Income Statement Group

1 JANUARY - 31 DECEMBER
 
Amounts in NOK million
Note
2013
2012
Operating revenues
2 955
2 779
Purchased materials
(1 371)
(1 279)
Salaries and other personnel expenses
(1 093)
(1 017)
Depreciation and impairment changes
(96)
(41)
Other operating expenses
(448)
(340)
Operating profit
 
(53)
103
Net finance
(8)
(6)
Pre-tax profit
 
(61)
96
Tax expense
1
(29)
Profit for the year from continuing operations
 
(59)
68
Profit for the year from discontinued operations
7
3
Profit for the year
 
(52)
71
       
Other comprehensive income
     
Items that will be recycled subsequently to profit or loss
     
Exchange differences on translating foreign operations
 
35
(9)
Items that will not be recycled subsequently to profit or loss
     
Change in estimate pensions
21
343
Tax expense on other comprehensive income
(6)
(96)
Other comprehensive income for the year
 
50
238
Total comprehensive income for the year
 
(2)
309
       
Profit for the year attributable to:
     
Parent company shareholders
 
(52)
71
       
Total comprehensive income attributable to:
     
Parent company shareholders
 
(2)
309
       
Earnings per share of profit for the year attributable to parent company shareholders
     
       
Basic and diluted earnings per share, continued operations
(0.9)
1.1
Basic and diluted earnings per share, discontinued operations
(0.8)
1.1
       
Notes 1-30 follow the financial statements and are an integral part thereof.
NOTE 1
GENERAL INFORMATION
   
Infratek AS and its subsidiaries (collectively referred to as the Group) is a leading supplier of technical services for the development,operation and securing of critical infrastructure in Norway, Sweden, Finland and Denmark. The Group's business activities are directed towards the corporate market: primarily grid owners and energy companies, telecom owners, the public sector, the oil and gas sector, real estate owners and retail chains.
   
                     
The business area Local Infrastructure comprises the Group’s activities related to infrastructure in Norway and Sweden which is geared towards the product areas of distribution network, highway and street lighting, fibre/telecom, district heating and railways.
   
                     
The business area Central Infrastructure comprises the Group’s activities related to infrastructure in Norway, Sweden and Finland geared towards the central transmission network for power transmission in Scandinavia; products and services related to transformer stations, cables and power lines for higher voltages.
   
     
The business area Security delivers technical security solutions to the Nordic countries, such as alarm systems, CCTV, access control facilities, integrated security solutions and electronic anti-theft solutions. In addition, the Security business area’s Electrical Safety unit delivers monitoring and inspection services to grid companies, allowing them to fulfil legally mandated responsibilities (so-called DLE services).
   
     
The Group operates its business activities through subsidiaries and has its headquarter in Oslo, Norway. The Company was listed on the Oslo Stock Exchange on 5 December 2007 after the Technical Services business area was spun off from the Hafslund Group - and was later delisted on 20 March 2014.
   
     
     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                   
 
NOTE 2
SUMMERY OF SIGNIFICANT ACCOUNTING PRINCIPLES
The most important accounting principles used in the preparation of the consolidated accounts are described below. These principles have been applied consistently to all presented reporting periods, unless otherwise stated in the description.
                 
The company is a limited company incorporated and domiciled in Norway with Breivollveien 31, Oslo, as its registered office address. The company was previously listed on the Oslo Stock Exchange but was delisted on 20 March 2014.
                 
2.1 Basis of preparation
The consolidated accounts of Infratek AS have been prepared and presented in accordance with International Financial Reporting Standards (IFRSs) and IFRIC interpretations, as adopted by the EU.
                 
The consolidated accounts are based on a modified historic cost principle. Primarily, the modification relates to value adjustments of financial assets available for sale and financial assets and liabilities (including derivatives), adjustments to fair value are posted over the statement of comprehensive income. These differences have no impact on the Infratek Group’s consolidated financial statements for 2013, with the exception of an option value for Infratek Sikkerhed Danmark A/S, see notes 15 and 25. The preparation of accounts according to IFRS requires the use of estimates. Furthermore, the application of the company’s accounting principles requires management to exercise judgment and apply assumptions. Areas highly subjected to the exercise of such judgment or with a high degree of complexity, and areas where assumptions and estimates are material to the consolidated accounts, are discussed in Note 4.
                 
The Group’s annual financial statements have been prepared in accordance with the going concern principle.
                 
2.1.1 Changes in accounting principles and information
a) New and amended accounting standards adopted by the Group.
The following standards, affecting group accounts, have been implemented for the financial year beginning 1 January 2013:
                 
· IFRS 13 Fair Value Measurement aims at improving consistency and reducing complexity by providing a precise definition of what fair value is. The standard is a common source of information regarding requirements to fair value measurement and disclosure requirements and should be utilised in connection with other standards where the fair value measurement is in use. The standard does not increase the use of fair value but provides guidance on how the measurement should be applied - when fair value measurement is required - or is permitted by other standards.
                 
· IAS 1 Presentation of Financial Statements has been amended relating to items classified under other comprehensive income. Such items should be grouped on the basis of whether they are potentially reclassifiable to profit or loss at a later stage - or not.
                 
· IAS 19 Employee Benefits was revised in June 2011 with effect from 1 January 2013. The change requires that all changes to estimates should be included in other comprehensive income as and when they occur (no corridor). Furthermore, an immediate entry of all expenses related to previous periods' pensions gain - and that interest expenses and expected return on pension plan assets are replaced with a net interest amount that is calculated by applying the discount rate to the net defined benefit liability (asset). In 2011, the Group changed its accounting principles regarding pensions and all actuarial gains and losses were booked as other comprehensive income. The implemented change to the calculation method of the net interest amount did not have any significant effect on the 2012 consolidated accounts as the discount rate used was equal to the interest rate. The group adopted the standard early, from 2012.
                 
b) New standards, amendments and interpretations of existing standards issued but not effective for the financial year beginning 1 January 2013 and not early adopted:
· IFRS 9 Financial Instruments addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9 was issued in November 2009, October 2010 and November 2013. The standard replaces the sections of IAS 39 that relate to the classification and measurement of financial instruments. IFRS 9 requires financial assets to be classified into two measurement categories; those to be measured at fair value and those to be measured at amortised cost. The determination of category is made at initial recognition. The classification depends on the entity's business model for managing its financial instruments and the instruments' contractual cash flow characteristics. For financial liabilities, the standard keeps most of the IAS 39 requirements. The main change is that in cases where the fair value option is used for a financial asset, the part of the fair value change relating to the entity's own credit risk is recognised in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. IFRS 9 entails several changes and simplifications that will lead to an increased use of hedge accounting. The Group has not yet fully assessed the impact of IFRS 9. Additional parts of IFRS 9 will be assessed when completed. The implementation date for IFRS 9 has not yet been set, however, it will not be earlier than 1 January 2017.
                 
· IFRS 10 Consolidated Financial Statements builds on existing principles by identifying the concept of control as the determining factor on whether an entity should be included in the consolidated financial statements of the parent company. The standard provides additional guidance to assist in the determination of control in cases where this is difficult to assess. The standard is not expected to have any new effect on the Group consolidated accounts. The standard is effective from 1 January 2014.
                 
· IFRS 11 Joint arrangements will replace IAS 31. IFRS 11 focuses on the rights and obligations of the parties to the arrangement rather than its legal form. There are two types of joint arrangements: joint operations and joint ventures. Joint operations arise where the investors have rights to the assets and obligations for the liabilities of an arrangement. A joint operator accounts for its share of the assets, liabilities, revenue and expenses. Joint ventures arise where the investors have rights to the net assets of the arrangement; joint ventures are accounted for under the equity method. Proportional consolidation of joint arrangements is no longer permitted. The standard is not expected to have a significant effect on the Group consolidated accounts. The standard is effective from 1 January 2014.
                 
· IFRS 12 Disclosures of Interests in Other Entities includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other balance sheet vehicles. The standard is not expected to have a significant effect on the Group consolidated accounts. The standard is effective from 1 January 2014.
                 
· IAS 36 Impairment of assets. Changes relate to disclosures regarding the recoverable amount of non-financial assets. The amendment removed certain disclosures regarding the recoverable amount of CGUs which had been included in IAS 36 at the time of IFRS 13 being issued. The change is effective from 1 January 2014.
                 
· IFRIC 21 Leviesregulates the accounting of liabilities to pay levies. The interpretation levies does not include tax on income. The interpretation provides guidance on when to recognise a liability for a levy imposed. The Group is not liable to pay material levies and the interpretation is not expected to have a significant effect on the Group consolidated accounts.
                 
There are no other IFRSs or IFRIC interpretations that are not yet effective and that would be expected to have a material impact on the Group consolidated accounts.
                 
2.2 Consolidation principles
a) Subsidiaries
Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies, accompanying a shareholding and more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group.
                 
The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets.
                 
If the business combination is achieved in stages, the aquisition date fair value of the acquirer's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.
                 
Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contigent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Contigent consideration that is classified as equity is not remeasured and its subsequent settlement is accounted for within equity.
                 
If the sum of the consideration, capitalised amount of non-controlling shareholders and actual value of previous ownership on the acquisition date surpasses the actual value of identifiable net assets in the acquired company, the difference shall be capitalised as goodwill. If the amount is lower than the acquired company's net asset value, the difference should be expensed to the statement of comprehensive income.
                 
Intra-Group transactions, inter-company balances, and unrealised profit between Group companies have been eliminated. Profit and losses resulting from inter-company transactions that are recognised in assets are also eliminated. Accounting principles of subsidiaries are modified when necessary to achieve conformity with Group accounting principles.
                 
b) Changes in ownership interests in subsidiaries without change of control
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions. In the case of additional purchases, the difference between the consideration paid and the share's relative share of net assets in the subsidiary is booked to the equity attributable to company shareholders. Gains or losses on disposals to non-controlling interests are also recognised in equity.
                 
c) Disposals of subsidiaries
When the Group ceases to have control of any retained interest in the entity, it is remeasured to its fair value when control is lost, with the change in carrying amount booked to profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.
                 
2.3 Segment reporting
Operating segments are reported in the same way as for internal reporting to the company’s highest decision-making body. The company’s highest decision-making body, which is responsible for allocating resources and assessing the financial performance of the operating segments, is defined as Group management.
                 
2.4 Foreign currency translation
a) Functional currency and presentation currency
Items included in the financial statements of each subsidiary in the Group are recorded in the currency mainly used in the economic area in which the subsidiary operates (its functional currency). Infratek’s consolidated financial statements are presented in Norwegian kroner (NOK), which is the functional currency and the presentation currency of the parent company.
                 
b) Transactions and balance sheet items
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign currency exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary items (assets and liabilities) denominated in foreign currencies at year-end, are translated at the exchange rate on the balance sheet date, and are recognised in the profit and loss account.
                 
c) Group companies
The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
                 
i) Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
ii) Income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and
iii) All resulting exchange differences are recognised in the expanded statement of comprehensive income and specified separately in equity.
                 
Goodwill and excess values relating to acquisitions of foreign entities are treated as assets and liabilities in the acquired entities and are translated at the exchange rate in effect on the balance sheet date. Exchange differences arising are recognised in other comprehensive income.
                 
2.5 Profit, plant and equipment
Property, plant, and equipment are recognised at acquisition cost less depreciation. Acquisition cost includes costs directly associated with the acquisition of the operating asset.
                 
Expenses that significantly increase the life of assets and/or increase capacity are added to the balance sheet value of operating assets or recorded separately in the balance sheet, when it is probable that future economic benefits associated with the expense will flow to the Group, and the expense can be reliably estimated. Other repair and maintenance costs are recognised in the profit and loss account for the period in which the expenses are incurred.
                 
Other operating assets that are in use are depreciated according to a straight-line plan, so that the acquisition costs of property, plant, and equipment are depreciated to their residual value at the annual depreciation rates as shown below:
                 
Improvement to leased premises*
   
10 years
 
 
 
   
Buildings
   
30 years
         
Machinery, furniture, vehicles etc.
   
3-12 years
         
IT-equipment (hardware)
   
3 years
         
                 
*) Improvements to leased premises are depreciated over the length of the particular premises’ leasing contract.
                 
The useful life of each operating asset, along with its residual value, is reassessed each balance sheet date and modified if necessary. When the carrying value of an operating asset exceeds the estimated recoverable amount, the value is written down to that recoverable amount (see Note 2.7).
                 
Gains and losses on the disposal of operating assets are recorded in the profit and loss account at the difference between the sales price and balance sheet value.
                 
