Fourth quarter 2016 Presentation to analysts and preliminary results 2016

Transcription

1 Fourth quarter 2016 Presentation to analysts and preliminary results 2016 Finn Bjørn Ruyter Oslo, 9 February 2017

2 Agenda 1 Summary of the year Fourth quarter 2016 results 3 Theme: Strategy 4 Appendix 2

3 Highlights for the year 2016 Solid profit after tax of NOK 1,402 million and 4 th consecutive year with improved earnings. Improved results in all four business areas partly driven by improvement initiatives and higher power prices. Positive contribution from non recurring effect from acquired networks business and appreciation of power derivatives. Lower year-on-year water flow and hydropower production. Profit growth improves key financial figures. The Board proposes a dividend of NOK 3.25 (NOK 3.0) per share for

4 EBITDA per business area EBITDA 2016 (NOK mill) Change in EBITDA from 2015 (NOK mill) ,143 2, , ,654 Network Heat Production Markets Other EBITDA 2016 EBITDA 2015 Network Heat Production Markets Other EBITDA

5 Strong focus on reducing the number of injuries Goal Injuries Hafslund 1 Industry average 2 0 injuries 2016: : 8 injuries per million hours (H2) 2015: 11 injuries per million hours (H2) Increase in number of injuries through Strong focus on developing competency and following up on injuries to avoid reoccurrence. 5 1 Last 12 months, Total number of injuries per million working hours to employees and suppliers in the Hafslund Group's own facilities, exclusive the business area Markets. 2 Industry Average for total injuries acc. to Energy Norway's statistics for Includes companies in the energy industry, incl. contractors, but excluding suppliers.

6 Strong profit growth in past years Profit after tax last five years (NOK mill) EBITDA per business area last five years (NOK mill) 4,000 4, ,000 2,000 1,000 2,171 2, ,795 1,003 2,920 1,284 3,143 1,402 3,000 2,000 1,000 2,171 2,446 2,795 2,920 3, , , EBITDA Profit after tax Network Heat Production Markets Other 6

7 Agenda 1 Summary of the year Fourth quarter 2016 results 3 Theme: Strategy 4 Appendix 7

8 Fourth quarter 2016 highlights Operating profit before depreciation (EBITDA) of NOK 818 million in the quarter is up NOK 22 million from last year - solid operations and result improvements in all business areas. Profit after tax of NOK 384 million - down NOK 27 million on the prior year primarily due to a lower positive tax effect of NOK 53 million compared with NOK 97 million in Improvement initiatives, higher power prices and appreciation on forward contracts contribute positively. Milder weather than normal in the quarter, but slightly colder weather compared with last year. Low water flow and hydropower production. 8

9 Key figures Earnings per share NOK2.0 EBITDA (NOK mill) Earnings per share (NOK) Net debt / EBITDA (x) Q Q Q Q Q Q Q Q Q Q EBITDA for the group last 12 months

10 EBITDA per business area EBITDA Q (NOK mill) Change in EBITDA from Q (NOK mill) Network Heat Production Markets Other EBITDA Q EBITDA Q Network Heat Production Markets Other EBITDA Q

11 Production and distribution Heat and Production (GWh) Network (GWh) Q Q Q Q Q Q Q Q Q Q Heat Production Network Lower power production than last year due to reduced water flow, but higher demand for energy due to colder weather. 11

12 Power price development NO1 NOK/kWh 0,40 0,35 0,30 0,25 0,20 0,15 0,10 0,05 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: NordPool Spot per

13 Developments in forward prices and hedging activities Forward prices for 2018 (YR-18) Results from hedging activities (NOK mill) NOK/kWh 0,30 0, , ,15 Jan-13 Jul-14 Jan-14 Jul-14 Jan-15 Jul-16 Jan-16 Jul-16 Jan Rising power prices have improved group revenues but reduced reported earnings from hedging activities. 13 Source Nasdaq OMX Commodities, Bloomberg, per

14 Results per business area NETWORK HEAT PRODUCTION MARKETS 14

15 Network NOK million Q Q Year 2016 Year 2015 Operating revenue Gross margin EBITDA Operating profit Energy delivery (GWh) Number of customers (in 1 000) Investments Development EBITDA (NOK mill) Q Energy supply in the period of 5.9 TWh up 0.4 TWh from Q Operating costs NOK 34 mill lower than last year mainly due to improvement initiatives. Stable operations and KILE-costs of NOK 17 mill (21 mill). Year 2016 Quarter Q Q Q Q Q Q Q Q Last 12 months Q Positive effects from improvement initiatives, as well as non recurring events in regulated revenue generates a particularly good result. Given normal energy demand operating profits for 2017 are expected around 10 % lower than in EBITDA EBITDA last 12 months 15

