Statkraft – Q1 2007
10.05.2007 08:00 | pressrelease
In the first quarter of the year the Group posted a profit before tax of NOK 3,533 million (NOK 2,282 million) and profit after tax of NOK 2,605 million (NOK 1,494 million). The above figures represent improvements of 55% and 74% respectively compared with the corresponding prior-year quarter. NOK 1,403 million of the pre-tax improvement of NOK 1,251 million is attributable to unrealised changes in value.
- Profit after tax of NOK 2,605 million for Q1 2007 (NOK 1,494 million)
- Lower sales revenues due to price reductions and lower production
- Strong results from hedging activities
- Significant increase in contribution from associated companies
“This result is impacted by good financial trading on the power exchange. This contributed to the Group achieving a satisfactory quarterly result, despite lower spot prices and production,” remarked President and CEO Bård Mikkelsen.
Markets and profits
The Group posted gross revenues of NOK 4,951 million in the first quarter of 2007, NOK 361 million (-7%) lower than in the corresponding prior-year period. The reduction is primarily attributable to a fall in production from 16.0 TWh in the first quarter of 2006 to 10.8 TWh in the first three months of 2007 (-33%) and a 40% decrease in the average spot price to 218 NOK/MWh, which together resulted in a fall in revenues from net physical spot sales of NOK 2,483 million. This was partially offset by an increase of NOK 956 million in revenues from hedging activities. The increase in revenues from end-users is attributable to the fact that Fjordkraft has been consolidated as a subsidiary since 1 January 2007. Energy purchases amounted to NOK 650 million, which represents an increase of NOK 570 million and is also primarily attributable to the first-time consolidation of Fjordkraft.
Operating expenses increased by NOK 169 million to NOK 1,448 million in the first quarter of the year. Salaries and payroll costs rose by NOK 73 million as a result of the consolidation of Fjordkraft, new business, increased staffing levels in existing business and ordinary salary increases. Other operating expenses totalled NOK 429 million in the reporting period. The increase of NOK 57 million is attributable to the consolidation of Fjordkraft, new business and project development.
The Group’s operating profit increased by 7% to NOK 2,605 million (NOK 2,433 million).
(Figures in brackets show comparative figures for 2006)
Profit contributions from associated companies increased to NOK 1,028 million (NOK 280 million). The Norwegian regional companies contributed an improvement of NOK 255 million, while E.ON Sverige posted an increase of just over NOK 300 million. The remainder of the improvement relates to unrealised changes in the value on power sales agreements in Germany.
At NOK 100 million, net financial expenses in the first quarter of 2007 were NOK 331 million lower than in the corresponding prior-year quarter. The reduction is primarily attributable to an increase of NOK 288 million in the unrealised values of the Group's interest rate and currency agreements. The net realised exchange gain of NOK 75 million in the first quarter also contributed to the fall in net financial expenses compared with the corresponding prior-year period, when a small exchange loss was realised.
The spot price on the Nordic market was lower in the first quarter of 2007 than in the first three months of 2006. Prices in the first quarter were primarily impacted by hydrologic conditions. Precipitation was higher and consumption lower than normal due to the relatively warm weather. The average spot price for the first quarter of 2007 was 218 NOK/MWh compared with 364 NOK/MWh for the corresponding quarter in 2006, and 213 NOK/MWh in the first quarter of 2005. The average spot price in March was 194 NOK/MWh, the lowest average monthly price since January 2005.
Total power consumption in the Nordic market was 6.0 TWh lower in the first quarter of the year than in the same period in 2006, a reduction of 5%. Total year-on-year consumption in Norwayfell by 6.0%, primarily as the result of a decrease in general consumption.
Together with its partner Catamount Energy Corporation, Statkraft was granted its first final licence in the United Kingdom. Blaengwen Wind Farm in Waleswill consist of 10 turbines and have a total capacity of 20-30 MW.
In Norway Småkraft AS was granted six licences for the construction of hydropower plants.
Statkraft opened a new regional office in Belgradeduring the first quarter.
The Group introduced a new profile on 30 March 2007through the adoption of a joint logo for Statkraft, Skagerak Energi and Trondheim Energiverk, with the latter company changing its name to Trondheim Energi from the same date.
Health and safety
Number of lost-time injuries per million hours worked for the first quarter of the year was 7.5. This represents a significant increase compared with the corresponding prior-year period (5.2), and trails the target figure. The total injuries indicator and days lost through injury per million hours worked indicator also increased compared with the corresponding prior-year period. Statkraft’s stated goal is for no accidents to occur in connection with its operations. The Group’s safety culture will be further enhanced through clear leadership, responsible involvement and a strategy of continuous improvement.
Cash flow and capital structure in 2006
The net cash flow from operating activities in the first three months of 2007 was NOK 2.9 billion, compared with NOK 3.8 billion in the first quarter of 2006. Net investments in the first quarter of the year totalled NOK 0.6 billion, where the largest items comprised NOK 0.2 billion for the gas power projects in Norwayand Germany, NOK 0.1 billion for the extension of the Leirfossene power plant in Trondheimand NOK 0.3 billion for other investments in plant and production equipment.
Statkraft ASissued three bond loans under the EMTN scheme in the first quarter of the year. These have terms of 6, 10.5 and 15 years and respective volumes of EUR 300 million, EUR 600 million and NOK 1,500 million. The new borrowing was issued to finance loan maturities and new investments. Total new borrowings in the first quarter of 2007 amounted to NOK 8.8 billion, while NOK 1.4 billion was used for repayment on loans.
Net liquidity changed by NOK 9.7 billion during the quarter. At the balance sheet date the Group's cash and cash equivalents totalled NOK 11.5 billion, compared with NOK 1.8 billion at the start of the year.
High inflows into the water reservoirs during the quarter and relatively good snow reservoirs have resulted in a robust resource situation and mean that forward contract prices will remain relatively low in the coming periods. Assuming normal future inflow conditions and continued low prices, production is expected to be lower than in 2006. The Group therefore expects to generate lower revenues from ongoing production in 2007 than in the previous year, but achieve a higher contribution from hedging operations. In overall terms, the forecasts point to a further good annual result for the Statkraft Group in 2007. However, significant uncertainty is attached to price developments and revenue and profit forecasts.
The Group focuses strongly on innovation and the development of new technologies for power production, and places particular emphasis on ocean energy and osmotic power. Work on the development of profitable new investments in water, wind and gas power in the Norwegian and European markets will be continued. On the development side, the current focus is on the completion of Statkraft’s two gas power plants in Germanyand Naturkraft’s plant at Kårstø in Norway. All three gas power plants are scheduled to start operation in autumn 2007.
Important future framework conditions for climate policy are currently being established in both the EU and Norway. The most important result to date can be seen in the establishment of ambitious targets for the reduction of greenhouse gas emissions. The formulation of targets and establishment of policy instruments to be used as part of the climate policy will have an important bearing on power markets and the choice of energy carriers for new investments in power production. More ambitious targets and further development of the European carbon quota market are expected to underpin Statkraft’s focus on environment-friendly energy in the years to come.
The Statkraft Group is a leading player in Europewithin renewable energy. The Group generates hydropower, wind power and district heating and constructs gas power plants in Norwayand Germany. Statkraft is a major player on the European energy exchanges. In Norwaythe company supplies electricity and heat to around 600,000 customers through its direct and indirect shareholdings in other companies. In 2006 Statkraft recorded a profit after tax of NOK 7.6 billion, and employed more than 2,100 employees in eight countries. The world needs pure energy. Statkraft works to deliver this every day.