While profits were boosted by the swap agreement with E.ON AG, the Group’s underlying performance was better than ever. The improvement in underlying performance can largely be ascribed to higher electricity prices, increased output and solid results from its hedging activities, though this was to some extent offset by substantially higher financial and tax expenses, and lower contributions from associates.
The Group generated gross operating revenues of NOK 25,465 million in 2008 (NOK 17,950 million), an increase of 42%. The improvement can be ascribed to significantly higher electricity prices and output levels than in 2007.
Electricity prices in the Nordic market were higher in 2008 than the year before. The average system price rose from 27.9 EUR/MWh to 44.7 EUR/MWh, an increase of 60%, and the Group generated a total of 53.4 TWh (44.9 TWh), an increase of 19%.
The Group made an underlying operating profit in 2008 of NOK 12,176 million (NOK 8,140 million), an improvement of 51%.
Important events during the quarter and future outlook
On 31 December 2008 Statkraft carried out a swap agreement with E.ON AG, under which E.ON AG took over Statkraft’s 44.6% shareholding in E.ON Sverige AB and a hydropower plant in Sweden in exchange for assets and 4.17% of the shares in E.ON AG. The entire transaction was worth around NOK 44 billion, and gave Statkraft a recognised gain of NOK 25,591 million in the fourth quarter. The transaction had a limited impact on liquidity. The agreement makes Statkraft Europe’s largest producer of renewable energy.
In October Statkraft and Boliden Odda entered into two long-term commercial electricity supply contracts for the period 2009-2030. Covering the supply of around 20 TWh of electrical power, it is the largest industrial electricity supply contract Statkraft has signed since 1998, and reinforces the company’s role as the largest and most important supplier of electricity to Norway’s power-intensive industry. As part of the agreement Statkraft took over Boliden Odda’s shares in AS Tyssefaldene, bringing Statkraft’s shareholding in this company to 60.17%. The agreement goes into effect as soon as all outstanding formalities, including tax issues, have been resolved.
In October the Leirfossene Power Plant in Trondheim went into operation. The new power plant replaced two old facilities, increasing annual output from 150 GWh to 193 GWh.
In November Statkraft AS and Norfund agreed a new ownership structure for SN Power. As a result Statkraft’s shareholding rose to 60%. The shareholder agreement was also renegotiated, and Statkraft received an option to raise its shareholding to 67% through the purchase of shares at market rates by 2015 at the latest. Norfund was given an option to sell all or some of its shares during the same period. At the same time a separate company was created to manage investments in Africa and Central America. Norfund has taken a direct stake in this company alongside SN Power. The agreement went into effect on 13 January 2009.
In December Statkraft and the Austrian energy company EVN signed a licence agreement to build a hydropower scheme in Albania. Through the agency of a joint venture, the plan is to construct three power plants with a combined installed capacity of 340 MW and an annual expected output of 1 TWh.
In February 2009 Statkraft’s board of directors asked the company’s owner, the Norwegian state, to increase its equity by NOK 8 billion and adjust its dividend policy to enable Statkraft to pursue its strategy of profitable growth in the area of environment-friendly and flexible power generation.
High reservoir levels at the start of the year and higher than normal precipitation levels mean that the resource situation in the Nordic region is robust. The average system price was considerably higher in 2008 than in 2007, but forward prices indicate a slightly lower price level in the time ahead. Combined with the increased production capacity resulting from the swap agreement with E.ON, this gives grounds for a relatively high level of electricity output in 2009, and increased revenues from day-to-day power sales. However, considerable uncertainty attaches to the future development of electricity prices and the hydrological resource situation. It is expected that prices and demand for power could fall in the short to medium term, as a result of the global financial crisis. The long-term consequences are more unsure.
Statkraft SF’s business
The purpose of Statkraft SF is to own all the shares in, and provide loans to, Statkraft AS. In addition, Statkraft SF owns certain assets that for technical reasons may not be owned by Statkraft AS. This applies to power plants that have reverted to state ownership and are leased to third parties and to plants that will be owned by Statkraft on reversion to state ownership, together with certain overseas investments (Asian Power Invest AB and Nordic Hydropower AB).
The consolidated financial statements for Statkraft SF will, with the exception of the retained assets and individual items on the liabilities side, be identical with the consolidated financial statements for the Statkraft AS sub-group. See reported fourth quarter and preliminary results for 2008 for Statkraft AS.
In the closing balance sheet for 2008, the value of the total assets of the Statkraft SF Group was NOK 145.3 billion, which is NOK 992 million greater than that of the total assets of the Statkraft AS Group. The book value of the leased power plants and the overseas investments amounted to NOK 1510 million.
The differences between the respective income statements of Statkraft SF and Statkraft AS primarily relate to revenues and expenses associated with ongoing operation of the retained assets. These differences are relatively modest.
Contacts:
Stein Dale, CFO, tel.: +47 24 06 72 11 / +47 450 02 111
Yngve Frøshaug, VP Investor Relations, tel.: +47 24 06 78 76 / +47 900 23 021
This information is subject to the disclosure requirements acc. to §5-12 vphl (Norwegian Securities Trading Act).