16 Network tariff income and income surplus-/shortfall NOK million P* Tariff income Regulated revenue own network Costs to overlying grid = Income surplus-/shortfall (707) 200 Development accumulated income surplus per mill Year 2016 Tariff income up NOK 255 mill compared to 2015 due to increased energy supply and higher network tariffs. Regulated revenue include positive non-recurring events from acquisition of network operations in Østfold in High regulated revenue in 2016 used to reduce income surplus. Regulated revenue expected significantly reduced in 2017 due to non-recurring events in * Given normal energy demand the rest of the year, current network tariffs and forward power prices

17 Network - status AMS August 16 January 17 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 586 mill per against total project cost estimate of NOK 2.4 billion. 17

18 Heat NOK million Q Q Year 2016 Year 2015 Operating revenue Gross margin EBITDA Operating profit 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 Operating profits of NOK 121 mill in the quarter and NOK 291 mill in 2016 which represents Heat s bestever result. Organic growth and colder weather gave a year-onyear production increase of 14 % against Q Hedge ratio next six months at 58 %. New customers connected in 2016 with a combined annual district heating requirement of 44 GWh. EBITDA EBITDA last 12 months 18

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

20 Production NOK million Q Q Year 2016 Year 2015 Operating revenue EBITDA Operating profit Revenue (NOK/kWh) Production volume (GWh) Investments Development EBITDA (NOK mill) Quarter Last 12 months Q Q Q Q Q Q Q Q Q Q Results are influenced by higher power prices which more than compensate for lower water flow and production volume. Production volume 14 % below normal. Achieved income of NOK/kWh 0.28 up NOK 0.06 from last year and somewhat below power price NO1. Hedge ratio next six months at 31 %. Estimated production in Q1 at about normal levels (545 GWh). Accumulated investments in new aggregate in Vamma NOK 393 mill. EBITDA EBITDA last 12 months 20

21 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 Feb Mar Apr May Jun Jul Aug Sep Oct Q4 Nov Dec Normal Normal 2 Max. capacity utilization : Normal production = 3100 GWh based on 10 years water flow history adjusted for efficiency improvements. 2: Normal = Median water flow last 10 years.

22 Markets NOK million Q Q Year 2016 Year 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 normally with high energy demand. The result reflects customer growth, appreciation of power derivatives and somewhat lower margins. Volume growth of 12 % due to colder weather and 43,000 additional customers compared to Q ,093,000 customers at the end of 2016, where of 375,000 customers are outside of Norway. Quarter Last 12 months Q Q Q Q Q Q Q Q Q EBITDA EBITDA last 12 months 22

23 Group summary NETWORK HEAT PRODUCTION MARKETS 23

24 Change in EBITDA and profit after tax Change in EBITDA from Q (NOK mill) Profit after tax Q (NOK mill) Earnings per share NOK EBITDA Q Gross margin Gain/loss financial items Operating expenses EBITDA Q EBITDA Q Depreciation Financial expenses Tax Profit after tax Q

25 Investments Annual investments Investments, excluding acquisitions (NOK bn.) Growth investments towards 2020 Periodical avg. investments 1.5 Average 2017P-2018P: NOK 2.1 billion Network AMS NOK 2.4 bn. ~ new customers annually District heating +260 GWh New aggregate in Vamma NOK 920 mill GWh Markets Customer growth P 2018 P 25

26 Change in net interest bearing debt Change in net debt in the quarter (NOK mill) Net debt / EBITDA (x) 1 7 9, , Equity ratio (%) 35% 36% 37% 34% 36% 91 Net debt EBITDA Paid interest and tax Change in working capital etc Investments Freed capital Net debt : EBITDA for the group last 12 months

27 Outlook Forward power price (NO1) for delivery of power in 2017 at 0.24 NOK/kWh, and in line with spot price in Regulated revenue expected significantly lower in 2017 due to non-recurring events in 2016 and corresponding operating profits are expected around 10 % lower than in 2016 given normal energy demand. Level of investments (ex. acquisitions) expected to increase to an average of NOK 2.1 billion per year in 2017 and 2018 from NOK 1.5 billion in The increase is driven by AMS and the new aggregate in Vamma. The organic growth is to be continued, while structural opportunities are being pursued Sources: NordPool Spot and Nasdaq OMX Commodities per

28 Agenda 1 Summary of the year Fourth quarter 2016 results 3 Theme: Strategy 4 Appendix 28

29 Hafslund leading market positions Norway s largest grid company ~ 700,000 customers 23% share * Norway s largest district heating operator ~ 1.7 TWh ~ 35% share * A medium sized power producer 3.1 TWh ~ 2% share * Norway s largest retail power supplier 5th largest in the Nordics ~ 1.1 mill. customers ~ 25% share * 29 * The Norwegian market

