Profit before unrealised financial items is the criterion used by Landsvirkjun in evaluating the Company's core operation. Profit before unrealised financial items amounted to USD 121.8 million in the year 2013 compared to USD 103.7 million in the previous year.
The realised foreign exchange difference was positive by USD 7 million in the year 2013 (negative by USD 5 million in the previous year) and is partly the reason for better operating results of core operations. The average nominal interests on long-term loans were approx. 3.5% compared to 3.3% in the previous year, taking into account the state guarantee fee. A low world market interest rate and decreased debt in the last years has had a positive effect on the Company's return.
A part of the parent Company’s electric power sales agreements are related to aluminium price development. International Financial Reporting Standards require that the aluminium price link be calculated as embedded derivatives. Calculated change in the value of the embedded derivatives is recognised in the income statement in the amount of USD 174.6 million as an expense in the year 2013 compared to USD 3.4 million in the previous year. Foreign exchange differences and fair value changes are mostly unrealised, which must be kept in mind in the evaluation of the Company's results. Unrealised financial items are therefore recognised as a separate item in management's presentation.
The return of the year, after tax, is contingent on changes in unrealised financial items, on which the Company has limited effect. Due to decreased world market energy prices in the year 2013 there was a loss on Landsvirkjun's operation in the amount of USD 38.5 million compared to a profit in the amount of 55.3 million in the previous year.