QUARTERLY REPORT

Transcription

1 QUARTERLY REPORT QUARTERLY REPORT 1 ST QUARTER

2 Q HIGHLIGHTS Agder Energi s first quarter net income under IFRS was NOK 71 million (controlling interest s share), compared with NOK 325 million in the year-earlier period. Overall, unrealised gains and losses on electricity, currency and interest rate contracts as well as on Euro-denominated loans reduced net income by NOK 218 million, in contrast to a positive contribution of NOK 34 million last year. Adjusted for this, net income was NOK 289 (291) million. Operating revenues in the period came to NOK 3,321 million (Q1 2017: NOK 2,866 million). For its internal reporting Agder Energi uses Norwegian Generally Accepted Accounting Principles (NGAAP), as this gives an accurate picture of its underlying operations. Under NGAAP, Agder Energi made an operating profit of NOK 703 (614) million in the first quarter. Pre-tax profit was NOK 641 (583) million. Net income amounted to NOK 246 million, down from NOK 302 million in the year-earlier quarter. The company generated 3,052 GWh (2,708 GWh) of hydroelectric power in the first quarter of the year. The average spot price (in the NO2 region) in the first quarter of 2018 was 36.1 øre/kwh (27.8 øre/kwh), up 30%. Southern Norway experienced heavy snow in January and February. Trees weighed down by snow outside the corridors that are cleared alongside the grid caused power cuts in several parts of the Agder region. This led to the biggest power outage since Agder Energi was founded. Agder Energi Nett is implementing several measures to improve reliability of supply for customers. In May Agder Energi sold 51% of the shares in Otera Infra to the contracting group Roadworks, a financially sound partner that complements our business and that is looking to grow. The aim is to improve Otera Infra s profitability, ensure value creation and safeguard jobs. Key figures Q Q Q Full year 2017 Operating revenues NOK millions 3,321 2,866 2,402 10,358 EBITDA 1) NOK millions ,770 Operating profit NOK millions ,062 Profit before tax NOK millions Net income (controlling interest's share) NOK millions Cash flow from operating activities NOK millions ,189 Purchase of property, plant, equipment and intangible assets NOK millions ,447 Capital employed 2) NOK millions 13,641 13,975 13,815 13,805 Operating margin % Return on capital employed 3) % Equity ratio % ) Operating profit before depreciation and impairment losses. 2) At the end of the reporting period. 3) Before tax, based on profit/loss and capital employed for the past four quarters. QUARTERLY REPORT 1 ST QUARTER

3 Operating profits for the quarter Accumulated operating profit NOK. mill 1000 NOK. mill Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Business areas Agder Energi is organised as a corporate group, with Agder Energi AS as the parent company. It has four business areas: Hydroelectric Power, Network, Energy Management and Marketing. The financial statements of the business areas follow Norwegian Generally Accepted Accounting Principles (NGAAP), as that is what is used for internal corporate governance purposes. Hydroelectric Power business area This area had NOK 1,124 (907) million of operating revenues in the first quarter, while its operating profit was NOK 791 (539) million. Pre-tax profit was NOK 769 (518) million. In the first quarter, it generated 3,052 GWh (2,708 GWh) of hydroelectric power. The Group s hydrological resources (the amount of water and snow both in and outside its reservoirs) fell over the quarter and were slightly lower than normal at the end of the first quarter. All of Agder Energi s electricity is generated in the NO2 price zone. At the end of the quarter, overall reservoir levels for all power companies in the price zone were around 5% below the average for the past ten years. The average spot price (in the NO2 region) in the first quarter of 2018 was 36.1 øre/kwh (27.8 øre/kwh), up 30%. A higher marginal cost of coal power, unusually low temperatures and falling hydrological resources were the most important drivers of the increase. The Group s electricity price hedges made a small negative contribution in the first quarter of 2018, with the prices achieved being somewhat lower than spot prices. The tax expense was NOK 422 (270) million, giving an effective tax rate of 54.9% (52.2%). The tax expense rose as a result of higher pre-tax profit and resource rent tax payable on account of the increase in spot prices, higher volumes and a higher tax rate. Net income amounted to NOK 347 (248) million. The business area invested NOK 131 (93) million in property, plant and equipment in the first quarter. The increase was due to the start of the Åseral Nord project, which involves building a new dam at Langevatn and refurbishing the tunnel between Langevatn and Nåvatn in Åseral, which has been affected by landslides. The Network business area The Network business area is responsible for developing, operating and maintaining the transmission and distribution grid in Aust-Agder and Vest-Agder. In the first quarter, Southern Norway experienced heavy snowfall. In some places, the amount of snow was four times the average. Heavy, wet new snow combined with temperature fluctuations led to trees bending or falling onto power lines, causing power cuts in several parts of the Agder region. This led to the biggest power outage since Agder Energi was founded, and led to increased costs, in the shape of expenses related to fault resolution and compensating customers, and a loss of revenues. The loss of revenues was due to KILE (quality-adjusted income cap for energy not supplied). The Norwegian Water Resources and Energy Directorate sets an income cap for grid operators. In the event of a power cut, the QUARTERLY REPORT 1 ST QUARTER