2.6 Intangible assets
a) Goodwill
               
Goodwill is the difference between acquisition cost and the Group’s share of net fair value of the identifiable assets at the time of acquisition. Goodwill on the acquisition of subsidiaries is classified as an intangible asset. Goodwill is reviewed annually for impairment, and entered in the balance sheet at acquisition cost less impairment losses. Impairment losses on goodwill are not reversed. Gains or losses on the sale of an activity include the goodwill in the balance sheet of the disposed activity.
                 
Following an initial identification of the need to write down goodwill, goodwill at the acquisition date is allocated to the cash-generating units in question. Allocation is made to the cash-generating units or groups of cash-generating units that are expected to benefit from the acquisition. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes.
                 
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognised immediately as an expense and is not reversed in subsequent periods.
                 
b) Software and licences
Software and licences comprise investments associated with the Group’s ERP system (IFS) which is capitalised at acquisition cost less depreciation, as well as the establishment of an in-house ICT platform. The ICT investments follow a depreciation plan as shown below:
                 
ICT base system investment
   
10 years
         
ICT Development of systems and other ICT related investments
   
3-5 years
         
                 
2.7 Impairment of non-financial assets
Intangible assets with non-definable useful lives are not depreciated, but are reviewed annually for impairment. Tangible fixed assets and intangible assets that are depreciated or amortised are reviewed for impairment when indications are that future earnings can no longer support the balance sheet value. Impairment charges are recorded in the profit and loss account as the difference between the balance sheet value and the recoverable amount. The recoverable amount is the higher of fair value less sales costs and value-in-use.
                 
At impairment reviews, fixed assets are grouped at the lowest level at which it is possible to distinguish independent cash flows (cash generating units). At each reporting date, evaluations are done as to reversal of previous impairment charges of non-financial assets (with the exception of goodwill).
                 
2.8 Financial assets
The Group only has financial assets in the categories loans and receivables. Loans and receivables are non-derivative financial assets with fixed payments that are not traded in an active market. They are classified as current assets unless they fall due more than 12 months after the balance sheet date. If the latter is the case, they are classified as non-current assets. Financial assets are recognised at the transaction date using the acquisiton price including transaction costs, with a subsequent assessment of the amortised value based on the effective interest method adjusted for any estimated loss.
                 
The Group has financial liabilities in the categories at fair value though the profit and loss and at amortised cost value. Financial liabilities at fair value through the profit and loss is initially booked to the balance sheet at fair value with later changes to the fair value booked through the profit and loss account. Financial liabilities at amortised cost are initially booked to the balance sheet at fair value minus transaction costs with subsequent assessment of amortised cost in accordance with the effective interest method.
                 
2.9 Inventory
Inventories are stated at the lower of acquisition cost or net realizable value. Acquisition cost is determined by the first-in, first-out (FIFO) method.
                 
2.10 Customer receivables
Customer receivables are amounts due from customers for merchandise sold or services performed as part of the ordinary course of Group business. If collection is expected in one year or less they are classified as current assets. If not, they are classified as non-current assets.
                 
Customer receivables are initially measured at fair value and subsequently measured at amortised costs using the effective interest method. Allocations for losses are recognised when there are objective indicators that the Group will not receive settlement according to original terms. Allocations consists of the difference between nominal value and recoverable value, which is the present value of expected cash flows, discounted at the original effective interest rate.
                 
2.11 Cash and cash equivalents
Cash and cash equivalents comprise cash, bank deposits, and other short-term readily tradable investments with up to three-month initial terms to maturity, and revolving credit facilities. The revolving credit facilities are presented in the balance sheet under short-term debt.
                 
2.12 Accounts payable
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.
                 
Accounts payable are initially measured at fair value. Subsequently, accounts payable is measured at amortisation cost by use of effective interest method.
                 
2.13 Share capital and share premium account
Ordinary shares are classified as equity. Costs directly attributable to the issue of new shares or options are shown in equity as a reduction in proceeds received in equity.
                 
2.14 Current and deferred tax
The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised directly in equity and other comprehensive income. In this case, the tax is also recognised in equity and other comprehensive income. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the company’s subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
                 
Deferred income tax is calculated, using the liability method, on all temporary differences between the tax values and consolidated accounting values of assets and liabilities. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. If the Group purchases an asset or liability in a transaction that is not part of a business combination, deferred tax at the transaction date is not recognised. Deferred tax is determined under taxation rates and tax laws that have been enacted or substantively enacted (expected to be signed into law) at the balance sheet date and that are expected to apply when the deferred tax benefit is realised or when the deferred tax is settled. Deferred tax benefits are entered in the balance sheet to the extent it is probable that future deferred taxable income will be present, and that the temporary differences can be offset from this income.
                 
Deferred tax is calculated on the temporary differences arising from investments in subsidiaries and associates, except where the Group controls the timing of the reversal of the temporary differences, and it is probable that they will not be reversed in the foreseeable future.
                 
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
                 
2.15 Pension liabilities, bonus programs, and other employee-benefit plans
a) Pension liabilities
               
Group companies have various retirement schemes. The schemes are generally funded through payments to insurance companies or trustee-administered funds, determined by periodic actuarial calculations. The Group has both defined benefit and contribution plans.
                 
Defined benefit plan
               
A defined benefit scheme is a retirement benefit scheme that defines the retirement benefits that an employee will receive on retirement. The retirement benefit is normally set as a percentage of the employee’s salary. The liability recognised in the balance sheet which relates to the defined benefit scheme is the present value of the future retirement benefits that have accrued at the balance sheet date, reduced by the fair value of the plan assets and including non-recognised expenses connected with previous periods’ accrued retirement benefits. The present value of future benefits accrued at the balance sheet date is calculated by discounting estimated future payments at a risk-free interest rate stipulated on the basis of the interest rate for high-quality corporate bonds in Norway. The retirement benefit liability is calculated annually by an independent actuary using the linear accruals method.
                 
Actuarial gains and losses attributable to changes in actuarial assumptions or base data are recognised through other comprehensive income on an ongoing basis after provisions for deferred tax. Changes in defined benefit pension liabilities attributable to changes in retirement benefit plans that have retrospective effect, where these rights are not contingent on future service, are recognised directly in the income statement. Changes that are not issued with retrospective effect are recognised in the income statement over the remaining service time.
                 
Net pension fund assets for overfunded schemes are classified as non-current assets and recognised in the balance sheet at fair value. Net retirement benefit liabilities for underfunded schemes and non-funded schemes that are covered by operations are classified as long-term liabilities. The net retirement benefit cost are divided between salaries and other personnel expenses and net finance, where the retirement benefits accrued during the period is classified as salaries and other personnel expenses and the net of interest on the estimated liability and the projected yield on pension fund assets are classified as net finance.
                 
Defined contribution plans
               
A defined contribution plan is a retirement plan in which the Group pays fixed contributions to a separate legal entity. The Group has no legal or other obligation to pay additional contributions if the unit does not have sufficient assets to pay all employees benefits associated with earnings in present and previous periods. For defined contribution plans, the Group contributes to a publicly or privately managed insurance plan for retirement payments, on a compulsory, agreed-upon, or voluntary basis. The Group has no further payment obligations once these contributions have been paid. Contributions are recognised as salary expenses when they fall due. Pre-paid contributions are recorded in the accounts as an asset to the extent the contribution may be refunded or reduced by future contributions.
                 
Defined contribution pension schemes are recognised in the accounts of Norwegian, Swedish, Finnish and Danish subsidiaries.
                 
b) Severance pay
Severance pay is paid when the Group terminates an employee’s employment before the normal retirement age, or when employees voluntarily terminate employment conditioned on receipt of such compensation. The Group recognises severance pay during the period when it can be proven to have an obligation either to terminate one or more employees pursuant to a formal, detailed, non-rescindable plan, or to provide severance pay as part of an offer to encourage voluntary resignations. Severance pay that falls due more than 12 months after the balance sheet date is discounted to present value.
                 
2.16 Provisions
The Group recognises provisions for restructuring, and legal claims, when: a) the Group has a present obligation, whether legal or constructive, as a result of past events; b) it is more likely than not that the obligation will be settled via a transfer of financial resources; and c) the size of the obligation may be estimated with a sufficient degree of reliability. Allocations for restructuring costs include termination charges on leasing contracts and severance pay to employees. No provisions are made for future operating losses.
                 
In instances where there are multiple commitments of a similar nature, the probability of the liability being settled is determined by assessing the group as a whole. Allocations for the group are recognised even if the probability may be low as to individual settlement outlays associated with individual group elements.
                 
Provisions are recognized at the present value of expected payments to meet the obligation. A before-tax discount rate is used, reflecting current market conditions and risk specific to the obligation. Any increase in the obligation amount arising from changes in the time frame used in calculating the obligation’s present value is recognised as an interest expense.
                 
2.17 Revenue recognition
Revenues are recognised in the profit and loss account as shown below:
                 
a) Sale of goods and services
Revenues from sales of goods and services are valued at the fair value of payments received, less deductions for value-added tax, returns, rebates, and discounts. Intra-Group sales are eliminated. Sales are recognised in the profit and loss account when revenues can be measured reliably and it is likely that the financial benefits associated with the transaction will flow to the Group.
                 
b) Construction contracts
Contract costs are recognised as expenses in the periodin which they are incurred. When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that are likely to be recoverable. When the outcome of a construction contract can be estimated reliable and it is probable that the contract will be profitable, contract revenue is recognised over the period of the contract. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.
                 
Variations in contract work, claims and incentive payments are included in contract revenue to the extent that may have been agreed with the customer and are capable of being reliable measured.
                 
The Group uses the "percentage-of-completion method" to determine the appropriate amount to recognise in a given period. The stage of completion is measured by reference to the contract costs incurred up to the balance sheet date as a percentage of total estimated costs for each contract. Costs incurred in the year in connection with future activity on a contract are excluded from contract costs in determining the stage of completion. They are presented as inventories, pre-payments or other assets, depending on their nature.
                 
The Group presents as an asset the gross amount due from customers for contract work for all contracts in progress for which costs incurred plus recognised profits (less recognised losses) exceed progress billings. Progress billings not yet paid by customers and retention are included within ‘trade and other receivables’. The Group presents as a liability the gross amount due to customers for contract work for all contracts in progress for which progress billings exceed costs incurred plus recognised profits (less recognised losses).
                 
c) Royalty income
Royalty income is recognised on an accruals basis in accordance with the substance of the relevant agreements.
                 
2.18 Leasing agreements
Leasing agreements, in which a significant proportion of the risk and return associated with ownership remains with the lessor, are classified as operational leases. Leasing payments arising from operational leases (less any financial incentives granted by the lessor) are expensed on a straight-line basis over the leasing period.
                 
Leasing contracts that are associated with fixed operating assets, and as to which the Group largely has all risk and control, are classified as financial leasing. Financial leasing is recognised in the balance sheet at the beginning of the lease period at the lower of fair value of the leased operating asset or the present value of the total minimum lease amounts. Each lease payment is allocated between a repayment element and an interest element, in such a way that the balance sheet shows a constant interest expense on outstanding lease commitments. Interest expenses are recognised in the profit and loss account as financial expenses. Lease liabilities are classified as other short-term liabilities or other long-term liabilities. Fixed operating assets acquired through financial lease agreements are depreciated over the expected lifetime or the lease period, whichever is shorter.
                 
2.19 Dividends
Dividend payments to shareholders are classified as current liability as of the time the dividend disbursement has been approved by the general shareholder’s meeting.
                 
2.20 Interest income
Interest income is recognised using the effective interest method. When a loan and receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loan and receivables is recognised using the original effective interest rate.
NOTE 3
FINANCIAL RISK MANAGEMENT
The Group’s business activities primarily entail exposure to interest rate risk, liquidity risk, and credit risk. The Group is not exposed to any significant financial price risk.
             
The Group’s risk management procedures support the Group’s value creation and ensure a continued solid financial platform by identifying and carefully managing financial and operational risk factors. As a rule, risk management is the responsibility of each business unit’s operational management. For a description of other areas of risk to which the Group is exposed, please see the Board of directors' report as well as guidelines for corporate governance.
             
a) Currency risk
Only to a limited extent, is Infratek operationally influenced by changes in foreign exchange, as the operations are only marginally applying purchases in foreign currency or trade across countries. When a significant foreign exchange risk is present, it is evaluated on a case by case basis and is secured through forward contracts or similar if required.
             
The Group has operations in Norway, Sweden, Denmark and Finland and is thus exposed financially to exchange rate risk from SEK, DKK and EUR - to NOK. Equity capital in foreign subsidiaries does not have currency hedging and exchange rate fluctuations do affect the Group’s equity capital. As of 31 December 2013, the Group had only a minor degree of financial derivates for currency hedging.
             
