Annual Report 2013 | Suomeksi |

20 Participations in associated companies and joint ventures

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Accounting policies + -
The Group’s interests in associated companies and jointly controlled entities are accounted for using the equity method of accounting. Assets acquired and liabilities assumed in the investment in associates or joint ventures are measured initially at their fair values at the acquisition date. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the associate or joint venture acquired, the difference is recognised directly in the income statement.
The Group’s share of its associates or joint ventures post-acquisition profits or losses after tax and the expenses related to the adjustments to the fair values of the assets and liabilities assumed are recognised in the income statement. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. The Group's share of post-acquisition adjustments to associates or joint ventures equity that has not been recognised in the associates or joint ventures income statement, is recognised directly in Group's shareholder's equity and against the carrying amount of the investment.
When the Group’s share of losses in an associate or a joint venture equals or exceeds its interest in the associate or joint venture, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate or joint venture.
Unrealised gains on transactions between the Group and its associates or joint ventures are eliminated to the extent of the Group’s interest in the associate or joint venture. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates or joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group.
Fortum owns shareholdings in associated electricity production companies (mainly nuclear and hydro), from which the owners purchase electricity at production cost, including interest costs and production taxes. The share of profit of these companies is mainly IFRS adjustments and depreciations on fair value adjustments from historical acquisitions since the companies are not profit making under local accounting principles.
If more recent information is not available, the share of the profit of certain associated or joint venture companies is included in the consolidated accounts based on the latest available information.
Fortum owns shareholdings in listed associated companies such as Hafslund ASA and TGC-1. The share of profit of these companies is accounted for based on previous quarter information since updated interim information is not normally available.
EUR million 2013 2012
Historical cost
1 January 1,683 1,637
Translation differences and other adjustments -97 41
Acquisitions - 10
Reclassifications -6 -5
Divestments -49 -
Historical cost 31 December 1,531 1,683
Equity adjustments to participations in associates and joint ventures
1 January 296 377
Translation differences and other adjustments -12 -8
Share of profits of associates 105 23
Reclassifications 6 5
Divestments -16 -
Dividends received -50 -45
OCI items associated companies 45 -56
Equity adjustments 31 December 374 296
Total 1,905 1,979
The carrying amount of investments in associated companies at the end of 2013 was EUR 1,905 million (2012: 1,979). Fortum owns shares in three (2012: three) companies classified as joint ventures. The total carrying value of these joint ventures was EUR 59 million (2012: 54).
20.1 Investments
There were no material investments in associated companies or joint ventures during 2013.
In December 2012 Turun Seudun Energiantuotanto Oy increased the company’s share capital by EUR 20 million of which Fortum’s share is EUR 10 million. The additional participation was recognised and paid in December 2012.
20.2 Divestments
In June 2013, Fortum agreed to sell its 47.9% ownership in the Swedish energy company Härjeåns Kraft AB to the Finnish energy company Oy Herrfors Ab, a subsidiary of the Katternö Group. The sales price was SEK 445 million (approximately EUR 51 million). The transaction was completed in July and a capital gain of EUR 17 million was booked to Distribution segment's third quarter results.
In July 2013 Fortum completed the divestment of its 33% holding in Infratek ASA to a fund managed by Triton. The sales price was NOK 295 million (approximately EUR 38 million). A capital gain of EUR 11 million was booked in the Power segment's third quarter results.
There were no material divestments of shares in associated companies during 2012.
20.3 Share of profits from associates
Fortum's share of profit for the full year 2013 amounted to 105 million (2012: 23), of which Hafslund represented EUR 31 million (2012: -20), TGC-1 EUR 46 million (2012: 27) and Gasum EUR 8 million (2012: 15). Share of profits from associates also includes Fortum's share of its nuclear associates Teollisuuden Voima Oyj, Forsmark Kraftgrupp AB and OKG AB EUR 21 million (2012: -6), of which EUR 17 million (2012: 1) is due to accounting of nuclear related assets and liabilities.
See Note 30 Nuclear related assets and liabilities.
In 2012 the share of profit from Hafslund included EUR -25 million related to extraordinary write-downs and provisions on BioWood Norway AS, Bio-El Fredrikstad and an ongoing tax dispute and EUR 7 million loss in relation to Hafslund's divestment of REC shares.
20.4 Dividends received
During 2013 Fortum has received EUR 50 million (2012: 45) in dividends from associates of which EUR 21 million (2012: 22) was received from Hafslund, EUR 12 million (2012: 10) from Gasum and EUR 4 million (2012: 4) from Infratek ASA.