4 Market prices in price zone NO2 Reservoir storage levels in price zone NO2 NOK/MWh % January February March April May June July August September October November December 10 0 January February March April May June July August September October November December Average last 10 years income cap is reduced to reflect the costs inflicted on customers by the power outage. As a result of the snowfall events in January and February, Agder s income cap was reduced by NOK 81 million. This was the main reason why operating revenues in the first quarter fell to NOK 294 (350) million, NOK 56 million lower than in the yearearlier period. The heavy snow resulted in a combined cost of NOK 44 million for compensating customers and fault resolution. Overall, the extreme weather reduced net income in the first quarter by NOK 125 million. Consequently, the business area suffered a net loss of NOK 38 million (net income of NOK 78 million). The business area invested NOK 176 (176) million in the first quarter, of which NOK 163 (143) million related to investments in new projects. NOK 67 (77) million was invested in the smart meter project. Including NOK 19 (33) million of customer contributions, gross investment in the business area was NOK 195 (209) million. The Energy Management business area The Energy Management business area includes Agder Energi Kraftforvaltning, LOS Energy and Agder Energi s electricity market operations in Germany. Agder Energi Kraftforvaltning is responsible for scheduling and hedging the hydropower portfolio on behalf of the Hydroelectric Power business area. LOS Energy is one of Scandinavia s leading energy retailers. In Norway, LOS Energy is the leading supplier of electricity to the commercial market. LOS Energy also has a securities trading licence for the Nordic countries, and significant turnover in the Swedish market, as well as customers in Denmark and Finland. Electricity market operations involve managing renewable energy, optimising distributed generation and selling demand response services. The business area s turnover was NOK 1,738 (1,111) million in the first quarter, up NOK 627 million from the first quarter last year. Over half of the improvement was due to an increase in turnover at LOS Energy, reflecting higher prices. Market operations in Germany also contributed significantly to turnover growth, thanks to growth in volumes managed. The business area made an operating loss of NOK 28 million, compared with a profit of NOK 14 million in the year-earlier quarter. The business that offers market access for small electricity generators and demand response services in Germany is lossmaking. Lower margins at LOS Energy also negatively affected results. The operating loss includes a NOK 8 (8) million depreciation expense arising from the acquisition of LOS Energy in Sweden. The Marketing business area The Marketing business area s turnover was NOK 561 (535) million in the first quarter, while operating profit was NOK 19 (39) million. The main companies in this business area are LOS, Otera and Agder Energi Varme. The Group s venture capital portfolio also forms part of the business area. The electricity retailer LOS s turnover in the first quarter was NOK 245 million, compared with NOK 221 million in the year-earlier period. The company s QUARTERLY REPORT 1 ST QUARTER

