Statkraft AS Third Quarter 2007
01.11.2007 08:12 | stock exchange information
- Profit after tax for third quarter of MNOK 1,048 (loss of MNOK 290),and profit after tax for year-to-date of MNOK 4,103 (MNOK 2,909)
- Reduction in sales revenues as a result of lower prices and output, but good results from trading activities
- Agreements of significant strategic importance signed with E.ON AG and the Swedish company SCA
(Figures in brackets show comparative figures for 2006)
In the third quarter Statkraft Group posted a profit before tax of MNOK 1,691 (MNOK 372) and a profit after tax of MNOK 1,048 (loss of MNOK 290). Adjusted for unrealised changes in the value of financial instruments, the Group posted respective pre- and post-tax profits of MNOK 1,248 (MNOK 1,596) and MNOK 682 (MNOK 600). The company has signed a letter of intent with the German company E.ON that could make Statkraft Europe's largest producer of renewable energy.
Highlights in the quarter
Statkraft and E.ON AG signed a letter of intent under the terms of which E.ON AG will acquire Statkraft's shareholding in E.ON Sverige AB in exchange for power generation assets and shares in E.ON AG. Statkraft will become Europe's largest producer of renewable energy following the implementation of this agreement.
Statkraft and the Swedish company SCA signed a ten-year industrial power agreement to deliver annual supplies of 500 GWh to SCA's business. A joint venture was also established to focus on renewable energy in Sweden. The plans include the construction of seven wind farms with a potential annual output of around 2.8 TWh, and the possible construction of hydropower facilities in four watercourses where SCA own waterfall rights.
The gas turbines and steam boilers at the two gas power plants in Germany (Knapsack and Herdecke) and at the gas power plant at Kårstø were started up for the first time and synchronised with the electricity grid.
The decision was taken to start construction of the world's first prototype osmosis power plant at Hurum in Buskerud. This represents an important step with regard to the future construction of a commercial plant. It has been estimated that this technology could contribute around 1,600 TWh of electricity globally each year.
The joint venture SN Power signed an agreement with the US energy company PSEG Global to purchase the latter's shares in the Peruvian company Electroandes SA for USD 390 million. This will make SN Power one of Peru's five largest power producers. In Chile, Statkraft has decided to start construction of a further hydropower plant and wind farm.
Market conditions and results
Gross operating revenues in the third quarter totalled MNOK 3,117, a fall of 10% compared with the third quarter of 2006. Revenues fell by 11% to MNOK 10,975 in the first nine months of the year. Output declined by 19% to 29.1 TWh compared with the first nine months of 2006, while the average spot price fell by 213 NOK/MWh to 186 NOK/MWh. Prices were impacted by a strong hydrological balance. Precipitation was higher and consumption lower than normal due to the relatively warm weather.
Operating expenses for the nine months to 30 September 2007 totalled MNOK 4,176, a year-on-year increase of MNOK 518. The increase is primarily attributable to the consolidation of Fjordkraft, new business, project development and increased supplier costs.
The operating profit was MNOK 1,005 (MNOK 1,574) for the third quarter and MNOK 4,234 for the first nine months of the year (MNOK 6,364). Adjusted for unrealised changes in the value of financial instruments, the above figures represent respective quarter-on-quarter and year-on-year decreases of 36% and 38%.
The share of income from associated companies in the first nine months of the year was MNOK 1,903. This represents an increase of MNOK 1,316 compared with the comparable prior-year period. The regional Norwegian companies Agder Energi and BKK, and E.ON Sverige made the largest contributions.
Net financial items in the third quarter of 2007 amounted to minus MNOK 259, a decrease of MNOK 1,498 compared with the first nine months of 2006. The reduction is primarily attributable to an improvement of MNOK 1,674 in the unrealised changes in value of the Group's interest-rate and currency agreements.
Cash flow and capital structure in 2007
The business generated a cash flow of NOK 3.0 bn in the first nine months of the year, compared with NOK 7.2 bn in the comparable prior year period. Investments in the period totalled NOK 3.2 bn. Statkraft AS issued three bond loans under the EMTN scheme in the first nine months of the year. Total new borrowings amounted to NOK 9.9 bn, while NOK 4.6 bn was repaid in borrowings. Net liquidity changed by NOK 1.7 bn, while at the end of the third quarter the Group's cash and cash equivalents totalled NOK 3.4 bn, compared with NOK 1.8 bn at the start of the year.
High inflows into the water reservoirs during the first three quarters of the year and relatively good snow reservoirs at the start of the year have resulted in a robust resource situation, while forward contract prices indicate higher prices for the end of the year. This will provide the basis for a relatively high power production in the fourth quarter and higher income from ongoing power sales. The Group also expects to achieve an increased contribution from hedging operations in 2007 than in 2006. In overall terms, the forecasts point to a further good annual result for the Statkraft Group in 2007, while the result of underlying operations is expected to be slightly weaker than in 2006. However, significant uncertainty attaches to price developments and thus revenue and profit forecasts.
Further work on the letter of intent relating to the swap deal between Statkraft and E.ON will require considerable attention from the entire organisation.
On the development side, the focus is on the testing and commissioning of Statkraft's three gas power plants. There will also be a significant focus on the build-up of operational and market activities associated with these, as well as on innovation and the development of new technologies for power production.
High priority will be given to the follow-up of the agreement with SCA and options for wind power construction in Sweden, and Statkraft will continue to actively endeavour to find similar solutions with other industrial businesses.
In its national budget for 2008 the government proposed that Statkraft pay the Norwegian state a dividend for 2007 corresponding to 98% of its consolidated profit after tax and minority interests. In the long-term, a dividend set at such a high level will impact Statkraft's opportunities with regard to continued innovation, growth and investment in new environment-friendly capacity.
Figures in brackets show comparative figures for 2006
EVP/CFO Eli Skrøvset, tel: +47 2406 7914/+47 909 86 495
VP IR Yngve Frøshaug, tel: +47 2406 7876/+47 900 23 021
|Report Q3 2007|
|Presentation Q3 2007|