Interim financial report Q3 v21

Interim financial report First nine months 2018

Contents Management’s review CEO’s review At a glance Outlook Results Q3 Results 9M Business units’ results Performance highlights Quarterly overview

3 5 6 7 8 11 16 17

Management statement Management statement Forward-looking statements

18 26

40 41

Capital Markets Day On 28 November at 9:00am CET we will host a capital markets day for our investors at our office in Gentofte, Denmark.

FURTHER INFORMATION

Media Relations

Investor Relations

Martin Barlebo

Daniel Lerup

+45 9955 9552

+45 9955 5935

Denmark: +45 3544 5583 International: +44 203 194 0544 USA: +1 855 269 2604 The conference call can be followed live at:

Financial statements Consolidated interim financial statement Notes

CONFERENCE CALL In connection with the presentation of the interim financial report a conference call for investors and analysts will be held on Thursday 1 November 2018 at 10:00am CET:

www.orsted.com

orsted.eventcdn.net/20181101 Ørsted A/S Presentation slides will be available prior to the conference call at:

orsted.com/en/Investors/Reports-and-presentations/ Financial-reports-and-presentations The interim financial report can be downloaded at:

orsted.com/en/Investors/Reports-and-presentations/ Financial-reports-and-presentations

CVR no. 36213728 Kraftværksvej 53 7000 Fredericia Tel. +45 9955 1111

Language At the general meeting on 8 March 2018 it was resolved that, as of the financial year 2018, Ørsted will present its financial statements and interim financial reports in English only.

– interim financial report – 9M 2018

CEO’s review — first nine months Solid growth in operating earnings and strengthened strategic platform

– – – – – – – – –

Operating profit (EBITDA) increased by 14% and totalled DKK 10.8 billion. Operating profits from offshore wind farms in operation increased by 32%. Full-year operating profit guidance increased by DKK 0.5 billion to DKK 13-14 billion. Green share of generation increased from 59% to 71%. Borkum Riffgrund 2 in Germany expected to be commissioned ahead of schedule. Acquisition of the US onshore wind company Lincoln Clean Energy closed. Agreement to acquire US based offshore wind developer Deepwater Wind. Farm-down of 50% of Hornsea 1 signed. Decision in the Elsam-case in favour of Ørsted.

Financial results Operating profit (EBITDA) for the first nine months of the year increased by 14% and amounted to DKK 10.8 billion. The results were driven mainly by higher generation from our offshore wind farms in operation. The newly commissioned offshore wind farms, Race Bank and Walney Extension, contributed to a 32% increase in EBITDA from our sites. Income from partnerships in Offshore Wind was slightly lower than in 9M 2017, which was positively affected by a deferred gain of DKK 1.4 billion from the 2016 Race Bank farmdown. Income from partnerships in 9M 2018 was mainly related to the construction of Walney Extension and Borkum Riffgrund 2. Bioenergy also contributed to the positive development due to improved spreads and


the bioconversion of Skærbæk Power Station, which was inaugurated in Q4 2017. Operating profit in Customer Solutions decreased slightly. Slightly lower earnings in Distribution were offset by higher than expected performance in both the Markets and LNG business, mainly from the increasing gas prices. The positive effect from the increasing gas prices is to a large extent expected to reverse in 2019 or later this year.

remaining construction portfolio due to timing across years.

auctions under the contracts for difference (CfD) scheme.

Offshore Wind Our offshore wind construction projects continue to progress according to plan.

In Taiwan, we are working on maturing our projects in the Greater Changhua area, and we are entering into contracts with local suppliers on an ongoing basis. In October, we selected Siemens Gamesa Renewable Energy (SGRE) as exclusive supplier of approx. 112 8MW wind turbines. As part of the contractual agreement SGRE has committed to establishing a local nacelle assembly facility at Taichung Harbour by 2021. Subject to final investment decision, expectedly in March 2019, the 900MW project comprising Changhua 1 & 2a is expected to be operational by late 2021.

We have had good progress with the construction of the German Borkum Riffgrund 2 wind farm and expect to have commissioned all turbines in the coming month, well ahead of schedule. The 450MW wind farm is located in the German part of the North Sea and will supply more than 450,000 German homes with green power.

Return on capital employed for the last 12 months increased from 15% in 9M 2017 to 23% in 9M 2018. We have increased our EBITDA (business performance) guidance excluding new partnership agreements by DKK 0.5 billion to DKK 13-14 billion. The increase is primarily due to good progress on our offshore construction projects, which is expected to result in higher earnings on our construction agreements and a faster ramp-up of generation from Borkum Riffgrund 2 and higher than expected earnings in our gas portfolio and LNG business. The Lincoln Clean Energy acquisition will only have a limited impact on EBITDA in 2018.

In September, we signed an agreement to farm down 50% of Hornsea 1 to Global Infrastructure Partners, and we expect to close the transaction within the coming weeks. As part of the agreement, we will provide longterm operations and maintenance services (O&M) as well as a route to market for the power generated by Hornsea 1. The farmdown is one of the largest renewable energy M&A transactions of all time and included the largest single-project renewable energy financing to date. The valuation underpins the attractiveness of our offshore wind assets.

Our full-year EBITDA for 2018, including the profit from the Hornsea 1 partnership, is expected to be significantly higher than the 2017 EBITDA level of DKK 22.5 billion.

In October, The Crown Estate in the UK confirmed that we have satisfied the application criteria for the development of our Race Bank Extension Offshore Wind Farm, which expectedly will have a capacity of 573MW. The project will now be subject to a planlevel Habitats Regulations Assessment (HRA) undertaken by The Crown Estate over the next six to nine months. Subject to all necessary consents being granted, Race Bank Extension will be able to participate in future

On 8 October, we increased our gross investment guidance from DKK 16-18 billion to DKK 23-25 billion following the agreement to acquire Deepwater Wind. The guidance includes the acquisition price of Deepwater Wind, early investment commitments for the US offshore and onshore wind portfolio in Q4 2018, as well as increased spending in the

3

In the US, we submitted a bid in the clean energy auction in Connecticut in September together with our partner Eversource Energy. The auction caters to all zero-carbon technologies, including nuclear, and it is as such uncertain how much, if any, capacity will be allocated to offshore wind. We expect to receive the outcome of the auction before the end of the year. On 8 October 2018, we announced that we have entered into an agreement to acquire Deepwater Wind at a price of USD 510 million (enterprise value of USD 700 million). The transaction is subject to clearance by the US competition authorities and is expected to close before the end of 2018. Deepwater Wind is the leading US-based offshore wind developer with an attractive and geographically diverse portfolio of projects along the US East Coast. The total potential capacity of approx 3.3GW consists of 30MW in operation, 810MW of offshore wind development

Management’s review

CEO’s review — first nine months continued projects with long-term revenue contracts in place or under negotiation, and approx 2.5GW which potentially can be developed in three awarded lease areas. Ørsted’s current US offshore wind portfolio has a total capacity of approx 5.5GW comprising up to 2GW of development rights at the Bay State Wind site off the coast of Massachusetts, up to 3.5GW of development rights at the Ocean Wind site off the coast of New Jersey, and two 6MW wind turbines in Virginia for phase one of Dominion Energy’s Coastal Virginia Offshore Wind Project. Ørsted has exclusive rights with Dominion Energy to discuss the potential development of up to 2GW of offshore wind capacity. Deepwater Wind’s and Ørsted’s US-based assets and organisations will be merged into the leading US offshore wind platform with the most comprehensive geographic coverage and the largest pipeline of development capacity. With the combined organisation and asset portfolio, Ørsted will be able to deliver clean energy to the eight states on the US East Coast that have already committed to build more than 10GW of offshore wind capacity by 2030.

decided that the Danish competition authorities will not be given permission to try the ruling by the High Court of Western Denmark on 24 May at the Supreme Court level. The High Court of Western Denmark found that Elsam, one of the six companies that merged into DONG Energy, now Ørsted, back in 2006, had not abused its dominant market position in 2005 and the first half of 2006. This decision is now final. We are pleased that we can put this court case behind us and move forward. We are now awaiting the development in the Elsam competition case for the period 2003 to 2004 and the related compensation case.

Onshore wind will be run and reported as a separate business unit within the Ørsted Group. At the same time, we have changed the names of our existing business units to Offshore Wind (formerly Wind Power), Bioenergy (formerly Bioenergy & Thermal Power) and Customer Solutions (formerly Distribution & Customer Solutions).

At the end of September, 545,000 smart meters installed by Radius and Kamstrup were in use at our power distribution customers. This is a significant milestone marking that we are now more than half-way through replacing the meters at all our customers by the end of 2019.

”

On 8 October 2018 we announced that we have entered into an agreement to acquire Deepwater Wind. Deepwater Wind’s and Ørsted’s US based assets and organisations will be merged into the leading US offshore wind platform with the most comprehensive geographic coverage and the largest pipeline of development capacity.

We remain very pleased with the operational and financial performance of the company as we continue to expand our position as a leading company in the global green energy industry.

Our Customer Solutions business has signed a 15-year agreement with innogy to balance the power generation from innogy’s 860MW offshore wind farm, Triton Knoll, in the UK. Under the agreement, Ørsted will sell the expected generation from the wind farm on the power market on a day-ahead basis and handle any deviations between the expected and actual generation the following day.

Utility business In June, we announced our plans to divest our Danish power distribution and residential customer businesses. We have seen good interest from the market and the preparations are progressing according to plan.

Lincoln Clean Energy On 1 October, we closed the acquisition of the US-based onshore wind company, Lincoln Clean Energy (LCE).

On 25 October, the Danish Appeals Permission Board ruled in favour of Ørsted and

Construction of the 300MW Tahoka wind farm is nearing completion. All wind turbines


have been installed and the project is currently being commissioned. By the end of the year, LCE will have an operational onshore wind capacity of 803MW. In addition, LCE has a portfolio of 700MW of capacity in advanced stages of development that can enter into construction during the coming year.

Henrik Poulsen CEO and President

4


2017

2018

71 59

93

Wind speed

93

Availability

Outlook 2018 Guidance 1 Nov. 2018

Guidance 8 Oct. 2018

Guidance 9 Aug. 2018

Guidance 20 Apr. 2018

Guidance 2 Feb. 2018

2017 realised

13-14

12.5-13.5

12.5-13.5

12.5-13.5

12-13

12.7

Offshore Wind (without new partnerships)*

Higher

Higher

Higher

Higher

Higher

10.8

Bioenergy

Higher

Higher

Higher

Higher

Higher

0.2 2.1 17.7

Outlook for 2018, DKK bn. EBITDA (without new partnerships)*

Customer Solutions Gross investments

In line

Lower

Lower

Lower

Significantly lower

23-25

23-25

16-18

16-18

16-18

Our EBITDA guidance for the Group is the prevailing guidance, whereas the directional earnings development per business unit serves as a means to support this. Higher/lower indicates the direction of the business unit's earnings relative to the results for 2017. * EBITDA excluding new partnership agreements closed later than 1 January 2018 (2017)

EBITDA We have increased our EBITDA (business performance) guidance excluding new partnership agreements by DKK 0.5 billion to DKK 13-14 billion. The increase is primarily due to good progress on our offshore construction projects, which will result in higher earnings on our construction agreements and a faster ramp-up of generation from Borkum Riffgrund 2 and higher than expected performance in our gas portfolio and LNG business. The Lincoln Clean Energy acquisition will only have a limited impact on operating profit in 2018.

Gross investments On 8 October, we increased our gross investment guidance from DKK 16-18 billion to DKK 23-25 billion following the agreement to acquire Deepwater Wind. The guidance includes the acquisition price of Deepwater Wind, early investment commitments for the US offshore and onshore wind portfolio in Q4 2018, as well as increased spending in the remaining construction portfolio due to timing across years.

Furthermore, our full-year EBITDA for 2018, including the profit from the Hornsea 1 partnership, is expected to be significantly higher than the 2017 EBITDA level of DKK 22.5 billion.


6


Results Q3 EBITDA Operating profit (EBITDA) totalled DKK 2.2 billion in Q3 2018 compared with DKK 1.8 billion in Q3 2017. The increase was driven by 31% higher earnings from offshore wind farms in operation relative to Q3 2017. This was due to ramp-up of the new offshore wind farms Walney Extension and Race Bank in the UK. In addition, earnings from our Markets and LNG business also contributed positively to the results. Higher margins in LNG was mainly due to utilisation of location spreads and optimisation of physical positions. Our Markets business had higher earnings mainly as a result of higher gas prices in Q3 2018. The increasing gas prices at the end of Q3 2018 led to an increase in the accounting value of our gas inventories and thus a positive EBITDA effect in Markets. All else being equal, this will lead to an offsetting negative effect in 2019 when we sell the gas. Furthermore, earnings in the Markets business in Q3 2018, was positively affected by the fact that the gas prices have increased since we hedged the price of the gas purchased in Q3. The gas was placed at our storage facilities with the intention to sell it in Q1 2019. The current gas prices (including forward prices for Q1 2019) are higher than both the hedged gas purchase prices in Q3 2018 and hedged gas sales prices in Q1 2019. This led to a gain in Q3 2018, when we bought the gas, and will expectedly lead to a loss in Q1 2019 when we sell the gas.

Profit for the period from continuing operations Profit for the period from continuing operations increased by DKK 0.2 billion to DKK 0.4 – interim financial report – 9M 2018

billion. The increase was mainly due to the higher EBITDA, partly offset by a negative effect from exchange rate adjustments and higher interest expenses. The latter was mainly due to a lower level of capitalised interests following the completion of the Walney Extension and Race Bank projects.

Cash flows from operating activities Cash flow from operating activities totalled DKK -0.1 billion in Q3 2018 compared with DKK -1.1 billion in Q3 2017. The increase of DKK 1.0 billion was due to the higher EBITDA and less funds tied up in work in progress mainly due to received milestone payments from partners in Q3 2018. This was partly offset by higher receivables as a result of higher generation from our offshore wind farms and higher value of gas at storages due to the increasing gas prices.

Financial results, DKKm Revenue EBITDA Depreciation EBIT Gain (loss) on divestment of enterprises Profit (loss) from associates and joint ventures Financial items, net Profit (loss) before tax Tax on profit (loss) for the period Tax rate Profit (loss) for the period, continuing operations Profit (loss) for the period, discont. operations Profit (loss) for the period

Q3 2018 15,018 2,225 (1,437) 788 181 2 (436) 535 (117) 22% 418 (13) 405

Q3 2017 11,869 1,757 (1,385) 372 (108) (7) 22 279 (70) 25% 209 2,931 3,140

Cash flow and net debt, DKKm

Q3 2018

Q3 2017

%

(117)

(1,095)

(89%)

2,225

1,757

27%

741

304

144%

Cash flows from operating activities EBITDA Derivatives

Gross investments

Changes in provisions

Gross investments amounted to DKK 4.4 billion in Q3 2018, 84% of which concerned investments in Offshore Wind. The main investments related to Hornsea 1, Borssele 1 & 2 and Borkum Riffgrund 2.

