Statkraft AS - fourth quarter and preliminary results for 2007
14.02.2008 08:08 | stock exchange information
Strong results despite lower prices
(Oslo, 14 February 2008) 2007 was characterised by high levels of precipitation and low electricity prices. Despite these factors, Statkraft managed to achieve a profit after tax of NOK 6,632 million (NOK 7,735 million). Adjusted for unrealised changes in value and significant non-recurring items, the Group posted a profit after tax of NOK 7,030 million (NOK 6,945 million). During 2007, Statkraft completed construction of three gas-fired power plants as well as hydropower and district heating plants. In October, the company signed a letter of intent with E.ON AG concerning the sale of shares in E.ON Sverige in exchange for assets and shares in E.ON AG. The agreement will make Statkraft the largest producer of renewable energy in Europe.
"Taking energy prices into account, the result for 2007 is very strong. This is due to good power optimisation and hedging, efficient operation and increased contributions from associated companies," remarked CEO and President Bård Mikkelsen. "The company's employees have put in a considerable effort during the year and helped ensure that we are now well positioned for further growth in Norway and abroad. The implementation of the agreement with E.ON will further strengthen our base," Mikkelsen continued.
Results for the year
The price of energy in the Nordic market was noticeably lower in 2007 than it was in 2006. The average spot price fell from NOK 391/MWh in 2006 to NOK 224/MWh in 2007, a reduction of 43% brought on by increased levels of precipitation and inflow. Total production for the Group stood at 44.9 TWh; 0.7 TWh less than in 2006.
The fourth quarter of 2007 returned a profit after tax of NOK 2,529 million. Adjusted for unrealised changes in value and non-recurring items, profit after tax stood at NOK 3,038 million - an increase of NOK 1,200 million on the previous year. The main reason for this increase is the higher level of production compared to the fourth quarter of 2006.
Gross sales for the year stood at NOK 17,619 million, an increase of NOK 1,419 million (9%) on 2006. The increase is primarily attributable to the consolidation of Fjordkraft and very good results achieved from dynamic hedging. Net operating revenues for the year, adjusted for unrealised changes in value and non-recurring items, fell by NOK 970 million on 2006, in part due to reductions in prices and production levels.
Operating expenses stood at NOK 6,019 million in 2007, an increase of NOK 921 million on 2006. The improvement primarily relates to the consolidation of Fjordkraft, the establishment of new operations and increased staffing levels in existing operations.
Operating profit for 2007 stood at NOK 7,242 million (NOK 11,847 million). Adjusted for unrealised changes in value and non-recurring items, this represents a fall of 20%.
The share of profits from associated companies increased to NOK 2,613 million (NOK 2,009 million). Adjusted for unrealised changes in value and non-recurring items, the increase in the share of profits from associated companies is NOK 840 million, where the most important contributions were made by E.ON Sverige and the Norwegian companies Agder Energi and BKK.
Net financial items totalled NOK -1,089 million in 2007, a reduction of NOK 1,185 million on the previous year. The reduction is attributable to a number of factors including the positive effect of unrealised changes in value in the Group's interest and currency agreements totalling NOK 1,358 million. Financial expenses were also affected by higher market interest rates and extended liabilities. Taxes fell by NOK 1,713 million compared to 2006 due to a lower taxable profit and a financial non-recurring effect relating to deferred tax assets following changes in regulations governing resource rent tax. The changes in power plant taxation regulations will result in higher taxes and an increase in tax payable.
Important events and future outlook
Statkraft has grown substantially during 2007. The company recently completed the construction of three gas-fired power plants, and has also commissioned several hydropower plants and a district heating plant. Combined, this produces an increase in annual production capacity of around 7 TWh. The letter of intent signed with E.ON AG concerning the sale of shares in E.ON Sverige in exchange for assets and shares in E.ON AG will provide the Group with a further 7 TWh of production capacity. This will see Statkraft's production increase by 33%. _In addition to this an agreement was entered into with SCA during 2007 concerning a joint initiative to examine the potential for developing hydropower and wind power in Sweden, while SN Power made investments in power plants in the Philippines, Chile and Peru. Following the strategy it has adopted, Statkraft is in an excellent position to experience continued growth and development both within Norway and internationally.
High inflow levels during 2007 and relatively full snow reservoirs mean that the current resource situation is robust. Forward prices indicate price levels will be higher in 2008 than they were in 2007. This, coupled with the increased production capacity available, provides the basis for relatively high power production during 2008 and increased revenues from ongoing power sales. However, uncertainty attaches to the price development.
The Group has a strong focus on innovation and the development of new technologies for power production. Work on developing new, profitable investments in hydro, wind and gas power generation in both the Norwegian and European markets will continue. In addition, Statkraft has also taken the decision to build the world's first prototype osmotic power plant. The facility at Hurum constitutes an important step on the road to the development of a commercially viable plant. During 2007, Statkraft entered into an extensive collaboration agreement with the Norwegian University of Science and Technology (NTNU), focusing on research in the field of sea energy, with aim of becoming Europe's leading skills and educational network in this area. In addition, the company also entered into several other agreements, which could result in development of solar power in Italy and Spain.
The EU's energy and climate policy up to 2020 is expected to improve the basis for Statkraft's growth in respect of renewable energy and flexible power production. This includes stricter CO2 emissions standards, higher targets in terms of the expansion of renewable energy and a more integrated European energy market. Broad political agreement on future climate targets in Norway, including the re-opening of negotiations in respect of a Norwegian-Swedish certificate market, is expected to strengthen the case for expanding renewable energy in Norway when viewed in conjunction with the effects of EU directives. By investing in hydro, wind and gas power generation, Statkraft is well positioned to participate in this development.
The Statkraft Group is a European leader within renewable energy. The Group generates hydropower, wind power, gas power and district heating and is a major player on the European energy exchanges. In Norway the company supplies electricity and heat to around 600,000 customers through its shareholdings in other companies. In 2007 Statkraft posted a profit after tax of NOK 6.6 billion, and employed around 2,250 employees in ten countries. The world needs pure energy. This is what Statkraft delivers - every day.
For further information please contact:
EVP/CFO Eli Skrøvset, tel: +47 24 06 79 14 / +47 909 86 495
VP Investor Relations Yngve Frøshaug, tel: +47 24 06 78 76 / +47 900 23 021
EVP Ragnvald Nærø, tel: +47 24 06 71 00 / +47 900 80 303
or visit our website www.statkraft.com
Enclosure: Group income statement and balance sheet for 2007.
|Presentation Q4 2007|
|Report Q4 2007|