Netherlands as of 14 March 2012. This is part of the establishment of a joint European intraday market, and will further increase the power system's flexibility.

A dangerous situation occurred in connection with the development of Sima - Samnanger project on 26 August, when a protester entered the construction area and moved toward a helicopter that was in the process of landing. The incident was experienced and handled as an emergency situation and the protester was reported to the police.

As part of making the information about the Nordic po-wer market as open as possible, a map has been introdu-ced that shows power flow and prices in the Nordic region at all times. The map is available at Statnett.no.

The NVE upholds its decision to impose a NOK 30 million administrative fine on Statnett in connection with break-down on the Oslofjord cable in 2008. The appeal has thus been submitted to the Ministry of Petroleum and Energy (MPE) for a final decision. The amount was recognised in the accounts in 2010.

Statnett chose to quickly implement emergency prepa-redness measures in connection with the incidents on 22 July; for instance, the back-up control centres and stations around Oslo were staffed. The evaluation has shown that the preparedness measures were effectively conducted and the identified improvements are under implementation.

During testing of the oil cables for the new subsea cables across outer Oslofjord, technical irregulations were iden-tified. Thus, the cables must be testet further and Nexans has informed Statnett that the planned installation this winter has been postponed. The project objetive is to ensure transmission capasity across the Oslofjord, secure supply in the eastern region and remove congestions in the grid. The subsea cables shall consist of six oil cables and three plastic insulated cables (PEX cables) and the work with the PEX cables which is scheduled for producti-on in 2012 is not affected by the progress of the oil cables. The project is scheduled for completion in October 2012. Statnett has a strong focus on the difficult operational situation at the current cables and continuously assesses all necessary mitigation measures.

Important events

In short


Security of supplyThe power situation in Norway has been good throughout the third quarter. There has been significant inflow despite limited snow in the mountains at the start of the quarter. The reservoir levels increased during the period in line with the median curve (from the 1993 to 2010 measurement series), from 62 percent at the end of June to 86 percent at the end of September. This is less than one percentage point above the median, and the water levels are considered normal for the season.

The overall power consumption in the third quarter was 25 TWh and the overall power production was 31 TWh. This resulted in net imports of 6 TWh for the quarter. In the corresponding period for 2010 the export volume was 4 TWh. As in the second quarter, low consumption and significant inflow have resulted in considerable price reductions, and the spot prices have been well below normal for the third quarter, particularly in Southern Norway. The lowest average price in the Nordic region, as in the last quarter, was found in NO5, and was due to full reservoirs.

The price differences between Southern Norway and the rest of the Nordic region during this period were caused by a com-bination of extraordinary inflow and reduced trade capacities. Between NO1 and Sweden, maintenance on both sides of the border has resulted in a relatively low capacity in the market. In Western Norway high reservoir levels have resulted in a high production , while planned maintenance resulted in considera-ble congestion. For some producers, the combination of signi-ficant inflow and restrictions in the grid has resulted in overflow. The situation is expected to improve when Sima – Samnanger is put into operation .

The security of supply in the third quarter has been good. There have been no incidents at Statnett's assets that have caused significant interruptions for end users. However, on 19 Septem-ber parts of Nordland were blacked out for one hour due to outage of a power line. Statnett took the responsibility for the outage which was a misjudgement of the operational situation. Due to upgrade activity, the area between Bodø and Mo i Rana was supplied only from Rana, so the consequences of the ou-tage were greater than it would have been otherwise.

Maintenance activity has caused the number of hours with re-duced operational security to be somewhat higher this quarter compared with the previous period. The increase was largest for Lofoten and Vesterålen, as well as the Bergen area, which all had N-0-operation for about 700 hours, or 32% of the time.

InvestmentsStatnett has major development projects under planning and im-plementation in order to maintain security of supply, create value and facilitate lower greenhouse gas emissions.

In total, Statnett has invested NOK 1 873 million so far this year (NOK 1 234 million), which is the sum of commissioned and on-going investment projects.