(237)

(50)

374%

Reversal of gain (loss) on sale of assets

26

52

(50%)

Other items

18

(158)

n.a.

(304)

344

n.a.

(14)

(17)

(18%) (59%)

Interest expense, net Paid tax Change in work in progress Change in other working capital

Divestments Divestments amounted to DKK 0.4 billion in Q3 2018 and related mainly to the divestment of our 50% ownership share in the Dutch gas-fired power plant Enecogen. Divestments in Q3 2017 concerned A2SEA and the receipt of a deferred payment related to the farm-down of Race Bank.

Gross investments

(879)

(2,153)

(1,693)

(1,174)

44%

(4,385)

(5,150)

(15%) (80%)

380

1,882

Free cash flow

(4,122)

(4,363)

(6%)

Net debt, beginning of period

4,603

10,332

(55%)

4,122

4,363

(6%)

1

(4,010)

n.a.

Dividends and hybrid coupon paid

138

289

(52%)

Cash flow from assets held for sale

38

28

36%

0

(1,014)

n.a.

55

272

(80%)

8,957

10,260

(13%)

Divestments

Free cash flow from continuing operations Free cash flow from discontinued operations

Interest bearing receivable re. O&G divestment Exchange rate adjustments, etc. Net debt, end of period

7

% 27% 27% 4% 112% n.a. n.a. n.a. 92% 67% (3%p) 100% n.a. (87%)


Results 9M Financial results Revenue Power generation from offshore wind increased by 20% to 6.7TWh in 9M 2018 due to the ramp-up of generation from Race Bank and Walney Extension. Thermal power generation was 17% lower than in 9M 2017 and amounted to 4.9TWh, while heat generation decreased by 3% to 6.0TWh in 9M 2018. Offshore wind power accounted for 58% of our total power generation, while the renewable energy share of our total heat and power generation accounted for 71% in 9M 2018 compared with 59% in the same period in 2017. Revenue amounted to DKK 53.4 billion. The increase of 22% relative to 9M 2017 was primarily due to higher revenue from construction agreements due to high activity on construction of offshore wind farms for partners, higher revenue from wind farms in operation and higher gas and power prices in 9M 2018.

Financial results, DKKm Revenue EBITDA Depreciation EBIT Gain (loss) on divestment of enterprises Profit (loss) from associates and joint ventures Financial items, net Profit before tax Tax on profit (loss) for the period Tax rate Profit (loss) for the period, continuing operations Profit (loss) for the period, discont. operations* Profit (loss) for the period


EBITDA Operating profit (EBITDA) totalled DKK 10.8 billion compared with DKK 9.5 billion in 9M 2017. The 14% increase was driven by the higher generation from the offshore wind farms in operation.

EBITDA, DKK billion EBITDA Of which existing partnerships

Earnings from our Bioenergy business increased by DKK 0.3 billion due to higher spreads as well as the bioconversion of Skærbæk Power Station, which was inaugurated in Q4 2017. Despite a high level of activity on the Walney Extension and Borkum Riffgrund 2 construction projects, earnings from construction agreements were DKK 0.3 billion lower than in 9M 2017. This was due to a deferred gain of DKK 1.4 billion in 9M 2017 related to the farmdown of 50% of Race Bank. EBITDA from Markets was slightly up compared to 9M 2017. The net increase was due to a one-off compensation awarded following the completion of an arbitration relating to a gas purchase contract in Q1 2018, higher gas prices and higher margins achieved in our UK power portfolio. The positive effect from the higher gas prices are expected to have an offsetting effect in 2019 when we sell the gas. In addition, there were higher margins in LNG mainly due to utilisation of location spreads and optimisation of physical positions. This was partly offset by the extraordinarily high earnings related to trading of our financial energy exposures in 9M 2017.

Earnings from Customer Solutions decreased by DKK 0.1 billion, mainly due to slightly lower earnings in Distribution from lower volumes transported as a result of the warm weather.

9M 2018 53,419 10,823 (4,281) 6,542 155 4 (1,235) 5,466 (1,140) 21% 4,326 (24) 4,302

9M 2017 43,906 9,487 (4,222) 5,265 (125) (52) (393) 4,695 (766) 16% 3,929 6,841 10,770

% 22% 14% 1% 24% n.a. n.a. 214% 16% 49% 5%p 10% n.a. (60%)

* Read more about discontinued operations in note 8.

EBIT EBIT increased by DKK 1.3 billion to DKK 6.5 billion in 9M 2018, primarily as a result of the higher EBITDA. 8

Business performance vs. IFRS We use business performance as an alternative to the results prepared in accordance with IFRS. Business performance represents the underlying financial performance of the Group in the reporting period as results are adjusted for temporary fluctuations in the market value of contracts (including hedging transactions) relating to other periods. The difference between the two principles will be eliminated as the contracts expire. Apart from this, there is no difference between business performance and the IFRS results. EBITDA in accordance with IFRS amounted to DKK 7.6 billion in 9M 2018 against DKK 10.3 billion in the same period in 2017. In accordance with the business performance principle, EBITDA was DKK 10.8 billion and DKK 9.5 billion, respectively. The difference between the two principles was thus DKK -3.3 billion in 9M 2018 against DKK 0.8 billion in 9M 2017.

Business performance VS IFRS

9M 2018 9M 2017

EBITDA - BP

10,823

Adjustments

(3,246)

9,487 776

EBITDA - IFRS

7,577

10,263

In the presentation of the results according to IFRS, we have elected not to apply the provisions on hedge accounting of commodities and related currency exposures. The market value adjustments of these are continuously recognised in the income statement, which means that the IFRS results for the individual years are not comparable. IFRS results do not reflect the commercial risk hedging, according to which the business units and the Group are managed and evaluated. In the management's review, comments are made on business performance only.


Results 9M continued Financial income and expenses Net financial income and expenses amounted to DKK -1.2 billion and were DKK 0.8 billion higher than the same period last year. The increase was due to a lower level of capitalised interests mainly at Walney Extension and Race Bank due to progress on the projects and negative effect from exchange rate adjustments (gain in 2017 and loss in 2018).

Tax and tax rate Tax on profit for the period amounted to DKK 1.1 billion, which was DKK 0.4 billion higher than in 9M 2017. The effective tax rate was 21% against 16% in the prior-year period (22% adjusted for the tax-exempted part of the Race Bank farm-down gain and the A2SEA divestment). Profit for the period from continuing operations Profit for the period from continuing operations totalled DKK 4.3 billion, DKK 0.4 billion higher than 9M 2017. The increase was primarily due to the higher EBIT partly offset by higher net finance cost and higher taxes.

Cash flows and net debt Cash flows from operating activities Cash flows from operating activities totalled DKK 2.8 billion in 9M 2018 compared with DKK -2.1 billion in 9M 2017. The increase of DKK 4.8 billion was due to the higher EBITDA, settlement of intra-group hedges related to the now divested oil and gas business having a negative effect in Q2 2017, and less funds tied up in work in progress and other working capital.

This was partly offset by higher paid tax in 9M 2018 as we chose to pay our taxes for 2018 on account in March instead of November. Paid taxes amounted to DKK 3.1 billion, including residual taxes of DKK 0.6 billion related to 2017.

9M 2018

9M 2017

%

2,778

(2,055)

n.a.

10,823

9,487

14%

1,027

(998)

n.a.

(156)

(363)

(57%)

Reversal of gain (loss) on sale of assets

90

(1,367)

n.a.

Other items

(6)

(36)

(83%)

Cash flows from operating activities EBITDA Derivatives Changes in provisions

Funds tied up in work in progress were DKK 2.9 billion lower than in 9M 2017. In 9M 2018, funds tied up in work in progress mainly related to the construction of Borkum Riffgrund 2 for partners and the offshore transmission asset at Hornsea 1, whereas we received milestone payments from partners related to the completion of Walney Extension, Race Bank and Borkum Riffgrund 2. In addition, we divested the transmission asset at Burbo Bank Extension. In 9M 2017, we tied up funds related to the construction of Burbo Bank Extension and Race Bank and offshore transmission assets at Walney Extension and Hornsea 1, whereas the milestone payments from partners came later in the year.

(944)

172

n.a.

Paid tax

(3,103)

(8)

n.a.

Change in work in progress

(3,049)

(5,936)

(49%)

Change in other working capital

(1,904)

(3,006)

(37%)

(9,565)

(11,939)

(20%)

Interest expense, net

Gross investments Divestments

1,201

2,107

(43%)

(5,586)

(11,887)

(53%)

Net debt, beginning of period

(1,517)

3,461

n.a.

Free cash flow from continuing operations

5,586

11,887

(53%)

128

(8,735)

n.a.

4,462

3,312

35%

75

147

(49%)

0

(1,014)

n.a.

223

1,202

(81%)

8,957

10,260

(13%)

Free cash flow

Free cash flow from discontinued operations Dividends and hybrid coupon paid Cash flow from assets held for sale Interest bearing receivable re. O&G divestment Exchange rate adjustments, etc. Net debt, end of period

cluding Hornsea 1 and Walney Extension in the UK, Borkum Riffgrund 2 in Germany and Borssele 1 & 2 in the Netherlands

Less funds were tied up in other working capital due to more funds tied up in clearing accounts in 9M 2017 mainly as a result of the transfer of the ineffective hedges from the now divested oil and gas business. In addition, there was a positive effect from less funds tied up in accounts receivables in 9M 2018. This was partly offset by repayment of a VAT loan to the Danish tax authorities in Q1 2018.

–

power stations (DKK 0.9 billion), mainly biomass conversion of Asnæs Power Station.

Cash flows from divestments in 9M 2018 related to the receipt of deferred proceeds from the farm-down of 50% of Walney Extension late 2017 and proceeds related to the divestment of our 50% ownership share in the Dutch gas-fired power plant Enecogen in July. Divestments in 9M 2017 related to A2SEA and receipt of deferred proceeds from the Race Bank farm-down.

Investments and divestments Gross investments amounted to DKK 9.6 billion against DKK 11.9 billion in 9M 2017. The main investments in 9M 2018 were:

– – interim financial report – 9M 2018

Cash flow and net debt, DKKm

offshore wind farms (DKK 7.9 billion), in9

Interest-bearing net debt Interest-bearing net debt totalled DKK 9.0 billion at the end of September 2018 against net cash of DKK 1.5 billion at the end of 2017. The DKK 10.5 billion increase was mainly due to dividend payment and paid hybrid coupon of DKK 4.5 billion and a negative free cash flow of DKK 5.6 billion.

Equity Equity was DKK 68.7 billion at the end of September 2018 against DKK 71.8 billion at the end of 2017. The decrease was due to the dividend payment, which was only partly offset by the profit for the period.


Results 9M continued Capital employed Capital employed was DKK 77.7 billion at 30 September 2018 against DKK 70.3 billion at the end of 2017 and DKK 74.5 billion at the end of September 2017. Offshore Wind’s share of capital employed was 84% at the end of 9M 2018. Capital employed, %

13%

Non-financial results

Key ratios, DKKm, %

9M 2018

9M 2017

%

Green share of heat and power generation The green share of heat and power generation amounted to 71% in 9M 2018, up 12 percentage points relative to the same period last year. The increase was due to a larger share of biomass-based generation as a result of the conversion of Skærbæk Power Station as well as increased generation from offshore wind farms.

ROCE1

23.0%

15.0%

8.0%p

Adjusted net debt

26,543

26,412

0%

42%

27%

15%p

FFO/adjusted net debt1 1) See page 29 in the annual report for 2017 for definitions.

3%

77.7 DKK billion 84%

Offshore Wind Bioenergy Customer Solutions

Key ratios Return on capital employed (ROCE) Return on capital employed (ROCE, last 12 months) was 23% at the end of 9M 2018, up 8 percentage points compared to the same period last year. The increase was mainly attributable to the higher EBIT over the 12month period, which was significantly impacted by the farm-down of Walney Extension and Borkum Riffgrund 2 at the end of 2017.

Carbon emissions Carbon emissions from our heat and power generation decreased to 153g CO2e/kWh in 9M 2018 against 172g CO2e/kWh in 9M 2017. The carbon emissions per kWh decreased for the same reasons as mentioned above. Safety In 9M 2018, we have had 79 total recordable injuries (TRIs), divided between 45 contractor injuries and 34 own employee injuries. This was a decrease of 24 injuries in total compared to the same period last year. Over the last 12 months, the total recordable injury rate (TRIR) decreased from 6.7 in 9M 2017 to 5.0 in 9M 2018.

Credit metric (FFO/adjusted net debt) The funds from operations (FFO)/adjusted net debt credit metric was 42% at the end of September 2018 against 27% in the same period last year. The increase was due to a higher FFO over the 12-month period.


10


Offshore Wind Highlights Q3 2018 – Borkum Riffgrund 2 in Germany expected to be commissioned ahead of schedule.

–

We signed the farm-down of Hornsea 1 in the UK, one of the largest renewable energy M&A transactions of all time. We expect to close the transaction within the coming weeks.

–

We received approval from The Crown Estate in the UK to progress with our Race Bank Extension Offshore Wind Farm project.

–

Financial results

2017 and amounted to DKK 2.0 billion. The increase was mainly due to ramp-up of Walney Extension and Race Bank, which led to a 31% increase in EBITDA from wind farms in operation compared to Q3 2017. This was partly offset by increased project development costs (included in Other).

Business drivers

Q3 2018 Q3 2017

8.9

0%

8.9

8.9

0%

5.1

3.8

34%

5.1

3.8

34%

Generation capacity, offshore wind

GW

2.9

2.3

26%

2.9

2.3

26%

Wind speed

m/s

7.7

7.9

(3%)

8.6

8.7

(2%)

Load factor

%

32

34

(2%p)

39

40

(1%p)

%

92

92

0%p

93

93

0%p

TWh

1.9

1.7

12%

6.7

5.6

20%

0.4

0.5

(20%)

1.5

1.7

(12%) 46%

United Kingdom Power price, LEBA UK Financial performance

EBITDA was DKK 0.3 billion higher than in Q3


1.2

0.9

33%

4.1

2.8

0.3

0.3

0%

1.1

1.1

0%

GBP/MWh

69.5

49.7

40%

63.5

51.0

25%

DKK/GBP

8.4

8.3

1%

8.4

8.5

(1%)

DKKm

34%

Germany British pound

Revenue totalled DKK 5.3 billion, 36% higher than in Q3 2017. Revenue from wind farms in operation increased by 26% due to the higher generation and a positive effect from new wind farms in the UK together with new O&M agreements, which was partly offset by slightly lower wind speed. The increasing UK power prices compared with Q3 2017, were to a large extent offset by hedges. Revenue from construction agreements increased due to a high level of activity at Borkum Riffgrund 2 in Q3 2018.