Net exchange differences on translating foreign operations to NOK in 2013 was NOK 35 million (-9 million). The below table shows the effect of the Group’s loss / gain on exchange rates by plus or minus 10 percent change in SEK, DKK and EUR currency vs. currency used for the financial year 2013. The amount relates to translation differences which is a part of other comprehensive income and does not affect net profit.
             
Sensitivity analysis translation differences
         
Currency rate change
Amounts in NOK million
Currency
+10%
-10%
Effect on other comprehensive income and equity
SEK
26
(26)
Effect on other comprehensive income and equity
DKK
-
-
Effect on other comprehensive income and equity
EUR
9
(9)
Total effect on other comprehensive income and equity
 
36
(36)
             
b) Interest rate risk
The Group’s operating revenues and cash flow from operations are largely unaffected by changes in interest rates. Variations in the interest rate may, however, affect customers’ willingness to invest, indirectly affecting the Group’s operating revenues and cash flow. As of 31 December 2013, the Group is primarily exposed to interest risk associated with surplus liquidity. At the close of 2013 the Group had net cash holdings of NOK 167 million and had earned NOK 1 million in interest income. Variations in NIBOR, STIBOR and EURIBOR will affect interest on cash reserve as well as the Group’s capital costs. NIBOR, for example, changed from 1.67 per cent on 2 January 2013 to 1.56 per cent on 31 December 2013. Given the Group’s cash holdings at the end of 2013 this would have resulted in an interest income interval of NOK 2.8 to 2.6 million. The Group’s interest income and expenses track general developments in the Norwegian, Swedish, Danish and Finnish money markets respectively. The Group has not made use of interest hedging instruments, and only to a very limited degree of currency hedging instruments.
             
c) Liquidity risk
Liquidity risk arises from a lack of coherence between cash flow from operations and financial commitments. Infratek’s business activities are subject to seasonal variations that may affect cash flow. Historically, Infratek has satisfactorily managed its working capital. As of 31 December 2013 Infratek had net cash holdings of NOK 167 million. Infratek also has an unused NOK 100 million overdraft facility with DNB Bank ASA which runs until terminated by either party at one month’s notice. Infratek’s borrowing agreement with DNB Bank ASA is conditional upon certain key financial indicators. DNB has an AA rating. The Group’s overdraft assumes a 25 per cent equity ratio. The agreement also contains certain restrictions on changes in the company’s legal status, e.g. merger/demerger, material acquisition/disposal of assets, changes in capital, as well as limitations relating to sale or pledging of group assets as security for liabilities. The lender undertakes to allow such transactions unless there are reasonable grounds for not doing so. The Group also has a group account system and accounts with short-term credit limits at subsidiary level which draw on the Group’s overall cash holdings. The Group’s cash flow from operating activities in 2013 was positive as a result of a positive pre-tax profit. Infratek is in compliance with all the requirements stipulated in its borrowing agreement. Overall these resources are deemed to provide solid liquidity for the Group. Per 31 December 2013, the Group has no long-term debt of significance. Due dates on long-term and short-term liabilities are listed below.
             
Maturity-analysis long-term debt
2012
1-3 years
3-5 years
5 years or later
Non-due
 
Amounts in NOK million
Total
       
Other long-term debt
10
-
-
-
10
Total long-term debt
10
-
-
-
10
             
2013
1-3 years
3-5 years
5 years or later
Due date not determined
 
Amounts in NOK million
Total
       
Other long-term debt
1
6
-
-
7
Total long-term debt
1
6
-
-
7
             
Maturity-analysis short-term debt:
2012
         
Amounts in NOK million
0-30 days
30-60 days
60-90 days
90-120 days
>120 days
Total
Accounts payable
171
6
2
1
-
180
Other current liabilities
157
-
130
-
78
365
Total current liabilities
328
6
132
1
78
545
             
2013
         
Amounts in NOK million
0-30 days
30-60 days
60-90 days
90-120 days
>120 days
Total
Accounts payable
144
31
2
1
1
179
Other current liabilities
168
-
125
-
76
369
Total current liabilities
312
31
127
1
77
548
             
d) Credit risk
           
Credit risk is the risk that customers will not settle their accounts. Credit risk is deemed to be part of the Group’s overall commercial risk and is followed up as part of its day-to-day operations. Infratek has established procedures for credit assessment of larger customers and suppliers. Historically, losses due to bad debts have been insignificant and today’s level of credit risk is considered acceptable. The Group's maximum credit exposure equals the carrying value of receivables and bank deposits.
             
Maturity-analysis long-term receivables
2012
1-3 years
3-5 years
5 years or later
Non-due
 
Amounts in NOK million
Total
       
Paid core-capital, pension fund
-
-
-
18
18
Subordinated loan, pension fund
-
-
-
2
2
Total long-term receivables
-
-
-
20
20
             
2013
1-3 years
3-5 years
5 years or later
Non-due
 
Amounts in NOK million
Total
       
Paid core-capital, pension fund
-
-
-
19
19
Subordinated loan, pension fund
-
-
-
2
2
Total long-term receivables
-
-
-
21
21
             
Maturity-analysis short-term receivables
2012
         
Amounts in NOK million
0-30 days
30-60 days
60-90 days
90-120 days
>120 days
Total
Accounts receivable
437
9
3
4
12
465
Accrued, non invoiced income
209
-
-
-
-
209
Other short term receivables
34
-
-
-
-
34
Total short term receivables
680
9
3
4
12
708
             
2013
         
Amounts in NOK million
0-30 days
30-60 days
60-90 days
90-120 days
>120 days
Total
Accounts receivable
429
7
3
4
-
443
Accrued, non invoiced income
267
-
-
-
-
267
Other short term receivables
39
-
-
-
-
39
Total short term receivables
735
7
3
4
-
749
             
All customer receivables in excess of 30 days have fallen due for payment.
             
Changes in the allowance for doubtful debts
   
Amounts in NOK million
2013
2012
   
Balance at beginning of the year
(8)
(8)
   
Impairment losses recognised on receivables
(1)
(1)
   
Amounts written off during the year as uncollectible (confirmed loss)
7
1
   
Closing balance allowance for doubtful debts
(2)
(8)
   
             
e) Categories of financial instruments
The group’s financial instruments are categorized as follows:
             
2012
   
Amounts in NOK million
Loans and receivables
Total
Assets
   
Other long-term receivables
20
20
Accounts receivables and other receivables (not including prepaid costs and incurred, not invoiced revenues) 1)
478
478
Cash and cash equivalents
244
244
Total assets
742
742
             
Amounts in NOK million
Other Financial obligations at amortized cost
Total
Liabilities
   
Long-term debt
10
10
Account payable and other short-term debt (not including statutory obligations) 2)
336
336
Total liabilities
346
346
             
2013
   
Amounts in NOK million
Loans and receivables
Total
Assets
   
Other long-term receivables
21
21
Accounts receivables and other receivables (not including prepaid costs and incurred, not invoiced revenues) 1)
462
462
Cash and cash equivalents
167
167
Total assets
650
650
             
Amounts in NOK million
Other Financial obligations at amortized cost
Total
Liabilities
   
Long-term debt
7
7
Account payable and other short-term debt (not including statutory obligations) 2)
358
358
Total liabilities
365
365
             
1) Prepayments and incurred, non-invoiced revenue is omitted from the receivable balance in the statement of financial position, since this is an analysis that is only required for financial instruments.
2) Statutory obligations and pre-paid amounts are omitted from accounts payable and other liabilities in the statement of financial position, since the analysis only is required for financial instruments.
             
Nominal value less write-downs on sustained losses on accounts receivable and payable is deemed to equal the fair value of an item. Fair value of financial liabilities (calculated for note disclosure) is estimated by discounting future cash flows using the Groups alternative market interest rate for similar financial instruments.
             
f) Capital management
The Group’s capital is managed with the goal of continued going concern, safeguarding and further developing the Group’s value and to ensure good credit rating and hence borrowing terms reflecting the operations of the Group. The Group has a solid capital structure and will over time seek a capital structure adapted to the Group’s activities to reduce capital costs, for example, through increased dividends, share buybacks, new share-issues or draw up interests-bearing loans to finance purchase of business.
             
The Group monitors its capital structure by following the developments in its cash and debt ratio, defined as net interest-bearing debt divided by total shareholders’ equity and net-interest-bearing debt. The Group’s debt ratio should not exceed the group’s ability to service a loan which will depend on the group’s future earnings and investment levels, as well as the interest rate level the Group can achieve.
             
Debt ratio
   
Amounts in NOK million
2013
2012
   
Interest-bearing debt
7
10
   
Cash and cash equivalents
(167)
(244)
   
Net interest-bearing debt (cash)
(160)
(234)
   
Total equity inclusive non-controlling interests
598
697
   
Total equity and net interest-bearing debt
438
463
   
Debt ratio
1.6%
2.2%
   
NOTE 4
IMPORTANT ACCOUNTING ESTIMATES AND ASSUMPTIONS
     
Estimates and assumptions are continuously evaluated, based on historical experience and other factors, including expectations as to future events deemed probable under the current circumstances. The Group prepares estimates and makes assumptions for projection purposes when preparing its accounts. Accounting estimates only rarely accord fully with the final outcome. The differences that arise between estimates and fair value are recognised in the period they become known if they pertain to this period. If the difference pertains to both current and future periods, recognition is distributed over the periods in question.
                 
Estimates and assumptions that can result in a significant risk of material change in the balance sheet value of assets or liabilities in the upcoming accounting year are discussed below.
                 
Revenue recognition
           
Recognition of income from fixed-price contracts uses the percentage-of-completion method. Current income recognition of projects entails uncertainty, as it is based on estimates and assessments. For projects in progress, there is uncertainty associated with progress on remaining work, disputes, work under guarantees, final projections, and other issues. Thus, the final outcome may deviate from the projected result. For completed projects, there is uncertainty associated with any hidden shortcomings, and possible customer disputes.
                 
Estimated impairment of goodwill
           
Each year, the Group performs tests to assess possible impairment of goodwill, see note 2.6. In 2013, Infratek has made a write-down of goodwill amounting to NOK 40 million in the segment Security as a result of expected synergies between business areas Security and Infrastructure not coming fully to fruition. The expected growth is therefore reduced. The recoverable amount from cash-generating units is determined by calculating its usable value. These calculations require the use of estimates (see also note 7).
                 
Tax
               
The Group’s earnings are taxed in several countries. Calculating a consolidated tax liability based on the sum of tax payable in each country requires extensive use of estimates and assumptions. For many transactions and calculations, a great deal of uncertainty will apply to the final tax liability. The Group recognises tax liabilities relating to future decisions in tax/other disputes, based on estimates of whether further tax on earnings will accrue. If the final decision in a case deviates from the original provision, the deviation will affect the recognised tax liability and the provision for deferred tax in the period in which the deviation occurs.
                 
Pension obligations
             
The present value of the pension obligations associated with defined benefit plans depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost (income) for pensions include the discount rate. Any changes in these assumptions will impact the carrying amount of pension obligations.
                 
The Group determines the appropriate discount rate at the end of each year. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the pension obligations. In determining the appropriate discount rate, the group considers the interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related pension liability. Some other relevant assumptions used are partly based on regular market terms. For additional information see note 17.
 

Loss on contract regarding office lease

A provision regarding the office lease agreement at Breivollveien 31 (Oslo) has been made, based on the assumption that the office space that is currently vacant will not be subleased during the remainder of the overall lease period. Later changes to the above mentioned  assumption would affect the balance sheet provision and future operating expenses.
                 
Other items
             
Other items that are affected by estimates are estimated useful life for operating assets, goodwill, pensions, and any utilisation of deferred tax benefit and calculation of the value of options related to a buyout responsibility concerning Infratek Sikkerhed Danmark A/S (see also note 25).
NOTE 5
BUSINESS SEGMENT REPORTING
       
Group management constitutes the Groups leading authority. Operational segments are based on Group management reporting guidelines when allocating resources and assessing profitability.
               
The Group’s corporate structure consists of three business areas; Local Infrastructure, Central Infrastructure and Security, based on the entity’s delivery of products and services. In financial terms, Infratek has reported within the following segments based on products supplied in 2013: Local Infrastructure, Central Infrastructure and Security, in addition to geography.
               
Segment information is presented for the Group’s business areas. The Group’s business segments reflect the division into product groups and is based on the Group’s in-house reporting structure. Group management assesses the segments’ performance on the basis of an adjusted operating profit (EBIT). This method of measurement excludes the effect of non-recurring costs when the costs are the result of an isolated incident which is not expected to be repeated. In the segment table such costs are reported as part of the segment “Other” (Group). Expenses related to a lack of subleasing of the Group’s main office have been expensed to Other in 2012 and 2013.
               
