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The appropriation for the year. excluding VAT. was NOK 280.3 million. The amount is recorded as operating contribution from the Norwegian government. Other revenue primarily relates to invoicing of services provided to Petoro Iceland AS.

 

The change in deferred revenue comprises deferred revenue related to NOK 3.7 million in investments made during 2018. ref. Note 4. as well as NOK 3.5 million in depreciation of investments made during the year and in earlier years.

 

Payroll expenses (All figures in NOK 1000)	2018	2017
Pay	105 421	107 223
Directors’ fees	1 841	1 787
Liability insurance for the board (applies to the entire board of directors)	105	108
Payroll tax	15 632	16 038
Pensions (see Note 11)	31 991	31 222
Other benefits	3 557	4 242
Total	158 547	160 620
Employees at 31 December	64	65
Employees with a signed contract who had not started work at 31 December	0	1
Average number of full-time equivalents employed	64.2	64.4

 

Remuneration of senior executives   (All figures in NOK 1000)	Fixed salaries1	Loyalty scheme2	Cash allowance3	Other taxable benefits4	Taxable pay	Expensed pension
Grethe K. Moen	3 369	0	212	190	3 771	2 431
Rest of the management team:
Olav Boye Sivertsen5	1 921	58	483	158	2 621	345
Roy Ruså	2 300	67	145	166	2 678	806
Ole Njærheim	2 337	0	130	152	2 619	218
Jonny Mæland6	2 128	0	500	142	2 770	219
Kjell Morisbak Lund7	2 687	66	139	153	3 045	217
Hege Manskow	1 439	0	90	144	1 673	246
Rest of the management team:	12 813	191	1 486	915	15 406	2 051

 

1. Fixed salaries consist of basic salary and holiday pay.
2. The company’s loyalty scheme made disbursements in January 2018 to three managers who satisfied the terms for the scheme. This disbursement is not included in pensionable income. This scheme was discontinued in 2017.
3. Cash allowance includes variable pay and nonrecurring disbursements. Cash allowance not included in pensionable income.
4. Other administratively set remuneration includes car allowance. as well as minor remuneration for new subscriptions. telephone and broadband communication. 
5. Cash allowance includes compensation (nonrecurring disbursement) for surrendering the right to early pension. Not included in holiday pay or pension.
6. Cash allowance (nonrecurring disbursement) in connection with employment. Not included in holiday pay or pension.
7. Fixed salaries includes cash allowance as compensation for loss of defined benefit pension calculated based on actuarial assumptions and pensionable income.

Grethe K. Moen. Olav Boye Sivertsen and Roy Ruså have a transitional arrangement for pension that is still defined benefit. while other executives in the company have a defined contribution arrangement.

Expensed pension represents the current year’s estimated cost of the overall pension liability for the CEO plus the rest of the management team. including calculated premium in the defined contribution scheme for managers covered by this. The loyalty scheme was discontinued in 2017. The second of three discontinuation rates was disbursed in January 2018.

 

The declaration on remuneration for the CEO and other senior executives is in line with the provisions of the Norwegian Public Limited Liability Companies Act and the guidelines for state ownership. including the Guidelines on pay and other remuneration for senior executives in wholly or partly state-owned enterprises and companies. which came into force on 13 February 2015.

Guidelines on remuneration
Petoro’s remuneration guidelines are entrenched in the company’s vision. goals and values. The relationship between the level of performance. demonstrated leadership/collegiality and reward shall be predictable. motivational. clear and easy to communicate. Petoro has a uniform pay policy and system for the whole company. and aims to pay a competitive rate without being a pacesetter on remuneration in relation to the relevant market for the petroleum industry.

Decision-making process
The board has appointed a compensation sub-committee comprising the deputy chair and another director. The human resources manager provides the secretariat function for this committee. which prepares proposals and recommendations for the board on compensation issues. The board determines compensation for the CEO. who in turn determines the compensation for other members of the company’s senior management within the approved framework.

Main principles for remuneration
Petoro’s wage policy is to be competitive without being a pacesetter on overall remuneration. including the company’s pension schemes.

The compensation package for the CEO and the other senior executives shall reflect the responsibilities and complexity of the role in question. the company’s values and culture. the relevant executive’s behaviour and performance. and the need to attract and retain key personnel. The arrangements are transparent and in accordance with principles for good corporate governance.

Basic pay is the main component in Petoro’s compensation scheme. Senior executives are also entitled to benefits on an equal footing with others in the company. including car allowance as well as pension and insurance benefits. as well as a system for communication allowance.

Pay levels in a reference market comprising relevant companies in the upstream oil and gas industry provide the basic guidelines for the company’s remuneration profile. Basic pay is primarily fixed on the basis of the responsibilities and complexity of the position. Basic pay is subject to an annual assessment.

