Hafslund. A pure-play utility. Investor presentation October 2016

Transcription

1 Hafslund A pure-play utility Investor presentation October 2016

2 Disclaimer Certain statements included within this presentation contain (and oral communications made by or on behalf of Hafslund may contain) forward-looking information, including, without limitation, those relating to (a) forecasts, projections and estimates, (b) statements of managements' plans, objectives and strategies for Hafslund, such as planned expansions and investments, (c) targeted production volumes and costs, capacities or rates, start-up costs, cost reductions and profit objectives, (d) various expectations about future developments in Hafslund's markets, particularly prices, supply and demand and competition, (e) results of operations, (f) margins, (g) growth rates, (h) risk management, as well as (i) statements preceded by "expected", "scheduled", "targeted", "planned", "propose", "intended" or similar statements. Although Hafslund believes that the expectations reflected in such forward-looking statements are reasonable, these forward-looking statements are based on a number of assumptions and forecasts that, by their nature, involve risk and uncertainty. Various factors could cause Hafslund's actual results to differ materially from those projected in a forward-looking statement or affect the extent to which a particular projection is realized. Factors that could cause these differences include, but are not limited to, world economic growth and other economic indicators, including rates of inflation and industrial production, trends in Hafslund's key markets, energy prices and changes in governmental regulations. No assurance can be given that such expectations will prove to have been correct. Hafslund disclaims any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. The Hafslund shares have not been registered under the U.S. Securities Act of 1933, as amended (the "Act"), and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Act. 2

3 Hafslund a pure-play utility Norway s largest grid company ~ 700,000 customers 23% share * Norway s largest district heating operator ~ 1.6 TWh ~ 35% share * Norway s largest retail power supplier 5 th largest in the Nordic region ~ 1.1 mill. customers ~ 25% share * A medium sized power producer 3.1 TWh ~ 2% share * 3 * Norwegian market

4 More than 100 years of history 1898 Hafslund established 1986 Nycomed part of Hafslund 1996 De-merger Hafslund Nycomed Restructuring Integration Value creation 2008 Focus on renewable energy Spin off: Infratek Established power sales in the Nordics Spin off: Security, REC, venture, fiber, etc An integrated and focues energy company 2014 Acquisition of Fortum s network business in Norway Strengthened focus on powersales Sweden and Finland Further organic and structural growth Operational optimization 4

5 Focusing the business Divested operations Hafslund /16 Gardermoen Energi NETT VARME Fiber Sentralnett PRODUKSJON MARKED NOK ~9 billion NOK ~0,8 billion Investments ~17 billion Streamlining of operations facilitates organic and structural growth within core areas 5

6 Hafslund is green in all business areas NETT Electrification VARME Renewable thermal energy PRODUKSJON Renewable energy MARKED Efficient energy consumption Vision: Energy solutions for the future - for you and the environment 6

7 Increased separation between network and power sales operations due to regulatory changes Upstream Downstream Customer Private Production Central grid Distribution Retail Enterprise Power Exchange Customer data collected in national database (Elhub) Automatic power meters (AMS) Power and network on a single invoice from power sales company (Supplier-centric model) 7

8 Hafslund today Energy plants and infrastructure in Eastern Norway Power sales in the Nordic region Critical infrastructure Local presence Capital intensive business Solid growth Strong Nordic presence Synergies across brands and countries Capital light business Clear multi brand strategy High growth ambitions Hafslund Tellier Supply area Networks Hydropower plants Heat, Oslo Hafslund headquarter Hafslund Kundesenter 8

9 9 NETWORK HEAT PRODUCTION MARKETS

10 The largest grid operator in Norway Location Key data 2015 Number of customers 689,000 Energy delivered 19,0 TWh Share of Norwegian grid ~ 23% Regulated asset base NOK 7.9 bn ROCE* 8,0% Located in the extended Oslo region, with significant population growth Regional and distribution grid Fully regulated through the Energy Act Automatic metering systems by 2019 One of Norway s most efficient grid operators with few power outages Supply area Network 10 * Return on capital employed

