Statkraft - Financial results for the fourth quarter and preliminary results for the 2006 financial year

15.02.2007 08:00 | pressrelease

(Oslo, 15 February 2007) 2006 was another very good year for Statkraft. Gross operating revenues rose by 8 per cent, profit before tax rose to NOK 9,826 million (NOK 8,449 m), while profit after tax came to NOK 6,285 million (NOK 5,620 m), an improvement of 12 per cent.

2006 was a very good year

  • Jump in profits due to high electricity prices and good operations
  • Profit after tax for the fourth quarter totalled NOK 1,710 million (NOK 2,085 m)[1]
  • Preliminary figure for profit after tax for 2006 totalled NOK 6,285 million (NOK 5,620 m)
  • Dividend payment to the Norwegian state of NOK 5,857 million (NOK 4,793 m)

Profit before tax for the fourth quarter alone totalled NOK 2,446 million, a drop of NOK 659 million compared with the year before. However, NOK 381 million of this can be ascribed to positive non-recurring items recorded in 2005. Adjusted for this, profit before tax fell by NOK 278 million or 10 per cent. The weaker performance of underlying operations was due largely to lower electricity output and weaker results from associated companies.

"Successful energy optimisation and efficient operations, combined with high electricity prices laid the foundation for the substantial improvement in profits compared with 2005, a year which was in itself extremely good. We are extremely pleased with the excellent work that has been put in at all levels in the organisation," says CEO Bård Mikkelsen. "At a time when climate change is causing concern, it is important to ascertain that the power we generate is not the problem; rather it is part of the solution. The whole world envies us for the hydropower situation we have. Statkraft's vision is to be a European leader in environment-friendly energy, and we aim to be one of the key players in this area in the Nordic and European energy market. Sound results and good markert operations are a good basis for this focus."

Market conditions and financial performance

The Group had gross operating revenues of NOK 4,145 in the fourth quarter 2006, NOK 1,238 million (23 per cent) less than in the corresponding period the year before. For the year as a whole gross operating revenues totalled NOK 16,225 million, a rise of NOK 1,204 (8 per cent) compared with 2005. Output totalled 45.7 TWh in 2006, 2.8 TWh (6 per cent) less than the year before. The average spot price for the year as a whole rose by NOK 156/MWh (66 per cent) to NOK 391/MWh. As a result, revenues from net physical spot sales were NOK 2,561 million higher than the year before. On the other hand, revenues from hedging trading fell by NOK 1,370 million.

Operating costs for 2006 as a whole totalled NOK 5,304 million, a drop of NOK 595 million (10 per cent) from the year before. The reduction can largely be ascribed to non-recurring items which were recorded in 2005. These included NOK 278 million in stamp duty incurred in connection with Statkraft's reorganisation and a NOK 361 million write-down in the value of the Group's wind farms.

The Group's operating profit increased by 19 per cent to NOK 9,952 million (NOK 8,375 m).

Statkraft's share of the profit from associated companies rose to NOK 1,689 million (NOK 1,577 m). The Group's Norwegian regional companies contributed NOK 192 million to this increase, while E.ON Sverige is expected to contribute less in 2006 than the year before. Low hydropower output and stoppages at its nuclear power facilities have weakened E.ON Sverige's results. Statkraft's share of the profit from E.ON Sverige is based on an estimate for the fourth quarter.

Lower interest-bearing debt and a slightly lower current interest rate on its borrowing portfolio reduced the Group's net financial expenses, but this was offset by unrealised losses on currency hedging agreements. Net financial expenses for the year were also higher than in 2005 when the gain on the sale of Hedmark Energi Holding AS was taken to income. For 2006 as a whole net financial expenses totalled NOK 1,816 million (1,504 m).

The spot price of electricity was 24 per cent lower in the fourth quarter 2006 than in the previous quarter. This can largely be ascribed to higher than normal precipitation levels, combined with low levels of consumption resulting from higher than normal temperatures.