Petoro has a variable salary scheme. The principle and framework for performance-related salary have been stipulated by the board and embedded in the “Guidelines on pay and other remuneration for senior executives in wholly or partly state-owned enterprises and companies”. which came into force on 13 February 2015. This scheme covers all employees. including the President and CEO. with an equal percentage of basic salary. The board will assess goal attainment and stipulate performance-related salary in accordance with the assessed goal attainment within the framework of 10 per cent of basic salary.

On 4 May 2017. the board decided to discontinue the loyalty scheme for employees. The President and CEO was not covered by this scheme. which was established in 2013 to aid the competitive situation. The discontinuation has been implemented with disbursement of the final payment in January 2019 to employees who were part of the scheme at the date of discontinuation.

Share programmes. options and other option-like arrangements are not used in Petoro.

Petoro AS implemented a new pension plan for the company with effect from 1 January 2016. This is a defined contribution plan pursuant to the Defined Contribution Pensions Act. From the same date. Petoro AS has no collective pension plan for employees with pay above 12 G. Petoro AS has a transitional scheme that is still defined-benefit also for pay above 12 G. This is the same for executives as for other employees less than 15 years from retirement age (67) at 1 January 2016. Senior executives with employment contracts entered into before 13 February 2015 are covered by the same transitional scheme as other employees.

The CEO’s retirement age is 67. The employment contract stipulates a mutual six-month period of notice. Agreement has been entered into on a pay guarantee scheme of 12 months in addition to the period of notice. One member of the management team can choose to resign at age 65 with reduced benefits. The remaining executives retire at 67. These pension agreements were established before the new guidelines of 13 February 2015 on employment terms for senior executives in state-owned companies came into force.

Senior executives appointed after the new guidelines came into force will only be covered by the company’s defined contribution plan for pay below 12 G. Consequently. after these new guidelines came into force. Petoro AS will have no new senior executives with a defined benefit pension and no pension expenses over and above those which follow from the defined benefit plan will accrue (pursuant to the Defined Contribution Pension Act).

Remuneration principles and their implementation in the preceding year 
The annual evaluation of the basic pay of the CEO and other senior executives is conducted with effect from 1 July. The board addressed the wage evaluation of the President and CEO in the board meeting on 20 September 2018. In 2018. the evaluation of other executives was carried out in the third quarter.

 

All figures in NOK 1000	Fixtures and fittings	Operating equipment	ICT	Total
Acquisition cost at 1 January 2018	4 979	8 553	36 327	49 859
Additions fixed assets	-	356	3 380	3 736
Disposal fixed assets/obsolescence	-	-	-	-
Acquisition cost 31 December 2018	4 979	8 909	39 707	53 595
Accumulated depreciation 1 January 2018	4 372	8 372	31 018	43 762
Reversed accumulated depreciation	-	-	-	-
Depreciation for the year	142	179	3 151	3 472
Accumulated depreciation 31 December 2018	4 514	8 551	34 169	47 234
Book value 31 December 2018	465	358	5 538	6 360

 

 

Economic life	Until lease expires in 2020	3/5 years	3 years
Depreciation schedule	Straight line	Straight line	Straight line

Operational leasing contracts include office equipment and machines. The initial lease period is 3-5 years.

 

Financial items (all figures in NOK 1 000)	2018	2017
Financial income
Interest income	2 786	860
Currency gain agio	624	460
Financial expenses
Interest expenses	-	-
Currency loss disagio	215	110
Other financial expenses	-	-
Net financial items	3 195	1 210

 

Company (All figures in NOK 1000)	Acquisition date	Business office	Ownership interest	Voting interest	Equity 31 December	Result 2018
Petoro Iceland AS	11.12.2012	Stavanger	100 %	100 %	2 272	-4

Petoro AS received NOK 2 million in state contributions in 2012. which are earmarked share capital in Petoro Iceland AS. The contribution is entered against the cost price of the shares. For this reason. the investments in Petoro Iceland AS are recorded on the balance sheet at NOK 0.

The company receives its own appropriations over the central government budget to fund its operations. It has also entered into an agreement with the parent company. Petoro AS. on an overdraft facility in the amount of NOK 3 million. This agreement has been established according to the arm’s-length principle and is based on normal commercial terms and principles. and is thereby considered to accord with the pricing of corresponding financial services in the market. The facility remained undrawn at 31 December 2018.

 

Other receivables consist in their entirety of pre-paid costs relating primarily to rent. insurance. licences. subscriptions for market information and VAT credits.
 
 

Bank deposits total NOK 230 million. including NOK 8 million in withheld tax and funds to cover unsecured pension obligations in the amount of NOK 172 million.