11 Roll-out of automatic power meters August 16 Sept 16 Ultimo 18 Roll-out plan H H H Pilots Roll-out phase H H installed power meters total power meters Not Hafslund Full scale roll-out of power meters started in August. Accumulated investments of NOK 454 mill per against total project estimate of NOK 2.4 billion. 11

12 District heat covering ~25% of Oslo s heat demand Location Key plants MW % Haraldrud Klemetsrud Vika Hoff Other Total 1, District heat produced and distributed in 2015: Energy: 1.6 TWh Renewable share: 99% Waste, biomass, electricity, heat pump and pellets primary fuel sources ROCE 2015: 5,0% Concession area Developed Networks 12

13 Heat: Volume and fuel mix Production volume (GWh) Fuel mix (GWh) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Normal 1 Q Q Q Q Bio oil, natural gas, oil Electricity Pellets Heat pumps Waste Q : Normal = expected production in 2016 provided normal temperatures.

14 Three large power stations in the river of Glomma Key data: MW GWh* Kykkelsrud 230 1,265 Vamma 215 1,350 Sarp Hafslund Eidsvoll 3,9 23 Total 560 3,100 Largest river based power plant in Norway Acquired prior to the reversion regime - perpetual waterfall rights New power station in Vamma will be completed during first half of 2019 Partial price hedging ROCE 2015: 8.8% Location 14

15 Production and water flow Production (GWh) Water flow and capacity utilization (m 3 /sec) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 0 jan Q3 feb mar apr mai jun jul aug sep okt nov des Normal Normal 2 Max. capacity utilization 15 1: Normal production = 3100 GWh based on 10 years data adjusted for efficiency improvements. 2: Normal = Median water flow last 10 years.

16 The construction of Vamma 12 is developing as planned About Vamma 12: Investment Installed capacity Production Vamma 12 Increased renewable production 920 NOKm 128 MW ~ GWh ~ 230 GWh The project will be completed before the spring flood of

17 The fifth largest power sales company in the Nordics Location Key data: Number of customers ~1.1 mill. High competition a marketing and margin game Hafslund Tellier Hafslund Kundesenter Energy sold 2015 (TWh) 17.9 Market share (Norway) ~25% Market position Norway #1 Market position Nordics #5 ROCE % Multiple brand names - common back office functions Bundling of related services Well positioned for organic growth throughout the Nordics 17

18 Hafslund will not IPO Markets in Source: Stock exchange notices 9 December 2015 and 21 April 2016

19 Regulation of Hafslund s business areas NETWORK HEAT PRODUCTION MARKETS Natural monopoly Natural monopoly Free competition Free competition NVE s income framework model sets regulated income Measured against other companies through an efficiency score The price for district heating shall not exceed the cost of electric heating in the relevant supply area Grid tariff and surcharges part of the sales price - regulated. Exposed to power price Buying and selling at market prices Resource tax dampens fluctuations in earnings Buying and selling at market prices Hedging of fixed price contracts Income regulated Price regulated Free competition Free competition 19

20 Capital allocation and EBITDA Capital employed (NOK billion) Share of regulated EBITDA , % 60% 59% 65% Markets Production Heat Network Free competition Regulated 2 > 60 percent of capital and EBITDA in regulated business 20 1 Capital employed and EBITDA for the four business areas 2 Regulated EBITDA is defined as Network and Heat, parts of Heat power price exposed

21 Hafslund's goal is to maintain a credit profile equivalent to a BBB+ rating Hafslund BBB+ Agder BBB+ BKK BBB+ Lyse BBB+ Statkraft A- 20% 4% 7% 28% 30% 16% 78% 60% 65% 59% 69% 18% 33% 12% 1% Other Production Grid and district heat Business risk: Strong high degree of regulated assets compared to other utilities in Norway 21 * Distribution based on EBITDA (EBIT for Statkraft) per business area as reported in the annual report for Shadow rating from DNB Markets Norwegian Electric Utilities Report 2016 (September 2016)