Revenue

5,304

3,913

36%

19,850

14,794

Sites, O&Ms and PPAs

2,866

2,281

26%

9,503

7,471

27%

Construction agreements*

2,407

1,566

54%

10,289

7,056

46% (78%)

Other incl. A2SEA EBITDA

DKKm

Sites, O&Ms and PPAs Construction agreements and divestment gains Other incl. A2SEA and project development

Divestments in Q3 2017 were related to Race Bank and A2SEA. There were no new divestments in Q3 2018.

66

(53%)

58

267

1,674

18%

9,018

8,004

13%

1,989

1,521

31%

6,989

5,303

32%

651

504

29%

3,352

3,634

(8%)

(668)

(351)

90%

(1,323)

(933)

42%

DKKm

(1,072)

(979)

9%

EBIT

DKKm

900

695

29%

Cash flow from operating activities

DKKm

555

(549)

n.a.

Gross investments

DKKm

(3,691)

(4,611)

(20%)

Divestments

DKKm

(20)

1,838

Free cash flow

DKKm

(3,156)

(3,322)

Capital employed

DKKm

65,719 64,892

* From 2018, the timing of recognition of revenue from construction of transmission assets has changed due to the implementation of IFRS 15, cf. note 1 to the consolidated financial statements. The implementation has no impact on EBITDA. 1)

11

31 1,972

Depreciation

ROCE1

Financial results 9M 2018 Power generation increased by 20% relative to 9M 2017, primarily due to the ramp-up of generation from Race Bank, Walney Extension and to some extent Burbo Bank Extension. We commissioned Burbo Bank Extension

%

8.9

Denmark

Gross investments amounted to DKK 3.7 billion in Q3 2018. The largest investments related to the construction of Hornsea 1, Borkum Riffgrund 2 and Borssele 1 & 2.

GW

the US-based offshore wind developer

Financial results Q3 2018 Power generation was 12% higher than Q3 2017 and amounted to 1.9TWh. The increase was mainly due to ramp-up of generation from Race Bank and Walney Extension. This was only partly offset by slightly lower wind speed in the UK in Q3 2018 compared to Q3 2017.

GW

Power generation

Cash flows from operating activities totalled DKK 0.6 billion in Q3 2018. The DKK 1.1 billion increase was due to higher EBITDA and less funds tied up in work in progress due to milestone payments on ongoing projects and high level of activity regarding construction of offshore transmission assets in the UK during Q3 2017. This was partly offset by higher receivables due to the higher generation.

% 9M 2018 9M 2017

Installed capacity, offshore wind

Availability

EBITDA from construction agreements increased by DKK 0.1 billion due to a high level of activity at Borkum Riffgrund 2 during the summer months of 2018, whereas Race Bank contributed in Q3 2017.

Decided (FID'ed) capacity, offshore wind

We entered into an agreement to acquire Deepwater Wind.

%

25.8

n.a.

(3,189) (3,039)

5%

5,829

4,965

17%

2,242

(237)

n.a.

(7,853) (10,479)

(25%)

767

1,927

(60%)

(5%) (4,844)

(8,789)

(45%)

65,719 64,892

1%

1%

15.8 10.0%p

25.8

15.8 10.0%p

O&Ms: Operation and maintenance agreements PPAs: Power purchase agreements

EBIT (last 12 months)/average capital employed


Offshore Wind continued in May 2017 and Race Bank in January 2018. Walney Extension started supplying power in October 2017 and was fully commissioned in May 2018. Wind speeds were 2% lower than last year and averaged 8.6m/s. This was slightly below a normal wind year (8.7m/s). Availability was 93%, which was at the same level as last year. Revenue from offshore wind farms in operation increased by 27% due to the abovementioned ramp-up from new offshore wind farms. Revenue from construction agreements increased by DKK 3.2 billion due to high activity on construction of the Borkum Riffgrund 2 and Walney Extension offshore wind farms for partners. EBITDA from sites, O&Ms and PPAs amounted to DKK 7.0 billion, up DKK 1.7 billion compared to 9M 2017. Ramp-up of Walney Extension, Race Bank and to some extent Burbo Bank Extension contributed positively to the higher earnings, whereas the slightly lower wind speed contributed negatively. EBITDA from construction agreements was DKK 0.3 billion lower than the same period last year, amounting to DKK 3.4 billion in 9M 2018. The high level of activity related to Walney Extension and Borkum Riffgrund 2 contributed positively in 9M 2018, whereas 9M 2017 was positively affected by construction progress on Race Bank and completion of Burbo Bank Extension and Gode Wind 1 & 2, as well as the recognition of a deferred farmdown gain on Race Bank.

Wind speed (m/s) for our offshore wind farms

commissioning of new offshore wind farms in the UK. Cash flows from operating activities amounted to DKK 2.2 billion in 9M 2018, up DKK 2.5 billion on 9M 2017. The net increase was due to the higher EBITDA, less funds tied up in work in progress due to higher milestone payments on ongoing projects and a VAT refund. This was partly offset by the previously mentioned early on-account tax payment for 2018 and payment of residual taxes regarding 2017.

The wind speed indicates how many metres per second the wind has blown in the areas where we have offshore wind farms. The weighting is based on our generation capacity.

Gross investments amounted to DKK 4.8 billion in 9M 2018. The largest investments related to the construction of Hornsea 1, Borkum Riffgrund 2, Borssele 1 & 2 and Walney Extension.

* Indicates m/s for full year 2018 (if Q4 follows the normal wind year)

Cash flows from divestments in 9M 2018 related to the receipt of deferred proceeds from the farm-down of 50% of Walney Extension in late 2017. Divestments in 9M 2017 were related to Race Bank and A2SEA. ROCE (last 12 months) increased by 10 percentage points to 26% and was particularly impacted by gains from the farm-downs of 50% of Walney Extension and Borkum Riffgrund 2 in Q4 2017.

Depreciation increased by 5% due to the – interim financial report – 9M 2018

12


Bioenergy Highlights Q3 2018 – On 25 October the Danish Appeals Permission Board ruled in favour of Ørsted in the case concerning the former Elsam.

Financial results 9M 2018

Financial results

Revenue increased by DKK 0.4 billion to DKK 4.4 billion in 9M 2018.

Business drivers

–

Revenue from heat sales increased by 14% even though heat generation decreased by 3%. This was due to cold weather in Q1 2018, only partly offset by the warm weather in Q2 and Q3 2018. The new heat contracts for Skærbæk Power Station, where heat is generated from biomass also contributed to the increase. Revenue from power and ancillary services increased by 4% to DKK 2.4 billion, driven by an increase of 39% in power prices compared to last year.

Biomass share in heat and power generation increased to 53% compared to 40% in 9M 2017.

–

Following the successful ramp-up of our newly commissioned biogas plant in Kalundborg we are continuously working on maturing our pipeline of additional biogas plants with corporate partners.

Financial results Q3 2018 Revenue decreased by DKK 0.1 billion to DKK 0.7 billion in Q3 2018. Heat revenue decreased by 28% as a result of the warm weather in Q3 2018. Power revenue decreased by 8%, driven by a 42% decrease in generation, also mainly due to the warm weather and the divestment of Enecogen, partly offset by higher power prices. EBITDA was DKK 0.1 billion lower than the same period last year and amounted to DKK -0.2 billion. The decrease was due to the warm weather, higher maintenance costs and project development costs related to biogas and energy storage solutions. Cash flows from operating activities increased by DKK 0.1 billion to DKK -0.2 billion. The increase was mainly due to a positive effect from lower receivables due to the lower generation in Q3 2018 and higher prepayments from heat customers in connection with biomass conversions.

Q3 2018 Q3 2017

Degree days

% 9M 2018 9M 2017

%

Number TWh

76

115

(34%)

1,642

1,810

0.3

0.7

(57%)

6.0

6.2

(3%)

TWh

0.7

1.2

(42%)

4.9

5.9

(17%)

Power price, DK

EUR/MWh

53.3

33.8

58%

43.3

31.2

39%

Green dark spread, DK

EUR/MWh

5.2

1.3

300%

2.4

(0.5)

n.a.

Green spark spread, DK

EUR/MWh

(2.7)

(0.6)

329%

(7.0)

(4.8)

46%

DKKm

660

776

(15%)

4,427

4,076

9%

201

278

(28%)

2,011

1,757

14%

Heat generation Power generation

Financial results Revenue

(9%)

Heat Power, including ancillary services

459

498

(8%)

2,416

2,319

4%

(204)

(142)

44%

164

(88)

n.a.

Heat

71

84

(15%)

520

460

13%

Ancillary services

78

65

20%

271

199

36% (16%)

EBITDA

DKKm

Power

EBITDA increased by DKK 0.3 billion and amounted to DKK 0.2 billion in 9M 2018. The increase was due to higher spreads in 9M 2018 as well as the bioconversion of Skærbæk Power Station, which was inaugurated in Q4 2017, partly offset by higher project development costs related to biogas and energy storage solutions.

(353)

(291)

21%

(627)

(747)

Depreciation

DKKm

(163)

(180)

(9%)

(487)

(507)

(4%)

EBIT

DKKm

(367)

(322)

14%

(323)

(595)

(46%)


DKKm

(169)

(244)

(31%)

509

(8)

n.a.

Gross investments

DKKm

(389)

(350)

11%

(948)

(971)

(2%)

Divestments

DKKm

400

(4)

n.a.

378

36

950%

Free cash flow

DKKm

(158)

(598)

(74%)

(61)

(943)

(94%)

Capital employed

DKKm

2,575

2,756

(7%)

2,575

2,756

(7%)

%

(10.0)

(26.1)

16.1%p

(10.0)

(26.1)

16.1%p

ROCE1 1)


EBITDA from ancillary services was DKK 0.1 billion higher than in 9M 2017. Cash flows from operating activities amounted to DKK 0.5 billion and was DKK 0.5 billion higher than the same period last year. The increase was due to the higher EBITDA in 9M 2018, settlement of early intra-group onaccount taxes for 2018 and residual taxes regarding 2017 and VAT. This was partly offset by lower prepayments from heat customers in connection with biomass conversions.

ed to the bioconversion of Asnæs Power Station.

Gross investments amounted to DKK 0.9 billion in 9M 2018. The largest investments relat– interim financial report – 9M 2018

13


Customer Solutions Highlights Q3 2018 – The process to divest our Danish power distribution and residential customer business on track.

–

At the end of September, the customers in our power distribution company, Radius, had taken 545,000 smart meters in use.

–

We signed a PPA with innogy, under which we will balance the power for the Triton

Financial results

gas prices have increased since we hedged the price of the gas purchased in Q3. The gas was placed at our storage facilities with the intention to sell it in Q1 2019. The current gas prices (including forward prices for Q1 2019) are higher than both the hedged gas purchase prices in Q3 2018 and hedged gas sales prices in Q1 2019. This led to a gain in Q3 2018, when we bought the gas, and will expectedly lead to a loss in Q1 2019 when we sell the gas.

Business drivers Regulatory asset base (power)

Financial results Q3 2018 Revenue was up 24% and amounted to DKK 10.5 billion in Q3 2018, driven primarily by an average increase in gas and UK power prices of 52% and 40%, respectively, relative to Q3 2017. In addition, gas volumes sold were higher than in Q3 2017, whereas power volumes were lower than in Q3 2017. EBITDA totalled DKK 0.5 billion, which was DKK 0.3 billion higher than in Q3 2017. The higher EBITDA was mainly due to higher earnings from our Markets and LNG business. Higher margins in LNG was mainly due to utilisation of location spreads and optimisation of physical positions. Our Markets business had higher than expected earnings mainly as a result of higher gas prices in Q3 2018. The increasing gas prices at the end of Q3 2018 led to an increase in the accounting value of our gas inventories and thus a positive EBITDA effect in Markets. All else being equal, this will lead to an offsetting negative effect in 2019 when we sell the gas. Furthermore, earnings in the Markets business in Q3 2018, was positively affected by the fact that the


DKKm Number

Degree days Customer satisfaction (B2C—touch point) Gas sales

Cash flows from operating activities amounted to DKK -0.6 billion in Q3 2018, the same level as in Q3 2017. The higher EBITDA was offset by more funds tied up in gas storages due to the increasing gas prices and higher accounts receivables.

%

10,957

10,623

3%

10,957

10,623

3%

76

115

(34%)

1,642

1,810

(9%) (1%)

75

76

(1%)

75

76

29.4

7%

108.1

99.2

9%

7.8

7.7

1%

29.4

30.0

(2%)

23.7

21.7

9%

78.7

69.2

14%

6.6

8.2

(20%)

24.9

27.1

(8%)

3.5

2.8

25%

11.0

8.5

29%

Markets (excl. volumes to Sales)

3.1

5.4

(43%)

13.9

18.6

(25%)

TWh

1.8

1.9

(5%)

6.1

6.2

(2%)

EUR/MWh

24.5

16.1

52%

22.2

16.7

33%

USD/boe

75.3

52.1

45%

72.1

51.9

39%

US dollar

DKK/USD

6.4

6.3

2%

6.2

6.7

(7%)

British pound

DKK/GBP

8.4

8.3

1%

8.4

8.5

(1%)

DKKm DKKm

10,505

8,441

24% 35,082

29,799

18%

478

202

137%

1,814

1,903

(5%)

Distribution

216

294

(27%)

899

1,027

(12%)

Sales

(32)

15

n.a.

(41)

11

n.a.

82

(95)

n.a.

868

847

2%

212

(12)

n.a.

88

18

389%

Oil price, Brent

Financial results Revenue EBITDA

Markets LNG Depreciation

DKKm

(192)

(217)

(12%)

(572)

(649)

(12%)

EBIT

DKKm

286

(15)

n.a.

1,242

1,254

(1%)


DKKm

(593)

(598)

(1%)

1,534

(842)

n.a.

Gross investments

DKKm

(236)

(184)

28%

(677)

(478)

42%

Divestments

DKKm

(1)

29

n.a.

47

102

(54%)

Free cash flow

DKKm

(830)

(753)

10%

904

(1,218)

n.a.

Capital employed

DKKm

10,243 10,044

2%

10,243 10,044

2%

ROCE1 1)

EBITDA from Distribution was down DKK 0.1 billion, mainly due to a decrease in the volumes transported as a result of the warmerthan-average temperatures.