 

The company’s share capital at 31 December 2018 comprised 10 000 shares with a nominal value of NOK 1 000 each. All shares are owned by the Ministry of Petroleum and Energy on behalf of the Norwegian state. and all have the same rights.

 

Petoro AS (All figures in NOK 1 000)	Share capital	Other equity	Total
Equity at 1 January 2018	10 000	7 251	17 251
Result for 2018		5 747	5 747
Equity at 31 Dec 2018	10 000	12 998	22 998

 

The company is obliged to offer an occupational pension scheme under the Norwegian Act on Mandatory Occupational Pension Schemes. The company’s pension plans comply with the requirements of this Act.

Petoro implemented a new pension plan for the company with effect from 1 January 2016. This is a defined contribution plan pursuant to the Defined Contribution Pensions Act. The company has a transitional arrangement for employees who are less than 15 years from retirement age as of 1 January 2016. Premiums for the defined contribution plan are expensed on a continuous basis.
 

Net pension cost  (all figures in NOK 1000)	2018	2017
Present value of benefits earned during the year	14 806	15 614
Interest expense on pension obligation	7 710	7 237
Return on pension plan assets	-3 898	- 2 852
Recorded change in estimates	5 241	3 260
Payroll tax	1 918	2 045
Pension cost. defined benefit scheme	25 777	25 304
Pension cost. defined contribution plan	6 214	5 918
Net pension cost	31 991	31 222

Calculation of the year’s net pension cost is based on the assumptions of previous years. The net pension liability is calculated on the basis of assumptions in the present year. Petoro has allocated own funds to cover unsecured pension obligations. ref. Note 8.
 

	2018	2017
Discount rate	2.60 %	2.50 %
Expected return on plan assets	4.30 %	4.00 %
Expected increase in pay	2.75 %	2.25 %
Expected increase in pensions	0.80 %	0.40 %
Expected adjustment of the National Insurance Scheme’s basic amount (G)	2.50 %	2.25 %

	2017	2016
Discount rate	2.50 %	2.60 %
Expected return on plan assets	4.00 %	3.30 %
Expected increase in pay	2.50 %	2.25 %
Expected increase in pensions	0.40 %	0.00 %
Expected adjustment of the National Insurance Scheme's Basic Amount (G)	2.25 %	2.00 %

The actuarial assumptions are based on common assumptions made in the insurance business for demographic factors.

 

Other current liabilities relate almost entirely to provision for costs incurred. pay outstanding and holiday pay.

 

KPMG AS is the company’s chosen auditor. Fees charged for external auditing of the group’s financial statements in 2018 totalled NOK 0.4 million. There were no invoices for additional services in 2018.

In accordance with the Act relating to the Office of the Auditor General of 7 May 2004. the OAG is the external auditor for the SDFI portfolio. PricewaterhouseCoopers AS (PwC) has been engaged as the company’s financial accountant in order to prepare a financial audit of the SDFI accounts as part of the company’s internal auditing. PwC has invoiced NOK 0.6 million for financial auditing and NOK 0.6 million for internal auditing in 2018. Costs have also been expensed for services from PwC within partner auditing totalling NOK 1.6 million.

 

Petoro AS entered into a lease with Smedvig Eiendom AS for office premises in the autumn of 2003. The ordinary term of the lease expired on 31 December 2014. Petoro AS chose to exercise its option to extend the lease to 31 December 2020. The remaining term of the lease is now two years. with an option to renew for a further five-year period. Rent for the year totalled NOK 11.1 million. which includes all operating and shared expenses.

 

Petoro has entered into an agreement with Upstream Accounting Excellence (UPAX) for the delivery of accounting and associated ICT services related to the SDFI accounts. This agreement entered into force on 1 March 2014 and runs for five years with an option for Petoro to extend it for a further year. Petoro has exercised the option for a one-year extension. Evry is the sub-contractor for ICT services. The recorded accounting fee for UPAX in 2018 amounted to NOK 14.3 million. Other services purchased from the contractor totalled NOK 1.1 million.

 

Petoro AS is the parent company for Petoro Iceland AS. The company has no employees and has entered into a management agreement with the parent company. The services as manager for Petoro Iceland AS are estimated at market price based on time spent and government travel rates. There is no debt in the parent company vis-à-vis the subsidiary at year-end.

 

Capitalised pension obligation	2018	2017
Estimated pension obligation at 31 Dec.	335 004	313 665
Pension plan assets (market value)	-101 827	-92 900
Net pension obligations before payroll tax	233 177	220 765
Unrecorded change in estimates	-66 432	-61 703
Capitalised pension obligation	166 745	159 062