Directors'report Normal

Alert Strained Very tight Rationing

The power situation at the end of September

N04

N03

N05 N01

N02

Investments Statnett Group

700

800

900

600

500

400

300

200

100

MNOK

2010 Q1 2010 Q2 2010 Q3 2011 Q12010 Q4 2011 Q2* 2011 Q3

* Includes acquisition of assets from Hafslund NOK 323 million


Project Location Cost Time

Ongoing major investment projects Funds granted Estimated completion

Sauda - Liastølen Rogaland NOK 200 million 2011

Major investment in transformer stations NOK 700 million 2011-2012

Increased preparedness: New back-up transformers NOK 250 million 2012

Ytre Oslofjord Vestfold/Østfold NOK 1 200 million 2012

Sima - Samnanger Hordaland NOK 1 045 million 2013

Varangerbotn - Skogfoss Finnmark NOK 500 million 2013

Skagerrak 4 Norway/Denmark Statnett share NOK 1 700 million 2014

Voltage upgrade in southern Norway

Subsection Kristiansand - Bamble (eastern corridor) Vest-Agder/Telemark NOK 650 million 2014

Ørskog – Fardal 1 Møre og Romsdal/Sogn og Fjordane NOK 4 500 million 2015

Licences pending or appealed Estimated cost 2 Earliest completion

Voltage upgrade in Central Norway

Subsection Klæbu – Namsos Trøndelag NOK 750 million 2014

Grid reinforcement Grenland region (eastern corridor) Telemark NOK 850 million 2014

Ofoten - Balsfjord Nordland/Troms NOK 1 500 million 2014

Namsos - Roan - Storheia Trøndelag NOK 1 000 - 1 500 million 2014

Voltage upgrade in southern Norway

Subsection Kristiansand - Bamble (eastern corridor) Vest-Agder NOK 70 million 2015

Subsection Feda - Tonstad (western corridor) Vest-Agder NOK 460 million 2016

Hamang station Akershus NOK 350 - 500 million 2016

Balsfjord - Hammerfest Troms/Finnmark NOK 3 500 million 2016-2018

Storheia - Snillfjord - Trollheim/Orkdal Sør-Trøndelag/Møre og Romsdal NOK 2 300 million 2017-2020

Planning proposal submitted Estimated cost Earliest completion

Norway/Sweden NOK 2 000 - 4 000 million 2018-2020

«Arctic Circle» Skaidi – Varangerbotn Finnmark NOK 2 300 million 2018-2020

ICT projects Funds granted Estimated completion

Modernisation of ICT infrastructure in Statnett stations NOK 130 million 2012

Computer network for power system management NOK 220 million 2014

Renewal of Statnett's central operations system NOK 490 million 2014

New Regulation and Market System NOK 240 million 2014

Overview of major investement projects

1 Licence granted for two sections

2 Estimate will be updated according to grid development plan in the fourth quarter of 2011


Important project events in the third quarter

Commissioned projects

• Hasletransformerstation:TheT6transformerisinoperationand full capacity towards Sweden is now established.

• Otherstationprojects:AnewstationinNarvikandreactorinVågåmo and Vang started operation in the third quarter.

Ongoing major investment projects

• Sauda-Liastølen:Theprojectisdelayedduetoaneedforreinforcement of multiple foundations. The project is still working toward completion in 2011.

• Ytre Oslofjord: The cable crossing, which will consist ofsix oil cables and three plastic-insulated cables (PEX ca-bles), was scheduled for completion in December 2011 and October 2012, respectively. There has been identified irregularities in the oil cables and this year's planned in-stallation has been postponed. Further progress depends on the results from the supplier's technical investigations. Production and installation of the PEX cables has not been affected by this.

• Sima-Samnanger:ArevisedschedulewithcompletioninDecember 2013 was announced earlier in 2011 due to lack of access to the entire route. The Directorate for Cultural Heritage's resolution regarding route changes near cultural heritage sites for two areas has been appealed by Statnett. The project has completed approximately 45 percent of the foundations and approximately 30 percentof the actual pylon installation. Construction of the Samnanger station is underway and is now owned by BKK. The cost for the project is now estimated to be NOK 1 045 million.