An overview of business segments follows below:
Local Infrastructure: Comprises the Group’s infrastructure operations in Norway and Sweden geared towards the product areas distribution network, highway and street lighting, fibre/telecom, district heating and railways. The services within this business area are organised in three regions in Sweden and one region in Norway.
               
Central Infrastructure: Comprises the Group’s infrastructure operations in Norway, Sweden, Denmark and Finland geared towards the central transmission network for power transmission in Scandinavia; products and services related to transformer stations, cables and power lines for higher voltages.
               
Security: Delivers security technology solutions such as alarm systems, CCTV surveillance, access control facilities, integrated security solutions, and electronic anti-theft solutions. The business area also delivers monitoring and inspection services to grid companies, which allow them to fulfil legally mandated responsibilities (so-called DLE services). The Security business area is established in Norway, Sweden and Finland.
               
Other (Group): This segment comprises mainly group costs in the form of costs incurred by the parent company Infratek AS in connection with the Board, CEO and Group Finance, day-to-day financial reporting, costs linked with the company’s stock market listing as well as shortfall of subleasing revenues from the company’s headquarters. Infratek AS is based in Norway.
               
Eliminations: This is elimination of Group-internal sales.
               
Segment information
Amounts in NOK million
Local Infrastructure
 
Central Infrastructure
 
Security
Other *
Eliminations
Group
 
2012
           
Gross segment operating revenue
1 892
591
287
9
-
2 779
 
Inter-segment sales
2
1
2
13
(17)
-
 
Operating revenues
1 894
591
290
22
(17)
2 779
 
Purchased material
(905)
(282)
(85)
(2)
(5)
(1 279)
 
Gross profit
990
310
204
19
(23)
1 500
 
Personell expenses
(615)
(235)
(130)
(40)
-
(1 017)
 
Other operating costs
(247)
(67)
(50)
5
23
(340)
 
EBITDA
128
8
24
(16)
-
144
 
Depreciations
(25)
(6)
(3)
(8)
 
(41)
 
EBIT
103
2
21
(24)
-
103
 
Financial expenses
(2)
(2)
0
(3)
-
(6)
 
Pre-tax profit
101
0
21
(27)
-
96
 
Tax
(31)
(0)
(6)
8
-
(29)
 
Profit from discontinued operations
-
-
3
-
-
3
 
Profit for the year
70
0
19
(18)
-
71
 
               
               
Amounts in NOK million
Lokal Infrastructure
Central Infrastructure
Security
Other *
Eliminations
Group
 
2013
           
Gross segment operating revenue
1 964
671
315
5
-
2 955
 
Inter-segment sales
1
1
2
15
(19)
-
 
Operating revenues
1 965
671
318
20
(19)
2 955
 
Purchased material
(915)
(345)
(113)
0
1
(1 371)
 
Gross profit
1 050
327
204
20
(18)
1 584
 
Personell expenses
(673)
(218)
(142)
(59)
-
(1 093)
 
Other operating costs
(276)
(96)
(61)
(33)
18
(448)
 
EBITDA
101
12
2
(73)
-
44
 
Depreciations
(35)
(8)
(42)
(11)
-
(96)
 
EBIT
66
4
(40)
(83)
-
(53)
 
Financial expenses
(2)
(1)
0
(4)
-
(8)
 
Pre-tax profit
64
2
(40)
(88)
-
(61)
 
Tax
(18)
(2)
(1)
22
-
1
 
Profit from discontinued operations
-
-
7
-
-
7
 
Profit for the year
46
1
(34)
(65)
-
(52)
 
               
               
Working capital as of 31 December and investments during the year:
   
Amounts in NOK million
 
Infrastructure
Security
Other *
Group
   
2012
           
Working capital
 
177
37
(23)
192
   
Investments
 
32
1
5
39
   
               
Amounts in NOK million
 
Infrastructure
Security
Other *
Group
   
2013
           
Working capital
 
237
21
(37)
221
   
Investments
 
23
1
10
35
   
               
               
Geographical segment information
Amounts in NOK million
Norway
Sweden
Finland
Denmark
Other *
Eliminations
Group
2012
           
Gross segment operating revenue
1 254
1 392
129
-
5
-
2 779
Operating profit
102
22
6
-
(27)
-
103
Profit from discontinued operations
3
-
-
-
-
-
3
Profit for the year
75
13
4
-
(21)
-
71
               
Working Capital
90
102
22
-
(23)
-
192
Investments
7
24
3
-
5
-
39
               
2013
           
Gross segment operating revenue
1 308
1 425
172
46
5
-
2 955
Operating profit
44
(18)
(1)
2
(79)
-
(53)
Profit from discontinued operations
7
-
-
-
-
-
7
Profit for the year
24
(16)
(2)
1
(59)
-
(52)
               
Working Capital
130
120
6
-
(36)
-
221
Investments
9
12
3
1
10
-
35
* Other consists of the parent company Infratek AS
NOTE 6
PROPERTY, PLANT AND EQUIPMENT
 
   
Machinery, furniture, vehicles etc.
 
Total
         
Amounts in NOK million
       
As of 1 January 2012
 
160
 
160
Assets acquired through acquisition of businesses
 
8
 
8
Regular additions
 
32
 
32
Depreciation of fixed assets at carrying value
 
(7)
 
(7)
Depreciation and impairment charges
 
(35)
 
(35)
Book value as of 31 December 2012
 
158
 
158
Acquisition costs as of 31 December 2011
 
294
 
294
Accumulated depreciation and impairment charges as of 31 December 2011
(136)
 
(136)
Book value as of 1 January 2013
 
158
 
158
Assets acquired through acquisition of businesses
 
3
 
3
Regular additions
 
24
 
24
Depreciation of fixed assets at carrying value
 
(10)
 
(10)
Depreciation and impairment charges
 
(50)
 
(50)
Book value as of 31 December 2013
 
125
 
125
Acquisition costs as of 31 December 2013
 
272
 
263
Accumulated depreciation and impairment charges as of 31 December 2013
(146)
 
(138)
Book value as of 31 December 2013
 
125
 
125
         
Depreciation period range
 
3-30 years
   
         
In 2013, the Group made an overall assessment of the depreciation rates for the individual fixed assets sub-groups. The depreciation period for vehicles in general was reduced from 8 to 6 years, but for lorries/trucks it was reduced from 12 to 8 years. The estimated remaining fixed assets life span was changed from 1 January 2013. The change resulted in an increased depreciation amount for 2013 compared to 2012. The Group is of the opinion that the revised depreciation period ranges give a more accurate view of the fixed assets' economic life span. The financial impact of the above revision is booked as a change in estimates in accordance with IAS 8.
         
2012
     
Annual leasing not recorded in the balance sheet under property, plant and equipment:
   
Minimum future payments
   
Premises rental
Machinery/ equipment
Total
Amounts in NOK million
       
Due within 1 year
 
17
38
54
Due later than 1 year not later than 5 years
 
46
64
109
Due later than 5 years
 
12
0
12
Total
 
75
101
176
         
Recognized as operating lease-cost during year
 
26
30
56
         
2013
     
Annual leasing not recorded in the balance sheet under property, plant and equipment:
   
Minimum future payments
   
Premises rental
Machinery/ equipment
Total
Amounts in NOK million
       
Due within 1 year
 
27
38
65
Due later than 1 year not later than 5 years
 
76
51
127
Due later than 5 years
 
-
-
-
Total
 
103
89
192
         
Recognized as operating lease-cost during year
 
30
39
69
NOTE 7
INTANGIBLE ASSETS
 
Customer portfolios
 
Software and licenses
Total intangible assets
Amounts in NOK million
Goodwill
     
Acquisition cost as of 1 January 2012
10
250
60
320
Accumulated amortization and impairment charges as of 1 January 2012
(10)
(28)
(11)
(49)
Book value as of 1 January 2012
-
222
49
271
Assets acquired through acquisition of businesses
-
11
-
11
Asset reduction through disposal of businesses
-
-
-
-
Regular additions
-
-
6
6
Depreciation and impairment charges
-
-
(6)
(6)
Book value as of 31 December 2012
-
232
49
281
Acquisition cost as of 31 December 2012
10
261
66
337
Accumulated amortization and impairment charges as of 31 December 2012
(10)
(28)
(17)
(55)
Book value as of 1 January 2013
-
232
49
281
Assets acquired through acquisition of businesses
-
9
-
9
Asset reduction through disposal of businesses
-
(14)
-
(14)
Regular additions
-
-
12
12
Depreciation and impairment charges
-
(40)
(5)
(45)
Scrapping of assets
-
-
(18)
(18)
Exchange differences on translating foreign operations
-
11
-
11
Book value as of 31 December 2013
-
198
38
236
Acquisition cost as of 31 December 2013
10
255
53
318
Accumulated amortization and impairment charges as of 31 December 2012
(10)
(68)
(16)
(94)
Exchange differences on translating foreign operations
 
11
-
11
Book value as of 31 December 2013
-
198
38
236
         
Rate of depreciation (in %)
20-50%
-
10%
 
         
A change of main IT infrastructure supplier and a major upgrade of the Group's ERP system has lead to the scrapping of some previous investments and system versions. A total scrapping value of NOK 18 million has been booked by 31 december 2013.
         
Goodwill impairment testing
       
The recoverable amount is measured by discounting future cash flows, which are based on plans for the business activities (budgets and forecasts) that have been approved by the Board. The following table shows the Group’s goodwill by profit centre (cash-generating unit). The Group’s cash-generating units are unchanged from the previous year’s impairment test. The goodwill relating to Eiendomssikring AS is no longer relevant as the entity was sold in 2013 (see note 26). A new goodwill item has been added as a result of the acquisiton of Infratek Sikkerhed Danmark A/S (see note 25).
         
Intangible assets with indefinite useful lives
   
Amounts in NOK million
 
Kontantgenererende enhet
Segment
Goodwill
   
Infratek Norge AS
Local / Central
42
   
Infratek Mätkontroll AB
Local
5
   
Infratek Sverige AB
Local / Central
74
   
Infratek Finland AB
Central
7
   
Infratek Sikkerhet AS
Security
45
   
Infratek Elsikkerhet AS
Security
-
   
Infratek Säkerhet Sverige AB
Security
15
   
Infratek Sikkerhed Danmark A/S
Security
10
   
Total
 
198
   
         
Turnover, margins and investments are based on management budgets for 2014 as well as projections for the interval 2015 to 2017. The terminal value is further based on the cash flow for year 2017, whereas an annual growth rate equivalent to 2.5 percent for the Swedish subsidiaries, 2.3 percent for the Finnish subsidiaries and 2.1 percent for Norwegian subsidiaries are employed. These considerations are in line with the general expected economic growth (inflation) in countries where Infratek is operating. As for the terminal value, the reinvestment corresponds to expected depreciation of the unit`s fixed assets. In order to capture assumed risk, a discount rate of 9.2 percent before taxes is utilised. Based on indications of goodwill value reduction for the Security business area, the Group has booked a goodwill impairment write-down of NOK 40 million. Expected synergies between business areas Infrastructure and Security have not come to full fruition and the expectation to assumed growth has therefore been reduced. The security market within critical infrastructure has so far not showed material growth and it has been challenging to take out sufficient cost synergies between the business areas. Within the segment Infrastructure, there have been no impairment write-downs in 2013. A downward cash flow adjustment of 20 percent in addition to a discount rate based on the Group`s capital structure would not lead to an impairment write-down.
NOTE 8
CONSTRUCTION CONTRACTS
   
Amounts in NOK million
2013
2012
   
Total operating revenues
2 955
2 779
   
- of which contract revenues
1 350
1 299
   
Sales of goods and services
1 605
1 511
   
         
Current contracts as of 31 December
       
Incurred contract expences for the period
975
1 054
   
Incurred contract profit for the period
58
83
   
Progress billings
(959)
(1 098)
   
Net value contracts in progress 31 December
74
40
   
         
Balance sheet amounts of:
       
Incurred, not invoiced
127
104
   
Pre-invoiced to customer
(53)
(64)
   
Net value contracts in progress 31 December
74
40
   
         
Remaining production on contracts with estimated loss 1)
9
6
   
1) Estimated production losses on remaining contracts, are recognised to the fullest in the profit and loss account.
   