Sales

Gas price, TTF

EBITDA amounted to DKK 1.8 billion in 9M 2018 which was DKK 0.1 billion lower than the year before.

31.5

TWh

Power distribution

Financial results 9M 2018 Revenue was up 18% at DKK 35.1 billion in 9M 2018, driven primarily by an average increase in gas and UK power prices of 33% and 25%, respectively, relative to 9M 2017. In addition, gas volumes sold were higher than in 9M 2017, whereas power volumes were lower than in 9M 2017.

% 9M 2018 9M 2017

TWh

Markets (excl. volumes to Sales) Power sales

Scale

Sales

Knoll Offshore Wind Farm once operational in 2021.

Q3 2018 Q3 2017

%

11.2

23.0 (11.8%p)

11.2

23.0 (11.8%p)


EBITDA from Markets was slightly up compared to 9M 2017 and amounted to DKK 0.9 billion. The increase was due to a one-off

14


Customer Solutions continued compensation awarded following the completion of an arbitration relating to a gas purchase contract in Q1 2018, higher gas prices and higher margins achieved in our UK power portfolio. The positive effect from the higher gas prices are expected to have an offsetting effect in 2019 when we sell the gas. This was partly offset by the extraordinarily high earnings related to trading of our financial energy exposures in 9M 2017. EBITDA from LNG increased by DKK 0.1 billion to DKK 0.1 billion as a result of increased gas prices and utilisation of location spreads and optimisation of physical positions. Cash flows from operating activities amounted to DKK 1.5 billion in 9M 2018. The increase of DKK 2.4 billion was primarily due to settlement of intra-group hedges related to the now divested oil and gas business having a negative effect in 2017, less funds tied up in clearing accounts toward trading partners, and lower gas inventory. This was partly offset by more funds tied up in ROC inventory due to higher offshore wind power generation and higher accounts receivables due to higher volumes sold. Gross investments totalled DKK 0.7 billion in 9M 2018, relating mainly to maintenance of the power distribution grid and the installation of new smart meters. ROCE (last 12 months) decreased by 12 percentage points to 11%. The period ending in 9M 2017 was positively impacted by one-off compensations as a result of renegotiation of gas purchase contracts.


15


Performance highlights Income statement (Business performance), DKKm Revenue EBITDA Offshore Wind Bioenergy Customer Solutions Other activities Depreciation and amortisation Impairment losses Operating profit (loss) (EBIT) Gain (loss) on divestment of enterprises Net financial income and expenses Share of profit (loss) from associates and joint ventures Profit (loss) before tax Tax Profit (loss) for the period from continuing operations Profit (loss) for the period from discontinued operations Profit (loss) for the period Balance sheet Assets Equity Shareholders in Ørsted A/S Non-controlling interests Hybrid capital Interest-bearing net debt Capital employed Additions to property, plant, and equipment Cash flow Cash flow from operating activities Gross investments Divestments Free cash flow Financial ratios Return on capital employed (ROCE)1,5, % FFO/adjusted net debt2,5, % Number of outstanding shares, end of period, '000 Share price, end of period, DKK Market capitalisation, end of period, DKK billion Earnings per share (EPS) (BP), DKK Income statement (IFRS) Revenue EBITDA Profit (loss) for the period from continuing operations


9M 2018 9M 2017 Q3 2018 Q3 2017 53,419 43,906 15,018 11,869 9,487 10,823 2,225 1,757 8,004 9,018 1,972 1,674 (88) 164 (204) (142) 1,903 1,814 478 202 (332) (173) (21) 23 (4,222) (4,281) (1,437) (1,385) 5,265 6,542 788 372 (125) 155 181 (108) (393) (1,235) (436) 22 (52) 4 2 (7) 4,695 5,466 535 279 (766) (1,140) (117) (70) 3,929 4,326 418 209 6,841 (24) (13) 2,931 10,770 4,302 405 3,140

2017 59,504 22,519 20,595 152 2,082 (310) (5,739) (545) 16,235 (139) (1,042) (10) 15,044 (1,765) 13,279 6,920 20,199

150,909 68,701 52,029 3,433 13,239 8,957 77,658 9,861

126,190 64,203 47,050 3,905 13,248 10,260 74,462 12,885

150,909 68,701 52,029 3,433 13,239 8,957 77,658 2,942

126,190 64,203 47,050 3,905 13,248 10,260 74,462 4,795

146,521 71,837 54,791 3,807 13,239 (1,517) 70,320 20,022

2,778 (9,565) 1,201 (5,586)

(2,055) (11,939) 2,107 (11,887)

(117) (4,385) 380 (4,122)

(1,095) (5,150) 1,882 (4,363)

1,023 (17,744) 16,982 261

23.0 41.7 420,155 436.3 183.3 9.7

15.0 26.5 420,155 360.4 151.4 24.7

23.0 41.7 420,155 436.3 183.3 1.1

15.0 26.5 420,155 360.4 151.4 7.1

25.2 50.3 420,155 338.7 142.3 46.4

49,355 7,577 1,794

44,998 10,263 4,534

12,798 567 (875)

11,647 1,643 120

59,709 22,574 13,321

Business drivers Offshore Wind Decided (FID'ed) capacity3, offshore wind, GW Installed capacity, offshore wind, GW Generation capacity, offshore wind, GW Wind speed3, m/s Load factor3, % Availability3, % Power generation, TWh Bioenergy Degree days3, number Heat generation, TWh Power generation, TWh Customer Solutions Regulatory value of power distribution assets4 Customer satisfaction (B2C—touch point), scale Power distribution, TWh Power sales, TWh Gas sales, TWh People and environment Employees (FTE), end of period number Total recordable injury rate (TRIR)5 Fatalities, number Green share of heat and power generation, % Carbon emissions, g/kWh

16

9M 2018

9M2017 Q3 2018 Q3 2017

2017

8.9 5.1 2.9

8.9 3.8 2.3

8.9 5.1 2.9

8.9 3.8 2.3

8.9 3.9 2.5

8.6 39 93 6.7

8.7 40 93 5.6

7.7 32 92 1.9

7.9 34 92 1.7

9.3 44 93 8.5

1,642 6.0 4.9

1,810 6.2 5.9

76 0.3 0.7

115 0.7 1.2

2,705 9.0 8.2

10,957 75 6.1 24.9 108.1

10,623 76 6.2 27.1 99.2

10,957 75 1.8 6.6 31.5

10,623 76 1.9 8.2 29.4

10,623 76 8.4 37.7 136.1

5,882

5,641

5,882

5,641

5,638

5.0 0 71 153

6.7 0 59 172

5.0 0 71 212

6.7 0 60 203

6.4 0 64 151

EBIT (last 12 months)/average capital employed. Net debt including 50% of hybrid capital, cash and securities not available for use (with the exception of repo transactions), present value of lease obligations, and decommissioning obligations less deferred tax. 3) See definition on page 172 and note 9 in the annual report for 2017. 4) The figures indicate values from the latest regulatory financial statements (updated in June). 5) Last 12 months.

Business performance vs. IFRS

1)

Business performance represents the underlying financial performance of the Group in the reporting period as results are adjusted for temporary fluctuations in the market value of contracts (including hedging transactions) relating to other periods. Apart from this, there is no difference between business performance and IFRS results. Read more in note 2.

2)


Quarterly overview Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Income statement 2018 2018 2018 2017 2017 2017 2017 2016 (Business performance), DKKm 15,018 18,593 19,808 15,598 11,869 15,540 16,497 15,678 Revenue 2,225 3,079 5,519 13,032 1,757 4,442 3,288 6,310 EBITDA 1,972 3,090 3,956 12,591 1,674 4,191 2,139 5,054 Offshore Wind (204) (71) 439 240 (142) (153) 207 115 Bioenergy 478 122 1,214 179 202 516 1,185 1,243 Customer Solutions (21) (62) (90) 22 23 (112) (243) (102) Other activities (1,437) (1,462) (1,382) (1,517) (1,385) (1,541) (1,296) (1,602) Depreciation and amortisation (545) Impairment losses 788 1,617 4,137 10,970 372 2,901 1,992 4,708 Operating profit (loss) (EBIT) 181 (16) (10) (14) (108) (6) (11) (80) Gain (loss) on divestment of enterprises (436) (504) (294) (649) 22 (81) (334) (352) Net financial income and expenses Share of profit (loss) from associates and 2 4 (2) 42 (7) (2) (43) (3) joint ventures 535 1,101 3,830 10,349 279 2,812 1,604 4,273 Profit (loss) before tax (117) (225) (798) (999) (70) (306) (390) (285) Tax Profit (loss) for the period from continuing 418 876 3,032 9,350 209 2,506 1,214 3,988 operations Profit (loss) for the period from discontinued operations (13) (19) 8 79 2,931 2,484 1,426 (473) 405 857 3,040 9,429 3,140 4,990 2,640 3,515 Profit (loss) for the period Balance sheet 150,909 149,149 147,739 146,521 126,190 133,550 132,030 136,489 Assets 68,701 69,744 70,823 71,837 64,203 62,160 58,112 57,500 Equity 52,029 52,884 53,861 54,791 47,050 43,990 39,828 39,106 Shareholders in Ørsted A/S 3,433 3,621 3,723 3,807 3,905 4,922 5,036 5,146 Non-controlling interests 13,239 13,239 13,239 13,239 13,248 13,248 13,248 13,248 Hybrid capital 8,957 4,603 4,331 (1,517) 10,260 10,332 6,523 3,461 Interest-bearing net debt 77,658 74,347 75,154 70,320 74,462 72,491 64,635 60,961 Capital employed 2,942 3,137 3,782 7,137 4,795 5,475 2,615 4,378 Additions to property, plant, equipment Cash flow (117) 3,293 (398) 3,078 (1,095) (1,848) 888 1,752 Cash flow from operating activities (4,385) (3,109) (2,071) (5,805) (5,150) (4,287) (2,502) (4,732) Gross investments 380 (14) 835 14,875 1,882 160 65 5,013 Divestments (4,122) 170 (1,634) 12,148 (4,363) (5,975) (1,549) 2,033 Free cash flow Financial ratios 23.0 23.5 26.7 25.2 15.0 18.4 17.4 24.4 Return on capital employed (ROCE)1, % 41.7 44.3 45.6 50.3 26.5 32.0 34.2 64.2 FFO/adjusted net debt2,5, % Number of outstanding shares, end of period, '000 420,155 420,155 420,155 420,155 420,155 420,155 420,155 420,155 436.3 386.0 392.0 338.7 360.4 293.9 268.9 267.6 Share price, end of period, DKK Market capitalisation, end of period, DKK billion 183.3 162.3 164.7 142.3 151.5 123.5 113.0 112.5 1.1 1.4 7.2 21.7 7.1 11.2 6.4 8.2 Earnings per share (EPS) (BP), DKK Income statement (IFRS) 12,798 16,859 19,698 14,711 11,647 15,925 17,426 13,396 Revenue EBITDA 567 1,725 5,285 12,311 1,643 4,777 3,843 4,572 Profit (loss) for the period from continuing (875) (180) 2,849 8,787 120 2,765 1,649 2,632 operations


Business drivers Offshore Wind Decided (FID'ed) capacity3, offshore wind, GW Installed capacity, offshore wind, GW Generation capacity, offshore wind, GW Wind speed, m/s Load factor3, % Availability3, % Power generation, TWh Bioenergy Degree days3, number Heat generation, TWh Power generation, TWh Customer Solutions Regulatory value of power distribution assets4 Customer satisfaction (B2C—touch point), scale Power distribution, TWh Power sales, TWh Gas sales, TWh People and environment Employees (FTE) end of period, number Total recordable injury rate (TRIR)5 Fatalities, number Green share of heat and power generation Carbon emissions, g CO2e/kWh

17

Q3 2018

Q2 2018

Q1 2018

Q4 2017

Q3 2017

Q2 2017

Q1 2017

Q4 2016

8.9 5.1 2.9 7.7 32 92 1.9

8.9 5.1 2.8 7.9 31 93 1.8

8.9 4.4 2.7 10.3 55 94 3.0

8.9 3.9 2.5 11.0 54 92 2.9

8.9 3.8 2.3 7.9 34 92 1.7

7.5 3.8 2.2 8.5 38 93 1.8

7.4 3.6 2.1 9.9 50 93 2.1

7.4 3.6 2.0 9.4 49 94 1.8

76 0.3 0.7

149 0.9 0.9

1,417 4.8 3.3

895 2.8 2.3

115 0.7 1.2

451 1.3 1.5

1,244 4.2 3.2

962 3.1 3.0

10,957

10,957

10,623

10,623

10,623

10,623

10,648

10,648

75 1.8 6.6 31.5

73 1.9 6.8 34.1

76 2.4 11.5 42.5

74 2.2 10.6 36.9

76 1.9 8.2 29.4

75 2.0 8.8 28.3

77 2.3 10.1 41.5

76 2.3 9.2 36.1

5,882 5.0 0 71 212

5,741 6.2 0 80 123

5,662 6.7 0 68 147

5,638 6.4 0 76 106

5,641 6.7 0 60 203

5,802 6.5 0 64 150

5,787 6.4 0 56 170

5,775 6.8 0 56 183

EBIT (last 12 months)/average capital employed. Net debt including 50% of hybrid capital, cash and securities not available for use (with the exception of repo transactions), present value of lease obligations, and decommissioning obligations less deferred tax. 3) See definition on page 172 and note 9 in the annual report for 2017. 4) The figures indicate values from the latest regulatory financial statements (updated in June) 5) Last 12 months.

Business performance vs. IFRS

1)

Business performance represents the underlying financial performance of the Group in the reporting period as results are adjusted for temporary fluctuations in the market value of contracts (including hedging transactions) relating to other periods. Apart from this, there is no difference between business performance and IFRS results. Read more in note 2.

2)


Contents Consolidated financial statements

Notes

Income statement 9M

19

1.

Basis of reporting

26

Statement of comprehensive income 9M

20

2.

Business performance

29

Income statement Q3

21

3.

Segment information

30

Statement of comprehensive income Q3

22

4.

Revenue

33

Balance sheet

23

5.

Other operating income and expenses

35

Statement of changes in equity 9M

24

6.

Gross and net investments

35

Statement of cash flows

25

7.

Assets classified as held for sale

36

8.

Discontinued operations

36

9.

Financial income and expenses

37

10.

Reserves

37

11.

Market risks

38

12.

Fair value measurement

38

13.