• VoltageupgradeEasternCorridor,Kristiansand–Bamble/Kragerø: The Board of Directors has decided to realisethe project. A licence from the Norwegian Water Resour-ces and Energy Directorate (NVE) was granted in the third quarter of 2011. Parts of the licence have been appealed.

• Ørskog - Fardal (Sogndal): Statnett's Board of Directorshas decided to start the construction work on the sections of the route for which Statnett has been granted a licence and Statnett has now started preparatory work for these sections. The Environment, Transport and Construction

plan has been approved by the NVE and the Directorate for Cultural Heritage has granted the necessary dispensation in relation to the Cultural Heritage Act. These conditions are necessary to start the construction work. Statnett has submitted an additional application for yet another alter-native site for a station in Sykkylven in connection with the ongoing licensing process. A final resolution for the remai-ning part of the project is expected in the fourth quarter of 2011. Statnett has awarded contracts for the project.

Licences pending or appealed

• Namsos-Roan-Storheia:Theprojecthasbeenappealedto the Ministry of Petroleum and Energy (MPE). The appeal has been reviewed by the MPE in the fourth quarter of 2011.

• VoltageupgradeWesternCorridor:Statnettistryingtofindalternative solutions for the Feda station in connection with the licence application for voltage upgrade on the Feda – Tonstad section. The need for an additional application will be assessed in the fourth quarter of 2011. A licence appli-cation for the Kristiansand – Feda route has been submit-ted to the NVE.

• GriddevelopmentsGrenlandBamble–Rød (EasternCor-ridor):AlicenceapplicationhasbeensubmittedtotheNVEfor processing and a consultative process has been imple-mented. Requirements for additional studies were received from the NVE in the third quarter of 2011.

• Ofoten-BalsfjordandBalsfjord-Hammerfest:Additionalas-sessments have been submitted to the NVE together with the required additional applications. The NVE's final inspection was carried out for both projects in the third quarter of 2011.

• Storheia - Snillfjord - Trollheim/Orkdal:Comprehensive re-quirements relating to additional assessments have been received from the NVE. These are scheduled for submission to the NVE in the fourth quarter of 2011.

Planning proposal submitted

• TheSydVestLink:Statnetthasnotified theNVEregardingthe Norwegian part of the project. The notification contains different routes of between 60 and 110 kilometres that will be subject to further assessment, including subsea cable connections. A construction period of three years is assu-med following a final licence decision.


• ”Arctic Circle" Skaidi - Varangerbotn: The impact assess-ment programme has been received from the NVE. The work on a licence application including associated impact assessments is scheduled to start in 2012.

Financial resultsThe quarterly report has been submitted in accordance with International Standards for Financial Reporting (IFRS) and inter-pretations stipulated by the International Accounting Standards Board (IAS). The accounting standards for presentation of fi-nancial accounts (IAS) and interim reports (IAS34) have been adhered to. The accounting principles and calculation methods used in the interim financial statements are the same as in the most recent annual financial statement.

Operating revenues

TheGroup'soperatingrevenuesinthethirdquarterof2011to-talled NOK 1 339 million (NOK 1 392 million in the third quarter of 2010). Operating revenues from regulated operations totalled NOK 1 300 million (NOK 1 353 million), while other operating revenues amounted to NOK 39 million (NOK 39 million). The reduction in operating revenues was mainly due to lower ta-riff revenues on the basis of lower stipulated tariffs for 2011 compared with 2010. The reduction in operating revenues was significantly offset by higher congestion revenues during the period. The high congestion revenues are a result of heavy pre-cipitation and low prices in the southern price areas in Norway towards the end of the third quarter.