         
         
         
         
         
         
         
         
         
         
         
         
         
       
 
NOTE 9
INVENTORY
 
Amounts in NOK million
2013
2012
Raw materials
-
-
Work in Progress
-
-
Purchased good for resale
24
35
Total inventory
24
35
     
Write-down of inventory recognized as expense during period
6
1
Total cost of inventories recognized as expense during period
628
738
     
An assessment of the inventory shows that the Group has a noticeable amount of products and components with an older technology and thus a reduced usability. Such products also showed low sales in 2013. As a result, the inventory has been reduced by NOK 6.4 million. The write-down is in accordance with IAS 2.36 e.
NOTE 10
OTHER NON-CURRENT RECEIVABLES
Amounts in NOK million
2013
2012
Paid core-capital, pension fund
19
18
Subordinated loan, pension fund
2
2
Total other non-current receivables
21
20
NOTE 11
ACCOUNTS RECEIVABLE AND OTHER RECEIVABLES
Amounts in NOK million
2013
2012
Accounts receivable
443
465
Bad debt reserve
(2)
(8)
Net accounts receivable
441
458
Accrued revenues
267
209
Prepaid expenses
20
21
Other receivables
19
13
Total accounts receivable and other receivables
747
700
NOTE 12
CASH AND CASH EQUIVALENTS
Amounts in NOK million
2013
2012
Bank deposits in Group account system
167
228
Bank deposits outside the Group account
-
16
Total bank deposits
167
244
     
Split by currency
   
Norwegian Kroner
116
178
Swedish Kroner
(19)
21
Euro
67
44
Danish Kroner
3
-
Total bank deposits
167
244
     
The Group has a group bank accounts system with DNB Bank ASA. A group accounts system entails joint and several liability for participating companies. Infratek AS’s top level accounts constitute the only accounts connected to the banks whereas deposits and withdrawals concerning the subsidiaries’ accounts consist of internal accounts with Infratek AS. Participating companies in the Group accounts system have a joint guarantor liability for any consolidated withdrawals.
     
The Group has an overdraft limit with DNB Bank of NOK 100 million. The facility may be terminated at one month’s notice by either party, and was unused as of 31 December 2013.
     
As of 31 December 2013 the Group had the following restricted bank deposits:
     
Restricted cash and cash equivalents
   
Amounts in NOK million
2013
2012
Employees tax deduction
-
4
Deposits
1
1
Other restricted cash and cash equivalents 1)
16
17
Total restricted cash and cash equivalents
17
22
     
1) Explanation to the other restricted cash and cash equivalents is given in note 8 for Infratek AS
NOTE 13
SHARE CAPITAL, SHARE PREMIUM ACCOUNT AND EARNINGS PER SHARE
As of 31 December Infratek’s share capital was as follows:
             
Amounts in NOK million
Type of change
No. of shares
Par value
Share capital
Share premium account
Total
             
Per 31. December 2012
63 863 224
5,00
319
46
365
             
Per 31. December 2013
63 863 224
5,00
319
46
365
             
The Board has proposed that there should be no dividend payments for 2013. Earnings per share is calculated by dividing the proportion of profit for the year distributed to the company’s shareholders by the weighted average of the number of outstanding ordinary shares through the year. As of 31 December 2013 the company had a total of 63,863,224 shares outstanding.
             
Earnings per share and average numbers of shares
           
Amounts in NOK million
     
2013
2012
 
Profit for the year from continuing operations attributable to parent company shareholders
(52)
71
 
Profit for the year from discontinuing operations attributable to parent company shareholders
-
-
 
Profit for the year attributable to parent company shareholders
(52)
71
 
Weighted average number of shares
63 863 224
63 863 224
 
             
Overview shareholders
   
As of 31 December 2013, Infratek AS’s largest shareholders were:
   
     
No. of shares
%
   
Infratek Group AS (Heraldic Holding AS)
 
50 744 412
79.5%
   
Odin Nordin
 
3 275 600
5.1%
   
Nordstjernan AB
 
1 964 567
3.1%
   
OBOS
 
1 851 915
2.9%
   
MP Pensjon PK
 
830 000
1.3%
   
DnB NOR Bank ASA
 
608 098
1.0%
   
Skandinaviska Enskil A/C clients account
600 000
0.9%
   
VJ Invest AS
 
597 638
0.9%
   
Tanja A/S
 
313 200
0.5%
   
VPF Nordea Avkastning C/O JPMorgan Europe
312 000
0.5%
   
Terra Total VPF
 
266 238
0.4%
   
VPF Nordea Kapital C/O JPMorgan Europe
249 850
0.4%
   
Frogner, Bjørn
 
206 000
0.3%
   
Verdipapirfondet Nor
 
154 000
0.2%
   
VPF Nordea SMB C/O JPMorgan Europe
150 340
0.2%
   
Polleninvest AS Nil
 
115 900
0.2%
   
Bangen, Lars
 
102 000
0.2%
   
Retiro AS
 
100 000
0.2%
   
Saxo Privatbank
 
92 706
0.1%
   
Verdipapirfondet War
 
77 268
0.1%
   
Total 20 largest share holders
   
62 611 732
98.0%
   
Remaining shareholders
   
1 251 492
2.0%
   
Total
   
63 863 224
100.0%
   
The board of directors and company management
   
192 000
0.3%
   
NOTE 14
ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES
Amounts in NOK million
2013
2012
Accounts payable
179
180
Public duties payable
125
130
Incurred expenses
135
132
Pre-invoiced income
67
79
Other liabilities
44
24
Total accounts payable and other current liabilities
549
545
NOTE 15
LONG-TERM DEBT
Amounts in NOK million
2013
2012
Other long-term interest-bearing debt
7
10
Total long-term debt
7
10
     
Long-term debt consists of a small bank loan in one of the Group’s subsidiaries and an option related to a buy-out responsibility concerning Infratek Sikkerhed A/S. See also note 25. The option is measured based on a fair value per 31 December 2013 and the change in value is recognised in the profit and loss account as a financial item. See also note 22, net financial items.
     
The below table represents the Group’s liabilities based on a fair value per 31 December 2013:
Amounts in NOK million
2013
2012
Other long-term debt
5
7
Total liabilities
5
7
NOTE 16
DEFERRED TAX ASSET
Deferred tax is to be presented net when the Group has a legal right to offset deferred tax benefits in the balance sheet.
Amounts in NOK million
     
2013
2012
Deferred tax assets that is expected realised in more than 12 months
63
61
Deferred tax assets that is expected realised within 12 months
-
-
Total deferred tax assets
     
63
61
           
Deferred tax that is expected realised in more than 12 months
(5)
(23)
Deferred tax that is expected realised within 12 months
-
-
Total deferred tax
     
(5)
(23)
Total deferred tax assets net
     
57
41
           
Amounts in NOK million
     
2013
2012
Balance sheet value as of 1 January
     
41
152
Change in pensions estimate recognized in other comprehensive income
     
(6)
(96)
Recognized in the period
     
21
(15)
Balance sheet value as of 31 December
     
57
41
           
Specification deferred tax
   
Pensions
Loss carry-
Other
 Total
Amounts in NOK million
   
forward
   
Deferred tax assets
         
Deferred tax assets as of 31 December 2011
 
163
6
3
172
Change in pensions estimate recognized in other comprehensive income
 
(96)
-
-
(96)
Recognized in the period
 
(4)
(6)
(2)
(12)
Deferred tax assets as of 31 december 2012
 
63
-
1
64
Change in pensions estimate recognized in other comprehensive income
 
(6)
-
-
(6)
Recognized in the period
 
(3)
-
7
4
Deferred tax assets as of 31 december 2013
 
55
-
8
63
 
   
Operating
Profit and
Construction
 
Amounts in NOK million
 
assets
loss account
contracts
Total
Deferred tax liability:
         
Deferred tax liability as of 31 december 2011
 
(7)
(5)
(8)
(20)
Deferred tax from acquired operations
 
-
-
-
-
Deferred tax from sold operations
 
-
-
-
-
Recognized in the period
 
(1)
1
(3)
(3)
Deferred tax liability as of 31 december 2012
 
(8)
(4)
(11)
(23)
Deferred tax from acquired operations
 
-
-
-
-
Deferred tax from sold operations
 
-
-
-
-
Recognized in the period
 
10
5
3
18
Deferred tax liability as of 31 december 2013
 
2
1
(8)
(5)
           
Deferred income tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit through future taxable profits is probable.
NOTE 17
PENSION EXPENSES, ASSETS AND LIABILITIES
Group companies have different pension plans organised in pension funds and insurance companies. Pension schemes are generally funded through payments made by the companies, determined on the basis of actuarial calculations or as a fixed percentage of the individual employee’s salary. The Group has both defined contribution and defined benefit plans.
             
Pension liabilities and assumptions
           
Amounts in NOK million
2013
2012
       
Present value of accrued pension liabilities for defined benefit plans in fund-based plans
667
638
       
Fair value of pension assets
(574)
(521)
       
Actual net pension liabilities for defined benefit plans in fund-based plans
93
117
       
Present value of liabilities non-fund-based plans
82
80
       
Social security contribution
27
29
       
Net pension liabilities in the balance sheet (after social security contribution)
202
226
       
             
Changes in defined-benefit pension liabilities during the year:
           
Pension liabilities as of 1 January (excl. social security contribution)
718
954
       
Present value of pension earnings
17
33
       
Interest expenses
30
25
       
Estimate changes
1
(279)
       
Pension payments
(17)
(13)
       
Liabilities due to plan changes and acquisitions
-
-
       
Pension liabilities as of 31 December (exclusive of social security contribution)
750
718
 
 
   
             
Change in fair value of pension assets:
           
Fair value of pension assets as of 1 January
521
445
       
Expected yield on pension funds
21
19
       
Estimate changes
22
22
       
Total contribution
21
47
       
Total payments from funds
(12)
(11)
       
Fair value of pension assets as of 31 December
574
521
       
             
Movement in actuarial gains and losses recognized in other comprehensive income:
Cumulative amount recognized in comprehensive income 01.01
(34)
297
       
Recognized in other comprehensive income in the period
(21)
(343)
       
Cumulative amount recognized in other comprehensive income 31.12
(55)
(46)
       
Deferred tax related to actuarial losses recognized inother comprehensive income
(15)
(13)
       
Cumulative amount recognized in other comprehensive income after tax 31.12
(40)
(34)
       
             
In accordance with IAS 19 the interest rate that is used to discount the pension liability shall be established using high-quality corporate bonds in Norway, if an active market for such high-quality bonds exists. The Group has previously applied the interest rate for government bonds as a discount rate, but now believes there to be an active market for high-quality corporate bonds in Norway. Norway has experienced a change in the underlying economic conditions relating to high-quality bonds. As a result, the Group has chosen to use the discount rate derived from such high-quality bonds instead of the interest rate for government bonds.
             
Calculations are based on the following assumptions:
2013
2012
       
Discount rate
4.10%
4.00%
       
Expected yield on pension funds
4.10%
4.00%
       
Salary growth
3.90%
4.00%
       
Social security base amount (G)
3.90%
4.00%
       
Annual social security pension growth - Private Funds
0.50%
0.50%
       
Annual social security pension growth - Public Funds
3.25%
2.25%
       
             
Pension effect on profit and loss statement
           
Total pension expenses recorded in profit and loss account:
           
Amounts in NOK million
2013
2012
       
Defined benefit plans:
           
Cost of present period’s pension earnings
17
33
       
Interest expenses
30
25
       
Expected yield on pension funds
(21)
(19)
       
Social security contribution
6
7
       
Members’ contributions
(1)
(2)
       
Employer’s contribution to non-capitalized defined benefit schemes in foreign subsidiaries
26
24
       
Pension costs, defined benefit plans
57
68
       
Defined contribution plans:
           
Employer’s contribution to defind constribution plans
25
26
       
Total pension expenses
82
94
       
             
Total pension costs are classified as:
           
Salaries and other personnel costs
82
94
       
Net finance
8
6
       
Total pension costs
90
100
       
             
Specification pension fund assets
           
Amounts in NOK million 
2013
2012
   
Equity instruments
172
30%
177
34%
   
Interest-bearing instruments
372
65%
323
62%
   
Property
18
3%
16
3%
   
Other
12
2%
5
1%
   
Fair value of pension assets
574
100%
521
100%
   
             
Expected contributions to the post-employment benefit plans for the year ending 31 December 2014 are NOK 30 million.
             
At 31 December
2013
2012
2011
     
Present value of defined benefit pension obligation
776
747
1 026
     
Fair value of plan assets
574
521
445
     
Deficit in the plan
202
226
581
     
Experienced adjustments on plan liabilities
1
(322)
213
     
Experienced adjustments on plan assets
22
22
16
     
             
Sensitivity analysis
Infratek has carried out a sensitivity analysis for the net pension liabilities and estimated pension-related costs. The tables below illustrate the effect of a one percentage point change in the discount rate, salary increases and change in the social security base amount (G) on the net pension liability and pension-related costs, given the original assumptions as described in the table above.
             