20.5 Principal associated companies
EUR million Participation % Carrying amount in Group
Company Segment Domicile 2013 2012 2013 2012
Kemijoki Oy Power Finland 18 18 215 223
Teollisuuden Voima Oyj (TVO) Power Finland 26 26 284 270
OKG AB Power Sweden 46 46 184 142
Forsmark Kraftgrupp AB Power Sweden 26 26 78 112
Gasum Oy Heat Finland 31 31 116 121
Territorial Generating Company 1 (TGC-1) Russia Russia 26 26 463 476
Hafslund ASA Other Norway 34 34 323 334
Others 242 301
Total 1,905 1,979
Fortum owns 63.8% of the hydro shares and 15.4% of the monetary shares in Kemijoki Oy. Each owner of hydro shares is entitled to the hydropower production in proportion to its hydro shareholding. Fortum's total ownership is 17.5% of the share capital. Since Fortum has significant influence due to its representation on the Board of Directors and participation in policy-making processes, Kemijoki Oy is accounted for as an associated company.
TVO has three series of shares which entitle the shareholders to electricity produced in the different power plants owned by TVO. Series A entitles to electricity produced in nuclear power plants Olkiluoto 1 and 2, series B entitles to electricity in the nuclear power plant presently being built, Olkiluoto 3, and series C entitles to electricity produced in TVO’s share of the thermal power plant Meri-Pori. The Meri-Pori power plant is a jointly controlled asset between Fortum and TVO. Fortum accounts for its 54.55% of the assets and TVO for 45.45%.
Fortum owns, through its Swedish subsidiaries, 45.5% of the shares in OKG AB and 25.5% of the shares in Forsmark Kraftgrupp AB. Each owner is entitled to electricity produced in proportion to its shareholding. Excluding non-controlling interests in the subsidiaries, Fortum’s participation in the associated companies are 43.4% and 22.2% respectively, which reflects the share of electricity produced that Fortum can sell further to the market. The minority part of the electricity purchased is invoiced further to each minority owner according to their respective shareholding and treated as pass-through.
See also Jointly controlled assets in Note 19 Property, plant and equipment.
Market value, based on market quotations of Fortum's shareholding in the listed principal associated companies on 31 December 2013 (Hafslund ASA and TGC-1) was EUR 514 million (2012: 581), of which Hafslund was EUR 369 million (2012: 412) and TGC-1 was EUR 145 million (2012: 169). The market quotation for the TGC-1 share is affected by the low liquidity of the TGC-1 shares in the Russian stock exchanges. During 2013 trading volumes of TGC-1 shares in relation to the number of shares of the company were approximately 10% in Russian stock exchanges.
Assets, liabilities, sales and profit and loss as presented by the Group's principal associates
EUR million
Company
Domicile Assets Liabilities Sales Profit/ Loss Ownership, % Votes, %
Kemijoki Oy 1) 3) Finland 462 366 41 -8 18 18
Teollisuuden Voima Oyj 1) 2) Finland 6,725 5,257 285 37 26 26
OKG AB 1) 3) Sweden 2,620 2,088 606 6 46 46
Forsmark Kraftgrupp AB 1) 3) Sweden 2,573 2,005 752 0 26 26
Gasum Oy 2) Finland 731 341 855 22 31 31
Territorial Generating Company 1 (TGC-1) 2) Russia 3,245 1,159 1,153 99 26 26
Hafslund ASA 2) Norway 2,869 1,992 1,175 69 34 33
1) Power plants are often built jointly with other power producers. Under the consortium agreements, each owner is entitled to electricity in proportion to its share of ownership or other agreements and each owner is liable for an equivalent portion of costs. The associated companies are not profit making, since the owners purchase electricity at production cost including interest cost and production taxes.
See also Note 11 Materials and services.
2) Based on September 2013 figures.
3) Based on December 2012 figures.
20.6 Transactions and balances
Associated company transactions
EUR million 2013 2012
Sales to associated companies 3 5
Interest on associated company loan receivables 27 41
Purchases from associated companies 626 652
Purchases from associated companies include mainly purchases of nuclear and hydro power at production cost including interest costs and production taxes.
See Note 11 Materials and services.
Associated company balances
EUR million 2013 2012
Receivables from associated companies
Long-term interest-bearing loan receivables 1,415 1,332
Trade receivables 14 10
Other receivables 19 9
Liabilities to associated companies
Long-term loan payables 248 234
Trade payables 12 21
Other payables 2 6
Long-term interest-bearing receivables are mainly receivables from Swedish nuclear companies, OKG AB and Forsmark Kraftgrupp AB, EUR 1,312 million (2012: 1,249).
Investments in Swedish nuclear companies are financed through loans from owners of the nuclear companies, pro rata ownership.
Transactions and balances with joint ventures
EUR million 2013 2012
Sales to joint ventures 63 118
Interest on joint venture loan receivables 2 -
Purchases from joint ventures 20 27
Receivables from joint ventures 51 49
Other payables to joint ventures 0 2
There is a decrease in sales in 2013 since the comparative 2012 figures include a sales of inventory to Turun Seudun Energiantuotanto Oy (TSE). Receivables from joint ventures included long-term interest-bearing loan receivables of EUR 37 million (2012: 38).
See Note 8 Acquisitions and disposals for information regarding the sale of Fortum Heat Naantali Oy shares to TSE.
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