Interest-bearing debt and FFO

39

— Interim financial report — 9M 2018

18

Management statement Statement by the Executive Board and the Board of Directors

40

Consolidated financial statements

Income statement 1 January - 30 September 9M 2018 Note 4

Income statement, DKKm Revenue Cost of sales

9M 2017

Business performance 53,419

Adjustments (4,064)

IFRS 49,355


Adjustments 1,092

IFRS 44,998 (30,691)

(36,777)

818

(35,959)

(30,375)

(316)

Other external expenses

(3,991)

-

(3,991)

(3,120)

-

(3,120)

Employee costs

(2,368)

-

(2,368)

(2,428)

-

(2,428)

Share of profit (loss) in associates and joint ventures

(1)

-

(1)

-

-

-

725

-

725

1,625

-

1,625

(184)

-

(184)

(121)

-

(121)

Operating profit (loss) before depreciation, amortisation and impairment losses (EBITDA)

10,823

(3,246)

7,577

9,487

776

10,263

Amortisation, depreciation and impairment losses on intangible assets and property, plant and equipment Operating profit (loss) (EBIT)

(4,281) 6,542

(3,246)

(4,281) 3,296

(4,222) 5,265

776

(4,222) 6,041

155

-

155

(125)

-

(125)

4

-

4

(52)

-

(52)

1,641

-

1,641

2,550

-

2,550

5

Other operating income

5

Other operating expenses

Gain on divestment of enterprises Share of profit (loss) in associates and joint ventures 9

Financial income

9

Financial expenses

(2,876)

-

(2,876)

(2,943)

-

(2,943)

Profit (loss) before tax

5,466

(3,246)

2,220

4,695

776

5,471

Tax on profit (loss) for the period

(1,140)

714

(426)

(766)

(171)

(937)

Profit (loss) for the period from continuing operations

4,326

(2,532)

1,794

3,929

605

4,534

8

Profit (loss) for the period from discontinued operations Profit (loss) for the period

(24)

-

(24)

6,841

(817)

6,024

4,302

(2,532)

1,770

10,770

(212)

10,558

4,048

(2,532)

1,516

10,379

(212)

10,167

231 23

401 (10)

Profit (loss) for the period is attributable to: Shareholders of Ørsted A/S Interests and costs after tax, hybrid capital owners of Ørsted A/S Non-controlling interests Profit (loss) per share, DKK: From continuing operations

231 23

401 (10)

9.7

3.7

8.4

9.9

From discontinued operations

(0.1)

(0.1)

16.3

14.3

Total profit (loss) per share

9.6

3.6

24.7

24.2

Profit (loss) per share The dilutive effect is less than 0.1%, and consequently ordinary and diluted profit (loss) per share are identical.


Profit (loss) for the period for our continuing operations Our former Oil & Gas business, which was divested 29 September 2017 is presented as discontinued operations. Effective tax rate The estimated average annual tax rate for ordinary business activities is 21% compared to 26% for the full year 2017.

Accounting policies Business performance The business performance principle is our alternative performance measure. According to IFRS, market value adjustments of energy contracts and related currency risk (including hedging) are recognised on an ongoing basis in the profit (loss) for the period, whereas under the business performance principle, they are deferred and recognised in the period in which the hedged exposure materialises. The difference between IFRS and business performance is specified in the ’Adjustments’ column. Read more about the business performance principle in note 2 as well as note 1.1 in the annual report 2017. Effective tax rate The estimated average annual tax rate is separated based on regions and into two different categories: a) ordinary business activities and b) gain (loss) on divestments.

19


Statement of comprehensive income 1 January - 30 September 9M 2018 Statement of comprehensive income, DKKm Profit (loss) for the period

9M 2017



Adjustments (2,532)

IFRS 1,770

Adjustments (212)

(4,068)

3,615

123

(369)

(453)

1,377

(507)

870

(246)

(1,281)

778

(503)

(101)

-

(101)

(1,510)

-

(1,510)

198

-

198

641

-

641

-

695

-

695 (69)

IFRS 10,558

Other comprehensive income: Cash-flow hedging: Value adjustments for the period Value adjustments transferred to income statement

Statement of comprehensive income All items in ’Other comprehensive income’ may be recycled to the income statement.

Exchange rate adjustments: Exchange rate adjustments relating to net investment in foreign enterprises Value adjustment of net investment hedges Value adjustments and hedges transferred to income statement Tax: Tax on hedging instruments

821

(714)

107

(10)

(59)

Tax on exchange rate adjustments

(27)

-

(27)

78

-

78

Other comprehensive income

(3,054)

2,532

(522)

(10)

212

202

Total comprehensive income

1,248

-

1,248

10,760

-

10,760

Comprehensive income for the period is attributable to: Shareholders in Ørsted A/S

999

10,486

Interest payments and costs after tax, hybrid capital owners of Ørsted A/S Non-controlling interests

231 18

401 (127)

1,248

10,760



20


Income statement 1 July - 30 September Q3 2018 Note 4

Income statement, DKKm Revenue Cost of sales Other external expenses Employee costs Share of profit (loss) in associates and joint ventures

Q3 2017


Adjustments (2,220)

IFRS 12,798


Adjustments (222)

(10,545)

562

(9,983)

(8,209)

108

(8,101)

(1,629)

-

(1,629)

(1,046)

-

(1,046)

(800)

-

(800)

(833)

-

(833)

(4)

-

(4)

(1)

-

(1)

IFRS 11,647

5


222

-

222

40

-

40

5

Other operating expenses

(37)

-

(37)

(63)

-

(63)

2,225

(1,658)

567

1,757

(114)

1,643

(1,437) 788

(1,658)

(1,437) (870)

(1,385) 372

(114)

(1,385) 258

181

-

181

(108)

-

(108)

2

-

2

(7)

-

(7)

215

-

215

1,158

-

1,158 (1,136)

Operating profit (loss) before depreciation, amortisation and impairment losses (EBITDA) Amortisation, depreciation and impairment losses on intangible assets and property, plant and equipment Operating profit (loss) (EBIT) Gain on divestment of enterprises Share of profit (loss) in associates and joint ventures 9

Financial income

9

Financial expenses

(651)

-

(651)

(1,136)

-

Profit (loss) before tax

535

(1,658)

(1,123)

279

(114)

165

Tax on profit (loss) for the period

(117)

365

248

(70)

25

(45)

Profit (loss) for the period from continuing operations

418

(1,293)

(875)

209

(89)

120

Profit (loss) for the period from discontinued operations

(13)

-

(13)

2,931

(223)

2,708

405

(1,293)

(888)

3,140

(312)

2,828

Shareholders in Ørsted A/S

435

(1,293)

(858)

2,992

(312)

2,680

Interests and costs after tax, hybrid capital owners of Ørsted A/S Non-controlling interests

(24) (6)

(24) (6)

146 2

146 2 0.0

8

Profit (loss) for the period Profit (loss) for the period is attributable to:

Profit (loss) per share, DKK: From continuing operations From discontinued operations Total profit (loss) per share

1.1

(2.0)

0.1

(0.1)

(0.1)

7.0

6.4

1.0

(2.1)

7.1

6.4

Profit (loss) per share The dilutive effect is less than 0.1%, and consequently ordinary and diluted profit (loss) per share are identical.


Profit (loss) for the period for our continuing operations Our former Oil & Gas business, which was divested 29 September 2017 is presented as discontinued operations. Effective tax rate The estimated average annual tax rate for ordinary business activities is 22% compared to 26% for the full year 2017.

Accounting policies Business performance The business performance principle is our alternative performance measure. According to IFRS, market value adjustments of energy contracts and related currency risk (including hedging) are recognised on an ongoing basis in the profit (loss) for the period, whereas under the business performance principle, they are deferred and recognised in the period in which the hedged exposure materialises. The difference between IFRS and business performance is specified in the ’Adjustments’ column. Read more about the business performance principle in note 2 as well as note 1.1 in the annual report 2017. Effective tax rate The estimated average annual tax rate is separated based on regions and into two different categories: a) ordinary business activities and b) gain (loss) on divestments.

21


Statement of comprehensive income 1 July - 30 September Q3 2018 Statement of comprehensive income, DKKm Profit (loss) for the period

Q3 2017

Business performance 405


Adjustments (1,293)

Adjustments (312)

(1,765)

1,926

254

(268)

161

74

254

328

(14)

(671)

145

(526)

(227) 120

-

(227) 120

(489) 225

-

(489) 225

695

-

695 46

IFRS (888)

IFRS 2,828

Other comprehensive income: Cash-flow hedging: Value adjustments for the period Value adjustments transferred to income statement

Statement of comprehensive income All items in ’Other comprehensive income’ may be recycled to the income statement.

Exchange rate adjustments: Exchange rate adjustments relating to net investment in foreign enterprises Value adjustment of net investment hedges Value adjustments and hedges transferred to income statement Tax: Tax on hedging instruments

316

(365)

(49)

133

(87)

Tax on exchange rate adjustments

(10)

-

(10)

39

-

39

Other comprehensive income

(1,312)

1,293

(19)

6

312

318


(907)

-

(907)

3,146

-

3,146

Comprehensive income for the period is attributable to: Shareholders in Ørsted A/S Interest payments and costs after tax, hybrid capital owners of Ørsted A/S Non-controlling interests Total comprehensive income


(877)

2,998

(24) (6)

146 2

(907)

3,146

22


Balance sheet Note

Assets, DKKm Intangible assets Land and buildings Production assets Fixtures and fittings, tools and equipment

30 September 2018 741

31 December 30 September 2017 2017 689 707

1,524

1,501

1,494

64,947

60,603

55,860

355

413

409

Property, plant and equipment under construction

15,023

13,328

20,211

Property, plant and equipment

81,849

75,845

77,974

462

339

376

Investments in associates and joint ventures Receivables from associates and joint ventures Other securities and equity investments Deferred tax

Equity and liabilities, DKKm Share capital

4,204

4,204

4,204

Reserves

(2,041)

(1,524)

20,537

Retained earnings

49,866

52,111

22,309

Equity attributable to shareholders in Ørsted A/S

52,029

54,791

47,050

13,239

13,239

13,248

3,433

3,807

3,905

68,701

71,837

64,203 2,640

Hybrid capital Non-controlling interests Equity

48

31

Deferred tax

1,782

2,128

130

135

Provisions

11,431

10,840

9,510

2,692

2,865

732

Bond and bank debt

23,505

25,715

21,764

2,025

1,955

1,999

5,450

5,337

3,273

Contract liabilities Other payables

88,040

81,871

81,954

1

Inventories

17,790

3,853

3,719

12

Derivatives

7,509

4,870

5,909

547

10,817

11,031

Trade receivables

7,457

9,170

6,554

Contract liabilities

Other receivables

2,936

3,519

2,690

Income tax 12

Securities Cash Current assets

7

Assets classified as held for sale Assets

1,618

296

898

20,333

25,280

7,521

1,976

4,203

3,308

60,166

62,008

41,630

2,703

2,642

2,606

150,909

146,521

126,190

Non-current liabilities Provisions 12

7

5,676

-

-

386

5,714

6,961

42,780

44,397

40,875

561

680

634

Bond and bank debt

8,399

3,921

1,016

Derivatives

11,325

4,374

3,084

1,238

1,317

-

Trade payables

12,218

11,499

10,435

Other payables

4,787

6,368

4,295

272

1,498

1,113

Current liabilities

38,800

29,657

20,577

Liabilities

81,580

74,054

61,452

628 150,909

630 146,521

535 126,190

Income tax

Contract assets and contract liabilities The adoption of IFRS 15 has changed our presentation as we have introduced contract assets and contract liabilities. As we have implemented IFRS 15 after the modified retrospective method, we have not restated comparative figures. Our former ‘Construction contracts’ assets and liabilities are now classified as ‘Contract assets’ and ‘Contract liabilities’, respectively. Read more about the impact in note 1 ‘Basis of reporting’.


31 December 30 September 2017 2017

63

Other non-current assets

Contract assets

30 September 2018

208

Other receivables Non-current assets

Note

Liabilities relating to assets classified as held for sale Equity and liabilities

Assets classified as held for sale Asses classified as held for sale’ relate to our oil pipe system.

23


Statement of changes in equity 1 January - 30 September 2018

DKKm Equity at 1 January

Share capital Reserves*

2017

ShareRetained Proposed holders in earnings dividends Ørsted A/S

Hybrid capital

Non-controlling interests

Total Group

Share capital Reserves*

ShareRetained Proposed holders in earnings dividends Ørsted A/S

Hybrid capital

Non-controlling interests

Total Group

4,204

(1,524)

48,328

3,783

54,791

13,239

3,807

71,837

4,204

20,218

12,162

2,522

39,106

13,248

5,146

57,500

Comprehensive income for the period: Profit (loss) for the period

-

-

1,516

-

1,516

231

23

1,770

-

-

10,167

-

10,167

401

(10)

10,558

Other comprehensive income: Cash flow hedging

-

(699)

-

-

(699)

-

-

(699)

-

367

-

-

367

-

-

367

Exchange rate adjustments

-

102

-

-

102

-

(5)

97

-

(57)

-

-

(57)

-

(117)

(174)

-

80

-

-

80

-

-

80

-

9

-

-

9

-

-

9

-

(517)

1,516

-

999

231

18

1,248

-

319

10,167

-

10,486

401

(127)

10,760

-

-

-

-

-

(326)

-

(326)

-

-

-

-

-

(507)

-

(507)

-

-

2

(3,783)

(3,781)

95 -

(378)

95 (4,159)

-

-

-

(2,522)

(2,522)

106 -

(297)

106 (2,819)

Share-based payment

-

-

18

-

18

-

-

18

-

-

11

-

11

-

-

11

Disposals, non-controlling interests Other changes

-

-

2

-

2

-

(14)

(12)

-

-

(31)

-

(31)

-

(817) -

(817) (31)

Tax on other comprehensive income Total comprehensive income Transactions with owners: Coupon payments, hybrid capital Tax on coupon payments, hybrid capital Dividends paid

Total transactions with owners

-

-

22

(3,783)

(3,761)

(231)

(392)

(4,384)

-

-

(20)

(2,522)

(2,542)

(401)

(1,114)

(4,057)

Equity at 30 September

4,204

(2,041)

49,866

-

52,029

13,239

3,433

68,701

4,204

20,537

22,309

-

47,050

13,248

3,905

64,203

* See note 10 ‘Reserves’ for more information about reserves.


