Annual Report 2014 | Suomeksi |

20 Participations in associated companies and joint ventures

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Accounting policies + -
The Group’s interests in associated companies and jointly controlled entities are accounted for using the equity method of accounting. Assets acquired and liabilities assumed in the investment in associates or joint ventures are measured initially at their fair values at the acquisition date. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the associate or joint venture acquired, the difference is recognised directly in the income statement.
The Group’s share of its associates or joint ventures post‑acquisition profits or losses after tax and the expenses related to the adjustments to the fair values of the assets and liabilities assumed are recognised in the income statement. The cumulative post‑acquisition movements are adjusted against the carrying amount of the investment. The Group's share of post‑acquisition adjustments to associates or joint ventures equity that has not been recognised in the associates or joint ventures income statement, is recognised directly in Group's shareholder's equity and against the carrying amount of the investment.
When the Group’s share of losses in an associate or a joint venture equals or exceeds its interest in the associate or joint venture, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate or joint venture.
Unrealised gains on transactions between the Group and its associates or joint ventures are eliminated to the extent of the Group’s interest in the associate or joint venture. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates or joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group.
If more recent information is not available, the share of the profit of certain associated or joint venture companies is included in the consolidated accounts based on the latest available information.
Critical accounting estimates and judgements + -
Management is required to make significant judgements when assessing the nature of Fortum's interest in its investees and when considering the classification of Fortum's joint arrangements. In the classification, emphasis has been put on decision‑making, legal structure and financing of the arrangements.
20.1 Principal associated companies and joint ventures
OKG AB Forsmarks Kraftgrupp AB Kemijoki Oy Hafslund ASA TGC‑1 TVO Fortum Värme
Nature of the relationship Power production company Power production company Power production company Holding in energy company (listed) Holding in energy company (listed) Power production company Holding in power and heat company
Classification Associated company Associated company Associated company Associated company Associated company Joint venture Joint venture
Segment Power and Technology Power and Technology Power and Technology Other Russia Power and Technology Heat, Electricity Sales and Solutions
Domicile Sweden Sweden Finland Norway Russia Finland Sweden
Ownership interest, % 1) 46 26 59 34 29 26 50
Votes, % 46 26 18 33 29 26 50
1) Kemijoki and TVO have different series of shares. The ownership interest varies due to the changes in equity assigned to the different share series. The ownership interests for 2013 for Kemijoki Oy and TVO were 59% and 26% respectively.
Shareholdings in power production companies
Power plants are often built jointly with other power producers. Under the consortium agreements, each owner is entitled to electricity in proportion to its share of ownership or other agreements and each owner is liable for an equivalent portion of costs. The production companies are not profit making, since the owners purchase electricity at production cost including interest cost and production taxes. The share of profit of these companies is mainly IFRS adjustments (e.g. accounting for nuclear related assets and liabilities) and depreciations on fair value adjustments from historical acquisitions since the companies are not profit making under local accounting principles.
Fortum has material shareholdings in such power production companies (mainly nuclear and hydro) that are consolidated using equity method either as associated companies (OKG AB, Forsmarks Kraftgrupp AB and Kemijoki Oy) or in some cases as joint ventures (Teollisuuden Voima Oyj (TVO)).
In Sweden nuclear production company shareholdings are 45.5% ownership of the shares in OKG AB and 25.5% ownership of the shares in Forsmarks Kraftgrupp AB. Excluding non‑controlling interests in the subsidiaries, Fortum’s participation in the companies are 43.4% and 22.2% respectively, which reflects the share of electricity produced that Fortum can sell further to the market. The minority part of the electricity purchased is invoiced further to each minority owner according to their respective shareholding and treated as pass‑through. OKG AB and Forsmarks Kraftgrupp AB are accounted for as associated companies as Fortum has a representation on the Board of Directors and it participates in policy‑making processes of the companies.
In Finland Fortum has an ownership in power production company TVO that has three series of shares which entitle the shareholders to electricity produced in the different power plants owned by TVO.
