Statkraft AS 1st Quarter 2007

Thursday, 10. May 2007 08:04



Result influenced by lower electricity prices and lower volum

* Profit after tax of NOK 2,605m for Q1 2007 (NOK 1,494m)
* Lower sales revenues due to price reductions and lower
production
* Strong results from hedging activities
* Significant increase in contribution from associated
companies


In the 1st quarter of the year the Group posted a profit before tax
of NOK 3,533m (NOK 2,282m) and profit after tax of NOK 2,605m (NOK
1,494m). The above figures represent improvements of 55% and 74%
respectively compared with the corresponding prior-year quarter. NOK
1,403m of the pre-tax improvement of NOK 1,251m is attributable to
unrealised changes in value.

Markets and profits
The Group posted gross revenues of NOK 4,951m in the 1st quarter of
2007, NOK 361m (-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 1st 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 2,483m. This was
partially offset by an increase of NOK 956m 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 650m, which
represents an increase of NOK 570m and is also primarily attributable
to the first-time consolidation of Fjordkraft.

Operating expenses increased by NOK 169m to NOK 1,448m in the 1st
quarter of the year. Salaries and payroll costs rose by NOK 73m 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 429m in the reporting period.
The increase of NOK 57m is attributable to the consolidation of
Fjordkraft, new business and project development.

The Group's operating profit increased by 7% to NOK 2,605m (NOK
2,433m).

Profit contributions from associated companies increased to NOK
1,028m (NOK 280m). The Norwegian regional companies contributed an
improvement of NOK 255m, while E.ON Sverige posted an increase of
just over NOK 300m. The remainder of the improvement relates to
unrealised changes in the value on power sales agreements in Germany.

At NOK 100m, net financial expenses in the 1st quarter of 2007 were
NOK 331m lower than in the corresponding prior-year quarter. The
reduction is primarily attributable to an increase of NOK 288m in the
unrealised values of the Group's interest rate and currency
agreements.

The spot price on the Nordic market was lower in the 1st quarter of
2007 than in the first three months of 2006. Prices in the 1st
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 1st quarter
of 2007 was 218 NOK/MWh compared with 364 NOK/MWh for the
corresponding quarter in 2006, and 213 NOK/MWh in the 1st quarter of
2005.

Total power consumption in the Nordic market was 6.0 TWh lower in the
1st quarter of the year than in the same period in 2006, a reduction
of 5%. Total year-on-year consumption in Norway fell by 6.0%.

Together with its partner Catamount Energy Corporation, Statkraft was
granted its 1st final licence in the United Kingdom. Blaengwen Wind
Farm in Wales will 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.
The Group introduced a new profile on 30 March 2007 through 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.

Cash flow and capital structure in 2006
The net cash flow from operating activities in the first three months
of 2007 was NOK 2.9bn, compared with NOK 3.8bn in the 1st quarter of
2006. Net investments in the 1st quarter of the year totalled NOK
0.6bn, where the largest items comprised NOK 0.2bn for the gas power
projects in Norway and Germany, NOK 0.1bn for the extension of the
Leirfossene power plant in Trondheim and NOK 0.3bn for other
investments.

Statkraft AS issued three bond loans under the EMTN scheme in the 1st
quarter of the year. These have terms of 6, 10.5 and 15 years and
respective volumes of EUR 300m, EUR 600m and NOK 1,500m. The new
borrowing was issued to finance loan maturities and new investments.
Total new borrowings in the 1st quarter of 2007 amounted to NOK
8.8bn, while NOK 1.4bn was used for repayment on loans.

Net liquidity changed by NOK 9.7bn during the quarter. At the balance
sheet date the Group's cash and cash equivalents totalled NOK 11.5bn.

Outlook
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 Germany and 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
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.

Contacts:
EVP/CFO Eli Skrøvset, tel: +47 2406 7914/+47 909 86 495
VP Investor Relations Yngve Frøshaug, tel: +47 2406 7876/+47 900 23
021


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Author:
Hugin
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