Statkraft – Q2 2008 - Strong growth and efficient operations

14.08.2008 08:00 | pressrelease

Statkraft’s profit after tax for H1 was NOK 3,218 million (NOK 3,056 million) , while the underlying profit after tax for the same period was NOK 4,513 million (NOK 3,310 million). The result for the second quarter was impacted by unrealised changes in value. However, despite returning a post-tax loss for the period of NOK 585 million (profit of NOK 450 million), the company posted a strong underlying profit after tax of NOK 1,570 million (NOK 726 million). These results are impacted by higher prices and production compared with the corresponding prior-year period. “Statkraft posted a strong result in the first six months of the year. This is attributable to higher electricity prices, increased production, good results from hedging activities, and efficient operations and energy optimisation,” remarked President and CEO Bård Mikkelsen.

“The company has taken a further step forward in Europe through its agreement with E.ON AG, which will allow the company to strengthen its position as a leading European player within environment-friendly energy,” stated Mikkelsen.

H1 result

Gross sales totalled NOK 11,945 million, an increase of NOK 4,087 million (52%) compared with H1 2007. The improvement is primarily attributable to higher revenues from net physical spot sales as a result of increased production and higher electricity prices. Adjusted for unrealised changes in value and non-recurring items, net operating revenues increased by NOK 2,863 million (45%).

The price of electricity on the Nordic market was significantly higher during H1 2008 than in the corresponding period in 2007. During the first six months of 2008 the average system price rose from 24.6 EUR/MWh to 36.4 EUR/MWh, an increase of 48%, while total power generated by the Group increased by 6.4 TWh (30%) to 27.5 TWh. Prices were impacted by breaks in cables linking Norway to the rest of Europe, and there were major regional price variations in Norway.

H1 operating expenses amounted to NOK 3,374 million, a rise of NOK 506 million compared with the previous year. The increase primarily relates to the company’s gas-fired power plants and other new business.

Operating profit totalled NOK 5,666 million (NOK 3,230 million), which represents a year-on-year improvement of 75%. Adjusted for unrealised changes in value and non-recurring items, this figure was 67%.

The share of profits from associates was NOK 738 million (NOK 1,456 million). Adjusted for unrealised changes in value and non-recurring items, this figure was NOK 1,791 million (NOK 1,564 million). The improvement is primarily attributable to E.ON Sverige.

(Figures in brackets show comparative figures for 2007.
Adjusted for unrealised changes in value and material non-recurring items affecting the Group and its associates.)

Net financial items totalled NOK -1,071 million (NOK -497 million). A significant proportion of the increase is attributable to unrealised changes in value in the Group's interest rate and currency agreements. Financial expenses were also impacted by higher market interest rates and increased liabilities.

Taxes increased by NOK 983 million as a result of higher taxable profits and an increase in resource rent tax.

Important events during the quarter and outlook

On 24 July E.ON AG and Statkraft signed an agreement under the terms of which Statkraft will exchange its shareholding in E.ON Sverige for assets and shares in E.ON AG. The transaction is expected to be implemented at the end of 2008.

In March Statkraft decided to proceed with the construction of Blaengwen Wind Farm in Wales. Statkraft and the American company Catamount each own 50 percent of the wind farm, which will have an installed capacity of 23 MW. In June, together with one of its partners in the UK, Statkraft was granted permission to construct Carraig Gheal Wind Farm on the west coast of Scotland. The wind farm will have an installed capacity of up to 60 MW.

In March Statkraft signed a cooperation agreement with NorWind within offshore wind power to implement a concept study for a large-scale, fixed-base offshore wind farm. In June Statkraft invested in Arise Windpower AB (11.8% shareholding), which develops onshore wind power projects in Southern Sweden, and WindSea AS (49% shareholding), which is developing a concept for offshore wind power based on a floating construction.

High reservoir levels at the end of the year and higher than normal precipitation levels have resulted in a robust resource situation. The system price was significantly higher during the first half of the year than in the corresponding period last year, and forward prices also indicate that prices will remain higher during the remainder of the year than during 2007. Together with the increase in generating capacity facilitated by the new gas-fired power plants, this will form the basis for a relatively high level of power production during 2008 and increases in revenues from ongoing power sales. However, uncertainty attaches to the further development of power prices and the resource situation.

Submission to the UK Listing Authority

Copies of the Quarterly Report and Financial Statement have been submitted to the UK Listing Authority, and will shortly be available for inspection at the UK Listing Authority’s Document Viewing Facility, which is situated at The Financial Services Authority, 25 The North Colonnade, Canary Wharf, London E14 5HS, Telephone No: (0) 20 7066 1000.

Statkraft is a leading player in Europe within renewable energy. The Group develops and generates hydropower, wind power, gas power, solar 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 2,300 employees in ten countries. The world needs pure energy. Statkraft works to deliver this every day.