Statkraft SF - Result 2nd quarter 2005

18.08.2005 08:00 | pressrelease

Pretax profit before tax NOK 1,576 m. Net profit NOK 1,135 m in the 2nd quarter 2005, up NOK 1,020 m and NOK 765 m respectively compared with the same period last year.

Consolidated pretax profit first six months of the year amounted to NOK 4,099 m, while its net profit totalled NOK 2,921 m. This is an improvement of NOK 1,349 m and NOK 999 m respectively compared with the same period last year.

The group's strong performance in the first half year is primarily due to the fact that it generated considerably more electricity than in the corresponding period last year, which more than compensated for the drop in prices. Revenues from contract sales also remained substantial. Reduced financial expenses contributed to the growth in profits, which was, nevertheless, tempered by a certain increase in operating expenses as well as repair costs incurred by Sydkraft (associated company) after a hurricane in January severely damaged the company's power distribution grid in southern Sweden.

Naturkraft, a 50-50 joint venture between Statkraft and Hydro, has decided to go ahead with the construction of a gas-fired power plant in Kårstø in western Norway. The plant will have a planned output of 420 MW. Statkraft's share of its annual production capacity will amount to 1.75 TWh, at an investment cost of NOK 1 billion.

Statkraft has signed long-term agreements with Fesil and Rio Doce Manganese Norway in Mo i Rana for the supply of 900 and 450 GWh/year respectively up to and including 2020. The agreements replace existing statutory-priced contracts with commercial contracts at market prices.

Over the next few years Statkraft will undertake several major projects which will provide generating capacity outside Norway. This will strengthen the group's position, both in the Nordic region and on the Continent, and is an important part of Statkraft's European strategy.

On 1 July Statkraft signed an agreement with Sydkraft for the acquisition of 24 hydropower plants in Sweden and Finland, with an average annual output of NOK 1.6 TWh, at a cost of NOK 3.9 billion. Statkraft will take over the facilities on 1 October this year.

Statkraft has also decided to invest some EUR 500 million in the construction of two gas-fired power plants in Germany, with production capacities of 800 MW and 400 MW respectively. Statkraft will have a 50 per cent stake in the smaller of the power plants. The two power plants will give Statkraft a combined annual production of some 5-6 TWh.

Statkraft SF's business

In connection with the reorganisation of Statkraft SF into a limited company with effect from 1 October 2004, most of Statkraft SF's business activities were transferred to the subsidiary Statkraft AS and its underlying companies. The transfer covered over 96 per cent of the assets held by Statkraft SF. However, certain assets which may not formally be transferred have been retained by Statkraft SF. This applies to power plants which have reverted to state ownership and which have been leased out to third parties (Sauda I, II, III, IV, Tysso II, Svelgen I, II and Mågeli) or which will come into Statkraft SF's possession upon reversion. Furthermore, certain investments in foreign enterprises have been retained (Himal Power Limited, Asian Power Invest AB, Nordic Hydropower AB and Empresa de Generación Eléctrica Cheves SA).

Following the reorganisation, the Statkraft SF Group's consolidated financial statements will, with the exception of the retained assets, be identical to the consolidated financial statements for its subsidiary the Statkraft AS Group. The financial impact, which is relatively modest, is described below.

The value of all Statkraft SF's assets as recorded on the balance sheet is NOK 2.3 billion higher than the value of Statkraft AS's assets. This largely corresponds with the book value of the power plants that have been leased out to third parties and the foreign investments which have not been transferred, in addition to short-term items which could not be transferred and cash reserves to meet its obligations.

On the balance sheet's liabilities side, the item "Other interest-free liabilities" is almost NOK 3.4 billion higher for Statkraft SF than for Statkraft AS. This is because the NOK 3.4 billion dividend payable to the Norwegian state for 2004 is recorded as a liability in Statkraft SF's accounts. No dividend for 2004 will be paid by Statkraft AS; therefore, this company has no such corresponding liability. There will be a difference in the two companies' equities as a result of the difference in dividend provisions.

During the second quarter Statkraft SF redeemed three bond loans in their entirety, with a combined outstanding balance of NOK 4.5 billion. In addition, a total of NOK 1.8 billion from two other bond loans was bought back. Statkraft AS repaid internal loans to Statkraft SF corresponding to the redemption and buybacks of external loans held by Statkraft SF.

At the end of the first half year Statkraft SF had cash and cash equivalents amounting to just over NOK 500 million, but only a small proportion of this will be available to cover dividend payments. During the second quarter Statkraft SF established a committed credit facility amounting to NOK 3.2 billion to finance the dividend, which was paid out on 22 July.