30 Energy and infrastructure, and power sales 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 Organic growth from investments and population growth 1.1 million customers Hydropower plants Hafslund headquarter Supply area Networks Heat, Oslo Hafslund Customer center Hafslund Tellier 30

31 Strong results well positioned for further growth Streamlining, improvement initiatives and growth have resulted in strong results and solid capital structure 2016: EBITDA per business area Results last five years (NOK bn.) Net debt/ebitda Markets 19% Production 15% 53% Networks x per Heat 14% Share of regulated business Target Unregulated 40% 60% Regulated < 4.0x Net debt/ EBITDA EBITDA Profit after tax 31 1 EBITDA for 2016 where 100% of Networks and 50% of Heat is included as regulated business

32 Strategic priorities Regulatory framework Environment Profitable growth Business development and digitalization Productivity Health, Safety and Environment 32

33 High degree of regulated business NETWORKS HEAT PRODUCTION MARKETS 100% regulated business > 50% of income regulated 1 0% regulated Market prices, but resource tax and energy price hedging reduces volatility 0% regulated Market prices, but resource tax and energy price hedging reduces volatility EBITDA 2016 NOK 1,654 mill EBITDA 2016 NOK 437 mill EBITDA 2016 NOK 462 mill EBITDA 2016 NOK 585 mill Income regulated and natural monopoly Price regulated and natural monopoly Resource tax and hedging program Diversified customer portfolio and electricity price hedging 33 1 Given today's energy prices, grid regulations and government taxes

34 Provider of environmentally friendly solutions NETWORKS Electrification HEAT Renewable thermal energy PRODUCTION Renewable energy MARKETS Efficient energy consumption Energy solutions for the future for you and the environment 34

35 Business development and productivity driven by digitalization Automation and cost efficiency Effective customer dialogue and customer growth New business opportunities Solar Wind Smart City Cloud IT/OT-convergence Energy storage Cooling Internet of things Big data Advanced analysis 35

36 Networks: Investments and structural growth Strategic priorities Organic growth - Automatic meters (AMS) - Reinvestments in the grid - Population growth Area AMS Invests NOK 2.4 billion in AMS to 700 customers by 2019 Structural growth - Primarily in geographical proximity Optimal operations - High uptime - Low costs Target: The most efficient grid company in Norway Hafslund s network area 36

37 Heat: Volume growth and new products Strategic priorities Organic growth - Customer densification - Replace oil heating in Oslo - Cooling - New products and services Increased volume The Munch museum New products and services Optimal operations - High uptime - Low costs - Target of 100% renewable heat The Deichmanske library How Youngstorget 3 will look like when it is ready in The building will be cooled with district heat from Hafslund. (Photo: Hille Melbye Architects / Thon Property) 37

38 Production: New renewable energy New aggregate in Kykkelsrud New aggregate in Vamma About the new aggregate Investment NOK 920 mill Installed effect 128 MW Production Vamma 12 1,000 GWh Increased renewable production 230 GWh Completion of the new aggregate in Vamma scheduled before the 2019 spring flood 38

39 Markets: Nordic growth strategy Nordic champion Potential new growth horizons Regional player National leader Hafslund Markets today 0.6 mill customers 0.7 mill customers 1.1 mill customers New products and business areas Nordic end user market 39

40 Increased growth in the years to come Growth last five years 1 +26% (+145 customers) NETWORKS Historical and expected investments Average 2017P-2018P: NOK 2.1 bn. Positioned for new growth opportunities +20% (+288 GWh) +11% (+330 GWh) HEAT PRODUCTION Structural growth +24% (+215 customers) MARKETS Yearly investments P 2018 P Periodic average investment 40 1 Growth ; Heat and Production compared to normal production. Ongoing investment in the new power aggregate in Vamma is included.

41 Target to maintain stable dividends Historical dividends and profit per share (NOK per share) * 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. 41 * The Board's proposed dividend for 2016.

42 Hafslund a pure play energy and infrastructure company NETWORKS Capital employed 100% = NOK 22.7 billion per HEAT 20% Heat Operational optimization and organic and structural growth Operational optimization and organic growth PRODUCTION 52% Networks 6% Markets MARKETS 1% Other 20% Production Uptime and growth Nordic growth strategy 42

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44 Agenda 1 Summary of the year Fourth quarter 2016 results 3 Theme: Strategy 4 Appendix 44

45 Oslo price (NO1) historic and forward 0.50 NOK/kWh NOK/kWh Power price - NO1 Period average 45 Sources: NordPool Spot, Nasdaq OMX per

