Statkraft's segment structure is presented according to the same structure for the internal governance information that the corporate management systematically reviews and uses to allocate resources and measure goal attainment. The segments are Nordic hydropower, Continental energy and trading, International hydropower, Wind power, District heating and Industrial ownership. Areas not shown as separate segments are presented under the heading Other activities.
Nordic hydropower is by far the largest of the segments measured by installed capacity and assets, as well as net operating revenues and results. The segment includes hydropower plants in Norway, Sweden and Finland. The production assets are mainly flexible. The segment's revenues are mainly generated by selling power in the spot market and under long term contracts, the latter mainly to power intensive industry in Norway. In Norway, Statkraft also delivers concessionary power. Multiple year reservoirs and the flexibility of the power plants enable optimisation of power production in relation to the hydrological situation and price situation. Nordic hydropower is therefore optimised over longer time periods than one year.
The volume traded in the spot market can vary significantly between years, based on access to resources and power optimisation. The management of Statkraft's multiple-year reservoirs in Norway enables the Group to normally achieve a higher average price than other power companies in Norway. The optimisation ability is assessed through the target figure «Realised price margin», which measures how much better the average price achieved by Statkraft is than that achieved by the rest of Norway. Statkraft has a long term goal, and a short term goal. In 2013, the realised price margin was higher than the goals, both in the short and long term.
Production costs in connection with hydropower are relatively low and are followed up through target figure "Cost per kWh"1). The low production costs are to some extent offset by higher tax rates for Norwegian hydropower production through economic rent taxation.
Availability is an important factor as regards optimising hydropower revenues, and Statkraft uses the target figure "Market adjusted availability"2) to monitor to what extent the installed capacity is available when it is most profitable to produce and thereby how well maintenance is planned.
The solid operations illustrated by the target figures were reflected in the segment's EBITDA, which was NOK 10 043 million in 2013 (NOK 9409 million). In addition to solid operations, the improvement was mainly a result of higher revenues from higher Nordic power prices.
Continental energy and trading
Continental energy and trading includes gas power plants in Germany and Norway, hydropower plants in Germany and the UK and bio based power plants in Germany, as well as the Baltic Cable, the subsea cable between Sweden and Germany. The power production is optimised in relation to the prices on input factors (fuel, carbon and hydrology) and sales prices (power and green certificates). The segment includes trading and origination, as well as revenue optimisation and risk mitigation related to both the Continental and Nordic production.
In order to mitigate risk in relation to uncertainty in future price and production volumes, Statkraft hedges the production revenues through financial power trading. The hedged percentage of the production varies with market development expectations. Power prices are influenced by other commodity prices such as coal, oil, gas and carbon, and as these prices can both be input factors in gas power production (gas and carbon), and price adjustment factors in contracts, Statkraft also engages in financial trading with these commodities.
Statkraft's analysis activities have a key position in the entire trading activities. The analysis activities are based on collection and processing of hydrological data and other market data. The data are used to estimate anticipated market prices and optimise the flexible production.
A dynamic management portfolio is important to optimise future revenues, and Statkraft measures the performance through the target figure «Added value from the management portfolios» for both the Nordic and the Continental portfolio. Both portfolios outperformed the Group's added value goals in 2013.
Statkraft is also engaged in relatively short term positioning with financial standard contracts (trading) and trading with structured products and customised agreements for industry and commerce (origination). Revenues can vary substantially between periods and years. Statkraft monitors the performance in trading and origination through the target figure «Creation of value from trading and origination», which measures the net profit in relation to the risk capital. The creation of value was significantly higher than the Group's goals in 2013.
Market activities made a positive overall contribution to the segment's EBITDA, but to a lesser extent than in the preceding year, which was a record year for the segment. EBITDA ended at NOK 402 million in 2013 (NOK 809 million).
International hydropower operates in emerging economies with anticipated expected high growth and increasing need for energy. Statkraft is focusing on selected markets where the Group's hydro-power expertise can create value. The activities include the shareholding of 60% in SN Power as well as the Group's hydropower activities in Southeast Europe with emphasis on Turkey and Albania. SN Power owns assets totalling 1052 MW, of which 317 in consolidated operations, in hydropower plants in South America, Asia and Africa. In addition, SN Power owns two hydropower plants totalling 186 MW (SN Power's share) under construction. In Brazil, SN Power is also engaged in power trading. SN Power's investments are often made with local partners or international investors. In Turkey, Statkraft owns a hydropower plant of 20 MW, while three hydropower plants totalling 619 MW are under construction. In Albania, Statkraft has started the construction of two power plants totalling 243 MW.
The segment's EBITDA ended at NOK 278 million in 2013 (NOK 320 million), whereas the share of profit from associated companies and joint ventures was NOK 458 million (NOK 146 million). The improvement in share of profit is primarily due to the write downs in India in 2012.
Wind power includes Statkraft's investments in onshore and offshore wind power. The segment has onshore wind farms in operation in Norway, Sweden and the UK, and an offshore wind farm in the UK. The revenues derive from sale of power at spot prices as well as green certificates. The segment has three wind farms in Sweden and one in the UK under construction. These will have an installed capacity totalling 339 MW (Statkraft’s share).
The costs associated with wind power are followed up through the target figure "Cost per kWh"1) for both onshore and offshore wind power, whereas availability is followed up through the target figure "Market adjusted availability"3).
Solid operations, new production capacity and higher power prices resulted in a doubling of the segment's sales to more than NOK 1 billion, and with an EBITDA margin of almost 50%, the segment's EBITDA was NOK 507 million in 2013 (NOK -25 million).
District heating operates in Norway and Sweden. The revenues are influenced by power prices, grid tariffs and taxes, and the price to customers is adjusted monthly or quarterly. Waste, biomass, oil and gas are important input factors in the production of district heating.
Solid and stable operations resulted in only a minor decline in the segment's EBITDA in spite of the sale of production assets, ending at NOK 133 million in 2013 (NOK 142 million).
Industrial ownership includes management and development of Norwegian shareholdings, and includes the companies Skagerak Energi, Fjordkraft, BKK, Istad and Agder Energi. The two former companies are included in the consolidated financial statements, while the other three companies are reported as associated companies. Skagerak Energi's activities are concentrated around the production of power, district heating operations, distribution grid operations, electrical entrepreneur activities and natural gas distribution. Fjordkraft's activities are concentrated around the sale of electricity to private individuals and companies.
The segment's EBITDA was NOK 1583 million in 2013 (NOK 1495 million). The improvement was mainly due to higher revenues as a result of higher power prices in the Nordic region. The share of profit for associated companies and joint ventures was NOK 640 million (NOK 781 million). The decline in share of profit is mainly due to lower production for BKK and unrealised changes in value for Agder Energi.
Other activities includes small scale hydropower, innovation and group functions. The 4.17% shareholding in E.ON SE was sold in 2013.
1) Cost per kWh: All variable production costs/normalised production volume.
2) Market adjusted availability: Share of available installed capacity when market prices are higher than water value.
3) Market adjusted availability: Actual production / (Actual production + estimated loss of production at production halt).