24


Statement of cash flows Note

2

Statement of cash flows DKKm Operating profit (loss) before depreciation, amortisation and impairment losses (EBITDA), IFRS Change in derivatives, business performance adjustments Change in derivatives, other adjustments Change in provisions Reversal of gain (loss) on sale of assets Other items Changes in work in progress

9M 2018

9M 2017

Q3 2018

Q3 2017

7,577

10,263

567

1,643

3,246

(776)

1,658

114

1,027 (156)

(998) (363)

741 (237)

304 (50)

90 (6)

(1,367) (36)

26 18

52 (158)

(3,049)

Changes in other working capital Interest received and similar items Interest paid and similar items

(5,936)

(879)

Note

Statement of cash flows DKKm Purchase of intangible assets and property, plant and equipment Sale of intangible assets and property, plant and equipment Divestment of enterprises Purchase of other equity investments Divestment of other equity investments Purchase of securities Sale/maturation of securities

(2,153)

Change in other non-current assets Transactions with associates and joint ventures Dividends received and capital reduction

(1,904)

(3,006)

(1,693)

(1,174)

2,167

2,947

454

1,037

(3,111)

(2,775)

(758)

(693)

Income tax paid

(3,103)

(8)

(14)

(17)

Cash flows from operating activities

2,778

(2,055)

(117)

(1,095)

Cash flows from investing activities Proceeds from raising of loans Instalments on loans Coupon payments on hybrid capital Dividends paid to shareholders in Ørsted A/S Transactions with non-controlling interests Change in other liabilities

Changes in work in progress ‘Changes in work in progress’ consist of elements in contract assets, contract liabilities and construction management agreements related to construction of offshore wind farms and construction of offshore transmission assets as well as the related trade payables.

Cash flows from financing activities Cash flows from continuing operations Cash flows from discontinued operations Total net change in cash and cash equivalents for the period Cash and cash equivalents at the beginning of the period Total net change in cash and cash equivalents for the period Cash flows for the period from assets classified as held for sale Other change in cash and cash equivalents Exchange rate adjustments of cash and cash equivalents Cash and cash equivalents at 30 September

Statement of cash flows Our supplementary statement of gross and net investments appears from note 6 ’Gross and net investments’ and free cash flows (FCF) from note 3 ’Segment information’.


25

9M 2018

9M 2017

Q3 2018

Q3 2017

(9,365)

(11,867)

(4,201)

(5,135)

840 376

1,460 597

(26) 403

1,343 537

(77)

-

(61)

-

(20,245)

23 (512)

(8,211)

6 -

24,869

9,120

12,643

2,988

7

(7)

7

-

(144)

(95)

(126)

9

25

13

24

-

(3,714)

(1,292)

452

(276)

6,158

904

2,159

904

(3,743)

(2,361)

(3,637)

(2,148)

(326)

(507)

-

(182)

(3,783)

(2,522)

-

-

(366) 1,042

(362) (12)

(160) 463

(209) 4

(1,018)

(4,860)

(1,175)

(1,631)

(1,954)

(8,207)

(840)

(3,002)

(128)

8,594

(1)

5,052

(2,082)

387

(841)

2,050

3,891

2,628

2,628

900

(2,082)

387

(841)

2,050

(75)

(147)

(38)

(25)

1

195

1

86

5

(63)

(10)

(11)

1,740

3,000

1,740

3,000


1. Basis of reporting This section provides an overview of our principal accounting policies and new and amended IFRS standards and interpretations.

Accounting policies Ørsted is a listed public company domiciled in Denmark. This interim financial report includes Ørsted and its subsidiaries (the Group). The interim financial report has been presented in accordance with IAS 34 ‘Interim Financial Reporting’ as adopted by the EU and further requirements in the Danish Financial Statements Act (Årsregnskabsloven). The interim financial report does not contain all the information required in the annual report and should therefore be read together with the annual report for 2017. No interim report has been prepared for the parent company.


Except for the sections below regarding implementation of new accounting standard and changed accounting policy, the accounting policies remain unchanged from the annual report for 2017 to which reference is made. Definitions of performance highlights can be found on page 78 of the annual report for 2017.

Payments’: the amendment addresses the accounting for cash-settled awards that include a ‘net settlement’ feature in respect of withholding tax. −

−

Implementation of new or changed accounting standards and interpretations Effective from 1 January 2018, we have implemented the following new or changed accounting standards (IAS and IFRS) and interpretations: −

−

IFRS 15 ‘Revenue from Contracts with Customers’ including amendments and clarifications. See separate section below. Amendment to IFRS 2 ‘Share-based

IFRIC 22 on foreign currency transactions and advance consideration. Annual improvements to IFRSs 2014-2016: improvements to IFRS 1 ‘First-time Adoption of IFRS’ and IAS 28 ‘Investments in Associates and Joint Ventures’ which entered into force on 1 January 2018.

Besides the impact from IFRS 15, the adoption of the new and changed standards has not affected our interim financial report and is not expected to impact the consolidated financial statements for 2018. In the following section, you can read more about the impact on recognition and measurement from IFRS 15 ‘Revenue from Contracts with Customers’. The new

26

reporting standard has an insignificant impact on profit (loss) for the year and diluted profit (loss) per share. The equity and the consolidated statement of cash flows are not affected.

Implementation of IFRS 15 On 1 January 2018, we implemented IFRS 15, 'Revenue from Contracts with Customers', which replaces IAS 11, IAS 18 and associated interpretations. We have implemented IFRS 15 with retrospective effect. However, we use the relief from restating comparative figures (modified retrospective method). The most important changes resulting from IFRS 15 compared to IAS 11 and IAS 18 can be summarised as follows: −

the model for recognition of revenue is changed from having been based on the


1. Basis of reporting (continued) transfer of the risks and rewards of ownership of a product or service to being based on the transfer of control of the goods or services transferred to the customer −

−

more detailed guidelines for how elements in a contract of sale are identified, and how the individual components will be recognised and measured more detailed guidance for recognition of revenue over time.

The impact of IFRS 15 on Ørsted In the UK, we offer construction agreements for offshore transmission assets. When construction of the offshore transmission assets is completed, they are sold to an offshore transmission owner (OFTO) through a regulated sales process. The UK energy regulator 'Office of Gas and Electricity Markets' (Ofgem) manages the sales process, determines the final transfer value and appoints the buyer. Under the new standard, a customer relationship does not exist between Ørsted and a final buyer when the construction of the offshore transmission assets commences. Therefore, we have deferred revenue recognition on offshore transmission assets from commencement of construction to the date of entering into a contract with a customer. In other words, the recognition of revenue begins when we sell a share of the offshore transmission asset under construction to a partner and takes place upon such partner joining the project. We recognise the remaining part of the offshore transmission asset when we find that control has passed to the OFTO.

In previous reporting periods, offshore transmission assets were recognised in step with the construction based on the completion degree of the asset (over time). Under IFRS 15, revenue from offshore transmission assets are recognised at a later point in time.

Extract Impact of adoption, DKKm

Effect of Previous change in accounting accounting policy policy

30 September 2018 New accounting policy

Effect of Previous change in New accounting accounting accounting policy policy policy

Assets Current assets Inventories

3,853

10,468

1

14,321

4,159

13,631

The change in policy does not affect the Group’s cash flows or results, but only the timing of when income and costs are recognised in the consolidated financial statements.

Construction contracts

10,817

(10,817)

1,2

-

14,178

(14,178)

-

-

1,693

2

1,693

-

547

547

2

Historically, we have not had, and we do not expect, a significant contribution margin relating to the sale of offshore transmission assets to partners and OFTOs. The Group's EBITDA, balance sheet total and equity will therefore remain unchanged in all material respects as a consequence of the changed accounting policies. The implementation of the terminology in IFRS 15 had the following effects on the presentation of the construction contracts, receivables and other payables in the balance sheet:

Other payables

−

−

−

−

−


1 January 2018

Impact on accounting

Contract assets Trade receivables

17,790

9,170

(1,344)

146,521

-

Share capital

4,204

-

Reserves

(1,524)

-

52,111

-

54,791

-

-

5,327

2

5,327

5,714

(5,327)

2

387

1,317

(1,317)

2

-

429

1,455

-

1,237

1,238

6,230

5,595

(808)

4,787

146,521

150,909

-

150,909

Assets

7,826

7,457

-

7,457

146,521

150,909

-

150,909

4,204

4,204

-

4,204

(1,524)

(2,041)

-

(2,041)

52,111

49,866

-

49,866

54,791

52,029

-

52,029

-

5,676

5,676

6,062

(5,676)

386

(429)

-

Equity and liabilities

Retained earnings Equity attributable to shareholders in Ørsted A/S Liabilities Non-current liabilities Contract liabilities Current liabilities Construction contracts Contract liabilities Other payables

construction of offshore transmission assets are classified as inventory


construction agreements other than offshore transmission assets are presented as contract assets and liabilities

Revenue

-

1,455

2

6,368

(138)

2

146,521

-

Income statement H1, IFRS 52,920

(3,565)

49,355

(39,524)

3,565

(35,959)

Operating profit (loss) before depreciation, amortisation and impairment losses (EBITDA)

7,577

-

7,577

Profit (loss) for the period

1,770

-

1,770

Cost of sales

Construction agreements related to offshore transmission assets are presented as contract assets and liabilities receivables related to ongoing services or in other ways where the receivable is not unconditional are presented as contract assets

1) Effect of change to timing of revenue recognition from transmission assets in profit (loss) 2) Effect of changed presentation of certain amounts in the balance sheet to reflect the terminology of IFRS 15

other payables related to prepayments 27

Comparatives for the 2017 financial year are not restated as we have applied the modified retrospective method. The effects of change in accounting policy are identical for business performance profit (loss).


1. Basis of reporting (continued) and deferred revenue as such are presented as contract liabilities. In summary, the following adjustments were made to the amounts recognised in the balance sheet at the date of initial application (1 January 2018). See table on previous page.

Change in accounting policy On 1 January 2018, we changed our accounting policy with respect to subsidies received under the Renewable Obligation schemes in the UK, known as green

certificates or Renewable Obligation Certificates (ROCs), and feed-in tariffs in Germany under the EEG2014 (the German Renewable Energy Sources Act). We now apply IAS 20 ‘Accounting for Government Grants and Disclosure of Government Assistance’, under which subsidies are recognised when there is a reasonable assurance that the grant will be received. Prior to this change in policy, we applied IAS 18 ‘Revenue’ to ROCs and feed-in tariffs in

Germany, while we applied IAS 20 to feed-in tariffs in Denmark and Contracts for Difference (CfDs) in the UK. We believe the new policy is preferable as it aligns our accounting of all subsidies received for our renewable power generation and allows comparability between years. This voluntary change in accounting policy did not result in any impact on the current year or any years included within these consolidated financial statements. The recognition, measurement, timing and

presentation of ROCs and feed-in tariffs are unchanged. Profit (loss), the equity and the consolidated statement of cash flows are therefore not affected by the change in accounting policy.

New standards and interpretations Below we have disclosed how IFRS 16 will be implemented and what our expectations are in respect of the financial impact. As described below there is still uncertainty about the impact.

Standard

Expected effect

Commencement

Transitional provision

IFRS 16 Leases

The lease obligation to be recognised in the balance sheet as of 1 January 2019 is expected to be significantly lower than indicated in the Annual Report for 2017. The lower obligation is primarily due to the expected closing of the farm-down of 50% of Hornsea 1 in Q4 2018. The Hornsea 1 project includes a significant seabed lease obligation of which 50% will be transferred to our partner. Lease obligations related to Lincoln Clean Energy (acquisition closed 1 October) and Deepwater Wind (agreement signed 8 October) have not yet been determined, but will have a counter effect. The analysis hereof is in progress.

IFRS 16 will be implemented at 1 January 2019.

The standard will be implemented with retrospective effect, and the comparative figures will not be restated. The requirements of the standard therefore only apply to ongoing and/or leases commencing at 1 January 2019. For all leases, we will measure the lease asset at the same amount as the lease debt, adjusted by the amount of prepayments and accrued lease payments as of 1 January 2019.


28


2. Business performance Specification of the difference between EBITDA according to business performance and according to IFRS, DKKm EBITDA - business performance Business performance adjustments in respect of revenue for the period Business performance adjustments in respect of cost of sales for the period EBITDA - IFRS Total business performance adjustments for the period comprise: Value adjustments for the period of hedging contracts that relate to future periods Reversal of gains (losses) relating to hedges deferred from prior periods where the hedged production or trading is recognised in business performance EBITDA for this period Total adjustments

Financial impact of hedging Our hedging of market risks is based on a number of different accounting principles, depending on the type of exposure being hedged. In the business performance result, the value of hedging contracts concerning energy and related currencies is deferred for recognition

9M 2018

9M 2017

Q3 2018

Q3 2017

10,823

9,487

2,225

1,757

(4,064)

1,092

(2,220)

(222)

818

(316)

562

108

7,577

10,263

567

1,643

(3,615)

507

(1,926)

(254)

369

269

268

140

(3,246)

776

(1,658)

(114)

The table shows the difference between the income statement according to business performance and according to IFRS, which is shown in the adjustments column in the income statement. The main reason for the difference between Business Performance and IFRS EBITDA in 2018 are losses on power hedges, due to the increase in power prices in 2018.

in the period in which the hedged exposure materialises. Exposure from the proceeds from partial sales of new offshore wind farms, among other things, is hedged as cash-flow hedging in accordance with the IFRS principles and is transferred to both IFRS and business performance EBITDA in the period in which the hedged exposure materialises.

Expected value for recognition in business performance EBITDA, DKKbn

The figure shows the time of the transfer of the market value of hedging contracts in business performance EBITDA for both business performance and IFRS hedges.