46 Group profit and loss account NOK million Q Q D Year 2016 Year 2015 Operating revenue Cost of energy (2 644) (1 823) (821) (7 954) (6 264) Gross margin Gain/loss financial items Operating expenses (806) (775) (31) (2 860) (2 833) EBITDA Depreciation and write-downs (262) (275) 13 (949) (947) Operating profit Interest expences etc (90) (125) 35 (304) (425) Market value change loan portfolio (3) Financial expenses (60) (92) 32 (217) (288) Pre-tax profit Tax (113) (18) (95) (573) (401) Profit after tax (27) Earnings per share (EPS) in NOK (0.1)

47 Group balance sheet NOK million D Q Intangible assets (9) Fixed assets Financial assets Accounts receivables and inventory Cash and cash equivalents Assets Equity (incl. min. int.) Allocation for liabilities (126) Long-term debt Other current liabilities Short-term debt Equity and liabilities Net interest-bearing debt Equity ratio 36 % 37 % -1 % 34 % 47

48 Group cash flow NOK million Q Q D Year 2016 Year 2015 EBITDA Paid interests (73) (88) 15 (350) (419) Paid tax (18) (87) 69 (380) (344) Marketvalue changes and other liquidity adjustments (33) 20 (52) (132) (45) Change in working capital, etc. (555) (517) (38) (241) 89 Total cash flow from operations Net operations and expansion investments (571) (510) (61) (1 513) (1 282) Net purchase/sale of shares etc. (7) 350 (357) Cash flow from investments activities (578) (159) (418) (1 126) (919) Cash flow to down payments and interests (437) (35) (402)

49 Capital employed and return on capital employed Capital employed NOK 22.7 bn. per Return on capital employed (%) Markets 6% Production 8.3% 9.2% 10.0% 20% Network 52% 1% Other 20% Heat : Includes write-downs in Bio-El and secondary networks at Søndre Nordstrand of NOK -127 million.

50 Loans portfolio data Debt maturity profile NOK million Commercial paper Bonds Loans at maturity next 12 months NOK million Other loans 580 Q4 16 Q3 16 D Bonds 67 % 73 % -6 % Commercial paper 3 % 0 % 3 % Other loans 30 % 27 % 3 % NOK million Q4 16 Q3 16 D Nominal value - market value of loands (130) (160) 30 Market value interest rate and fx derivatives* (13) Average interest inlc. derivatives (%) 3.1 % 3.3 % -0.2 % Loans at maturity next quarter (988) Unused drawdown facilities (500) *) incl. currency derivatives under hedge accounting Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Commercial paper Bonds Other loans 5 0

51 Key figures Group Year 2016 Year 2015 Heat Year 2016 Year 2015 Capital matters Total assets Capital employed Equity Market capitalization Equity ratio 36 % 34 % Net interest-bearing debt Capital employed Avg. district heating income (NOK/kWh) Gross margin (NOK/kWh) Sales volume (GWh) Production Year 2016 Year 2015 Profitability EBITDA Earnings per share (EPS) Cash flow per share Capital employed Sales price (NOK/kWh) Production volume (GWh) Network Year 2016 Year 2015 Capital employed Gross margin Energy delivery (TWh) Number of customers (in 1000) NVE-capital (regulatory) Markets Year 2016 Year 2015 Capital employed of this working capital 212 (227) Number of customers (in 1 000) Volume power sales (GWh)

52 Shareholders as of # Shareholder Class A shares held Class B share held Total Ownership Share of voting rights 1 City of Oslo % 58.5 % 2 Fortum Forvaltning AS % 32.8 % 3 Kommunal Landspensjonskasse % 4.6 % 4 MP Pensjon PK % 0.0 % 5 Folketrygdfondet % 0.1 % 6 The Northern Trust Company % 0.2 % 7 Greenwich Land Securities AS % 0.1 % 8 Avanza Bank AB % 0.1 % 9 Nordnet % 0.1 % 10 JP Morgan Chase Bank % 0.0 % Total, 10 largest shareholders % 96.4 % Other shareholders % 3.6 % Total % 100 % 52

53 Definitions Group Return on equity Return on capital employed Capital employed Equity ratio Net interest-bearing debt Earnings per share Debt / EBITDA Cash flow per share Hedge ratio Hydro power Hedge ratio District heating Profit after tax last 12 months / Average 12-month equity incl. non-controlling interests Operating profit/loss / Average 12-month capital employed Equity + Net interest-bearing liabilities + Net tax positions Equity / Total assets Interest-bearing liabilities - Interest-bearing receivables and cash equivalents Profit after tax / Average number of shares Net interest-bearing debt at the end of the quarter / EBITDA last 12 months Net cash from operations / Average no. of shares Hedged amount of estimated production portfolio Hedged amount of estimated production. Net power price exposure by sales reduced by use of electricity and one-third of heat pumps 53

54 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:

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