Income Statement Group

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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				2011	2010 restated
Present value of accrued pension liabilities for defined benefit plans in fund-based plans				843	662
Fair value of pension assets				(445)	(383)
Actual net pension liabilities for defined benefit plans in fund-based plans				398	280
Present value of liabilities not in fund-based plans				111	57
Social security contribution				72	47
Net pension liabilities in the balance sheet
(after social security contribution)				581	384

Changes in defined-benefit pension liabilities during the year:
Pension liabilities as of 1 January (excl. social security contribution)				718	646
Present value of pension earnings				28	29
Interest expenses				29	27
Estimate changes				189	59
Pension payments				(11)	(6)
Liabilities due to plan changes and acquisitions				1	(37)
Pension liabilities as of 31 December
(exclusive of social security contribution)				954	718

Change in fair value of pension assets:
Fair value of pension assets as of 1 January				383	357
Expected yield on pension funds				21	21
Estimate changes				16	(29)
Total contribution				35	40
Total payments from funds				(10)	(6)
Fair value of pension assets as of 31 December				445	383

Movement in actuarial gains and losses recognized in other comprehensive income:
Cumulative amount recognized in comprehensive income 01.01				100	-
Recognized in other comprehensive income in the period				197	100
Cumulative amount recognized inother comprehensive income 31.12				297	100
Deferred tax related to actuarial losses recognized in other comprehensive income				83	28
Cumulative amount recognized in other comprehensive income after tax 31.12				214	72

Calculations are based on the following assumptions:				2011	2010
Discount rate				2.60%	4.00%
Expected yield on pension funds				4.10%	5.40%
Salary growth				3.25%	3.75%
Social security base amount (G)				3.25%	3.75%
Annual social security pension growth - Private Fund				0.10%	1.30%
Annual social security pension growth - Public Fund				2.50%	2.97%

Pension effect on profit and loss statement
Total pension expenses recorded in profit and loss account:
Amounts in NOK million				2011	2010 restated
Defined benefit plans:
Cost of present period’s pension earnings				28	29
Interest expenses				29	27
Expected yield on pension funds				(21)	(21)
Amortization of plan amendments				-	(38)
Social security contribution				5	2
Members’ contributions				(1)	(1)
Employer’s contribution to non-capitalized defined benefit schemes in foreign subsidiaries				28	28
Pension costs, defined benefit plans				68	26
Defined contribution plans:
Employer’s contribution to defind constribution plans				22	29
Total pension expenses				90	55

Total pension costs are classified as:
Salaries and other personnel costs				82	49
Net finance				8	6
Total pension costs				90	55

Specification pension fund assets
Amounts in million NOK		2011		2010
Equity instruments		142	32%	88	23%
Interest-bearing instruments		285	64%	249	65%
Property		4	1%	34	9%
Other		13	3%	11	3%
Fair value of pension assets		445	100%	383	100%

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 2011, 484 employees were covered by defined benefit plans, divided between Hafslund Private Pensjonskasse (86), Hafslund Offentlige Pensjonskasse (307), Storebrand (8) and KLP (83). As of 31 December 2011 100 people were receiving pensions under these schemes, divided between Hafslund Private Pensjonskasse (6), Hafslund Offentlige Pensjonskasse (34) and KLP (60). 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 employees who were not previously included in a pension scheme in the Group’s Norwegian businesses.

The Group has in 2011 changed the accounting policy for pensions. The Group has 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 year-end. Pension liabilities (net present value of pension payments earned on the balance sheet date, adjusted for future salary growth) are valued using best estimates based on assumptions as of the balance sheet date. Substantial estimate deviations are largely due to reduced discount rate in 2011 compared with 2010. The actuarial estimates of pension liabilities have been prepared by independent actuaries. The assumptions regarding salary growth, increase in pension payments, and social security base amount adjustments are based on historic observations, established tariff agreements, and the relationship between certain assumptions. The demographic assumptions are based on recommendation from the Norwegian Accounting Standards Board.

The Group has also changed how the net retirement benefit costs are presented in the consolidated statement of comprehensive income. The Group has changed its presentation of net retirement benefit cost 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 the 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. See the impact of the changed accounting policy in Note 2.2

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. Hafslund 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, Hafslund becomes exempt 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 ASA was reduced from 64.6% to 43.3%. 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. Projected long-term return on pension assets is based on an estimated government bond interest rate as of 31 December, adjusted for differences in yield for the various categories in which pension assets are invested. The expected long-term yield is based on long-term historic yield. Actual yield on pension assets was -0.7 percent in 2011, compared with 7.4 percent in 2010.

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. Any estimate deviation is distributed proportionately among asset categories.

Pensions in Sweden
As of 31 December 2011 a total of 431 “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 521,000 can select an alternative ITP in the chosen insurance company. 10 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.

343 “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.