Energi Quarterly report Q3 2016

Transcription

1 Energi Quarterly report

2 2 E-CO Energi // The Board of Directors report CONSOLIDATED QUARTERLY REPORT 1 JANUARY 30 SEPTEMBER (Comparable figures for in parentheses) KEY FIGURES Year Results Operating revenue Operating income Earnings before tax Net profit (37) Capital structure and cash flow Total assets Equity Liquid assets Equity ratio 38% 41% 38% 41% 38% Cash flow from operating activities (29) 689 Other Power production (GWh) The YTD consolidated net profit was MNOK 256, down MNOK 113 year-on-year. The most important reason for the decline in profits is lower actual power prices due to lower earnings from hedging. The actual YTD selling price in was 11 per cent higher than the area price, compared with 44 per cent higher during the same months of. It has been decided that E-CO Energi will participate in the development of the Nedre Otta power plant. With anticipated annual production of a total of 315 GWh, Nedre Otta will be Norway s largest ongoing hydropower project. OPERATIONS The Group s core activities are the ownership, operation and management of hydropower installations, including: Energy management - the sale of power on the wholesale market Production operations, maintenance and project implementation Business development in energy and related fields The Group consists of the parent company E-CO Energi Holding AS and the wholly owned subsidiaries E-CO Energi AS and Oslo Lysverker AS. Through these companies, the Group owns stakes in Oppland Energi AS (61.4 per cent), Vinstra Kraftselskap DA (66.7 per cent), Opplandskraft DA (25 per cent), Embretsfosskraftverkene DA (50 per cent) and NGK Utbygging AS (25 per cent). Including production interests in co-owned power plants, E-CO has a normal production output of 10 TWh. E-CO Energi is wholly owned by Oslo Municipality. ABOUT THE QUARTERLY REPORT The quarterly report for is presented in compliance with Norwegian accounting standards and generally accepted Norwegian accounting practices. The same accounting principles and estimation methods have been applied here as were applied to the Financial Statements for. The accounts for have not been audited. The quarterly figures are commented to the extent that special circumstances applied in. A significant share of the Group s output is generated by power plants with considerable reservoir capacity, normally entailing large seasonal fluctuations in production. A reservoir station will ordinarily generate the bulk of its annual production in the winter season. This is reflected in operating revenues and profits, which are usually substantially lower in Q2 and than in the other two quarters. MARKET CONDITIONS, PRODUCTION AND PRICES The market prices on NordPool have been significantly higher in this year than last year. The main reason for this is a lower hydrological balance and less inflow compared with. Towards the end of the quarter, and in particular after the end of the quarter, spot and forward prices for the rest of and for 2017 have also increased, not least as a result of higher coal and gas prices. In June, Statnett s central grid suffered a serious cable failure in the Oslo Fjord. The repair time was estimated at nearly 4 months due to the complexity and the amount of work involved in laying a new back-up cable. This transmission line is an essential part of the transmission capacity from price area NO1 to Sweden, as well as for the capacity from price area NO5 to NO1. Statnett reduced the capacity available between NO5 and NO1 significantly as the summer progressed, with consequences in the form of pent-up power and generally lower prices in NO5. On average for the quarter, the prices were NOK and NOK, in NO1 and NO5, respectively, lower than the Nordic system price. E-CO Energi estimates that the price

