Statkraft – Q1 2009 - Satisfactory result from operations

20.05.2009 08.00 | pressrelease

The Group posted an operating profit, adjusted for unrealised changes in value and material non-recurring items, of NOK 3 943 million in the first quarter of 2009 (NOK 3 838 million). This represents an improvement of 3% compared with the same period in 2008. The improvement in the operating result is primarily attributable to an increase in production as a result of the acquisition of new assets, while the average Nordic system price was on a par with the previous year. Adjusted for unrealised changes in value and material non-recurring items, the underlying profit after tax amounted to NOK 1 786 million (NOK 2 943 million). The interim financial statements are impacted by large unrealised changes in value. Unadjusted for these items, the accounting profit after tax was NOK 2 723 million (NOK 3 803 million)1.

“Statkraft posted a satisfactory operating result in the first quarter and achieved a year-on-year improvement in underlying operations of 3%. The result is impacted by the takeover of new assets under the swap deal with E.ON AG at the end of 2008 and the consolidation of SN Power as a subsidiary since January this year,” explained President and CEO Bård Mikkelsen.

“By entering into several major agreements, at the beginning of 2009, Statkraft has stepped up its focus in a number of areas including offshore wind power in the United Kingdom and hydropower in Southeast Europe, and further strengthened its position as Europe’s largest producer of renewable energy,” remarked Mikkelsen.

Quarterly result

Power prices in the Nordic market in the first quarter were on a par with prices in the corresponding prior-year period. The average system price in the Nordic market in the first quarter of 2009 was 38.2 EUR/MWh, compared with 38.0 EUR/MWh in 2008 and 26.7 EUR/MWh in 2007.

The Group generated gross operating revenues of NOK 8 031 million in the first quarter (NOK 7 164 million), which represents an increase of 12%. The rise is primarily attributable to higher production resulting from the takeover of assets from E.ON AG.

Operating expenses totalled NOK 2 290 million (NOK 1 738 million), which represents an increase of 32% compared with the corresponding prior-year period. The rise is primarily attributable to the swap deal with E.ON AG and the consolidation of SN Power as a subsidiary. Higher provisions for pension liabilities also contributed to the increase.

The underlying share of profit from the Group's associates was NOK 398 million (NOK 1 121 million). The decrease is attributable to the fact that the 44.6%-shareholding in E.ON Sverige AB was swapped for wholly owned assets within hydropower, gas power and district heating in Sweden, Germany and the United Kingdom at the end of 2008. Statkraft also acquired 4.17% of the shares in E.ON AG. Dividends from these shares will be recognised as income in the second quarter.

Underlying net financial items amounted to NOK -857 million (NOK -407 million). Financial expenses increased by NOK 447 million compared with the first quarter of 2008. This is primarily attributable to a realised net loss on loans denoted in foreign currency. However, interest expenses are reduced, primarily as a result of lower market interest rates. At NOK 121 million, financial income was on a par with the previous year.

The tax expense on the underlying profit comprised NOK 1 699 million (NOK 1 609 million), which corresponds to an effective tax rate of 48.7% (35.3%).

Highlights in the quarter

In March Statkraft purchased a 50%-stake in StatoilHydro’s project to construct Sheringham Shoal Offshore Wind Farm off the coast of Norfolk in the United Kingdom. The wind farm, which is due to be completed in 2011, will comprise of 88 turbines and have a total installed capacity of 315 MW. The project’s expected annual output is 1.1 TWh and the related total investments are estimated at around NOK 10 billion.

In February, Statkraft, StatoilHydro and the British companies RWE npower renewables and Airtricity agreed to establish a consortium to apply for offshore wind power zones off the United Kingdom coast. The UK authorities will facilitate the development of a total of 25 000 MW throughout the third allocation round. The zones are expected to be allocated towards the end of 2009 and any construction will commence in 2015 at the earliest.

On 17 March Statkraft and the Turkish company Global Investment Holdings entered into an agreement under the terms of which Statkraft will take over hydropower projects in Turkey. The agreement will grant Statkraft the rights to seven hydropower projects, and once completed the plants will have an overall annual mean production capacity of more than 2 TWh. This is the first agreement that Statkraft has entered into in Turkey.

Two new power plants entered operation in Norway in the first quarter: Rødberg, with a production capacity of 15.5 GWh and Sylsjø, with a production capacity of 8.5 GWh.

Statkraft acquired a 100%-stake in Blaengwen Wind Farm in Wales in March after purchasing its partner’s 50%-shareholding in the project.

In December 2008 Norfund and Statkraft reached an agreement on the restructuring of ownership in SN Power. On 13 January Statkraft increased its shareholding in the company from 50% to 60% through a combination of a purchase of shares from Norfund and a private placement in SN Power in the amount of NOK 2 billion.

There were a total of five fatalities in connection with SN Power's operations in the first quarter, four of which occurred at the Allain Duhangan construction project in India, in which SN Power has a 43%-shareholding. Three of the fatalities related to traffic accidents while one fatality occurred in connection with safety work being performed in one of the tunnels. A further fatality occurred at a smaller power plant in Peru. The incidents are being investigated and are subject to an internal project review, while a project-independent review is also being performed by SN Power.

1 Comparative figures for 2008 are shown in brackets.

Statkraft is Europe’s largest generator of renewable energy. The Group develops and generates hydropower, wind power, gas power and district heating, and is a major player on the European energy exchanges. Statkraft also develops solar power, marine energy, osmotic power and other innovative energy solutions. In 2008 Statkraft posted gross operating revenues of NOK 25.1 billion and an underlying profit after tax of NOK 8.1 billion. The Group employs more than 3 200 staff in more than 20 countries.