Investor Presentaiton
Glossary
Balancing costs
The cost of settling intraday differences between expected (day-
ahead) and actual (real-time) production
Intermittency costs
As hedges are settled against a fixed baseload production (volume x
market price), this is the cost associated with when our actual
production is either above or below the baseload production.
When approaching the delivery period, some costs can be
proactively addressed by shaping baseload hedges from a P50
volume profile to the expected actual volume profile, minimising
profile risk (i.e. real-time pricing impacted by volume of renewables
generating at that time)
Overhedging
Misalignment between volume of actual production versus volume
that was hedged. Potential causes include delayed ramp-up and low
wind
Ineffective hedges
Expected overhedging of future periods, which we, according to IFRS,
have to recognise already in the quarter where we report
Price-ineffective hedges under IFRS 9
In 2021, we started reporting according to IFRS 9 instead of the
previous 'Business Performance' principle, as it had become easier to
apply IFRS hedge accounting for our energy hedges. However, as we
hedge up to five years ahead and within markets with low liquidity,
we often use proxy hedging in addition to hedges that directly
matches our exposures. In periods with 'normal' price levels and
volatility, the impact of proxy hedging is insignificant.
However, due to the very high energy prices and volatility in 2022,
this has led to a larger part of our trades being deemed ineffective
under IFRS 9 (if value of proxy hedge is larger than the change in the
exposure), compared to the former business performance principle.
Consequently, we have recognised the negative market value of
these ineffective hedges in EBITDA in our Offshore and Bioenergy
segments. Compared with the former business performance principle
we have therefore included a higher loss on hedges in the current
period at the benefit of a lower loss in future periods.
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