Statkraft AS - Second Quarter 2006
17.08.2006 08:01 | stock exchange information
Output and profits remain high
(Comparable figures for 2005 in brackets)
In the second quarter Statkraft continued to generate high levels of output which, combined with high prices in the market, produced another strong result. Operations have been good and profits in the quarter were also positively affected by lower financial expenses compared with the second quarter last year. Statkraft made a profit before tax of NOK 2,103 million in the second quarter 2006 (NOK 1,554 million), while profit after tax totalled NOK 1,327 million (NOK 891 million). For the first half year as a whole, profit before tax totalled NOK 6,147 million (NOK 4,026 million), while profit after tax came to NOK 4,195 million (2,630 million).
Market conditions and financial results
The Statkraft Group's gross operating revenues in the first half of 2006 totalled NOK 8,741 million, NOK 1,651 million or 23 per cent higher than in the same period last year. Output rose from 25.5 TWh in the first half of 2005 to 26.7 TWh this year, while the average spot price rose from NOK 225/MWh to NOK 356/MWh. Revenues from hedging activities fell compared with the first half of 2005.
Operating costs totalled NOK 2,518 million in the first half, a rise of NOK 47 million compared with 2005. Costs increased as a result of the consolidation of new businesses, the start-up of new facilities and the adjustment of the basis for calculating compensation payments, licence fees and property tax. This is partly offset by changes in the accounting treatment of pension costs and periodic maintenance, which are part of the company's adjustment to IFRS. Underlying operating costs show a slight rise.
The group's operating profit rose by 33 per cent in the first half, to NOK 5,656 million (NOK 4,245 million).
Statkraft's share in the profit from associated companies rose sharply to NOK 1,177 million (NOK 758 million). The increase derives almost entirely from E.ON Sverige, and is due to the fact that the company's contribution in first quarter 2005 was reduced by NOK 359 million in non-recurring costs associated with hurricane damage repairs. The profit shares contributed by Norwegian regional power utilities have improved.
Reduced interest-bearing debt and slightly lower current interest rates on the debt portfolio cut net financial expenses, which totalled NOK 686 million for the first half year (NOK 977 million).
During the first six months of the year the Nordic electricity market was affected by lower than normal precipitation levels and snow reserves, and high levels of consumption. High fuel costs for thermal power generation and high carbon quota prices also helped to drive up prices. These factors combined to give an average spot price during the first half of NOK 356/MWh, a rise of 58 per cent.
Electricity consumption in the Nordic region totalled 209.8 TWh, a rise of 4.5 per cent compared with the first half of 2005. A total of 205.5 TWh was generated in the Nordic region, a rise of 1.7 per cent. Net imports into the Nordic market totalled 4.2 TWh.
In July Statkraft signed a long-term agreement to supply Eramet Norway AS with electricity from 2011 to 2020 inclusive. The agreement, which will cover the bulk of the power needed by Eramet's smelting works at Sauda and Porsgrunn, replaces existing statutory-priced contracts with Eramet.
The construction of two gas-fired power plants in Germany and one in Norway continues on schedule and within budget. Construction is also underway at the Kjøllefjord Wind Farm, the Heimdal district heating facility, and the new Leirfossene power plant in Nidelven.
In the second quarter Statkraft entered into a cooperation agreement with the Serbian state-owned company Elektroprivreda Serbia (EPS), with the focus on power plant modernisation and power trading.
Statkraft AS has established an EMTN programme which is registered with the London Stock Exchange. The programme allows loans to be issued both in the international and Norwegian bond markets.
Cash flow and capital structure
The business generated a cash flow of NOK 6.4 billion in the first half year. Net investments totalled NOK 2.2 billion, of which NOK 1.1 billion was associated with the company's gas-power projects. Long-term debt was repaid in the amount of NOK 0.8 billion, while NOK 0.4 billion in group contribution was paid. Cash and cash equivalents at the end of the first half totalled NOK 7.4 billion, NOK 3 billion higher than at the start of the year. Dividend and group contributions totalling NOK 4.4 billion were paid to Statkraft SF in July.
Based on the reservoir water levels at the end of the first half, and given a relatively normal level of precipitation during the rest of the year, the group expects its total annual output to be slightly lower than in 2005. Although electricity prices were affected by the fall in carbon quota prices in the second quarter, forward-contract prices have risen sharply since May and are at a high level for the rest of the year. In recent years commercial contracts have provided substantial additional revenues. The contribution from these contracts is expected to weaken considerably in 2006, if the high price level continues. Power sales revenues as a whole, however, are expected to remain at 2005 levels. No significant changes in the group's running costs are expected. The group is therefore well placed to maintain its strong financial performance. The Board expects, however, a weaker result in the second half of the year compared to the first half.
CFO Eli Skrøvset, tel.: +47-24067914 / +47-90986495
SVP Accounting and IR Lisbeth Lindberg, tel.: +47-24067286 / +47-99523150
 Figures in parentheses show the comparable figures for the first half of 2005
|Report 2nd quarter 2006|
|Presentation of 2nd quarter 2006|