3 3 E-CO Energi // The Board of Directors report PRODUCTION (GWh) The average selling price in, excluding concessionary power, was NOK/kWh (0.244 NOK/kWh). The actual selling price was 11 per cent higher than the area price (44 per cent). PERFORMANCE YTD revenues added up to MNOK 1 685, which was MNOK 90 lower than at 30 September last year (MNOK 1 775). A lower actual selling price is the main reason for the decline of 5 per cent. The decline in the actual selling price is ascribable to the contribution from hedging, which was substantially lower during the three first quarters this year, compared with last year. 0 Q1 Q2 Q Operating expenses aggregated MNOK 828 at (MNOK 850). The operating profit at came to MNOK 857 (MNOK 925). This is equivalent to a decline of 7 per cent. differences have added up to roughly MNOK 60 in lost income from June to the end of September. E-CO Energi has asked Statnett to attach importance to ensuring good capacity between the price areas in setting their priorities and taking decisions. The filling ratio in the Nordic reservoirs was 81 per cent (91 per cent), compared with a historical median level of 84 per cent at the end of. The NO5 price area, where E-CO Energi has about two-thirds of its production, has above normal reservoir levels. The rest of the Group s production is in price area NO1, which has a normal filling ratio. Collectively, the Norwegian reservoirs are roughly at the normal level, while reservoir levels in Sweden are below normal. Norwegian power production totalled TWh at (105.9 TWh). Gross power consumption added up to 95.6 TWh (94.8 TWh). Net power exports totalled 13.9 TWh in (11.1 TWh). The Group s power production came to GWh at end-september this year (7 288 GWh). Production aggregated GWh (2 053 GWh) in. The average system price was NOK/kWh at 30 September (0.181 NOK/kWh). The weighted area price compared with E-CO Energi s production was NOK/kWh (0.169 NOK/kWh). Net YTD financial expenses came to MNOK 181 (MNOK 174). Net interest-bearing liabilities (excl. subordinated loans) added up to MNOK at 30 September, resulting in an increase of MNOK 92 year-on-year. The effective interest rate on loans (excl. subordinated loan) was 2.8 per cent at 30 September (2.9 per cent). The estimated interest rate on subordinated loan was 1.8 per cent (2.2 per cent). Earnings before tax totalled MNOK 676 (MNOK 751), i.e. down 10 per cent year-on-year. Tax came to MNOK 420 (MNOK 382) during the period. Recognised resource rent tax added up to MNOK 252 (MNOK 179) at the end of. The increase in resource rent tax is ascribable to higher spot prices, as well as an increase in the tax rate from 31 to 33 per cent. Tax on ordinary income added up to MNOK 168 (MNOK 203). The decline is due to lower earnings before tax as well as a decrease in the tax rate from 27 to 25 per cent. In the government budget for 2017, the Government proposes increasing the resource rent tax rate to 34.3 per cent and decreasing the general income tax rate from 25 to 24 per cent. The profit after tax was MNOK 256 (MNOK 369), comparable to a reduction of 31 per cent. PRICES, MONTHLY AVERAGE (NOK/kWh) 0,4 0,3 0,2 0,1 OPERATING PROFIT (NOK million) ,0 Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec. 0 Q1 Q2 Q4 NordPool System price NordPool System price Forward price Sales price 2014