5 operating profit was NOK 15 (28) million. Otera supplies contracting services for the installation, operation, maintenance and servicing of electricity and transport infrastructure. In the first quarter, Otera s turnover was NOK 208 (232) million. The first quarter is normally Otera s weakest, and it made a NOK 8 million operating loss, down from a NOK 1 million profit in the same period last year. The first quarter of 2017 included a gain on the disposal of Otera XP, which means that the underlying performance last year was weaker than this year. Agder Energi Varme s turnover was NOK 46 (40) million, while its operating profit was NOK 14 (12) million. The amount of heating energy supplied in the first quarter rose to 64 GWh (56 GWh), mainly due to lower-than-normal temperatures. Customer growth and rising sales of construction site heating also helped to push up volumes. Our hedging of energy contracts made a negative contribution in the period. The company invested NOK 1 (7) million. Cash flows and capital adequacy Cash flow from operating activities came to NOK 683 million in the first quarter, compared with NOK 204 million the previous year. Operating profit adjusted for depreciation and unrealised gains and losses on energy and currency contracts was NOK 918 (768) million. The rest of the increase in cash flow from operating activities reflected changes in working capital, which fluctuates from quarter to quarter but evens out over the long run. Investment in property, plant and equipment and intangible assets amounted to NOK 326 (322) million. NOK 19 (33) million of this comprised investments in power distribution networks paid for by customers. On the statement of cash flows investments are presented gross, with customer payments included under net cash provided by operating activities. The Hydroelectric Power and Network business areas were responsible for 98% of the investments in property, plant and equipment. Net cash used in investing activities totalled NOK 337 million in the first quarter, compared with NOK 299 million in the yearearlier period. Net financial income in the first quarter came to NOK 2 million (NOK 52 million expense). Interest on the Group s debt portfolio was NOK 62 (62) million. There was an unrealised NOK 70 (2) million gain on our interest rate swaps. Investments in associates contributed a NOK 2 (7) million loss. Average interest-bearing liabilities were NOK 9.0 (8.5) billion in the first quarter, and the average interest rate on the debt portfolio was 2.8% (2.9%). The Group had a liquidity buffer of NOK 2.7 (1.5) billion, consisting of unused credit facilities and bank deposits. Operations and working environment At the close of the quarter, the Group had 1,200 (1,376) full-time and temporary employees, representing 1,166 (1,346) full-time equivalents. The main reason for the reduction over the past twelve months was the sale of Net- Nordic. The sickness absence rate for the first quarter was 4.0% (3.7%). The 12-month rolling average sickness absence rate was 3.5% (3.5%). We recorded 4 (1) occupational accidents in the first quarter. The incidents occurred at Otera Infra (2), AE Vannkraft (1) and AE Varme (1). 3 (1) of the incidents resulted in lost time. So far this year, 33 (48) days have been lost to injury. The accident figures are equivalent to a 12-month rolling average lost time injury frequency (number of LTIs per million work hours) of 3.0 (3.0), a total injury frequency (number of injuries, whether or not they resulted in lost time, per million work hours) of 5.1 (5.0) and an injury severity rate (number of days lost per million work hours) of 61 (177). Outlook The prices for annual contracts in the futures markets indicate that prices in 2018 will be higher than in At the end of the quarter, the Group s hydrological resources (water and snow) were slightly below normal. Assuming normal precipitation levels, we expect hydroelectric power generation and turnover from energy sales to remain relatively high in In the first quarter, the financial results of the Network business area suffered as a result of significantly higher expenses for fault resolution, compensation and KILE caused by the heavy snowfall in January. We therefore expect the net income of this business area to fall significantly in Kristiansand, 15 May 2018 The Board of Directors of Agder Energi AS QUARTERLY REPORT 1 ST QUARTER

6 INCOME STATEMENT (Amounts in NOK million) Q1 Energy sales Transmission revenues Other operating revenues Gains and losses on energy and currency contracts Total operating revenues Energy purchases Transmission expenses Other raw materials and consumables used Employee benefits Depreciation and impairment losses Property taxes and licence fees Other operating expenses Total operating expenses Operating profit Share of profit of associates and joint ventures Financial income Unrealised gains/losses on interest rate contracts Financial expenses Net financial income/expenses Profit before tax Income tax Resource rent tax Tax expense Net income from continuing operations Net income from discontinued operations Net income Of which attributable to non-controlling interests Of which attributable to controlling interest QUARTERLY REPORT 1 ST QUARTER

7 COMPREHENSIVE INCOME (Amounts in NOK million) Q1 Net income Other comprehensive income Cash flow hedges Translation differences Tax impact Total items that may be reclassified to income statement Remeasurements of pensions Tax impact Total items that will not be reclassified to income statement Total other comprehensive income Comprehensive income Of which attributable to non-controlling interests Of which attributable to controlling interest QUARTERLY REPORT 1 ST QUARTER

8 STATEMENT OF FINANCIAL POSITION (Amounts in NOK million) 31/03/ /03/17 31/12/2017 Deferred tax assets Intangible assets Property, plant and equipment Investments in associates and joint ventures Derivatives Other non-current financial assets Total non-current assets Inventories Receivables Derivatives Cash and cash equivalents Total current assets TOTAL ASSETS Paid-in capital Retained earnings Non-controlling interests Total equity Deferred tax Provisions Derivatives Interest-bearing non-current liabilities Total non-current liabilities Interest-bearing current liabilities Tax payable Derivatives Other non-interest-bearing current liabilities Total current liabilities TOTAL EQUITY AND LIABILITIES QUARTERLY REPORT 1 ST QUARTER