22 Key financial ratios for Hafslund Net debt / EBITDA (x) FFO / Net debt* 3,4 Significant financial risk: 3,0-4,0x Significant financial risk: 20-30% 28% 26% 3,3 23% 2,8 2,9 22% 2,7 26% Strong development in financial risk metrics indicate solid investment capacity 22 * FFO defined as EBITDA subtracted interest paid and taxes paid, before any other adjustments

23 Investments Investments, excluding acquisitions (NOK bn.) Growth investments towards Average 2017P-2018P: NOK 2.1 billion Network AMS NOK 2.4 bn. ~ new customers annually District heating +260 GWh P 2017 P 2018 P Vamma 12 NOK 920 mill GWh Markets Organic customer growth Annual investments Periodical avg. Investments 23

24 Maintaining stable dividends Historical dividends and profit per share (NOK per share) * ** Extraordinary dividend Ordinary dividend Profit per share The long-term dividend policy of the Group is to pay stable dividends that over time equals at least 50 percent of annual profit after tax 24 * Extraordinary dividend in 2010 associated with freeing up capital from the sale of the fiber business.

25 Hafslund - a pure play energy and infrastructure company NETWORK HEAT Capital employed 100% = NOK 21.9 billion per Organic and structural growth and operational optimization 20% Heat Organic growth and operational optimization PRODUCTION Network 51% 6% Markets 1% Other MARKETS 21% Production Uptime and growth Nordic growth strategy 25

26

27 Investor information Additional information is available from Hafslund s website: You can subscribe to Hafslund press releases Group CFO, Heidi Ulmo heidi.ulmo@hafslund.no Tel: Head of Finance and Investor Relations, Martin S. Lundby martin.lundby@hafslund.no Tel:

28 Group summary NETWORK HEAT PRODUCTION MARKETS 28

29 Network NOK million Q Q Ytd 2016 Ytd 2015 Operating revenue Gross margin EBITDA Operating profit Energy delivery (GWh) Number of customers (in 1 000) Investments Development EBITDA (NOK mill) Q Operating profit up 27 % from last year. Operating costs NOK 39 mill lower than last year. Increased amount of lightning strikes compared to Q resulted in KILE-costs of NOK 30 mill (17 mill). Year 2016 Quarter Q Q Q Q Q Q Q Q Q Last 12 months Operating profit for 2016 estimated approximately 25 % higher than EBITDA EBITDA last 12 months 29

30 Network - Forecasted 2016 tariff income and income surplus- /shortfall NOK million P * Tariff income Regulated revenue own network Costs to overlying grid = Income surplus-/shortfall (700) Year 2016 Tariff income expected higher than 2015 due to increased energy supply and higher network tariffs. Regulated revenue includes positive one-offs from acquisition of network operations in Østfold. Development accumulated income surplus per mill High regulated revenue in 2016 is used to reduce income surplus P Regulated revenue expected substantially lower in 2017 due to one-offs in * Given normal energy demand the rest of the year, current network tariffs and forward power prices

31 Network - status AMS August 16 Sept 16 Ultimo 18 Roll-out plan H H H Pilots Roll-out phase H H installed power meters total power meters Not Hafslund Full scale roll-out of power meters started in August. Accumulated investments of NOK 454 mill per against total project estimate of NOK 2.4 billion. 31

32 Heat NOK million Q Q Ytd 2016 Ytd 2015 Operating revenue Gross margin EBITDA (12) Operating profit (50) (30) Production volume (GWh) Gross margin (NOK/kWh) Investments Development EBITDA (NOK mill) Quarter Last 12 months Q Q Q Q Q Q Q Q Q Q Mild weather at the end of the quarter resulted in energy demand 11 % under the normal. The positive effect of increased power prices is offset by lower production volume and hedging activities. Somewhat higher operating costs due to increased maintenance activity and improvement initiatives. Hedge ratio next six months at 64 %. New customers connected in Q with a total yearly heating requirement of 11 GWh. EBITDA EBITDA siste 12 mnd 32

33 Heat - Volume and fuel mix Production volume (GWh) Fuel mix (GWh) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Normal 1 Q Q Q Q Bio oil, natural gas, oil Electricity Pellets Heat pumps Waste Q : Normal = expected production in 2016 provided normal temperatures.