29


3. Segment information 9M 2018 Income statement, DKKm External revenue Intra-group revenue

Reportable segments

Other activities/ eliminations


Offshore Wind

Bioenergy

Customer Solutions

Adjustments

IFRS

14,689

4,820

33,952

53,461

(42)

53,419

(4,064)

49,355

5,161

(393)

1,130

5,898

(5,898)1

-

-

-

Revenue

19,850

4,427

35,082

59,359

(5,940)

53,419

(4,064)

49,355

Cost of sales

(7,632)

(3,184)

(31,722)

(42,538)

5,761

(36,777)

818

(35,959)

Employee costs and other external expenses

(3,704)

(1,097)

(1,567)

(6,368)

9

(6,359)

-

(6,359)

Additional other operating income and expenses

584

16

34

634

(3)

631

-

631

Gain (loss) on disposal of non-current assets

(77)

-

(13)

(90)

-

(90)

-

(90)

Share of profit (loss) in associates and joint ventures EBITDA Depreciation and amortisation Impairment losses Operating profit (loss) (EBIT)

(3)

2

-

(1)

-

(1)

-

(1)

9,018

164

1,814

10,996

(173)

10,823

(3,246)

7,577

(3,189)

(487)

(572)

(4,248)

(33)

(4,281)

-

(4,281)

-

-

-

-

-

-

-

-

5,829

(323)

1,242

6,748

(206)

6,542

(3,246)

3,296

62,376

7,977

11,929

82,282

308

82,590

-

82,590

Equity investments and non-current receivables

242

44

329

615

814

1,429

-

1,429

Net working capital, work in progress

10,140

-

-

10,140

-

10,140

-

10,140

Net working capital, capital expenditures

(3,407)

(197)

-

(3,604)

-

(3,604)

-

(3,604)

1,455

(3,397)

870

(1,072)

161

(911)

-

(911)

(1,856)

(176)

(1,724)

(3,756)

(57)

(3,813)

-

(3,813)

Net working capital, other items Derivatives, net Assets classified as held for sale, net

-

-

2,075

2,075

-

2,075

-

2,075

Decommissioning obligations

(4,109)

(722)

(574)

(5,405)

-

(5,405)

-

(5,405)

Other provisions

(1,905)

(833)

(3,005)

(5,743)

(844)

(6,587)

-

(6,587)

2,754

(138)

342

2,958

(702)

2,256

-

2,256

29

17

1

47

(559)

(512)

-

(512)

65,719

2,575

10,243

78,537

(879)

77,658

-

77,658

Tax, net Other receivables and other payables, net Capital employed at 30 September Of which capital employed for discontinued operations Of which capital employed for continuing operations Return on capital employed (ROCE) % Cash flow from operating activities Gross investments Divestments Free cash flow (FCF)


The column ’Other activities/eliminations’ covers primarily the elimination of intersegment transactions. Also included are income and costs, assets and liabilities, investment activity, taxes, etc., handled at group level. Including the elimination of other activities, the total elimination of intra-group revenue amounts to DKK 7,556 million. 1

Key ratios Property, plant and equipment and intangible assets

Profit (loss) and cash flows are shown only for continuing operations.

(156)

-

(156)

77,814

-

77,814

25.8

(10.0)

11.2

-

-

23.0

-

-

2,242

509

1,534

4,285

(1,507)

2,778

-

2,778

(7,853)

(948)

(677)

(9,478)

(87)

(9,565)

-

(9,565)

767

378

47

1,192

9

1,201

-

1,201

(4,844)

(61)

904

(4,001)

(1,585)

(5,586)

-

(5,586)

30


3. Segment information (continued) 9M 2017 Income statement, DKKm

Reportable segments



Offshore Wind

Bioenergy

Customer Solutions

Adjustments

IFRS

External revenue

11,261

3,918

28,948

44,127

(221)

43,906

1,092

44,998

Intra-group revenue

3,533

158

851

4,542

(4,542) 1

-

-

-

Revenue

14,794

4,076

29,799

48,669

(4,763)

43,906

1,092

44,998

Cost of sales

(5,138)

(3,153)

(26,556)

(34,847)

4,472

(30,375)

(316)

(30,691)


(3,118)

(1,025)

(1,362)

(5,505)

(43)

(5,548)

-

(5,548)

103

11

21

135

2

137

-

137

1,363

3

1

1,367

-

1,367

-

1,367

-

-

-

-

-

-

-

-

Additional other operating income and expenses Gain (loss) on disposal of non-current assets Share of profit (loss) in associates and joint ventures EBITDA

8,004

(88)

1,903

9,819

(332)

9,487

776

10,263

Depreciation and amortisation

(3,039)

(507)

(649)

(4,195)

(27)

(4,222)

-

(4,222)

-

-

-

-

-

-

-

-

4,965

(595)

1,254

5,624

(359)

5,265

776

6,041

Impairment losses Operating profit (loss) (EBIT) Key ratios Property, plant and equipment and intangible assets Equity investments and non-current receivables Net working capital, work in progress Net working capital, capital expenditures Net working capital, other items Derivatives, net Assets classified as held for sale, net Decommissioning obligations Other provisions

59,784

7,182

11,408

78,374

307

78,681

-

194

41

302

537

710

1,247

-

78,681 1,247

9,801

-

-

9,801

-

9,801

-

9,801

(3,580)

(145)

-

(3,725)

-

(3,725)

-

(3,725)

585

(3,228)

(1,099)

(3,742)

(17)

(3,759)

-

(3,759)

2,628

(121)

431

2,938

(114)

2,824

-

2,824

-

-

2,072

2,072

-

2,072

-

2,072

(3,066)

(699)

(200)

(3,965)

-

(3,965)

-

(3,965)

(1,771)

(750)

(2,392)

(4,913)

(1,266)

(6,179)

-

(6,179)

Tax, net

178

476

(556)

98

(2,222)

(2,124)

-

(2,124)

Other receivables and other payables, net

139

-

78

217

(628)

(411)

-

(411)

64,892

2,756

10,044

77,692

(3,230)

74,462

-

74,462

Capital employed at 30 September Of which capital employed for discontinued operations Of which capital employed for continuing operations Return on capital employed (ROCE) % Cash flow from operating activities Gross investments Divestments Free cash flow (FCF)


(84)

-

(84)

74,546

-

74,546

15.8

(26.1)

23.0

-

-

15.0

-

-

(237)

(8)

(842)

(1,087)

(968)

(2,055)

-

(2,055)

(10,479)

(971)

(478)

(11,928)

(11)

(11,939)

-

(11,939)

1,927

36

102

2,065

42

2,107

-

2,107

(8,789)

(943)

(1,218)

(10,950)

(937)

(11,887)

-

(11,887)

31

Up until the divestment, the discontinued operations in the divested Oil & Gas business were included in assets classified as held for sale and in discontinued operations. Including the elimination of other activities, the total elimination of intra-group revenue amounts to DKK 6,076 million. 1

We have implemented IFRS 15 after the modified retrospective method. See note 1 ’Basis of reporting’ and note 4 ’Revenue’.


3. Segment information (continued) Q3 2018 Income statement, DKKm

Reporting segments



Offshore Wind

Bioenergy

Customer Solutions

Adjustments

IFRS

External revenue

3,925

862

10,134

14,921

97

15,018

(2,220)

12,798

Intra-group revenue

1,379

(202)

371

1,548

(1,548)1

-

-

-

Revenue

5,304

660

10,505

16,469

(1,451)

15,018

(2,220)

12,798

Cost of sales

(2,087)

(432)

(9,434)

(11,953)

1,408

(10,545)

562

(9,983)


(1,422)

(433)

(597)

(2,452)

23

(2,429)

-

(2,429)

Additional other operating income and expenses

209

-

4

213

(1)

212

-

212

Gain (loss) on disposal of non-current assets

(27)

-

-

(27)

-

(27)

-

(27)

Share of profit (loss) in associates and joint ventures

(5)

1

-

(4)

-

(4)

-

(4)

1,972

(204)

478

2,246

(21)

2,225

(1,658)

567

(1,072)

(163)

(192)

(1,427)

(10)

(1,437)

-

(1,437)

-

-

-

-

-

-

-

-

900

(367)

286

819

(31)

788

(1,658)

(870)

Offshore Wind

Bioenergy

Customer Solutions

Reporting segments



Adjustments

IFRS

External revenue

2,865

724

8,224

11,813

56

11,869

(222)

11,647

Intra-group revenue

1,048

52

217

1,317

(1,317)1

-

-

11,647

EBITDA Depreciation and amortisation Impairment losses Operating profit (loss) (EBIT), continuing operations

Q3 2017 Income statement, DKKm

Revenue

3,913

776

8,441

13,130

(1,261)

11,869

(222)

Cost of sales

(1,177)

(556)

(7,779)

(9,512)

1,303

(8,209)

108

(8,101)

(1,030)

(366)

(463)

(1,859)

(20)

(1,879)

-

(1,879)

Employee costs and other external expenses Additional other operating income and expenses

24

2

2

28

1

29

-

29

(55)

2

1

(52)

-

(52)

-

(52)

(1)

-

-

(1)

-

(1)

-

(1)

EBITDA

1,674

(142)

202

1,734

23

1,757

(114)

1,643

Depreciation and amortisation

(979)

(180)

(217)

(1,376)

(9)

(1,385)

-

(1,385)

Gain (loss) on disposal of non-current assets Share of profit (loss) in associates and joint ventures

Impairment losses Operating profit (loss) (EBIT), continuing operations


-

-

-

-

-

-

-

-

695

(322)

(15)

358

14

372

(114)

258

32

Including the elimination of other activities, the total elimination of intra-group revenue amounts to DKK 2,135 million. 1

We have implemented IFRS 15 after the modified retrospective method. See note 1 ’Basis of reporting’ and note 4 ’Revenue’.

Up until the divestment, the discontinued operations in the divested Oil & Gas business were included in ‘assets classified as held for sale’ and in discontinued operations. Including the elimination of other activities, the total elimination of intra-group revenue amounts to DKK 1,832 million. 1


4. Revenue Revenue 9M 2018, DKKm

Offshore Wind

Bioenergy

Customer Solutions

-

34

18,191

Sale of gas Generation and sale of power Revenue from construction of offshore wind farms Generation and sale of heat and steam Distribution and transmission


9M total

(683)

17,542

Revenue 9M 2017, DKKm Sale of gas

3,625

2,098

14,192

(5,096)1

14,819

10,266

-

-

-

10,266

-

2,011 -

1,942

(22)

2,011 1,920

Generation and sale of power Revenue from construction of offshore wind farms Generation and sale of heat and steam Distribution and transmission

1,087

179

371

58

1,695

Other revenue

Total revenue from customers, IFRS

14,978

4,322

34,696

(5,743)

48,253

Government grants

5,124

382

-

-

5,506

Adjustments Total revenue, business performance

Other revenue

Economic hedging

(2,866)

(332)

957

302

(1,939)

-

165

(2,779)

149

(2,465)

17,236

4,537

32,874

(5,292)

49,355

2,614

(110)

2,208

(648)

4,064

19,850

4,427

35,082

(5,940)

53,419

Other revenue Total revenue, IFRS Adjustments Total revenue, business performance Timing of revenue recognition from customers, IFRS At a point in time

1,024

2,185

21,504

(342)

24,371

Over time

13,954

2,137

13,192

(5,401)

23,882


14,978

4,322

34,696

(5,743)

48,253

Total revenue, IFRS

9M total

Offshore Wind

Bioenergy

-

-

14,087

(1,168)

12,919

6,473

2,280

14,059

(3,793)

19,019

7,056

-

-

-

7,056

-

1,757

-

-

1,757

-

-

1,919

(22)

1,897

1,690

207

80

373

2,350

15,219

4,244

30,145

(4,610)

44,998

(425)

(168)

(346)

(153)

(1,092)

14,794

4,076

29,799

(4,763)

43,906

The elimination column includes elimination of the internal sale of ROCs between Offshore Wind (included as government grants) and Customer Solutions. The ROCs recognised as inventory in Customer Solutions before sold to external customers which creates a mismatch in timing of the internal purchase and the external sale of the ROCs in Customer Solutions. Therefore the amount to be eliminated can exceed the amount of ROCs recognised in Offshore Wind for the period. 1


Customer Solutions

We have implemented IFRS 15 after the modified retrospective method. Therefore, we have not restated comparative figures. In 2017, we presented revenue from green certificates, mainly ROCs, as generation and sale of power. From 1 January 2018, this revenue is now being presented as government grants.

Revenue The timing of transfer of goods or services to customers is categorised as follows: ‘At a point in time’ mainly comprises: − sale of gas or power in the market, e.g.

North Pool, TTF, NBP − transmission assets for offshore wind

farms. ‘Over time’ mainly comprises: − construction agreements of offshore

wind farms and transmission assets − long-term contracts with customers to

deliver gas, power or heat.


Revenue increased by 22% in 9M 2018 compared to 9M 2017. The increase was mainly due to higher revenue from construction agreements due to high activity on construction of offshore wind farms for partners, higher revenue from offshore wind farms in operation and higher gas and power prices in 2018. In 9M 2018, revenue according to IFRS increased by 10% relative to the same period in 2017. 33


4. Revenue (continued) Revenue Q3 2018, DKKm Sale of gas Generation and sale of power Revenue from construction of offshore wind farms Generation and sale of heat and steam Distribution and transmission

Offshore Wind

Bioenergy

Customer Solutions

-

12

5,940


Q3 total

(159)

5,793

Revenue Q3 2017, DKKm Sale of gas

1,262

461

3,659

(1,246)1

4,136

2,384

-

-

-

2,384

-

201 -

604

(19)

201 585

Generation and sale of power Revenue from construction of offshore wind farms Generation and sale of heat and steam Distribution and transmission

379

38

140

10

567

Other revenue


4,025

712

10,343

(1,414)

13,666

Government grants

1,431

37

-

-

1,468

Adjustments

(1,223)

16

344

136

(727)

-

(46)

(1,655)

92

(1,609)

Total revenue, business performance

4,233

719

9,032

(1,186)

12,798

1,071

(59)

1,473

(265)

2,220

5,304

660

10,505

(1,451)

15,018

Other revenue

Economic hedging Other revenue Total revenue, IFRS Adjustments Total revenue, business performance Timing of revenue recognition from customers, IFRS At a point in time

Total revenue, IFRS


Q3 total

Offshore Wind

Bioenergy

Customer Solutions

-

-

3,524

(256)

3,268

2,003

577

3,873

(1,108)

5,345

1,566

-

-

-

1,566

-

278

-

-

278

-

-

624

(7)

617

92

(54)

425

110

573

3,661

801

8,446

(1,261)

11,647

252

(25)

(5)

-

222

3,913

776

8,441

(1,261)

11,869

The elimination column includes elimination of the internal sale of ROCs between Offshore Wind (included as government grants) and Customer Solutions. The ROCs are put on inventory in Customer Solutions before sold to the external customers which creates a mismatch in timing of the internal purchase and the external sale of the ROCs in Customer Solutions. Therefore the amount to be eliminated can exceed the amount of ROCs recognised in Offshore Wind for the period. 1

-

465

6,436

(80)

6,821

Over time

4,025

247

3,907

(1,334)

6,845


4,025

712

10,343

(1,414)

13,666


34


6. Gross and net investments

5. Other operating income and expenses Other operating income, DKKm

9M 2018

9M 2017

Q3 2018

Q3 2017

2

1,449

-

7

Compensations

344

126

145

25

Miscellaneous operating income

379

50

77

8

Total other operating income

725

1,625

222

40

Gain on divestment of assets

Other operating expenses, DKKm Loss on divestment of assets Miscellaneous operating expenses Total other operating expenses


9M 2018

9M 2017

Q3 2018

Q3 2017

92

82

27

59

92

39

10

4

184

121

37

63

Gross and net investments, DKK million Cash flow from investing activities Dividends received and capital reduction, reversed Purchase and sale of securities, reversed Loans to associates and joint ventures, reversed

9M 2018

9M 2017

Q3 2018

Q3 2017

(3,714)

(1,292)

452

(276)

(25)

(13)

(24)

-

(4,624)

(8,608)

(4,432)

(2,988)

14

31

(4)

(6)

(1,216)

(2,057)

(377)

(1,880)

(9,565)

(11,939)

(4,385)

(5,150)

(15)

50

3

2

Sale of non-current assets

1,216

2,057

377

1,880

Total cash flows from divestments

1,201

2,107

380

1,882

(8,364)

(9,832)

(4,005)

(3,268)

Sale of non-current assets, reversed Total gross investments Transactions with non-controlling interests in connection with divestments

Total net investments

Compensations were mainly received from transmission system operators (TSOs). The gain on divestment of assets in 9M 2017 primarily consisted of contingent consideration relating to the farm-down of Race Bank (UK) in 2016.