Attheendofthethirdquarter2011theGroup'stotaloperatingrevenues amounted to NOK 4 180 million (NOK 5 235 million). Operating revenues from regulated operations totalled NOK 4 062 million (NOK 5 028 million), while other operating revenues amounted to NOK 118 million (NOK 207 million). The reduction in operating revenues was due to lower tariff revenues as a re-sult of lower stipulated tariffs for 2011 compared with 2010.

Statnett's operating revenues mainly derive from regulated grid operations. Operating revenues from regulated activities in Statnett's financial reporting consist mainly of grid tariffs from the customers as well as congestion revenues (price differen-

ces between areas in the Nordic region and towards the Net-herlands). The grid operations are regulated by the NVE which stipulates a cap for Statnett's revenues (permitted revenue). If the total revenues from grid operations for one year diverge from the permitted revenue, a so-called higher or lower revenue willoccur.Higher/lowerrevenuewillleveloutovertimethroughadjustment of future grid tariffs.

In the third quarter 2011 Statnett's higher revenue amounted to NOK 373 million (higher revenue of NOK 241 million). So far in 2011, the higher revenue amounts to NOK 863 million (higher revenue of NOK 1 550 million). Accumulated higher revenue including interest was NOK 2 452 million at the end of Sep-tember 2011.

Operating costs

TheGroup's operating costs totalledNOK914million in thethird quarter (NOK 851 million).

The increase was mainly due to wage costs and transmission losses. Wage costs increased by NOK 27 million in the third quarter of 2011 compared with the corresponding period in 2010. This was due to an increase in staff in 2010 and 2011 as a result of increased activities in development projects, opera-tions and maintenance. Due to high utilisation of capacity rela-ted to development projects, a higher proportion of the wage costs have been allocated to investment work in the balance sheet , thus reducing the growth in the wage costs.

Transmission losses were NOK 12 million higher in the third quarter compared with the same period in 2010 and were mainly due to higher volume, partly offset by a lower energy price.

In the third quarter 2011 system services costs were reduced by NOK 18 million. Due to high production, and thus reduced prices in the frequency market, the purchasing costs of primary reserves were lower in 2011. Special regulation costs have been higher in the third quarter 2011compared with the corre-sponding period in 2010. This is due to a significant power sur-plus combined with maintenance in the third quarter of 2011.


At the end of the third quarter 2011 operating costs totalled NOK 2 896 million (NOK 2 825 million).

Wage costs have been NOK 87 million higher so far this year compared with the corresponding period in 2010. However, the actual increase was NOK 48 million, as the costs in 2010 were reduced by NOK 39 million in connection with changes to the regulations related to pensions. Increased wage costs are due to an increase in staffing mainly related to Statnett's project and maintenance activities.

System services costs were reduced by NOK 51 million. This was primarily due to reduced costs of special adjustments and lower purchasing costs of primary reserves. Transmission los-ses were NOK 28 million lower than in the corresponding period in 2010 mainly due to lower energy prices.

So far in 2011, depreciation has increased by NOK 63 million, in line with the increased investments.

Other operating costs so far in 2011 are unchanged compared to the corresponding period in 2010.

Operating profit

TheGroup'soperatingprofitinthethirdquarterof2011wasNOK 425 million (NOK 541 million). At the end of the third quarter2011theGroup'stotaloperatingprofitamountedtoNOK 1 284 million (NOK 2 410 million).

Financial items

TheGroup's net financial items for the third quarter of 2011amounted to a loss of NOK 71 million (loss of NOK 59 million). Sofarin2011,theGroup'snetfinancialitemsamountedtoaloss of NOK 203 million (loss of NOK 165 million).

Net profit

TheGroup'sprofitaftertaxwasNOK254million(NOK344million)in the third quarter of 2011. At the end of the third quarter 2011 the profit after tax was NOK 774 million (NOK 1 630 million). The profit after taxadjusted for changes inhigher/lower revenueafter taxwas NOK 153 million at the end of the third quarter. Lower con-gestion revenues was the main reason for the reduction in profit.