Sensitivity analysis for the net pension liability
           
Amounts in NOK million
Discount rate
Salary growth
Change in G
Percentage point change
+ 1 %
- 1 %
+ 1 %
- 1 %
+ 1 %
- 1 %
Net pension liabilities
(130)
173
44
(37)
121
(94)
Deferred tax - / tax asset
(35)
47
12
(10)
33
(25)
Effect on equity
96
(126)
(32)
38
(88)
69
             
Sensitivity analysis for estimated pension-related costs
           
Amounts in NOK million
Discount rate
Salary growth
Change in G
Percentage point change
+ 1 %
- 1 %
+ 1 %
- 1 %
+ 1 %
- 1 %
Pension cost
(3)
4
2
(2)
2
(1)
Financial expenses
(5)
7
2
(1)
5
(4)
Total pension cost
(8)
10
4
(3)
6
(5)
             
The estimates are based on facts and conditions as of 31 December 2013. Actual results could therefore deviate from these estimates to a material extent.
             
Pensions in Norway
   
Pursuant to Norway’s law on mandatory service pensions, defined contribution plans have been established in all Norwegian companies. The Group’s mandatory service pension schemes (OTP) for employees in Norway are administered by DNB and Storebrand.
             
As of 31 December 2013, 329 employees were covered by defined benefit plans, divided between Hafslund Private Pensjonskasse (64), Hafslund Offentlige Pensjonskasse (200), Storebrand (7) and KLP (58). As of 31 December 2013, 132 people were receiving pensions under these schemes, divided between Hafslund Private Pensjonskasse (12), Hafslund Offentlige Pensjonskasse (58) and KLP (62). There are few pensioners receiving benefits under Hafslund’s defined benefits schemes, since all pensioners were transferred to Hafslund ASA prior to the company’s flotation in December 2007. In addition, the Group has defined contribution plans with various insurance companies. The defined benefit plans belonging to the Hafslund Group’s two pension schemes, of which Infratek is a member, were closed with effect from 1 January 2007. This means they were closed to new members. Since January 2007, defined contribution plans were introduced for all new employees and for employees who were not previously included in a pension scheme in the Group’s Norwegian businesses.
             
In 2011, the Group changed the accounting policy for pensions. The Group changed from recognizing estimate deviations that arise from changes in actuarial assumptions or base data over and above the greater of 10 percent of pension asset value or 10 percent of pension liabilities, in the profit and loss account over a period that corresponds to employees’ expected average remaining terms of employment to recognising actuarial gains and losses attributable to changes in actuarial assumptions or base data through other comprehensive income on an ongoing basis after provisions for deferred tax.
             
Pension assets are valued at fair value as of the year-end. Pension liabilities (net present value of pension payments earned per the balance sheet date, adjusted for future salary growth) are valued using best estimates based on assumptions as of the balance sheet date. The substantial estimate reduction in 2012 is largely due to an increased discount rate in 2012 compared to 2011. The actuarial estimates of pension liabilities have been prepared by independent actuaries. The assumptions regarding salary growth, increase in pension payments, and change in G are based on historic observations, established tariff agreements, and the relationship between certain assumptions.
             
In 2011, the Group also changed how the net retirement benefit costs are presented in the consolidated statement of comprehensive income. The Group changed its presentation of net retirement benefit cost from solely being presented as salaries and other personnel expenses - to dividing net retirement benefit cost between salaries and other personnel expenses and net finance. The retirement benefits accrued during the period is classified as salaries and other personnel expenses - and net interest on the estimated liability and the projected yield on pension fund assets are classified as net finance. The Group believes that the changed policy provides more relevant information for the users of the financial statements.
             
Employees who terminate employment before reaching retirement age receive paid-up policies. Hafslund’s pension funds, in which Infratek participates, manage these paid-up policies, which are associated with earned rights in municipal contribution plans. Infratek has a financial commitment to upwardly adjust these paid-up policies in line with increases in the social security base amount. At such time as paid up policies that have been earned in other contribution plans are issued, Infratek is released from further obligations to the employees to which the policies pertain. Assets and liabilities are valued at the time of issuance of the paid-up policy and are separated from pension assets and liabilities.
             
As a consequence of Infratek’s acquisition of Fortum’s contracting operations, Hafslund ASA’s shareholding in Infratek AS was reduced from 64.6 percent to 43.3 percent. This led Infratek to apply to leave the defined benefit plans in the Hafslund Group’s pension funds in 2009. A mutual pension fund - following the principles of independent enterprises in Section 7-2 of the Act relating to Insurance Companies, Pension Enterprises etc. (the Insurance Act) no. 44 of 10 June 2005 - has been established.
             
Other demographic assumptions that have been used in the calculation of Norwegian defined benefit pension liabilities are as follows: for mortality and disability, Norwegian life insurance companies’ table GAP2007. The expected yield on pension assets is based on the interest for high-quality corporate bonds taking into consideration the remaining term, which is the samme discount rate used for pension liabilities. The value-adjusted yield on pension assets was 7.4 percent in 2013 and 7.5 percent in 2012.
             
Pension assets are invested in equity instruments, real estate, bonds and money market placements. Bonds and money market placements are issued by the Norwegian government, Norwegian municipalities, finance institutions, and corporations. Bonds in foreign currencies are currency hedged. Investments are in Norwegian and foreign shares.
             
Pensions in Sweden
   
As of 31 December 2013 a total of 269 “tjänstemän” employed by Infratek’s Swedish subsidiary were members of the ITP (Industrins og handelns tilläggspension) defined benefit plan. All “tjänstemän” also have an ITPK defined contribution plan. “Tjänstemän” with a salary in excess of SEK 566,000 can select an alternative ITP in the chosen insurance company. 6 employees have, for historic reasons, an alternative ITP with higher benefits relating to retirement, family and incapacity pension. For “tjänstemän” in the Swedish company, Infratek has purchased insurance cover from Alecta which manages and administers the ITP pension insurance scheme. In addition, a special tax in accordance with the collective agreement for the additional pension EFA-Sif, "Sveriges Ingenjörer och Ledarna", corresponding to 0.8 percent of salary.
             
414 “Kollektivänstallda” are covered by the Avtalepension SAF-LO, a defined contribution plan. In addition there is a special charge relating to the collective agreement on supplementary pensions EIO-SEF and EIO-SEF corresponding to 1 percent of salary. The defined contribution plan for “kollektivänstallda” is administered by Fora.
             
The defined benefits scheme for Infratek’s employees in Sweden, acts as a defined contribution scheme for the Group, with annual premiums being charged as expenses as they accrue. The Group has no pension liabilities apart from payment of annual pension premiums. Employees who leave the company before retirement age receive a paid-up policy. The paid-up policies are managed by the company in which the employee has accrued pension rights. Infratek has no obligations after the employee has received a paid-up policy.
             
Pensions in Finland
   
All companies in Finland are obliged to establish a mandatory service pension for their employees. All employees in Finland are covered by the mandatory service pension scheme, which is based on defined contributions. This scheme is insured through Varma Pension Insurance Company.
             
Before its acquisition by Infratek, 59 employees of the Finnish subsidiary previously had supplementary defined benefits pension plans with Fortum Pension Foundation. This defined benefits scheme provided a defined pension for these employees if the mandatory scheme did not cover this amount. When Infratek Finland Oy was acquired by Infratek this defined benefit agreement was replaced by a supplementary pension agreement with the insurance company Mandatum Life in Finland. This supplementary pension agreement will be funded through annual pension premiums to cover the employees’ accrued pension entitlements. The premiums will be paid by Infratek Finland Oy. The annual premium covers the expected costs associated with the supplementary pension scheme and no further obligations devolve to the company.
             
For these 59 employees there is also a contingent liability in the event that the employee’s employment contract is terminated by the employer. For more information regarding this contingent liability, see Note 28.
NOTE 18
RELATED PARTY TRANSACTIONS
As of 31 December 2013, the Infratek Group AS owns 79.5 percent of the shares in Infratek AS. During the year, there have been no related party transactions between Infratek AS and Infratek Group AS - or parties related to Infratek Group AS. Until 26 June 2013, Hafslund ASA and Fortum Nordic AB were defined as related parties. The Group sells - and to a lesser degree buys - goods and services to and from the Hafslund and Fortum groups. All transactions with related parties are based on sound market terms.
         
During the period when the Hafslund Group was defined as a related party in 2013, the total sale of goods and services to the company amounted to NOK 201.8 million. The purchase of goods and services to Hafslund amounted to NOK 7.4 million. For the same period, the total sale of goods and services to the Fortum Group amounted to NOK 224 million - and the purchase of goods and services amounted to NOK 3.7 million.
NOTE 19
OTHER OPERATING EXPENSES
Specification of other operating expenses
   
Amounts in NOK million
2013
2012
Maintenance
(54)
(54)
Consulting services
(45)
(50)
Rent, electricity, etc.
(89)
(59)
Sales and marketing expenses
(10)
(9)
Office expenses
(18)
(19)
Transportation expenses
(135)
(117)
Other operating expenses
(98)
(32)
Total other operating expenses
(448)
(340)
     
Specification of fee to auditor
   
Amounts in NOK million
2013
2012
Fee statutory audit
(2)
(2)
Fee assurance services
-
-
Fee tax advisory services
-
-
Fee other non-audit services
(1)
(1)
Total auditor fee
(3)
(3)
NOTE 20
SALARIES AND OTHER PERSONNEL EXPENSES
Specification of personnel expenses
     
Amounts in NOK million
2013
2012
 
Salaries and other personnel expenses
(807)
(745)
 
Social security contribution
(167)
(161)
 
Pension expenses - defined benefit plans
(57)
(68)
 
Pension expenses - contribution plans
(25)
(26)
 
Other benefits
(37)
(17)
 
Total salaries and other personnel expenses
(1 093)
(1 017)
 
       
Average number of employees
     
 
2013
2012
 
Norway
700
730
 
Sweden
803
814
 
Finland
133
133
 
Denmark
16
-
 
Total
1 653
1 677
 
NOTE 21
REMUNERATION PAYABLE TO SENIOR COMPANY OFFICERS
The below overview shows remuneration for the period 1 January to 31 December 2013 for top employees in the Infratek Group, defined as board members and Group management.
               
Remuneration to board members and group management 2013
Amounts in NOK thousand 
Salary and remuneration 1), 5)
 
Construction to pension plans 6)
Change in earned pension rights 6)
   
Name
Position
Bonus 2), 5)
Loan
Numbers of shares held3)
     
Board Members
           
Mimi K. Berdal
Chairman
244
-
-
-
-
12 000
Lars Ove Håkansson
Board Deputy Chairman
-
-
-
-
-
-
Peter Strannegård
Board Deputy Chairman 7.5 - 26.9
67
-
-
-
-
-
Hans Kristian Rød
Board Deputy Chairman 1.1. - 7.5
104
-
-
-
-
-
Mari Thjømøe
Board member
-
-
-
-
-
-
Thorbjørn Graarud
Board member
-
-
-
-
-
-
Carl Johan Falkenberg, 4)
Board member
-
-
-
-
-
-
Dag Andresen
Board member 1.1. - 26.09
175
-
-
-
-
2 000
Kari Ekelund Thørud
Board member 1.1. - 26.09
145
-
-
-
-
-
Roger Andrè Hansen
Board member (employee representative)
887
21
-
48
246
1 500
Rune Tobiassen
Board member (employee representative)
878
-
10
-
-
1 500
Olle Strömberg
Board member (employee representative)
SEK 596
-
SEK 35
-
-
-
               
Senior executives
           
Lars Bangen
CEO / Group Executive Vice President Local Infrastructure
2 010
150
-
164
393
102 000
Vibecke Skjolde
Group Executive Vice President / CFO
1 777
231
18
-
263
13 500
Alf Engqvist
Group Executive Vice President Central Infrastructure
SEK 1 770
SEK 114
SEK 57
SEK 576
-
8 000
Lars Erik Finne
Group Executive Vice President Security
1 487
119
29
89
357
61 500
Amund Kristiansen
Group Executive Vice President People & Safety
1 282
-
17
-
360
-
Bjørn Frogner
CEO 1.1. - 25.10
4 983
313
31
179
212
206 000
               
Note:
1) Salary etc. includes fixed salary, non-monetary payments, benefit of interest-free loans, electronic communication, etc in 2013. The principle of extracting bonus earned in previous years has changed and bonuses are now included in the year they are paid out.
2) Paid out in 2013, earned in 2012
3) Including shares owned by related parties. Shares are mainly acquired at market prices. As part of the listing at the Oslo Stock Exchange in December 2007, all employees were offered to purchase up to 1 500 shares at a 20 percent discount.
4) Carl Johan Falkenberg is an adviser for the Triton funds who indirectly owns 50,744,412 shares in Infratek AS per 31 December 2013.
5) Specified amounts also function as a basis for social security contribution, amounting to 14.1 percent in Norway and 31.4 percent in Sweden, respectively.
6) Specified amounts also function as a basis for social security contribution in Norway as well as for payroll taxes in Sweden, amounting to 14,1 percent and 24,26 percent respectively.
               
