Statkraft AS - Fourth Quarter 2005

16.02.2006 08.10 | stock exchange information

2005 - a record year <!-- hugin-supplied --><br> * Profits rise as a result of high production levels and reduced financial expenses <!-- hugin-supplied --><br> * Smooth operations and good power optimisation create added value <!-- hugin-supplied --><br> * Net profit of NOK 2,085 m (NOK 2,054 m) in Q4 2005 <!-- hugin-supplied --><br> * Preliminary net profit of NOK 5,620 m (NOK 4,415 m) for 2005 <!-- hugin-supplied --><br> * Generating capacity of 1.6 TWh acquired in Sweden and Finland <!-- hugin-supplied --><br> * Directive for the sale of Trondheim Energiverk overturned

(Comparable pro forma figures for 2004 in brackets)
Profits for the Statkraft Group continued to rise in the fourth quarter as a result of high production levels. Revenues from financial power trading were considerable, financial expenses were reduced and a one-off compensation for the termination of a sales agreement for green certificates was taken to income. Statkraft made a profit before tax of NOK 3,106 million (NOK 1,793 million) and a net profit of NOK 2,085 million (NOK 2,054 million) in the fourth quarter. For 2005 as a whole, the group made a profit of NOK 8,449 million before tax (NOK 4,630 million) and a net profit of NOK 5,620 million (NOK 4,415 million).
"2005 broke records on a number of areas. Profits have never been better, and we broke a number of production records. We are very pleased indeed with the fantastic efforts at all levels within the organisation. A substantial resource supply combined with smooth operations and good power optimisation laid the foundation for the significant increase in profits", says President and CEO Bård Mikkelsen.
Market conditions and results
The group's operating revenues for the year increased by NOK 4,179 million, ending at NOK 15,021 million. This increase was due primarily to the fact that production was increased from 34.3 TWh in 2004 to 48.5 TWh in 2005, and that electricity prices remained stable throughout the year. Financial power trading revenues were also substantial. Despite high production levels, water levels in the reservoirs were slightly higher than normal at the end of the year. A one-off compensation of NOK 1,006 million from the Dutch company Nuon was taken to income, for the termination of agreements relating to the sale of green certificates from the wind farms at Smøla and Hitra for the years 2006-2020.
The contributions to profits from associated companies increased as a result of high power production within the Norwegian companies, but were reduced slightly by the fact that E.ON Sverige (formerly Sydkraft) incurred huge costs for the repair of damage after a hurricane. In total, the contributions to profits amounted to NOK 1,577 million (NOK 1,493 million).
Operating costs amounted to NOK 5,899 million, an increase of NOK 1,085 million compared with 2004. Of this, NOK 484 million is related to non-recurring items associated with stamp duty and plant write-downs. Compensation payments, licence fees, depreciation and property tax increased by NOK 197 million as a result of regulation of the calculation base and new plants; salaries and payroll costs increased by NOK 106 million, largely due to pensions; other operating expenses increased by NOK 298 million, primarily as a result of reversed costs in the 2004 accounts and new business in 2005. Operating expenses for basic operations were stable in relation to 2004.
The group's operating profit increased by 56 per cent to NOK 8,375 million (NOK 5,377 million).
[1]) Figures in brackets show comparable pro forma figures for 2004
Lower interest-bearing liabilities and a lower average interest rate on the debt portfolio reduced financial expenses. Financial income includes sales gains of NOK 334 million. Net financial expenses totalled NOK 1,504 million for the year (NOK 2,240 million).
In 2005 the weather was mild in the Nordic region, with precipitation and inflow above normal, which, on the margin forces down electricity prices. High fuel prices for thermal power production and high prices for carbon quotas did, however, counteract this effect. On average, the system price this year on Nord Pool was NOK 235/MWh, NOK 7/MWh lower than in 2004.
Power consumption in Norway increased by 1.5 per cent from 2004, while consumption in the Nordic region fell by 1.1 per cent to 390.0 TWh. Nordic power production amounted to 391.0 TWh, an increase of 2.3 per cent. Power production in Norway increased by 23.2 per cent. The Nordic market exported 0.9 TWh of power.
Major events
On 1 October Statkraft acquired 20 hydropower plants in Sweden and four in Finland, with a total average annual output of 1.6 TWh, for NOK 4.1 billion.
In 2005 Statkraft made an effort to sell off Trondheim Energiverk (TEV) to comply with the Norwegian Competition Authority's directive to sell the company. The directive was reversed in November, and Statkraft decided to terminate the sales process. Statkraft no longer has any outstanding directives issued by the Competition Authority.
The construction of the three gas-fired power plants in which Statkraft has decided to participate is well underway. Two of these gas-fired power plants are in Germany and one is in Norway. Phase 2 of the Smøla Wind Farm, which was opened in September, is now fully operational.
Cash flow and equity
In 2005 the business generated a cash flow of NOK 12.3 billion. This includes receipts of NOK 2.2 billion in connection with the agreement to lease out 65 per cent of the power produced at the Rana Power Plant for a period of 15 years, and NOK 0.9 billion in dividends received from associated companies. Net investments totalled NOK 4.6 billion, of which NOK 2.2 billion was spent on increasing generating capacity. NOK 4.5 billion was used for investments in shares in other companies, including the power plants in Sweden and Finland. The sale of the company's shareholding in HEAS brought in NOK 2.1 billion. NOK 8.5 billion net was used to repay debt. The company's cash and cash equivalents totalled NOK 4.4 billion at the end of the year, compared with NOK 5.3 billion at the start of the year.
Over the last few years, contributions from financial trading have been very high and well above a normalised level. At the start of 2006 the level of water in Statkraft's reservoirs was slightly higher than normal. Current forward contract prices on the Nordic power exchange indicate that the price level will continue to remain relatively high. With a relatively normal inflow of water throughout 2006, this will provide the foundation for continuing high income from power generation and sales. Nor is the Board anticipating any significant changes in the group's costs associated with ongoing operations. The group is thus well positioned to continue generating high revenues.
CFO Eli Skrøvset, tel.: +47-24067914 / +47-90986495
SVP Accounting and IR Lisbeth Lindberg, tel.: +47-24067286 / +47-99523150
Report 4th quarter 2005:
Presentation of 4th quarter 2005: