Statkraft - Q2 2007
16.08.2007 08:00 | pressrelease
(Oslo, 16 August 2007) The Statkraft Group posted respective pre- and post-tax profits of NOK655 million (NOK 2,540 million) and NOK 451 million (NOK 1,705 million) for the second quarter of 2007. The profit before tax for the first half of the year totalled NOK 4,188 million (NOK 4,822 million), while the profit after tax was NOK 3,056 (NOK 3,199 million). The above figures represent respective decreases of 13% and 4% compared with the first six months of 2006. Adjusted for unrealised changes in value, the decrease in the profit before tax was in excess of 30%.
- Weaker second quarter, but satisfactory half-year result
- Profit after tax of NOK 451 million in the second quarter (NOK 1,705 million) 
- Profit after tax of NOK 3,056 million for the first six months (NOK 3,199 million)
- Reduced sales revenues due to price reductions and lower production
- Strong results from trading activities
"Despite a strong fall in the spot price and lower production, the Group achieved a satisfactory half-yearly result. This is primarily attributable to efficient financial trading on the power exchanges in the Nordic region and the rest of Europe, and efficient operations," remarked President and CEO Bård Mikkelsen.
Markets and profits
Gross operating revenues for the second quarter amounted to NOK 2,906 million, which corresponds to a fall of 18% compared with the second quarter of 2006. Gross operating revenues for the first half of the year fell by 11% to NOK 7,858 million. Output declined by 28% compared with the first half of 2006 to 19.2 TWh, while the average spot price fell by NOK 156/MWh to NOK 200/MWh (-44%).
In the first six months of the year operating expenses totalled NOK 2,868 million, which represents an increase of NOK 442 million. Salaries and payroll costs increased by NOK 135 million to NOK 721 million as a result of the consolidation of Fjordkraft, new business, higher staffing levels in existing business and ordinary pay rises. Other operating expenses totalled NOK 892 million in the first six months of the year, an increase of NOK 211 million, which is primarily attributable to the consolidation of Fjordkraft, new business, project development and higher supplier costs.
The Group's operating income totalled NOK 3,230 million (NOK 4,790 million). Adjusted for unrealised changes in value, the above figures represent respective quarter-on-quarter and year-on-year decreases of 58% and 38%.
The share of income from associated companies in the first half of the year was NOK 1,456 million. This represents an increase of NOK 611 million compared with the first six months of 2006. The share of income from the regional Norwegian companies, primarily Agder Energi and BKK, is estimated at NOK 433 million, an improvement of NOK 256 million. E.ON Sverige contributed NOK 953 million in the first half of the year, an improvement of NOK 225 million. The remainder of the improvement relates to unrealised changes in the value of long-term power sales agreements in Germany (Herdecke). Unrealised changes in the value of financial instruments in the first six months of 2007 amounted to NOK 201 million (- NOK 321 million).
At NOK 497 million, net financial expenses in the first half of 2007 were NOK 316 million lower than in the first six months of 2006. The reduction is primarily attributable to an increase of NOK 374 million in the unrealised changes in value of the Group's interest rate and currency agreements. The change in the unrealised value of put options for E.ON Sverige also contributed to a decrease in net financial items compared with the first half of 2006. Financial expenses were also impacted by higher market interest rates and an increased loan volume.
The spot price on the Nordic region was significantly lower in the first half of 2007 than in the first six months of 2006. Prices in the period were primarily impacted by a strong hydrologic balance. Precipitation was higher than normal, while consumption was low due to the relatively warm weather. The average spot price for the first half of 2007 was NOK 200/MWh, compared with NOK 356/MWh for the first half of 2006 and NOK 225/MWh for the first half of 2005.
Total power consumption in the Nordic region was 5.8 TWh lower in the first half of the year than in the same period in 2006, a reduction of 2.8%. Total year-on-year consumption in Norway fell by 2.4%, primarily as a result of a decrease in general consumption.
The test period for the gas power plants at Knapsack, Herdecke and Karstø began at the start of June, while test operation of the turbine at the Pålsbu hydropower plant also commenced in June.
On 11 May Statkraft was granted a final licence for the Kjensvatn hydropower plant in Nordland.
During the second quarter Småkraft AS took the decision to construct a further four small-scale hydropower plants.
The new waste incineration plant at Heimdal district heating plant in Trondheim entered operation on 13 March 2007, while the plant's official test period started on 5 May.
Agder Energi AS and Statkraft AS signed a letter of intent to collaborate on wind power in June 2007. The agreement covers the development, construction and operation of wind farms in Norway and the rest of Europe.
In April SN Power (Statkrafts owns 50% of the shares) took over the Magat hydropower plant in the Philippines in collaboration with the Philippine company Aboitiz Equity Ventures.
In June Statkraft signed a letter of intent with Norsk Solkraft to develop and establish power plants based on solar technology.
Health and safety
The number of lost-time injuries per million hours worked for the second quarter was 3.1. This represents a significant improvement on the result for the second quarter of 2006 (6.9). The total injuries indicator and days lost through injury per million hours worked indicator also decreased 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 2007
The net cash flow from operating activities in the first six months of 2007 was NOK 1.8 billion, compared with NOK 5.1 billion in the first half of 2006. Investments in the first six months of the year totalled NOK 1.8 billion, where NOK 0.6 billion relates to gas power projects in Norway and Germany, and NOK 0.3 billion relates to capital deposits in SN Power, 0.1 billion relates to capital deposits in Telenor Cinclus, and a total of NOK 0.8 billion relates to investments in plant and operating assets.
Statkraft AS issued three bond loans under the EMTN Programme in the first half of the year. Total new borrowings in the first half of 2007 amounted to NOK 9 billion, while NOK 4.6 billion was repaid in borrowings.
Net changes in cash flow increased by NOK 6.7 billion during the first six months of 2007. At the balance sheet date the Group's cash and cash equivalents totalled NOK 8.4 billion, compared with NOK 1.8 billion at the start of the year.
High inflows into the water reservoirs during the first half of the year and relatively good snow reservoirs have resulted in a robust resource situation and low spot prices. Forward contract prices are higher for the end of the year. Assuming normal future inflow conditions, 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 to 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 attaches to price developments and thus 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, osmotic power and bioenergy. 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 focus is on the testing and commissioning of Statkraft's two gas power plants in Germany and Naturkraft's plant at Kårstø in Norway. All three gas power plants are scheduled to start operation in autumn 2007.
Following the merger of Statoil and Hydro, the merged company will be joint owners in and co-toller and gas suppliers to the Kårstø gas power plant. This development further highlights the need for a flexible option for selling gas to the market. Statkraft is actively working to find solutions to this problem.
The Norwegian government presented its Ownership Policy on 13 June, which confirmed the guidance contained in the Ownership Report that was presented in December 2006. Both support Statkraft's strategy of being a European leader in environment-friendly energy and participating in industrial developments in Norway and the rest of Europe. 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 more 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 Europe within renewable energy. The Group generates hydropower, wind power and district heating and constructs gas power plants in Norway and Germany. Statkraft is a major player on the European energy exchanges. In Norway the company supplies electricity and heat to around 600,000 customers through its direct and indirect shareholdings in other companies. In 2006, Statkraft posted a profit after tax of NOK 7.6 billion and employed around 2,100 employees in nine countries. The world needs pure energy. Statkraft works to deliver this every day.