               
Remuneration to board members and group management 2012
Amounts in NOK thousand
Salary and remuneration 1), 6)
 
Construction to pension plans 7)
Change in earned pension rights 7)
   
Name
Position
Bonus 2), 6)
Loan
Numbers of shares held3)
     
Board Members
           
Mimi K. Berdal
Chairman
235
-
-
-
-
12 000
Hans Kristian Rød, 4)
Board Deputy Chairman
204
-
-
-
-
-
Tove Elisabeth Pettersen, 5)
Board member
75
-
-
-
-
-
Dag Andresen
Board member
184
-
-
-
-
2 000
Kari Ekelund Thørud, 5)
Board member
78
-
-
-
-
-
Roger Andrè Hansen
Board member (employee representative)
801
21
-
46
71
1 500
Otto Rune Stokke
Board member (employee representative)
657
-
-
84
-
-
Kalle Strandberg
Board member (employee representative)
SEK 477
-
SEK 15
-
-
-
               
Senior executives
           
Bjørn Frogner
CEO
2 786
313
30
162
258
206 000
Vibecke Skjolde
Group Executive Vice President / CFO
1 652
231
18
-
303
13 500
Lars Bangen
Group Executive Vice President Local Infrastructure
1 847
150
-
156
114
102 000
Alf Engqvist
Group Executive Vice President Central Infrastructure
SEK 1 674
SEK 114
SEK 41
SEK 530
-
8 000
Lars Erik Finne
Group Executive Vice President Security
1 439
119
28
83
397
61 500
               
Note:
1) Salary etc.includes fixed salary, non-monetary payments, benefits of interest of free loans, electronic communication, etc in 2012 deducted by earned bonus in 2012 but paid in 2013
2) Earned bonus in 2012 as paid out in 2013 excluding holiday allowance
3) Including shares owned by related parties. Shares are mainly acquired at market prices. As part of the listing at the Oslo Stock Exchange in December 2007, all employees were offered to purchase up to 1 500 shares at a 20 percent discount.
4) Hans Kristian Rød is employed in the Fortum group, which further holds 21,074,864 shares in Infratek AS.
5) Tove Elisabeth Pettersen resigned subsequent to the general meeting and was replaced by Kari Ekelund Thørud. Thørud is employed in the Hafslund Group, which further holds 27,652,360.
6) Specified amounts also function as a basis for social security contribution, amounting to 14.1 percent in Norway and 31.4 percent in Sweden, respectively.
7) Specified amounts also function as a basis for social security contribution in Norway as well as for payroll taxes in Sweden, amounting to 14,1 percent and 24,26 percent respectively.
               
Terms and conditions of the CEO and other members of group management
The CEO is entitled to a fixed annual salary of NOK 2.6 million, as well as a bonus amounting to no more than 50 per cent of his fixed annual salary. The bonus is determined annually based on the Group’s performance with respect to share price development and group targets, and an individual appraisal based on predefined goals. The CEO has a six-month notice period. In the event that his employment is terminated, he is entitled – upon certain conditions being met – to receive his salary for a period of 18 months in addition to the period of notice. Other members of group management are entitled to a fixed annual salary of between NOK 1.3 million and NOK 1.8 million. Annual bonuses are limited to no more than 35 per cent of fixed annual salary. Bonuses are determined annually. Half of the bonus paid to both the CEO and other members of group management shall be used to buy shares in Infratek AS, with a lock-in period of two years given that the company is not in an insider position. Other members of group management have a six-month notice period and, in the event of termination of their employment, are entitled – upon certain conditions being met – to receive their salary for a period of 12 months in addition to the period of notice.
               
Group management’s pension rights vary based on the duration and type of position within the former Hafslund Group. CEO Bjørn Frogner and EVP Lars Erik Finne are members of Hafslund Private Pension Fund, while EVP, Lars Bangen, is a member of Hafslund Public Pension Fund.
               
The pension funds represent performance based pension schemes of between 60 and 70 per cent, with an upper limit set at 12 G (1 G = NOK 85.245). In addition to membership in Hafslund Private Pension Fund, Finne has an annual deposit based pension plan equivalent to 3 per cent; up to 12 G. Vibecke Skjolde and Amund Kristiansen has a deposit based pension plan of 2 per cent of annual income up to 12 G. Group management's pension age is 67. Norwegian members of the Group management have a right to early retirement pursuant to the prevailing AFP agreement.
               
Alf Engqvist is covered by the performance based pension plan which applies to civil servants in Sweden (the IPT plan). The payment is equivalent to 10 per cent of salaries between SEK 0 and SEK 424 500, 65 per cent of salaries between SEK 424 500 and SEK 1 132 000 and 32.5 per cent of salaries between SEK 1 132 000 and SEK 1 698 000 in 2013. Engquist also has a deposit based pension equivalent to 2 per cent of annual gross income. The pension age is 65.
               
Members of group management have group life insurance coverage, health insurance and an interest-free car loan of between NOK 400 000 and NOK 500 000, which is written down by a tenth of the original amount of the loan each year. In addition an annual car subsidy is paid. These benefits are included in the column for fixed salary, etc, and the interest benefit is declared for tax purposes. In addition benefits-in-kind such as ADSL (home office), mobile phone and newspapers are offered.
               
Share-based payment
No agreements have been entered into with respect to share-based payment schemes for employees of the Infratek Group.
               
Remuneration paid to Infratek AS’s Board of Directors and Audit Committee members
The amount of directors’ fees and audit committee members fees is proposed by the company’s Selection Committee and is voted on by the annual general meeting.
               
The remuneration paid to the Board of Directors breakes down as follows: chairman of the Board NOK 248 000; deputy chairman of the board, NOK 181 000; and other board members, NOK 160 000. Audit Committee members receives an annual fee of NOK 33 500.
               
Declaration by the Board of Directors with respect to the salaries and other benefits payable to senior executives
At a meeting held on 6 February 2008 the Board of Directors of Infratek AS issued this declaration with respect to the salaries and other benefits payable to senior executives, defined as the CEO and members of group management.
               
In accordance with Section 6-16a of the Limited Companies Act, the Board will lay the following guidelines before the annual general meeting for its approval.
               
Fixed salary: To be based on the contents of the position, its level of responsibility, the competence of the incumbent and their length of tenure in the position. The salary shall be competitive with respect to the degree of responsibility and industrial level.
               
Benefits-in-kind: For the purpose of car ownership or where other satisfactory security is pledged, an interest-free loan to be written down over 10 years within accepted guidelines, may be granted. Furthermore, a subsidy for car running costs may also be granted. Benefits-in-kind shall otherwise largely be linked to expenses deriving from ADSL (home office), mobile phone and newspapers.
               
Annual bonus: Any bonus shall be predetermined and paid on the basis of the position’s level and the added value the employee or group of employees has generated. Annual bonuses for the CEO and members of group management shall be capped at 50 per cent of their fixed salaries. This stipulation may be waived by the Board of Directors, with the reasons for the decision being minuted. Bonuses are to be set annually. Group performance goals are determined by the Board.
               
Share ownership schemes: The CEO and members of group management may be included in share ownership schemes for all employees. In connection with share ownership schemes over and above those extended to all employees, a lock-in period shall be set for all or part of those schemes.
               
To strengthen the ties between the workforce and the Group, as well as to provide Infratek employees the opportunity to share in the Group’s future value creation, consideration shall be given to whether all employees should be given or have the chance to buy shares in Infratek AS. Such a share scheme shall be evaluated in light of other forms of remuneration and of competitive remuneration within those markets in which the Group operates. Shares shall be granted on the basis of predefined key figures for the Group, as well as the type of position, number of hours worked (if part-time) and length of service. Any offer of shares shall be seen in light of the Group’s overall compensation costs.
               
Option schemes: The Group does not use option schemes.
               
Pension: Over and above legacy schemes, the CEO and members of group management may have a defined contribution scheme of up to five per cent of 12G, unless otherwise agreed with the Board. The retirement age for these individual shall, as a rule, be 67. The CEO and members of group management are entitled to retire early in accordance with the regulations governing the AFP early retirement scheme in effect at any given time.
               
Notice and severance pay: The CEO and members of group management may terminate their employment with a six-months notice period. In certain circumstances, and depending on the position concerned, severance pay of between 12 and 18 months may be granted..
               
All members of the Infratek’s group management receive a remuneration that falls within the terms of the Board’s declaration with respect to the salaries and other benefits payable to senior executives.
               
The guidelines for determining salaries and other benefits were first adopted at a meeting of the Board of Directors on 26 October 2007. The Group will seek to implement these guidelines in the Group, but respect any agreements previously entered into.
NOTE 22
FINANCIAL INCOME/EXPENSE
Net financial income
   
Amounts in NOK million
2013
2012
Interest income
1
2
Other financial income
1
1
Interest expenses
(3)
(1)
Other financial expenses
(7)
(9)
Total financial income/-expenses
(8)
(6)
     
Net financial items were negatively affected by a change in the options related to buyout obligations for Infratek Sikkerhed A/S by NOK 0.1 million. Net financial items were also negatively affected by net interest costs related to pension obligations as well as calculated yield on pension fund assets, adding up to a total of NOK 8.1 million. See also note 17.
NOTE 23
TAX EXPENSE
 
Amounts in NOK million
2013
2012
Tax payable
(20)
(14)
Change in deferred tax
21
(15)
Total tax expense
1
(29)
     
Tax payable in the balance sheet
   
Amounts in NOK million
2013
2012
Tax payable
(20)
(15)
Prepaid tax
21
14
Tax payable in the balance sheet
1
(1)
     
Reconciliation effective tax rate
   
Tax on the Group’s pre-tax profit differs from the amount that would have resulted from the application of the nominal taxation rate. The reconciliation between the nominal tax rate and the effective tax rate is shown below:
Amounts in NOK million
2013
2012
Pre-tax profit
(61)
96
Expected tax expense, 28% nominal tax rate
17
(27)
Non-deductible expenses
(6)
(2)
Non-deductible goodwill write-down
(11)
-
Variance as a result of different tax rates
(1)
-
Impact of changed tax rate
3
-
Total tax expense
1
(29)
     
Effective tax rate
2%
30%
     
The effective tax rate for 2013 was negatively affected by permanent variances as well as changes in variances which do not provide a basis for the calculation of deferred tax.
NOTE 24
CASH FLOW FROM OPERATIONS
   
Spesification of cash flow from operations
         
Amounts in NOK million
Note
2013
2012
   
Pre-tax profit
 
(61)
96
   
Adjustments for:
         
- depreciation and write-downs
6, 7
97
41
   
- other non-liquid items
 
19
1
   
- profit/loss disposal of fixed assets
 
25
0
   
- change in pension liabilities
17
(3)
(12)
   
- financial income/-expenses
22
(1)
1
   
Change in working capital:
         
- inventory
 
14
2
   
- accounts receivable and other receivables
 
(35)
17
 
 
- accounts payable and other current debt
 
(10)
(9)
   
- other working capital elements
 
(1)
(4)
   
Cash flow from operating activities
 
44
133
   
Translation exchange related to working capital
 
18
(3)
   
Cash flow from operations before tax and interest
 
62
130
   
NOTE 25
BUSINESS MERGER
Acquisition of shares in Infratek Sikkerhed Danmark A/S (previously Plahn Systems A/S):
On 10 January 2013, Infratek Sikkerhet AS purchased 51 percent of the Danish security company Infratek Sikkerhed Danmark A/S (Plahn Systems A/S). As part of the purchase, a sales-purchase option was agreed relating to the remaining 49 percent of the company - both agreements due in 2018. Based on existing options, and as Infratek does not have any control over whether minority shares will or will not be kept in the future, the purchase is to be treated as a 100 percent acquisition as per IFRS. The 100% purchase is accompanied by a commitment to pay the remaining 49 percent of the shares when due in 2018.
     
Acquisition analysis related to the purchase of Infratek Sikkerhet Danmark A/S:
Amounts in NOK million
2013
 
Purchase price 51 % of the shares
6
 
Estimated value option regarding remaining 49%
5
 
Total consideration
11
 
Fair value net assets
2
 
Goodwill
9
 
     
Observable assets and liabilities related to the acquisition per 10 January 2013:
Amounts in NOK million
Fair value
 
Property, plant and equipment
2
 
Inventory
2
 
Accounts receivable and other receivables
12
 
Cash and cash equivalents
2
 
Accounts payable and other current liabilities
(15)
 
Long-term loan
(1)
 
Acquired net assets
2
 
     
Goodwill related to the acquisition
   
After assessing actual value related to all identifiable assets and liabilities, the Group is left with a net item which was activated as goodwill. The estimated goodwill was activated in the Group’s balance sheet based on expectations that synergy effects involving the Group’s current operations will provide the Group with opportunities for increased growth in revenues in the future. See also note 7. The goodwill is not tax deductible.
     