Electricity consumption in the Nordic region totalled 390.5 TWh, a rise of 0.1 per cent compared with the year before. Electricity output during the period totalled 379.1 TWh, a fall of 3.0 per cent. A net total of 11.4 TWh was imported into the Nordic market, while Norway had net electricity imports of 0.8 TWh.

Health and safety

The H1 figure (lost-time injuries per million working hours) for 2006 totalled 6.3, slightly less than the 6.6 achieved in 2005. Both the total number of injuries (H2) and sickness absence in connection with injuries (F) were reduced from 2005 to 2006. Statkraft has set itself the clear target of zero injuries in connection with the Group's operations. The safety culture shall be further developed by means of clear management, a responsible commitment and the objective of continual improvement. As a result of this, an SVP HSE was appointed in 2006.

Important events in the fourth quarter

The Norwegian national budget for 2007 requires Statkraft SF to pay the Norwegian state a dividend for 2006 of 98 per cent of its consolidated profit after tax and minority interests. This corresponds to NOK 5,857 million.

During the fourth quarter it became clear that the Svartisen power plant would be out of operation until the middle of March 2007 as a result of damage to the generator. It has been decided to invest in an additional 250 MW generator at the power plant, which currently has an installed capacity of 350 MW and a mean annual output of 2.2 TWh.

Trondheim Energiverk completed the construction of a district heating pipeline from the Heimdal central heating plant to the centre of Trondheim.

Cash flow and equity in 2006

Operating activities generated a cash flow of NOK 6.6 billion. Net investments totalled NOK 4.4 billion, of which NOK 2.2 billion was related to gas power projects in Germany and Norway. The Group raised a total of 1.2 billion in new debt, and paid NOK 4.8 billion in dividend and group contribution to its owner. NOK 1.2 billion was paid to minority shareholders in the subsidiary Skagerak Energi in connection with a capital reduction and as dividends. Cash and cash equivalents at the end of the year totalled NOK 1.8 billion, NOK 2.6 billion less than at the start of the year.

Outlook

During the second half of 2006 the board of directors has been working to revise Statkraft's strategic platform. This process has confirmed the company's vision of being a European leader in environment-friendly energy. For the period 2007-2009 the strategic focus will be continued and made more clear in respect of three areas: increased value creation through efficient power generation and energy trading; investment in new technology development as well as environment-friendly and profitable generating capacity; and the strengthening of the Group's position in the grid, retail sales and district heating segments.

At the beginning of December the government published its Report no. 13 (2006-2007) to the Storting, detailing its policy on state ownership. On the whole, the board is satisfied with the commercial guidelines contained in the report. The government agrees that Statkraft shall be a European leader in environment-friendly energy, and should continue to participate in the industrial development of both Norway and Europe. The government thereby gives Statkraft its full backing to pursue its strategy. However, the report also stipulates that the dividend payable by the company shall normally lie in the upper quartile. The board emphasises that a continued high level of dividend payment may necessitate an injection of capital if the company is to realise the opportunities for further growth and investment.

Despite the fact that 2006 was a challenging year from a market and operational point of view, Statkraft achieved strong financial results. The improvement compared with 2005 can be ascribed to a combination of good operations and energy optimisation and high electricity prices. The board has based its outlook for 2007 on a more normal market situation than that experienced in 2006 and an expectation that the high price and output levels will not be maintained. It therefore expects that power sales revenues will fall slightly and that the overall financial results achieved by the Group's underlying operations will not be quite as strong as in 2006.

Statkraft is Europe's second largest renewable energy company. We produce hydropower and wind power, we build gas-fired power plants and we focus on innovation with a clear ambition to deliver the energy solutions of the future. We are a considerable actor on Europe's power exchanges, with special expertise within physical and financial power trading.In Norway we own shares in companies that supply electricity to more than 500,000 customers.We had gross revenues of around NOK 16 billion and total assets of around NOK 96 billion in 2006. More than 2,000 employees in Norway, Sweden, Finland, Germany, the Netherlands Great Britain, Bulgaria and Serbia create value every day. Together we strive to be a European leader in environment-friendly energy.

[1]Figures in parentheses show the comparable figures for 2005