Cash flow and balance sheet

TheGroup’soperatingactivitiesgeneratedanaccumulatedcashflow of NOK 1 120 million in the third quarter of 2011. The net cash flow from investment activities totalled a loss of NOK 1 865 million. In total, loans were paid down by NOK 1 050 million, and new loans of NOK 1 481 million were raised. At the end of the thirdquarter,theGroup'sliquidassetsandmarket-basedsecuri-ties amounted to NOK 1 090 million (NOK 1 023 million).

Attheendofthefirstquarter,theGrouphadtotalassetsofNOK22 896 million (NOK 20 304 million), and interest-bearing debt amounted to NOK 12 756 million. The market value of interest swap and currency swap agreements (fair value hedges) related to interest-bearing debt was NOK 1 631 million. Net interest-be-aring debt, corrected for this, totalled NOK 11 125 million.

Subsidiaries

Statnett SF owns Statnett Transport AS a 100 percent. At the end of the third quarter operating revenues for the Statnett TransportGroupamountedtoNOK81million(NOK71million)and the profit before tax was NOK 3 million (NOK 1 million).

StatnettSFowns100percentofNorGer.Theactivity is rela-ted to early-phase development of a subsea cable connection toGermany,andwillbeintegratedwithNORD.LINK,whichisStatnett's other subsea cable project between Norway and Germany.Attheendofthethirdquarterof2011thelossbeforetax amounted to NOK 48 million (loss of NOK 50 million), which is in line with the project's budget.

Statnett SF owns 30 percent of Nord Pool Spot AS. Statnett's share of the profit in Nord Pool Spot AS contributed NOK 3 mil-lion(NOK2million)totheStatnettGroup'sprofitasofthethirdquarter of 2011. In 2010 there were additional revenues of NOK 7 million relating to Statnett's shareholding in Nord Pool ASA, which was sold in 2010.

RiskStatnett's activities expose the company to risks. Below follows a description of some of the risks that may influence the supply of electricity and Statnett's value creation.


Risk of serious Health, Safety and Environment

incidents (HSE incidents)

Statnett's activities entail a risk of incidents associated with Health, Safety and the Environment. This risk is reduced by im-plementing documented work processes, safe job analyses, a strong management focus on HSE, as well as the reporting of incidents and near misses in a learning perspective.

Risks associated with power supply

Significant risks relating to the power supply are the risk of outages (faulty components in the power system), power supply risks (the balance between production and consumption) and risks related to energy access. Statnett manages power supply risks through daily grid operations combined with grid investments, preventive maintenance and purchase of power reserves. Statnett works continuouslytoimprovethecompany’spreparednesstominimizethe negative impact of any outages. The Board of Directors deci-ded in fall 2010 that Statnett mainly will construct the power grid according to the N-1 criterion. This means that power supply to the end-user will be maintained even after a fault occurs in the transmission system.

Statnett’sgoalistoensurethatallend-usershavereliablepowersupply, and if a fault occurs in the transmission system, no end-user will be without electricity for more than two hours at a time. There have been several incidents in 2011 which have impacted end-users. The total costs of energy not supplied for connected end-users (under the KILE scheme) have been NOK 73 million so far in 2011 compared with NOK 14 million in the corresponding period in 2010. Costs in 2011 are mainly related to grid failures in the first quarter.

Regulatory risk

Statnett’s activities are subject to comprehensive regulatory re-quirements. Changes in the regulatory framework may affect Statnett’sactivities.Changesintheprocessingtimeoflicenceap-plications, for instance, could lead to acceleration or postpone-ment of planned reinforcements of the main grid.

Project risk

Statnett has a large portfolio of planned and ongoing maintenance and development projects. Statnett conducts a thorough assess-

ment of risk in connection with the projects. The Board is pre-sented with risk assessments relating to all major investments. Statnett has implemented a uniform project management model focussing on risk management.