34 Production NOK million Q Q Ytd 2016 Ytd 2015 Operating revenue EBITDA Operating profit Revenue (NOK/kWh) Production volume (GWh) Investments Development EBITDA (NOK mill) Q Production volume is 22 % below last year and 11 % below the normal. Revenue (NOK/kWh) of 0.20 is NOK 0.03 higher than last year and slightly below power price NO1. Hedge ratio next six months at 35 %. Estimated production in Q4 slightly below normal levels Quarter Last 12 months Q Q Q Q Q Q Q Q Q EBITDA EBITDA last 12 months 34 1 Normal levels for Q4 is ~690 GWh.

35 Production and water flow Production (GWh) Water flow and capacity utilization (m 3 /sec) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 0 jan Q3 feb mar apr mai jun jul aug sep okt nov des Normal Normal 2 Max. capacity utilization 35 1: Normal production = 3100 GWh based on 10 years data adjusted for efficiency improvements. 2: Normal = Median water flow last 10 years.

36 Construction of Vamma 12 according to plan Facts Investment Installed effect Production Vamma 12 Increased renewable energy production NOK 920 mill 128 MW ~ GWh ~ 230 GWh Status - progress Investment incurred per NOK 299 mill Ground construction finished autumn Startup concrete construction autumn Startup installation autumn Completion scheduled before the 2019 spring flood. 36

37 Markets NOK million Q Q Ytd 2016 Ytd 2015 Operating revenues Gross margin EBITDA Operating profit Number of customers (in 1 000) Sold volume (GWh) Development EBITDA (NOK mill) Q Satisfying results in a quarter with low energy demand. Increased volume due to 39,000 additional customers than in Q The result reflects costs related to increased marketing activities and somewhat lower margins. 1,084,000 customers at the end of Q3, where 365,000 customers are outside Norway. Quarter Last 12 months Q Q Q Q Q Q Q Q Q EBITDA EBITDA last 12 months 37

38 Oslo price (NO1) historic and forward 0.50 NOK/kWh NOK/kWh Power price - Oslo price Period average 38 Source: NordPool Spot, Nasdaq OMX Prices per

39 Group profit and loss account NOK million Q Q Ytd 2016 Ytd 2015 Operating revenue Cost of energy (1 268) (836) (432) (5 310) (4 441) Gross margin (10) Gain/loss financial items Operating expenses (681) (678) (3) (2 054) (2 058) EBITDA (4) Depreciation and write-downs (234) (236) 2 (688) (672) Operating profit (2) Interest expences etc (72) (123) 51 (214) (300) Market value change loan portfolio (14) Financial expenses (42) (79) 37 (157) (195) Pre-tax profit Tax (127) (111) (16) (460) (383) Profit after tax Earnings per share (EPS) in NOK 1,31 1,21 0,10 5,22 4,47 39

40 Group balance sheet NOK million Q Intangible assets (19) Fixed assets (108) Financial assets (134) Accounts receivables and inventory Cash and cash equivalents (106) 337 Assets (107) Equity (incl. min. int.) Allocation for liabilities Long-term debt Other current liabilities (265) Short-term debt (363) Equity and liabilities (107) Net interest-bearing debt Equity ratio 37 % 36 % 1 % 33 % 40