Net cash outlay related to the cost price
   
Amounts in NOK million
2013
 
The fair value of acquired cash and cash equivalents on acquisition
2
 
Cash Payment 100 %
(6)
 
Net cash consideration
(4)
 
     
Effect of acquired companies on the annual results
   
The acquisition of Infratek Sikkerhed Danmark A/S was made with effect from 10 January 2013. The company's result included in the Group's profit and loss for 2013 is therefore earned in the period 10 January 2013 - 31 December 2013.
     
The acquired company has contributed based on the following figures for operating revenue and operating profit as reported in the Group’s annual results for 2013:
     
Amounts in NOK million
2013
 
Revenues
46
 
Operating profit
2
 
     
Acquisition of Infratek Säkerhet Sverige AB
 
Infratek Sikkerhet AS has with effect from 10 Juli 2013 exercised the option to buy the remaining 49 percent of Infratek Säkerhet Sverige AB. Infratek Sikkerhet paid NOK 6.4 million for the remaining share of the company. No new goodwill has arisen as a result of the purchase.
     
Acquisition of shares in WKTS AB (Wigh Kellokumpu Track Service AB):
On 2 February 2012, Infratek Sverige AB aquired 100 per cent of the shares in the Swedish railway company WKTS AB.
     
Acquisition analysis related to the purchase of WKTS AB:
 
Amounts in NOK million
2012
 
Purchase price 100 %
13
 
Total consideration
13
 
Fair value net assets
5
 
Goodwill
7
 
     
Observable assets and liabilities related to the acquisition per 2 February 2012:
Amounts in NOK million
Fair value
 
Property, plant and equipment
5
 
Inventory
1
 
Accounts receivable and other receivables
7
 
Cash and cash equivalents
3
 
Accounts payable and other current liabilities
(8)
 
Long-term loan
(2)
 
Acquired net assets
5
 
     
Goodwill related to the acquisition
   
After assessing actual value related to all identifiable assets and liabilities, the Group is left with a net item which was activated as goodwill. The estimated goodwill was activated in the Group’s balance sheet based on expectations that synergy effects involving the Group’s current operations will provide the Group with opportunities for increased growth in revenues in the future. See also note 7. The goodwill is not tax deductible.
     
Net cash outlay related to the cost price
   
Amounts in NOK million
2012
 
The fair value of acquired cash and cash equivalents on acquisition
3
 
Cash Payment 100 %
(13)
 
Net cash consideration
(10)
 
     
Effect of acquired companies on the annual results
The acquisition of WKTS AB became effective from 2 February 2012. For this reason, the company`s results as included in the Groups overall results of 2012, was earned in the interval between 2 February 2012 and 31 December 2012.
     
The acquired company has contributed based on the following figures for operating revenue and operating profit as reported in the Group’s annual results for 2012:
     
Amounts in NOK million
2012
 
Revenues
28
 
Operating profit
1
 
     
Acquisition of shares in Infratek Mätkontroll AB (Emsab AB):
 
On 6 March 2012, Infratek Sverige AB aquired 100 per cent of the shares in the company Infratek Mätkontroll AB (Emsab AB), an accredited laboratory that calibrates electrical instruments, meters and metering systems.
     
Acquisition analysis related to the purchase of Infratek Mätkontroll AB:
Amounts in NOK million
2012
 
Purchase price 100 %
4
 
Total consideration
4
 
Fair value net assets
-
 
Goodwill
4
 
     
Observable assets and liabilities related to the acquisition per 6 March 2012:
Amounts in NOK million
Fair value
 
Accounts receivable and other receivables
1
 
Accounts payable and other current liabilities
(1)
 
Acquired net assets
0
 
     
Goodwill related to the acquisition
   
After assessing actual value related to all identifiable assets and liabilities, the Group is left with a net item which was activated as goodwill. The estimated goodwill was activated in the Group’s balance sheet based on expectations that synergy effects involving the Group’s current operations will provide the Group with opportunities for increased growth in revenues in the future. See also note 7. The goodwill is not tax deductible.
     
Net cash outlay related to the cost price
   
Amounts in NOK million
2012
 
The fair value of acquired cash and cash equivalents on acquisition
-
 
Cash Payment 100 %
(4)
 
Net cash consideration
(4)
 
     
Effect of acquired companies on the annual results
The acquisition of Infratek Mätkontroll AB (Emsab AB) became effective from 6 March 2012. Of this reason, the company`s results as included in the Groups overall results of 2012, was earned in the interval between 6 March 2012 and 31 December 2012.
     
The acquired company has contributed based on the following figures for operating revenue and operating profit as reported in the Group’s annual results for 2012:
     
Amounts in NOK million
2012
 
Revenues
25
 
Operating profit
1
 
NOTE 26
SALE OF SUBSIDIARIES
With effect from 30 September 2013, the subsidiary Eiendomssikring AS was sold for NOK 24.5 million.
     
The following shows a breakdown on the consolidated balance sheet associated with Eiendomssikring AS at the time of sale:
     
Book value of assets and liabilities at the time of sale
 
Amounts in NOK million
2013
 
Deferred tax asset
0
 
Goodwill
14
 
Inventories
8
 
Accounts receivable and other receivables
4
 
Cash and cash equivalents
3
 
Accounts payable and other liabilities
(9)
 
Book value of disposed assets and liabilities
20
 
Selling price inclusive sales cost
25
 
Loss on disposal of Eiendomssikring AS
5
 
     
Net cash inflow on disposal of subsidiary Eiendomssikring AS
 
Amounts in NOK million
2013
 
Selling price *
15
 
Cash and cash equvalents in Eiendomssikring AS
(3)
 
Net cash inflow on disposal of Eiendomssikring AS
12
 
     
* At the time of sale per 30 September 2013, Infratek Sikkerhet AS received NOK 15 million. The remaining amount of NOK 9.5 million will be paid 1 March 2014.
     
Effect of sold company on the annual results
   
Amounts in NOK million
2013
2012
Revenues
21
31
Operating profit
3
5
Tax expense
(1)
(2)
Income for the year
2
3
Gain from sale of Eiendomssikring AS
5
-
Profit for the year from discontinued operations
7
3
NOTE 27
GUARANTEE COMMITMENTS
 
Spesification of other allocations and liabilities
     
Amounts in NOK million
2013
2012
 
Guarantee commitments
1
1
 
Accruals for building rent obligations
19
-
 
Total other allocations and liabilities
20
1
 
       
Total Group guarantee commitments amounts to NOK 1 million per 31 december 2013. Accrued future guarantee commitments are calculated as a best assessment - also using historic experience.
 
       
In 2009, the Group entered into a ten year lease for Breivollveien 31 (Oslo). As a result of sold entities and other organisational changes, parts of these premises are now unused. The unused space has been advertised for sublease for the past two years without success - and the vacant office space and related costs are assessed to fulfill the criteria of a loss making contract.
       
Infratek has since 2010 subleased the 3rd floor of the same premises at Breivollveien 31 (Oslo). As part of a walk-through of the Group's total lease commitments, a revised assessment of the cash flow derived from this sublease agreement has been performed. A revised method for the allocation of property charges means that the Group has a loss related to the overall leasing contract, a contract that runs until the end of 2018. A loss accrual has been made based on contractual obligations and payments for the remaining lease period. There is a low degree of unceretainty regarding the size of the calculated loss. The measurement of the loss accrual meets the demands for a best estimate of the commitment. As a base for the calculation, the SSB long-term prognosis for the Consumer Price Index at 2.2 percent - and a discount rate of 2.07 percent - have been applied.
       
The best estimate on the loss accrual related to the lease contract for Breivollveien 31 (Oslo) was NOK 24.5 million at the end of 2013, of which NOK 5 million are classified as short-term, and the remaining NOK 19.5 million are classified as a long-term liability.
NOTE 28
CONTINGENT LIABILITIES
     
Contingent liability regarding Norwegian and Finnish employees
There is a contingent liability with respect to 59 employees of Infratek’s Finnish subsidiary Infratek Finland Oy, who were previously members of Fortum Pension Foundation, should they be made redundant by the company. In the event that they are made redundant, Infratek Finland Oy is obligated to compensate for any difference between estimated defined pension benefits according to the defined benefits based supplementary pension agreement and accrued pension entitlement under the mandatory service pension scheme. The size of the amount depends on whether or not the employee continues to accrue pension rights in the mandatory service pension scheme after their redundancy. This contingent liability is estimated at between EUR 6,000 and EUR 7,000 per employee per year. The amount cannot be calculated exactly until the ordinary pension period begins. As of 31 December 2013 the average age of these 59 employees was approximately 58.
           
Infratek Service AS, which was merged with Infratek Entreprenør AS in 2009, acquired 25 employees from Halden E-verk in 1992. These employees were transferred to KLP in 1992, but have earned pension rights in the Halden Kommunale Pensjonskasse. Since the acquisition, no demands concerning adjustment premiums or similar have been received from Halden Kommunale Pensjonskasse. On this basis, Infratek Entreprenør AS does not consider itself to have any liabilities linked to Halden Kommunale Pensjonskasse.
           
Bank and group guarantees
The Group purchases bank guarantees as security for certain liabilities. Per 31 December 2013, these bank guarantees amounted to NOK 166.3 million including NOK 30.3 million in tax deduction guarantees and NOK 136.0 million in project guarantees. Corresponding guarantees in 2012 were NOK 30.2 million and NOK 71.5 million, respectively.
           
Additionally, group guarantees adding up to a total of NOK 61.3 million were made whereas the corresponding amount made last year was NOK 44.2 million.
NOTE 29
EVENTS AFTER THE BALANCE SHEET DATE
Infratek sells its security operation in Finland to Turvatiimi Oyj
14 February 2014, Infratek and its security operation in Finland sold its security customer base to Turvatiimi Oyj. The 6 employees in Infratek Security Finland Oy were all employed by Turvatiimi Oyj.
           
Infratek has several Nordic security customers with operations in Finland. To properly manage the Finnish security market going forward, Infratek and Turvatiimi Oyj entered into a partner agreement. Turvatiimi Oyj has a country-wide presence in Finland within manual security services - and is listed at the Helsinki Stock Exchange.
           
Decision on delisting Infratek AS on the Oslo Stock Exchange
18 March 2014, Oslo Stock Exchange decided to delist the shares of Infratek AS. The delisting was executed in accordance with paragraph 25 (1) of the Stock Exchange Act. The last day of trading was 20 March 2014.
           
Decision to convert Infratek ASA from a public limited company to a limited company
In an Extraordinary general meeting 10 March 2014 it was decided to convert Infratek ASA to a liability company, ref the Norwegian Public Limited Liability Companies Act paragraph 15-1. The resolution passed came into motion as the company's shares were delisted at the Oslo Stock Exchange. The change was registered in the Register of Business Enterprises 28 March 2014.
           
The Board of directors and company management do not know of any other events after the balance sheet date that could effect the profit and loss, balance sheet, cash flow or equity.
NOTE 30
 
COMPANIES INCLUDED IN THE CONSOLIDATION OF THE GROUP
Company
 
Registered business address
Ownership percentage
Infratek AS (parent company)
 
Oslo, Norway
100
Infratek Norge AS
 
Oslo, Norway
100
Infratek Sverige AB 1)
 
Stockholm, Sweden
100
Infratek Finland OY
 
Helsinki, Finland
100
Infratek Mätkontroll Sverige AB
 
Storvik, Sweden
100
Infratek Elsikkerhet AS
 
Oslo, Norway
100
Infratek Sikkerhet AS
 
Oslo, Norway
100
Infratek Sikkerhed Danmark A/S 2)
 
Frederiksværk, Denmark
51
Infratek Säkerhet Sverige AB 3)
 
Stockholm, Sweden
100
Infratek Security Finland Oy
 
Helsinki, Finland
100
       
1) Wigh Kellokumpu Track Service AB was merged with Infratek Sverige AB in 2013.
2) 10 January 2013, Infratek acquired 51 percent of the shares in Infratek Sikkerhed Danmark A/S (Plahn Systems A/S). As part of the purchase agreement, there is a sale and purchase option related to the remaining 49 percent. This option leads to the purchase being treated as a 100 percent acquisition.
3) Infratek Sikkerhet AS has with effect from 10 Juli 2013 exercised the option to buy the remaining 49 percent of Infratek Säkerhet Sverige AB.