Shares in series A entitle to electricity produced in nuclear power plants Olkiluoto 1 and 2 and Fortum owns 26.6% of these shares. Series B entitles to electricity in the nuclear power plant presently being built, Olkiluoto 3, and Fortum's ownership in this share series is 25%. Series C entitles to electricity produced in TVO’s share of the thermal power plant Meri‑Pori. The Meri‑Pori power plant is accounted for as a joint operation in Fortum. Fortum accounts for its 54.55% of the assets and TVO for 45.45%.
See also Joint operation in Note 19 Property, plant and equipment.
The most significant hydro production company shareholding is 63.8% of the hydro shares and 15.4% of the monetary shares in Kemijoki Oy. Each owner of hydro shares is entitled to the hydropower production in proportion to its hydro shareholding. Since Fortum has a representation on the Board of Directors and it participates in the policy‑making processes, Kemijoki Oy is accounted for as an associated company.
Other shareholdings accounted for using the equity method
In Sweden Fortum has a 50.1% ownership in AB Fortum Värme Holding samägt med Stockholms stad (Fortum Värme). Fortum Värme is a district heating company, producing heat and power with CHP plants in Stockholm area, that is co‑owned with the City of Stockholm. The shareholding is accounted for as a joint venture as according to the shareholders agreement control is shared.
Fortum owns shareholdings in listed companies such as Hafslund ASA and Territorial Generating Company 1 (TGC‑1). The shareholdings are accounted for as associated companies as Fortum has representatives in the Board of Directors of the companies. The share of profit of these companies is accounted for based on previous quarter information since updated interim information is not normally available.
Participations in associated companies and joint ventures in the balance sheet
EUR million 2014 2013
Principal associates 1,074 1,263
Principal joint ventures 730 721
Other associates 42 226
Other joint ventures 182 132
Carrying amount 31 December 2,027 2,341
Changes in participation during the year
EUR million Joint ventures 2014 Associated companies 2014 Joint ventures 2013 Associated companies 2013
Historical cost
1 January 518 1,130 529 1,270
Translation differences and other adjustments ‑11 ‑166 ‑7 ‑88
Acquisitions 36 26 0 0
Reclassifications 5 ‑9 0 ‑6
Divestments ‑3 ‑143 ‑4 ‑45
Historical cost 31 December 546 838 518 1,130
Equity adjustments
1 January 334 359 270 305
Translation differences and other adjustments ‑23 ‑71 ‑17 ‑15
Share of profits of associates and joint ventures 76 72 92 86
Reclassifications 12 ‑7 0 6
Divestments 0 ‑36 0 ‑16
Dividends received ‑27 ‑30 ‑24 ‑49
OCI items associated companies ‑6 ‑10 13 42
Equity adjustments 31 December 366 277 334 359
Carrying amount at 31 December 912 1,115 853 1,489
Share of profit of associates and joint ventures
EUR million 2014 2013
Principal associates
OKG AB 5 13
Forsmarks Kraftgrupp AB ‑9 ‑4
Kemijoki Oy ‑5 ‑8
Hafslund ASA 36 31
TGC‑1 35 46
Principal associates, total 61 78
Principal joint ventures
Fortum Värme 67 73
TVO ‑4 12
Principal joint ventures, total 64 84
Other associates 11 8
Other joint ventures 12 7
Total 149 178
The unrecognized share of losses of associated companies and joint ventures (for the reporting period and cumulatively) is zero.
Share of profits from Teollisuuden Voima Oyj, Forsmarks Kraftgrupp AB and OKG AB includes EUR 2 million (2013: 17) arising from accounting of nuclear related assets and liabilities.
20.2 Investments in associated companies and joint ventures
During 2014 Fortum has acquired additional shares in its associated company, Territorial Generating Company 1. After the acquisition Fortum owns 29.45% of the shares in TGC‑1.
In July 2014 Fortum acquired 33.66% in AS Eesti Gaas and a similar shareholding in AS Võrguteenus Valdus. The acquired shares increased Fortum's holding in both companies to approximately 51%. Fortum continues to account for its holdings in the Estonian natural gas businesses using the equity method.
There were no material investments in associated companies or joint ventures during 2013.