Foreign currency risk

Statnett's revenues are mainly in Norwegian Kroner (NOK), whe-reassomeoftheGroup'sexpensesareinforeigncurrencies.Cur-rency risk is minimised through several measures, including using currency swap agreements to hedge the risk in the currency obli-gations in investment projects. All Statnett loans in foreign currency are converted to NOK through currency swap agreements.

Interest rate risk

A large proportion of revenues from grid activities are calculated as return on the enterprise's grid capital. The calculation is based on the interest rate on five-year government bonds and a risk sup-plement. Statnett's revenues are therefore affected by fluctuating interestrates.Inordertoreducetheenterprise’stotalinterestraterisk, Statnett seeks to achieve as good match as possible bet-ween movements in interest rates on loans and the interest rate usedtocalculatereturnontheenterprise’scapital.

Credit risk

Statnett assumes credit risk through placing surplus liquidity with securities issuers. Statnett has limits which set credit rating requi-rements for counterparties and maximum exposure limits for each individual investment of surplus liquidity. Statnett is also exposed to a limited credit risk related to the company's collection of main grid tariffs, and as responsible for balance settlement in the regulating power market. Routines have been established for provision of se-curity relating to trade in the regulating power market.

Financial risk

The risk of Statnett not being granted refinancing on the company's loans is low. The risk is reduced by Statnett having a spread ma-turity structure on existing loans. The enterprise has a credit facility totalling NOK 3.5 billion with a five-year term to be able to fund up to 12 months' operation without incurring any new debt. Statnett has long-term borrowing ratings of A+ and A2 from Standard & Poor’sandMoody’sInvestorService,respectively.


Oslo, 10 November 2011

The Board of Directors, Statnett SF

Corporate social responsibilityStatnett's objectives involves a comprehensive social responsibility. Statnett has the responsibility to maintain security of supply in Norway, in addition to provide for value creation within the Norwe-gian energy sector and facilitate lower greenhouse gas emissions. This social responsibility is ensured through a close and long-term cooperation with domestic and regional authorities, participants in the power sector, customers, suppliers and other stakeholders, where social and environmental issues are ensured. Corporate so-cial responsibility (CSR) is embedded in the company's continuous corporate governance and anchored in the enterprise's manage-ment and organisation. See Statnett's annual report 2010 for more information about CSR.

Health, Safety and Environment (HSE)4 November there was an accident under the work of the Sauda – Liastølen project, where an employee of the general contractor died. The incident will be investigated by the police and the Labour Inspection and Statnett has started a separate investigation of the accident to ensure the internal needs rela-ted to the accident.

There have been five incidents in Statnett SF in the third quarter 2011 which resulted in personal injuries, and one of these resul-ted in absence. In August there was also an incident in Statnett Transportwithariskofinjury/deathandmaterialdamage.

During the third quarter, Statnett’s contractors have had tenpersonal injuries, five of these resulted in absence. In addition, Statnett has experienced incidents such as discovery of un-detonated explosives from older construction work, and one sub-contractor has failed to comply with the provisions in the Working Environment Act's regarding working hours. This con-tractor has been subject to an external audit and follow-up and Statnett has introduced more stringent requirements for wages and working conditions in tender materials for new projects.

Overallabsenceduetoillnesswas3.6percentintheGroupinthe third quarter of 2011, compared with 3.8 percent in the third quarter of 2010.

OutlookStatnett’smainobjectiveistoensureastablesupplyofelectricityand facilitate a well-functioning power market. Experiences last winter with several outages and recent experience with high pro-duction due to high reservoir levels combined with significant up-grade activity, have shown that at times there are tight margins in the power system. The power balance in the Norwegian system is currently considered to be good.

To secure a stable security of supply for the future, Statnett will makesubstantialgridinvestmentsintheyearstocome.Statnett’sfuture activities will be dominated by high project activity, both wit-hin maintenance and through major development projects. There is particular focus on the progress in the Sima- Samnanger project, aswellasØrskog-Fardal,whichisanimportantpowerlinetoensu-re access to electricity in Central Norway. Furthermore, Statnett will continue the development of projects which will secure supply to Southern and Southwest Norway, as well as the Northern regions. TheconsiderableprojectvolumeispresentedintheGridDevelop-ment Plan which Statnett will present in the fourth quarter. The Mi-nistry of Petroleum and Energy (MPE) has furthermore indicated its plansregardingpresentationofthe"GridReport"(Nettmeldingen)inlate2011/early2012,andthisisexpectedtoimpactStatnett'sactivities and project portfolio in the future.