4 4 E-CO Energi // The Board of Directors report INVESTMENTS, CASH FLOW AND CAPITAL STRUCTURE Investments in tangible fixed assets amounted to MNOK 186 (MNOK 204). The largest investment project is the construction of the Rosten Power Plant in the Gudbrandsdalen Valley, which is scheduled for completion in The total cost framework is MNOK 873. E-CO Energi owns a 44 per cent stake. Other investments generally refers to maintenance. Along with Eidefoss, E-CO Energi and Eidsiva (as owners of Opplandskraft) have decided to invest in the Nedre Otta hydropower plant in the municipalities of Sel and Vågå. The new power plant will have an estimated capacity of approx. 315 GWh, of which roughly 270 GWh will be new production that qualifies for a Norwegian- Swedish electricity certificate. The cost of the Nedre Otta development is estimated at MNOK E-CO Energi owns a 27 per cent stake. The power plant is currently Norway s largest ongoing hydropower project. The Nedre Otta power plant is scheduled for completion in spring The cash flow from operating activities was minus MNOK 153 (minus MNOK 29) at. The increase in the cash flow is related to lower tax payments compared with last year. Taxes for the preceding year settle are paid as advance tax in two instalments in February and April. When tax returns are filed in October, actual taxes are assessed for the preceding year. Excess advance tax of MNOK 176 paid in earlier this year was reimbursed to E-CO Energi in connection with the tax settlement for in October this year. At end-september, the Group s liquid reserves aggregated MNOK (MNOK 183). In, E-CO Energi raised a loan of MUSD 125 on the US market. The loan is hedged against NOK comparable to MNOK and has a 15-year term to maturity. At 30 September, the Group had MNOK in interest-bearing liabilities apart from subordinated loan (MNOK 4 742), of which certificate loans added up to MNOK 500. At 30 September, the Group had an equity ratio of 37.7 per cent (41.4 per cent). RISK, EVENTS AND UNCERTAINTY FACTORS E-CO Energi s financial risk is primarily associated with production volume and power prices, including hedging transactions and trends in currency exchange rates. E-CO Energi s policy involves hedging parts of future production. The value of hedged production is hedged from EUR to NOK. There is risk associated with a difference between the system price and the area price. Since the Group has substantial debt, there is also financial risk associated with the interest rate trend. E-CO Energi s policy is to bind interest rates on parts of the portfolio. Foreign loans are hedged against NOK in their entirety. At 30 September, the Group had hedged a percentage of expected production for the rest of. The percentage of price-hedged power is on a par with last year, but is significantly lower than in preceding years. Fluctuations in forward prices for power and exchange rates can lead to large unrealised changes in the value of the hedging portfolio, which, in accordance with the Group s accounting policies, are not recognised. The unrealised value of the Group s hedging portfolio (including currency hedging) was minus MNOK 22 at 30 September this year. At year-end, the unrealised positive value was MNOK 187. PROSPECTS FOR THE FUTURE The Group has a significant position and expertise in the efficient planning, management and operation of hydropower production, and it has a sound financial position. The Group s strategy going forward will primarily be to invest in hydropower production in Norway to the extent that profitable investment alternatives exist. In addition, the Group will consider opportunities for investments in hydropower outside Norway, and in wind power and power exchanges with other countries. The Group had above normal reservoir levels at the end of. Provided precipitation is normal for the rest of the year, production is expected to be above normal in. The power price trend towards the end of the quarter and after the end of the quarter indicates that the Group expects a better net profit for the year than at the end of the preceding quarter. It is a therefore now more probable that the net profit for will be on a par with last year, even though there is still significant uncertainty attached to the power price trend for the remainder of the year. Forward prices and the prospects for 2017 have improved, but the price scenario still indicates that lower results must be expected in future than what the Group has obtained in recent years. Oslo, 7 November The Board of Directors of E-CO Energi Holding AS

5 5 E-CO Energi // Financial report INCOME STATEMENT Year Energy revenue Other operating revenues Operating revenues Energy purchases, transmission (57) (51) (179) (173) (233) Property tax and licence fees (64) (65) (194) (198) (261) Other operating expenses (80) (87) (246) (274) (396) Depreciation (70) (69) (209) (205) (274) Operating expenses (271) (272) (828) (850) (1 164) Operating profit Net financial expenses (66) (60) (181) (174) (231) Profit before taxes Taxes (75) (45) (420) (382) (583) Profit after taxes (37) Earnings per share (NOK) (22)

6 6 E-CO Energi // Financial report BALANCE SHEET 30 Sept. 30 Sept. 31 Dec. Assets Intangible assets Property, plant and equipment Financial fixed assets Fixed assets Short-term receivables Short-term investments Bank deposits, cash in hand, etc Current assets Assets Equity and liabilities Paid-in capital Retained earnings Equity Provision for commitments Subordinated loan Other long-term liabilities Long-term liabilities Allocated to dividends Other current liabilities Short-term liabilities Equity and liabilities

7 7 E-CO Energi // Financial report CASH FLOW ANALYSIS Year Cash flow from operating activities Changes in taxes payable (292) (645) (260) Other changes in working capital items (26) Cash flow from operating activities (29) 689 Investments in fixed assets (66) (83) (186) (204) (297) Other investments/sales 0 (2) (13) Cash flow from investment activities (66) (85) (199) (167) (246) Change in short-term loans (500) New long-term loans Repayment of long-term loans 0 (289) 0 (289) (462) Dividends/other funding 0 0 (685) (740) (740) Cash flow from financing activities 536 (289) 751 (229) (702) Cash flow during the period 672 (160) 705 (425) (259) Liquid reserves at beginning of period Liquid reserves at end of period EQUITY Year Equity at the beginning of the period Result in the reporting period (37) Allocated to dividends (685) Equity at closing of period E-CO Energi Holding AS C.J. Hambros plass 2 C P.O. Box 255 Sentrum 0103 Oslo, Norway Phone (+47) energi@e-co.no oktanoslo.no 46162