See also Note 8 Acquisitions and disposals.
20.3 Divestments of associated companies and joint ventures
In November Fortum’s Heat, Electricity Sales and Solutions segment sold its 31% shareholding in the Finnish natural gas company Gasum Oy.
During the first quarter 2014 Power and Technology segment divested Fortum's 30% shareholding in its associated company Karlshamn Kraft AB.
In June 2013, Fortum agreed to sell its 47.9% ownership in the Swedish energy associate Härjeåns Kraft AB. The transaction was completed in July.
In July 2013 Fortum completed the divestment of its 33% holding in associated company Infratek ASA.
See also Note 8 Acquisitions and disposals.
Summarised financial information of the principal associated companies in 2014
EUR million OKG AB Forsmarks Kraftgrupp AB Kemijoki Oy Hafslund ASA TGC‑1
Balance sheet 31 Dec 2013 31 Dec 2013 31 Dec 2013 30 Sept 2014 30 Sept 2014
Non‑current assets 2,200 2,094 449 2,426 1,814
Current assets 462 488 9 406 259
Non‑current liabilities 2,552 2,348 279 1,452 481
Current liabilities 97 197 90 532 205
Equity 13 37 88 849 1,388
Attributable to NCI 2 118
Attributable to the owners of the parent 13 37 88 847 1,270
Statement of comprehensive income 1 Jan 2013 ‑
31 Dec 2013
1 Jan 2013 ‑
31 Dec 2013
1 Jan 2013 ‑
31 Dec 2013
1 Oct 2013 ‑
30 Sep 2014
1 Oct 2013 ‑
30 Sep 2014
Revenue 568 727 57 1,481 1,357
Profit or loss from continuing operations 1 1 ‑7 120 126
Other comprehensive income ‑23
Total comprehensive income 1 1 ‑7 96 126
Attributable to NCI 8
Attributable to the owners of the parent 1 1 ‑7 96 118
Reconciliation to carrying amount in the Fortum group
Group's interest in the equity of the associate at 1 January 8 10 57 298 489
Change in share of profit and from OCI items ‑5 33 35
Dividends received ‑20 ‑4
Acquisitions 52
Translation differences and other adjustments ‑2 ‑23 ‑198
Group's interest in the equity of the associate at 31 December 6 9 52 289 374
Fair values on acquisitions and different accounting principles 145 79 158 11 ‑48
Carrying amount at 31 December 151 88 210 299 326
Market value for listed shares 1) 373 71
1) The market quotation for the TGC‑1 share is affected by the low liquidity of the TGC‑1 shares in the Russian stock exchanges. During 2014 trading volumes of TGC‑1 shares in relation to the number of shares of the company were approximately 9% (2013: 10%).
Summarised financial information of the principal associated companies in 2013
EUR million OKG AB Forsmarks Kraftgrupp AB Kemijoki Oy Hafslund ASA TGC‑1
Balance sheet 31 Dec 2012 31 Dec 2012 31 Dec 2012 30 Sept 2013 30 Sept 2013
Non‑current assets 2,191 2,061 453 2,482 2,878
Current assets 429 512 9 388 366
Non‑current liabilities 2,480 2,284 237 1,447 732
Current liabilities 121 251 129 545 427
Equity 18 38 96 877 2,085
Attributable to NCI 2 179
Attributable to the owners of the parent 18 38 96 875 1,906
Statement of comprehensive income 1 Jan 2012 ‑
31 Dec 2012
1 Jan 2012 ‑
31 Dec 2012
1 Jan 2012 ‑
31 Dec 2012
1 Oct 2012 ‑
30 Sep 2013
1 Oct 2012 ‑
30 Sep 2013
Revenue 594 753 56 1,634 1,641
Profit or loss from continuing operations 6 ‑8 95 167
Other comprehensive income ‑2 0
Total comprehensive income 6 ‑8 92 167
Attributable to NCI 8
Attributable to the owners of the parent 6 ‑8 92 159
Reconciliation to carrying amount in the Fortum group
Group's interest in the equity of the associate at 1 January 6 10 63 305 510
Change in share of profit and from OCI items 3 ‑6 52 46
Dividends received ‑3 ‑21 ‑3
Translation differences and other adjustments 2 ‑38 ‑64
Group's interest in the equity of the associate at 31 December 8 10 57 298 489
