Statkraft AS - First Quarter 2006
11.05.2006 08:17 | stock exchange information
(Comparable figures for 2005 in brackets)
High production levels and good power prices in the market resulted in sound profits for Statkraft in the first quarter which represented a significant improvement on the first quarter 2005. Furthermore, net financial expenses were reduced, and profit contributions from associated companies increased. Statkraft made a profit before tax of NOK 4,044 million (NOK 2,472 million) and a net profit of NOK 2,868 (NOK 1,739 million).
"Hydropower production in the Nordic region was higher in the first quarter this year than in any equivalent quarter previously. Prices were very high over the quarter, and Statkraft maintained high production levels. This, together with good resource optimisation and smooth operations, resulted in sound earnings over the quarter," says President and CEO Bård Mikkelsen.
Market conditions and results
The group's operating revenues for the first quarter increased by NOK 1,340 million compared with the first quarter 2005, ending at NOK 5,253 million. This increase was due mainly to the fact that production increased from 14.3 TWh in the first quarter last year to 16.1 TWh this year, and that the average spot price was 71 per cent higher. Revenues from commercial contracts were down on the first quarter last year.
Operating expenses amounted to NOK 1,359 million, an increase of NOK 162 million on 2005. Much of this increase was due to consolidation of new companies, the commissioning of new facilities and the regulation of the basis for calculation of compensation payments, licence fees and property tax. Expenses in underlying operations display a slight increase.
The group's operating profit increased by 41 per cent, amounting to NOK 3,527 million (NOK 2,504 million).
Profit contributions from associated companies increased markedly, amounting to NOK 854 million (NOK 436 million). This increase is mainly applicable to E.ON Sverige and is essentially due to the fact that the share of profits from the company in the first quarter last year was affected by non-recurring expenses of NOK 359 million connected with the repair of damage after a hurricane.
Lower interest-bearing liabilities and lower average interest rates on the debt portfolio reduced net financial expenses, which amounted to NOK 337 million for the quarter (NOK 468 million).
In the first quarter, the power market was characterised by little precipitation, low snow reservoirs in the mountains and cold weather in Norway and Sweden. This contributed to the average price in the quarter increasing by NOK 151/MWh compared to last year, totalling NOK 364/MWh. In addition, high fuel prices in thermal power generation and high carbon prices have driven prices up.
Power consumption in the Nordic Region was up 5.0 per cent compared with the first quarter last year, amounting to 121 TWh. Nordic power production over the period amounted to 120.2 TWh, an increase of 3.7 per cent. 0.8 TWh was imported net to the Nordic market.
The construction of two gas-fired power plants in Germany and one at Kårstø in Norway is well under way. The construction of Kjøllefjord Wind Farm and several small hydropower projects is continuing. A decision has been made that TEV is to construct the new Leirfossene power plant in Nidelven. The development cost is estimated at NOK 400 million.
A subsidiary has been set up in the United Kingdom for the development of wind power in Great Britain, and Statkraft has opened a trading office in Sofia, Bulgaria for the purpose of developing trading opportunities in South-Eastern Europe. The company has entered into a Memorandum of Understanding with Montenegrin company Elektroprivreda Crne Gore to prepare a study of business opportunities in the field of hydropower in Montenegro.
Cash flow and equity
In the first quarter, the business generated a cash flow of NOK 3.8 billion. Net investments totalled NOK 800 million, of which NOK 550 million was spent on the gas-fired power plant projects in Germany. Net long-term liabilities were reduced by NOK 450 million. Cash reserves at the end of the quarter amounted to NOK 6.9 billion, an increase of NOK 2.5 billion compared with the start of the year.
At the end of the first quarter, the snow reservoirs were lower than normal, and with relatively normal precipitation to come, the group expects this year's generation to be slightly lower than in 2005. The enormous drop in the price of carbon at the end of April resulted in falling forward prices, but forward prices are still at a high level. Over the last few years, commercial contracts have resulted in significant added values. Contributions from these contracts are expected to be significantly weaker in 2006 if the high price levels are sustained. In total, revenue from power sales is expected to be on a similar level to 2005. No significant changes in the group's expenses linked with ongoing operations are expected. Thus the group is in a good position to continue generating good returns.
CFO Eli Skrøvset, tel.: +47-24067914 / +47-90986495
SVP Accounting and IR Lisbeth Lindberg, tel.: +47-24067286 / +47-99523150
Report 1st quarter 2006:
Presentation of 1st quarter 2006: