Statkraft – Q1 2008 - Increased production and higher prices boost profits

20.05.2008 08.00 | pressrelease

Results for the first quarter of 2008 were boosted by higher prices and levels of production than in the corresponding period last year, with Statkraft posting a profit of NOK 3,803 million after tax (NOK 2,605 million)1. Adjusted for unrealised changes in value and material non-recurring items, the Group's profit totalled NOK 2,943 million after tax (NOK 2,584 million).

"Higher electricity prices, an increase in production, efficient operations and energy optimisation and hedging activities that continue to show good results all contributed to a healthy quarterly result for Statkraft," remarked President and CEO Bård Mikkelsen.

Quarterly results

The price of electricity in the Nordic market was significantly higher during the first quarter of this year compared with the same period in 2007. The average system price rose from 218 NOK/MWh to 303 NOK/MWh, an increase of 39%, and total power generated by the Group rose by 3.4 TWh to 15.2 TWh, an increase of 29% compared to the first quarter of last year.

Gross revenues totalled NOK 7,164 million, an increase of NOK 2,213 million (45%) compared to the first quarter of 2007. The improvement can mainly be attributed to increased income from net physical spot sales as a result of increased levels of production and higher electricity prices. Net operating revenues adjusted for unrealised changes in value and non-recurring items increased by NOK 1,506 million (37%).

Operating expenses amounted to NOK 1,738 million during the first quarter, an increase of NOK 289 million compared to the previous year. The increase can primarily be ascribed to gas power operations in Norway and Germany.

Operating profit totalled NOK 5,238 million (NOK 2,605 million), an improvement of 101%. Adjusted for unrealised changes in value and non-recurring items, increase is 46%.

Share of profits from associates increased to NOK 1,164 million (NOK 1,029 million). Following adjustment for unrealised changes in value and non-recurring items this represents an improvement of NOK 37 million, which can be ascribed to E.ON Sverige.

Net financial items totalled NOK -671 million (NOK -100 million). A significant proportion of the increase can be ascribed to a negative development of NOK 387 million in unrealised changes in value in the Group's interest rate and currency agreements. Financial expenses were also affected by higher market interest rates and an increase in debt.

Taxes increased by NOK 999 million as a result of higher taxable profits and an increase in resource rent tax.

1) Figures in brackets show comparative figures for 2007.

Highlights in the quarter and outlook

Work continued during the first quarter in connection with the letter of intent entered into with E.ON AG, which involves Statkraft exchanging its holding in E.ON Sverige for flexible production assets and shares in E.ON AG. It is anticipated that a final agreement will be signed during the first half of 2008.

In March, Statkraft resolved to proceed with the development of the Blaengwen Wind Farm in Wales. Statkraft and the American corporation Catamount each own 50 percent of the wind farm, which will have an installed capacity of 23 MW.

Statkraft has entered into an agreement with the government of Republika Srpska, part of Bosnia-Herzegovina, of which the initial phase covers planning work in relation to the development and construction of hydropower plants.

In March, Statkraft signed a cooperation agreement with NorWind in relation to offshore wind power. Under this agreement, NorWind is to complete a concept study for a large-scale, fixed-base offshore wind farm.

High water levels in the reservoirs at the turn of the year and relatively good snow reservoirs mean that the resource situation is currently robust. The system price has been significantly higher during the first quarter compared with the same period last year, and forward prices also indicate that price levels will remain higher during the remainder of the year than was the case in 2007. Together with the increase in generating capacity enabled by the gas-fired power plants, this forms the basis for a relatively high level of production during 2008 and increased income from ongoing power sales. There is, however, uncertainty attached to price developments and, among other things, prices will be affected by a prolonged reduction in exchange capacity as a result of repair work in connection with transmission cables to Sweden and Denmark. This will particularly affect prices in Southern Norway.

The Statkraft Group is a leading player in Europe within renewable energy. The Group generates hydropower, wind power and district heating and 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 2007 Statkraft recorded a profit after tax of NOK 6.6 billion and employed more than 2,250 employees in ten countries. The world needs pure energy. Statkraft works to deliver this every day.