9 STATEMENT OF CASH FLOWS Q1 Full-year (Amounts in NOK million) Cash flow from operating activities Profit before tax from continuing operations Profit before tax from discontinued operations Depreciation and impairment losses Unrealised gains/losses on energy, currency and interest rate contracts Share of profit of associates and joint ventures Loss/gain on disposals Tax paid Change in trade receivables Change in trade payables Change in net working capital, etc Net cash provided by operating activities Investing activities Purchase of property, plant, equipment and intangible assets Purchase of property, plant and equipment paid for by customers Purchase of businesses/financial assets Net change in loans Sale of property, plant, equipment and intangible assets Sale of businesses/financial assets Net cash used in investing activities Financing activities New long-term borrowings Repayment of long-term borrowings Net change in current liabilities Dividends paid Net cash used in financing activities Net change in cash and cash equivalents Cash and cash equivalents at start of period Cash and cash equivalents at end of period QUARTERLY REPORT 1 ST QUARTER

10 STATEMENT OF CHANGES IN EQUITY (Amounts in NOK million) Paid-in capital Cash flow hedges Translation differences Retained earnings Total for controlling interest Noncontrolling interests Total equity Equity at 01/01/ Net income for the year Other comprehensive income and expenses Dividends paid Changes due to acquisitions, disposals, etc Equity at 31/12/ Equity at 01/01/ Net income for the year Other comprehensive income and expenses Changes due to acquisitions, disposals, etc Equity at 31/12/ QUARTERLY REPORT 1 ST QUARTER

11 BUSINESS AREAS OPERATING REVENUES UNDER NGAAP Q1 Full-year (Amounts in NOK million) Hydroelectric power Network Energy management Marketing Parent company/other/eliminations Group (NGAAP) OPERATING PROFIT UNDER NGAAP Q1 Full-year (Amounts in NOK million) Hydroelectric power Network Energy management Marketing Parent company/other/eliminations Group (NGAAP) NET INCOME UNDER NGAAP Q1 Full-year (Amounts in NOK million) Hydroelectric power Network Energy management Marketing Parent company/other/eliminations Group (NGAAP) Of which attributable to non-controlling interests Of which attributable to controlling interest QUARTERLY REPORT 1 ST QUARTER

12 RECONCILIATION OF FIGURES FOR BUSINESS AREA WITH REPORTED IFRS FIGURES OPERATING REVENUES Q4 Full-year (Amounts in NOK million) Operating revenues under NGAAP Energy sales Surplus/shortfall in transmission revenues Unrealised gains and losses Other Operating revenues under IFRS OPERATING PROFIT Q4 Full-year (Amounts in NOK million) Operating profit (NGAAP) IFRS adjustments to revenues (see above) Goodwill amortisation and impairment Electricity and currency contracts Other Operating profit under IFRS NET INCOME Q4 Full-year (Amounts in NOK million) Net income (NGAAP) IFRS adjustments to operating profit (see above) Unrealised gains and losses on interest rate swaps Other financial income/expenses Tax Net income (IFRS) QUARTERLY REPORT 1 ST QUARTER