To be able to realise the planned development projects, Statnett is dependent on an efficient licensing process and increased use of turnkey contracts. Statnett is concerned to further improve the cooperation with stakeholders in order to obtain important input in theprocessofplanningandrealizationofnewpower lines. Inthis regards, several initiatives are taken towards local and regional authorities and other stakeholders.

Absence due to illness

5%

4%

3%

2%

1%

10 Q2 10 Q3 10 Q4 11 Q110 Q1 11 Q2 11 Q3

H value rolling 12 months’ average

6

5

4

3

2

1

0 sep 10

oct 10

nov 10

dec 10

jan 11

feb 11

mar 11

apr 11

may 11

jun 11

jul 11

aug 11

sep 11


Statement of comprehensive income

(Amounts in NOK million) 2011 2010 2011 2010 Year 2010

OPERATING REVENUE

Operating revenue regulated operations 1 300 1 353 4 062 5 028 6 980

Other operating revenue 39 39 118 207 267

Total operating revenue 1 339 1 392 4 180 5 235 7 247

OPERATING COSTS

System services 153 171 424 475 592

Transmission losses 160 148 676 704 1 058

Wage costs 163 136 493 406 550

Depreciation and write-downs of tangible fixed assets 186 164 555 492 666

Other operating costs 252 232 748 748 1 102

Total operating costs 914 851 2 896 2 825 3 968

Operating profit 425 541 1 284 2 410 3 279

Revenues from joint ventures and associates - - 3 9 11

Financial income 17 31 53 92 105

Financial costs 88 90 256 257 337

Profit before tax 354 482 1 084 2 254 3 058

Tax 100 138 310 624 860

Profit for the period 254 344 774 1 630 2 198

OTHER COMPREHENSIVE INCOME

Changes in fair value, held-for-sale investments - - - - 1

Changes in fair value for cash flow hedges -48 - -51 -11 -10

Tax related to other comprehensive income 13 - 14 3 3

Other comprehensive income -35 - -37 -8 -6

Total comprehensive income 219 344 737 1 622 2 192

Year to dateThird quarter

Statnett Group


Balance sheet

(Amounts in NOK million) 30.09.11 30.09.10 31.12.10

ASSETS

INTANGIBLE FIXED ASSETS

Goodwill 53 53 53

Other intangible fixed assets 13 13 13

Total intangible fixed assets 66 66 66

NON CURRENT FIXED ASSETS

Tangible fixed assets 16 701 15 946 16 396

Plant under construction 2 877 1 820 1 848

Investment in other group companies 52 48 51

Long-term investments 1 209 1 151 1 118

Total fixed assets 20 839 18 965 19 413

CURRENT ASSETS

Trade accounts recievable and other short-term receivables 901 250 869

Investment in commercial market-based securities 586 539 593

Liquid assets 504 484 1 129

Total current assets 1 991 1 273 2 591

Total current assets 22 896 20 304 22 070

EQUITY AND DEBTLIABILITIES

EQUITY

Contributed capital 2 700 2 700 2 700

Retained earnings 5 350 4 368 4 950

Non-controlling interest - -12 -22

Total equity 8 050 7 056 7 628

PROVISIONS FOR LIABILITIES

Deferred tax 422 315 334

Pension liabilities 336 325 345

Other liabilities 63 98 163

Long-term interest-bearing debt 9 790 10 872 10 456

Total long-term liabilities and debt 10 611 11 610 11 298

CURRENT LIABILITIES

Short-term interest-bearing debt 2 966 388 1 301

Trade account payable and other short-term debt 1 063 905 1 277

Tax payable 206 345 566

Total current liabilities 4 235 1 638 3 144

Total equity and debt liabilities 22 896 20 304 22 070

Statnett Group


Statement of changes in equity

Total equity Non- allocated to Total controlling the owner of Other equity Contributed(Amounts in NOK million) equity interest Statnett SF accrued Funds capital