Fair values on acquisitions and different accounting principles 176 68 158 24 ‑26
Carrying amount at 31 December 184 78 215 323 463
Market value for listed shares 369 145
Summarised financial information of the principal joint ventures in 2014 and 2013
2014 2013
EUR million TVO Fortum
Värme
TVO Fortum
Värme
Balance sheet 30 Sept 2014 31 Dec 2014 30 Sept 2013 31 Dec 2013
Non‑current assets 6,567 2,552 6,218 2,490
Current assets 423 313 507 322
of which cash and cash equivalents 128 6 220 3
Non‑current liabilities 4,994 1,362 4,870 1,266
of which non‑current interest‑bearing liabilities 4,078 995 3,982 906
Current liabilities 516 432 387 471
of which current financial liabilities 351 298 180 301
Equity 1) 1,480 1,071 1,468 1,074
Attributable to NCI 1
Attributable to the shareholders of the company 1,480 1,071 1,468 1,073
Statement of comprehensive income 1 Oct 2013 ‑
30 Sep 2014
1 Jan 2014 ‑
31 Dec 2014
1 Oct 2012 ‑
30 Sep 2013
1 Jan 2013 ‑
31 Dec 2013
Revenue 353 716 386 807
Depreciation and amortisation ‑58 ‑128 ‑57 ‑124
Interest income 23 1 36 1
Interest expense ‑67 ‑28 ‑64 ‑29
Income tax expense or income ‑30 ‑33
Profit or loss from continuing operations 4 126 36 136
Other comprehensive income 12 ‑22 12 20
Total comprehensive income 16 104 48 157
Attributable to NCI 1
Attributable to the shareholders of the company 16 104 48 155
Reconciliation to carrying amount in the Fortum group
Group's interest in the equity of the joint venture at 1 January 289 537 277 498
Change in share of profit and from OCI items 3 53 12 78
Dividends received ‑22 ‑23
Translation differences and other adjustments ‑32 ‑16
Group's interest in the equity of the joint venture at 31 December 292 535 289 537
Fair values on acquisitions and different accounting principles ‑7 ‑91 ‑5 ‑101
Carrying amount at 31 December 285 445 284 436
1) The equity of TVO includes subordinated loans of EUR 339 million (2013: 339). Fortum has given part of these loans, pro rata to the ownership.
See also Associated companies in Note 39 Legal actions and official proceedings.
See Note 30 Nuclear related assets and liabilities.
20.4 Transactions and balances
Associated company transactions
EUR million 2014 2013
Sales to associated companies 1 0
Interest on associated company loan receivables 31 28
Purchases from associated companies 483 539
Purchases from associated companies include mainly purchases of nuclear and hydro power at production cost including interest costs and production taxes.
Associated company balances
EUR million 2014 2013
Receivables from associated companies
Long‑term interest‑bearing loan receivables 1,327 1,320
Trade receivables 1 0
Other receivables 0 12
Liabilities to associated companies
Long‑term loan payables 1 0
Trade payables 1 10
Other payables 0 0
For more info about receivables from associated companies, please see note 22 Long‑term and short‑term interest‑bearing receivables.
Joint venture transactions
EUR million 2014 2013
Sales to joint ventures 82 94
Interest on joint venture loan receivables 28 34
Purchases from joint ventures 85 113
Purchases from joint ventures include mainly purchases of nuclear and hydro power at production cost including interest costs and production taxes.
Joint venture balances
EUR million 2014 2013
Receivables from joint ventures
Long‑term interest‑bearing loan receivables 714 1,267
Trade receivables 17 27
Other receivables 15 20
Liabilities to joint ventures
Long‑term loan payables 261 248
Trade payables 5 6
Other payables 4 3
For more info about receivables from joint ventures, please see note 22 Long‑term and short‑term interest‑bearing receivables.

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