13 NOTES TO THE INTERIM FINANCIAL STATEMENTS NOTE 1 Accounting principles Agder Energi s consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU. The same accounting principles and calculation methods have been applied as for the annual financial statements for 2017, with the exception of the implementation of IFRS 15 Revenue from contracts with customers and IFRS 9 Financial instruments. IFRS 9 Financial instruments The implementation of IFRS 9 has not had any significant impact on the financial statements of Agder Energi. IFRS 15 Revenue from contracts with customers Agder Energi implemented IFRS 15 with effect from 1 January The standard applies to the recognition of revenue. Around 90% of Agder Energi s revenue from customers comes from the sale of energy or transmission and distribution services. Within those areas, the standard has had the following impacts: There is widespread use of financial instruments within the Hydroelectric Power business area. They are mainly used as economic hedges for revenues from hydroelectric power generation. In 2017 and earlier, realised gains and losses on these hedges were presented as energy sales, while unrealised gains and losses were presented on a separate line. Realised gains and losses on financial instruments do not meet the definition of revenue from customer contracts in IFRS 15. Nor do they meet the requirements for accounting hedges. They have therefore been presented together with unrealised changes in value on the line for Gains and losses on electricity and currency contracts. Within the Energy Management business area, we offer management services where we sign contracts with customers that mirror the conditions obtained by Agder Energi in financial markets. The products are offered in volumes that reflect customers expected actual electricity consumption. In 2017 and earlier, realised gains and losses on financial contracts with customers were considered an integrated part of the electricity delivery and were presented as energy sales. Unrealised gains and losses were presented on a separate line. Under IFRS 15, only payments for the physical supply of electricity to customers satisfy the definition of revenue from contracts with customers. Realised gains and losses on financial contracts have therefore been taken out of energy sales and are now presented together with unrealised gains and losses under Gains and losses on electricity and currency contracts. Consequently, realised gains and losses on contracts with financial markets have been moved from energy purchases to the line for Gains and losses on electricity and currency contracts. Applied to the financial statements for 2017, the above changes have reduced energy sales by NOK 150 million, and increased energy purchases by NOK 135 million. Meanwhile, NOK 285 million of revenue has been recognised under Gains and losses on electricity and currency contracts, so the net impact on profit is 0. The comparative figures for 2017 have been restated. In the Network business area, customers contribute toward the cost of upgrades or new connections to the power grid. Under the previous rules, Agder Energi did not consider this to be a separate performance obligation. This continues to be our assessment. We have also maintained our view that customer contributions should be recognised as revenue over the useful life of the asset. There are discussions within the industry as to whether upgrades and new connections should be considered separate performance obligations under IFRS 15 and about when customer contributions should be recognised. If standard practice in the industry turns out to be different from Agder Energi s assessment, it may result in us changing our conclusion. The impacts of IFRS 15 described above only affect the presentation of the income statement. They do not affect the timing of revenue recognition and therefore have no impact on the Group s equity. QUARTERLY REPORT 1 ST QUARTER

14 Accounting principles of the business areas The financial statements of the parent company and subsidiaries adhere to Norwegian Generally Accepted Accounting Principles (NGAAP). Internal reporting to the management team is also based on NGAAP, and in the interim report the business areas are also presented using NGAAP. These figures are not audited. NOTE 2 Business areas Segment information is reported using the same segments as used in financial reports to the senior management team. Segment reporting is used by Agder Energi s management to assess the performance of the various business areas, and to allocate resources to them. See page 11 for tables showing the financial performance of the business areas. NOTE 3 Unrealised gains and losses The table below gives details of how unrealised gains and losses affect the financial results reported by the Group: (Amounts in NOK million) Unrealised Q Q Realised Total Unrealised Realised Total Unrealised Embedded derivatives Other electricity and currency contracts Total gains and losses on electricity and currency contracts Realised Total Unrealised gains and losses on interest rate contracts Impact of unrealised gains and losses on pre-tax profit Tax effect of unrealised gains and losses Income tax Resource rent tax* Total Impact of unrealised gains and losses on net income *Only applies to embedded derivatives QUARTERLY REPORT 1 ST QUARTER

15 NOTE 4 Changes in interest-bearing liabilities The table below gives details of changes in the Group s interest-bearing liabilities so far this year: (Amounts in NOK million) Interest-bearing liabilities at 31/12/ New long-term borrowings (cash item) 450 Repayment of long-term borrowings (cash item) -157 Net change in overdraft and other current liabilities (cash item) -480 Exchange rate fluctuations (non-cash item) -39 Gains/losses on fair value hedges (non-cash item) -9 Interest-bearing liabilities at 31/03/ NOTE 5 Alternative performance measures Agder Energi s consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). The parent company and subsidiaries present their financial statements in accordance with Norwegian Generally Accepted Accounting Principles (NGAAP), and internal reporting to the management team is also based on NGAAP. The senior management team believes that NGAAP gives a better picture of the Group s underlying performance, since it does not include unrealised gains and losses on electricity, currency and interest rate contracts and on Euro-denominated loans used for hedging purposes. However, changes in the market values of the Group s trading portfolios are also included under NGAAP. Other than this, there are only minor differences between the figures reported under IFRS and NGAAP. The tables on page 12 show the reconciliation of reported IFRS figures with NGAAP figures. QUARTERLY REPORT 1 ST QUARTER

16 Design: Kikkut kommunikasjon, Photo: Agder Energi, English translation: Språkverkstaden Agder Energi P.O. Box 603 Lundsiden, 4606 Kristiansand Visiting address (head office): Kjøita 18, 4630 Kristiansand Tel. no.: Organisation number: NO Front page: Otera repairs the damage after a tree crossed the stream line at Senumstad Bridge in Birkenes. QUARTERLY REPORT 1 ST Front page: Hallandsfoss in Valle. QUARTER