41 Group cash flow NOK million Q Q Ytd 2016 Ytd 2015 EBITDA (4) Paid interests (49) (53) 4 (277) (331) Paid tax 0 (29) 29 (362) (257) Marketvalue changes and other liquidity adjustments (38) (40) 2 (99) (64) Change in working capital, etc. (550) (140) (410) Total cash flow from operations (379) Net operations and expansion investments (392) (296) (96) (942) (772) Net purchase/sale of shares etc Cash flow from investments activities (126) (284) 158 (548) (760) Cash flow to down payments and interests (104) 117 (221)

42 Capital employed and return on capital employed Capital employed NOK 22 bn. as of Return on capital employed (%) Markets 6% Production 8.3% 9.2% 10.0% 21% Network 51% 1% Other 20% Heat : Includes write-downs in Bio-El and secondary networks at Søndre Nordstrand of NOK -127 million.. 2: Last 12 months

43 Loans portfolio data Debt maturity profile NOK million Q3 16 Q Bonds 73 % 76 % -3 % Bonds Other loans Commercial paper 0 % 0 % 0 % Other loans 27 % 24 % 3 % NOK million Q3 16 Q2 16 Loans at maturity next 12 months NOK million Nominal value - market value of loans (160) (191) 32 Market value interest rate and fx derivatives* Average interest incl. derivatives (%) 3.3 % 3.4 % -0.1 % Loans at maturity next quarter Unused drawdown facilities (83) *) incl. currency derivatives under hedge accounting 0 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Bonds Other loans 43

44 Key figures Group Ytd 2016 Ytd 2015 Capital matters Total assets Capital employed Equity Market capitalization Equity ratio 37 % 33 % Net interest-bearing debt Profitability EBITDA Earnings per share (EPS) 5,22 4,47 Cash flow per share 9,74 10,65 Heat Ytd 2016 Ytd 2015 Capital employed Avg. district heating income (NOK/kWh) 0,71 0,63 Gross margin (NOK/kWh) 0,46 0,39 Sales volume (GWh) Production Ytd 2016 Ytd 2015 Capital employed Sales price (NOK/kWh) 0,22 0,19 Production volume (GWh) Network Ytd 2016 Ytd 2015 Capital employed Gross margin Energy delivery (TWh) Number of customers (in 1000) NVE-capital (regulatory) Markets Ytd 2016 Ytd 2015 Capital employed of this working capital (164) (173) Number of customers (in 1 000) Volume power sales (GWh)

45 Shareholders as of # Shareholder Class A shares held Class B share held Total Ownership Share of voting rights 1 City of Oslo ,7 % 58,5 % 2 Fortum Forvaltning AS ,1 % 32,8 % 3 Kommunal Landspensjonskasse ,8 % 4,6 % 4 MP Pensjon PK ,0 % 0,0 % 5 Folketrygdfondet ,4 % 0,1 % 6 Avanza Bank AB ,2 % 0,1 % 7 Nordnet ,2 % 0,1 % 8 Greenwich Land Securities AS ,2 % 0,1 % 9 JP Morgan Chase Bank ,2 % 0,0 % 10 New Alternatives Fund, Inc ,2 % 0,3 % Total, 10 largest shareholders ,0 % 96,5 % Other shareholders ,0 % 3,5 % Total % 100 % 45

46 Definitions Group Capital employed Equity + Net Interest-bearing debt + Net tax positions Equity ratio (in %) (Equity incl. Minority interests / Total assets) X 100 Debt / EBITDA Earnings per share Cash flow per share Return on capital employed last 12 months Hedge ratio Hydro power Hedge ratio District heating Net debt at the end of the quarter / EBITDA last 12 months Profit after tax / Average no. of shares outstanding Net cash from operations / Average no. of shares Operating profit last 12 months / Average capital employed last 12 months Ratio of the estimated production portfolio hedged in the period (excluding fixed-price contracts) Ratio of the estimated net power price exposure hedged, by: Sales reduced with electricity use and 1/3 heat pumps 46

47