The table shows gross and net investments based on cash flows from investing activities.

35


8. Discontinued operations

7. Assets classified as held for sale 30 September 2018

Assets classified as held for sale, DKKm Intangible assets Property, plant and equipment Inventories

31 December 2017

30 September 2017

18

20

21

2,123

2,119

2,127

16

16

16

Trade receivables

127

73

40

Other receivables

370

368

353

49

46

49

Income tax Cash Total assets classified as held for sale Deferred tax

-

-

-

2,703

2,642

2,606

99

99

67

368

359

280

Trade payables

94

80

136

Other payables

62

92

51

5

-

1

628

630

535

2,075

2,012

2,071

Provisions

Income tax Total liabilities relating to assets classified as held for sale Net assets classified as held for sale

The table shows assets and liabilities which have been put up for sale and, therefore, are not expected to contribute to our future earnings.

Discontinued operations

Capital employed

Discontinued operations comprise our Oil & Gas business, which we sold to INEOS on 29 September 2017.

Our capital employed in discontinued operations mainly consisted of provisions relating to the sale (tax indemnifications and payments related to the Fredericia stabilisation plant) as well as a conditional payment (receivable selling price) which does not carry interest.

Financial results Profit (loss) for the period amounted to DKK -24 million. Cash flows amounted to DKK -128 million and mainly concerned the payment of fees for exiting Oil & Gas insurance activities. This fee was provided for at the time of the divestment in Q3 2017.

"TTFUTDMBTTJmFEBTIFMEGPSTBMF

Performance highlights, DKKm

At 30 September 2018, assets classified as held for sale comprised our oil pipe system in Denmark, which is to be sold to the Danish transmission system operator, Energinet. At 30 September 2017, assets classified as held for sale comprised our oil pipe system.

EBIT

On 29 September 2017, we divested our Oil & Gas business to INEOS. Until the divestment, we presented our Oil & Gas business as assets classified as held for sale and as discontinued operations.

9M 2018

9M 2017

Q3 2018

Q3 2017

-

7,149

-

1,389

Profit (loss) from discontinued operations

(24)

4,662

(13)

752

Cash flows from discontinued operations

(128)

8,594

(1)

5,052

Capital employed, discontinued operations 30 September DKKm 2018 Equity investments and non-current receivables 732 Net working capital, other items (92)

31 December 2017

Derivatives, net Other provisions Tax, net Other receivables and other payables, net Total


In addition, we have interest-bearing receivables of USD 150 million (not part of capital employed), which will be received in the 2018-2020 period. The first payment was received 1 October 2018.

36

691 -

(43)

-

(805)

(935)

4

(3)

48

11

(156)

(236)


10. Reserves

9. Financial income and expenses Net financial income and expenses, DKKm

9M 2018

9M 2017

Q3 2018

Q3 2017

Reserves 2018, DKKm

Interest expenses, net

(836)

(259)

(318)

(58)

Reserves at 1 January 2018

Interest element of provisions, etc.

(294)

(324)

(103)

(111)

Exchange rate adjustments

7

(25)

72

35

Value adjustments of hedging

Value adjustments of derivatives, net Exchange rate adjustments, net Value adjustments of securities, net Other financial income and expenses, net Net financial income and expenses

Hedging reserve

Share premium reserve

Total reserves

(1,825)

301

-

(1,524)

(96)

-

-

(96)

-

(255)

-

(255)

(11)

202

(62)

66

Value adjustments transferred to:

(125)

(79)

(49)

(13)

Revenue

-

(319)

-

(319)

24

92

24

103


-

73

-

73

(1,235)

(393)

(436)

22

17

63

-

80

(79) (1,904)

(438) (137)

-

(517) (2,041)

Foreign currency translation reserve (1,558)

Hedging reserve 497

Share premium reserve 21,279

Total reserves 20,218

(1,393)

-

-

(1,393)

-

1,511

-

1,511

Revenue

-

(250)

-

(250)


-

191

-

191

562

(311)

-

251

248

(239)

-

9

(583) (2,141)

902 1,399

21,279

319 20,537

Tax: Tax on hedging and currency adjustments

Financial income and expenses The table shows net financial income and expenses, corresponding to our internal reporting. Exchange rate adjustments and hedging contracts entered into to hedge currency risks are presented net under the item ’Exchange rate adjustments, net’.

Foreign currency translation reserve

The increase in interest expenses net in 2018 compared with 2017 is mainly driven by lower capitalised interest and higher interest expenses on cross currency swaps used for hedging purposes. Exchange rate adjustments, net have decreased mainly due to gains on NOK positions in 2017.

Comprehensive income for the period Total reserves at 30 September

Reserves 2017, DKKm Reserves at 1 January 2017 Exchange rate adjustments Value adjustments of hedging Value adjustments transferred to:

Profit (loss) from discontinued operations Tax: Tax on hedging and currency adjustments Comprehensive income for the period Total reserves at 30 September


37


12. Fair value measurement

11. Market risks Market risks The management of market risks is to ensure stable and robust financial ratios that support our growth strategy. We hedge prices for up to five years to reduce cash flow fluctuations. Prices are not hedged in the medium to long term, and our

Assets

long-term market risks are therefore determined by our strategic decisions on investments in new assets, the conclusion of long-term contracts as well as any divestment of assets.

Fair value hierarchy, DKKm

Our energy and currency exposures for the next five years are shown below.

Level 3

Securities


Derivatives

Other receivables

Derivatives

9M 2018 Level 1

-

-

-

-

Level 2

20,333

7,054

-

11,046

Total 2018

-

455

107

279

20,333

7,509

107

11,325

9M 2017

Currency exposure 1 October 2018 - 30 September 2023, DKKbn

Level 1

5,379

795

-

635

Level 2

2,142

4,493

-

1,769

Level 3 Total 2017

-

621

105

680

7,521

5,909

105

3,084

Valuation principles and key assumptions

Our gross currency exposure totalled DKK 84.7 billion before hedging and gross DKK 16.3 billion after hedging at the end of September 2018.

In order to minimise the use of subjective estimates or modifications of parameters and calculation models, it is our policy to determine fair values based on external information that most accurately reflects the fair values. Accounting policies Level 1 comprises quoted securities and derivatives that are traded in active markets.

Energy exposure 1 October 2018 - 30 September 2023, DKKbn

Level 2 comprises derivatives, for which valuation models with observable inputs are used to measure fair value. Level 3 derivatives comprises primarily long-term contract on the purchase/sale of, in particular, power and gas. Our gross energy exposures totalled DKK 21.7 billion before hedging and gross DKK 8.0 billion after hedging at the end of September 2018.


The fair values are based on assumptions concerning the long-term prices of, in particular, power, gas, coal, USD, EUR, volatilities as well as risk premiums in respect of liquidity and market risks. Since there are no active markets for the long-term prices of power, oil and gas, the fair value has been determined through an estimate of the future prices. The

38

Securities are now considered as level 2 due to a change in valuation input provider.

most important parameter resulting in commodity contracts being classified as level 3 is the power price. Normally, the price can be observed for a maximum of five years in the power market, after which an active market no longer exists. Beyond the five-year horizon, the energy price is thus projected on the basis of the observable forward price for year one to five. As the forward price of power develops stably during the five-year period, the projection over a small number of years is not deemed to be associated with any material risk. In connection with the divestment of our Oil & Gas business, we will receive USD 100 million if the Rosebank field is developed. This payment is recognised at fair value in level 3 under other receivables. All assets and liabilities measured at fair value are measured on a recurring basis.


13. Interest-bearing debt and FFO Interest-bearing debt and interest-bearing assets, DKKm

30 September 2018

31 December 2017

30 September 2017

Interest-bearing debt comprises: Bank debt

8,135

2,069

2,983

Bond debt

23,770

27,567

19,797

Total bond and bank debt

31,905

29,636

22,780

Liabilities classified as held for sale

-

-

-

Other interest-bearing debt

1,171

-

-

Total interest-bearing debt

33,076

29,636

22,780

20,333

25,280

7,521

1,975

4,203

3,308

63

48

31

Other receivables

750

647

646

Receivables in connection with divestments

998

975

1,014

-

-

-

Total interest-bearing assets

24,119

31,153

12,520

Total interest-bearing net debt

8,957

(1,517)

10,260

Interest-bearing assets comprises: Securities Cash Receivables from associates and joint ventures

Assets classified as held for sale

Interest-bearing net debt totalled DKK 8,957 million as of 30 September 2018, which is an increase of DKK 10,474 million relative to 31 December 2017. The increase was driven by a decrease in interestbearing assets totalling DKK 7,034 million, of which DKK 4,947 million were related to securities and cash. In addition, interest-bearing debt increased by DKK 2,269 million, which relates to short-term repo loans. Other interest-bearing debt relates to cash collateral received for derivatives with a positive fair value.

Market value of bond and bank debt The market value of bond and bank debt amounted to DKK 28,075 million and DKK 8,190 million, respectively, at 30 September2018.


Funds from operations (FFO) LTM1 DKKm EBITDA - business performance Interest expenses, net

30 September 2018

31 December 2017

30 September 2017

23,855

22,519

15,796

(1,206)

(629)

(543)

(439)

(754)

(659)

(197)

(194)

(173)

Reversal of interest expenses transferred to assets Interest element of decommissioning obligations 50% of coupon payments on hybrid capital Calculated interest paid on operating lease obligations Adjusted interest expenses, net

(230)

(320)

(320)

(267) (2,339)

(234) (2,131)

(273) (1,968)

Reversal of gain (loss) on divestment of assets

(9,378)

(10,835)

(4,062)

Reversal of recognised operating lease payment in profit (loss) for the year Total current tax

796 (1,868)

885 (2,447)

887 (3,667)

Funds from operations (FFO)

11,066

7,991

6,986

30 September 2018

31 December 2017

30 September 2017

8,957

(1,517)

10,260

6,619

6,619

6,624

1,041

749

784

5,428 5,404

6,095 4,751

5,429 3,965

(908)

(797)

(650)

26,541

15,900

26,412

30 September 2018

31 December 2017

30 September 2017

41.7%

50.3%

26.5%

1

Last 12 months

Adjusted interest-bearing net debt DKKm Total interest-bearing net debt 50% of hybrid capital Cash and securities not available for distribution, excluding repo loans Present value of operating lease payments Decommissioning obligations Deferred tax on decommissioning obligations Total adjusted interest-bearing net debt

Funds from operations (FFO)/ adjusted interest-bearing net debt Funds from operations (FFO)/ adjusted interest-bearing net debt

39

The table shows which items are included in funds from operations. FFO is calculated for the continuing operations.

The table shows which items are included in the adjusted interestbearing debt as well as FFO relative to adjusted interestbearing debt.


Statement by the Executive Board and the Board of Directors The Board of Directors and the Executive Board have today considered and approved the interim report of Ørsted A/S for the period 1 January - 30 September 2018. The interim report, which has not been audited or reviewed by the company’s independent auditors, has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the EU and

additional requirements in the Danish Financial Statements Act (Årsregnskabsloven). Apart from the implementation of IFRS 15 and the changed accounting policy for subsidies, the accounting policies remain unchanged from the annual report for 2017. In our opinion, the interim financial report gives a true and fair view of the Group's assets, liabilities and financial position at

30 September 2018 and of the results of the Group's operations and cash flows for the period 1 January - 30 September 2018. Furthermore, in our opinion the management's review gives a fair presentation of the development in the Group's operations and financial circumstances, of the results for the period, and of the overall financial position of the Group as well as a description of the most

significant risks and elements of uncertainty facing the Group.

Lynda Armstrong

Pia Gjellerup

Dieter Wemmer

Over and above the disclosures in the interim financial report, no changes in the Group's most significant risks and uncertainties have occurred relative to the disclosures in the annual report for 2017.

Skærbæk, 1 November 2018

Executive Board

Henrik Poulsen

Marianne Wiinholt

President and CEO

CFO

Board of Directors

Thomas Thune Andersen

Lene Skole

Chairman

Deputy Chairman

Jørgen Kildahl

Peter Korsholm

Benny D. Loft

Hanne Sten Andersen*

Poul Dreyer*

Benny Gøbel*


40

*Employee representative


Forward-looking statements This report contains certain forward-looking statements, including but not limited to, the statements and expectations contained in the ‘Outlook’ section of this report (p. 6). Statements herein, other than statements of historical fact, regarding our future results of operations, financial condition, cash flows, business strategy, plans and future objectives are forward-looking statements. Words such as ‘targets’, ‘believe’, ‘expect’, ‘aim’, ‘intend’, ‘plan’, ‘seek’, ‘will’, ‘may’, ‘should’ ‘anticipate’, ‘continue’, ‘predict’ or variations of these words, as well as other statements regarding matters that are not historical fact or regarding future events or prospects, constitute forward-looking statements.

We have based these forward-looking statements on our current views with respect to future events and financial performance. These views involve a number of risks and uncertainties, which could cause actual results to differ materially from those predicted in the forward-looking statements and from our past performance. Although, we believe that the estimates and projections reflected in the forward-looking statements are reasonable, they may prove materially incorrect and actual results may materially differ due to a variety of factors. These factors include, but are not limited to market risks, development and construction of assets, changes in temperature, wind conditions and precipitation, regulatory risks, operation of offshore wind farms, cost of electricity for offshore wind power, changes in the competitive environment in our markets, security of supply and cable break-downs or other disruptions. As a result, you should not rely on these forward-looking statements. Please also refer to the overview of risk factors in ‘Risk and risk management’ on pp 47-50 of the Annual Report 2017 available at www.orsted.com.

Unless required by law, we are under no duty and undertake no obligation to update or revise any forward-looking statement after the distribution of this report, whether as a result of new information, future events or otherwise.


41


Interim financial report Q3 v21

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