Equity as at 1 January 2010 5 618 - 5 618 2 915 3 2 700

Profit/loss for the year 2 198 -25 2 223 2 223 - -

Other comprehensive income -6 - -6 - -6 -

Dividends paid -132 - -132 -132 - -

Non-controlling interest -50 3 -53 -53 - -

Equity as at 31 December 2010 7 628 -22 7 650 4 953 -3 2 700

Equity as at 1 January 2010 5 618 - 5 618 2 915 3 2 700

Profit for the period 1 630 -13 1 643 1 643 - -


Dividends paid -132 - -132 -132 - -

Non-controlling interest -52 1 -53 -53 - -

Equity as at 30 September 2010 7 056 -12 7 068 4 373 -5 2 700

Equity as at 1 January 2011 7 628 -22 7 650 4 953 -3 2 700

Profit/loss for the period 774 -21 795 795 - -


Dividends paid -315 - -315 -315 - -

Acquisition subsidiaries - 43 -43 -43 - -

Equity as at 30 September 2011 8 050 - 8 050 5 390 -40 2 700

Statnett Group


Cash flow statement

(Amounts in NOK million) 30.09.11 30.09.10 31.12.10

Cash flow from operating activities

Profit before tax 1 084 2 254 3 058

Loss/gain(-) on sale of fixed assets -2 -1 -6

Ordinary depreciation and write-downs 555 492 666

Loss/ gain(-) on sales on investments on associates and joint ventures - -28 -28

Interest recognised in the income statement for the period 230 226 306

Interest received for the period 34 23 29

Interest paid for the period -256 -288 -362

Changes in trade accounts receivable/payable 250 -30 -348

Changes in other accruals -772 226 500

Profit/loss from companies using equity method -3 -9 -11

Net cash flow from operating activities 1 120 2 865 3 804

Cash flow from investing activities

Proceeds from sale of tangible fixed assets 7 1 13

Purchase of tangible fixed assets and plants under construction -1 873 -1 234 -1 892

Merger NorGer net for cash acquired - -32 -32

Changes in investments in associates and joint ventures 3 111 93

Changes in long-term loan receivables -2 51 56

Dividend received - 22 22

Net cash flow from investing activities -1 865 -1 081 -1 740

Cash flow from financing activities

Proceeds from new interest-bearing borrowings 1 481 750 1 250

Repayment of interest-bearing debt -1 050 -2 277 -2 364

Proceeds from sale of market-based securities 306 184 305

Purchase of market-based securities -302 -167 -336

Dividends paid -315 -132 -132

Net cash-flow from financing activities 120 -1 642 -1 277

Net cash flow for the period -625 142 787

Cash and cash equivalents at the start of the period 1 129 342 342

Cash and cash equivalents at the close of the period 504 484 1 129

Included under the item cash and cash equivalents as at 30 September 2011 are reserved tax withholdings to the amount of NOK 49 million in the Group.

Unused credit facilities of NOK 3 500 million are not included in cash and cash equivalents above.

Statnett Group

Note 1 – Accounting PrinciplesThe interim accounts for the third quarter of 2011 have been presented in accordance with IAS 34. The interim accounts do not contain all the additional information required in the annual accounts, and should therefore be read in the context of the consoli-dated accounts presented on 31 December 2010.

The accounting principles that have been applied for the interim accounts for the third quarter of 2011 are consistent with the accounting principles that were applied for the consolidated accounts presented on 31 December 2010.


StatnettHusebybakken 28B, OsloPO Box 5192 MajorstuenN-0302 Oslo

Telephone: +47 23 90 30 00Fax: +47 22 52 70 01www.statnett.no

Documents

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