0QUARTER2 LY REPORT 10

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1 QUARTERLY REPORT 02 10

2 BOARD COMMENTS MAIN ITEMS AS AT THE 2ND QUARTER OF 2010 The group s operating income for the first six months of the year was NOK 4,377 million (NOK 4,247 million) 1, and its operating profit amounted to NOK 884 million (NOK 1,160 million). Pre-tax profits amounted to NOK 865 million (NOK 1,550 million). After adjustment for unrealised value changes and significant one-off items, the group s operating profit amounted to NOK 960 million (NOK 1,206 million) and its profit after tax amounted to NOK 758 million (NOK 844 million). Agder Energi s operations involve the group being exposed to fluctuations in energy prices, energy quantities, currency exchange rates and interest rates. In order to secure and manage its cash flows in these areas the group makes use of hedging contracts and unrealised value changes are recognised on the profit and loss account. The unrealised value changes relating to energy, currency and interest rate contracts have a considerable impact on the group s profits. During the first half of the year these value changes amounted to NOK 107 million before tax, compared to NOK 705 million during the corresponding period last year. These changes are accountable for much of the reduction in the group s pretax profits. Cash flow from operations was NOK 147 million (NOK 787 million). Energy production during the first half of the year amounted to 3,573 GWh (4,013 GWh). The average spot price (NO2) has been 39.9 øre/kwh (32.9 øre/kwh), i.e. up by 21% compared to last year. Tax amounted to NOK 414 million (NOK 665 million). The true tax rate was 47.9% (42.9%). The group s profit after tax was NOK 451 million (NOK 885 million). When corrected for unrealised value changes and significant one-off items the group s profit after tax amounted to NOK 374 million (NOK 377 million) for the first half of the year. At the beginning of July the marketing company LOS purchased Statoil s electricity operations, thus making it Norway s largest supplier of energy to the corporate market. In June the Norwegian Water Resources and Energy Directorate granted Statkraft Agder Energi Vind (in which the group has a 38% stake) licences to develop a total of 320 MW at Kvenndalsfjellet and Storheia in Fosen, Sør-Trøndelag. The electricity generated by these wind parks will be capable of covering the energy consumption of 45,000 households. In June Statnett took over 50% of the shares in the NorGer project, which is a planned direct current cable between Norway and Germany. The other owners, Agder Energi, EGL and Lyse, subsequently each acquired stakes of 16.67%. One person died in a drowning accident at the decommissioned Kringsjå power station in the municipality of Vennesla on 13 July after intruders broke the station area. No extra security measures have been implemented at this or other decommissioned sites. 1) The accounts for the Agder Energi group have been prepared in accordance with International Financial Reporting Standards (IRFS). The accounts for the parent company and its subsidiaries have been presented in accordance with generally accepted accounting principles (GAAP), and the business areas are presented in the quarterly report in accordance with GAAP. QUARTERLY REPORT 2 ND QUARTER

3 BOARD COMMENTS Financial key figures* Key figures 2 nd quarter 2 nd quarter 2 nd quarter Operating income NOK mill. 4,377 4,247 3,510 8,287 EBITDA NOK mill. 1,100 1,361 1,256 2,694 Operating profit NOK mill ,160 1,064 2,271 Pre-tax profit NOK mill ,550 1,013 2,789 Profit after tax NOK mill ,604 Operating margin % Return on equity % Return on average capital employed % Total return on capital % Solvency ratio % Net interest-bearing liabilities/ebitda * The 2009 figures are annual values and are not directly comparable with other figures. Quarterly operating profits Accumulated operating profits NOK mill. NOK mill st quarter 2 nd quarter 3 rd quarter 4 th quarter 1 st quarter 2 nd quarter 3 rd quarter 4 th quarter QUARTERLY REPORT 2 ND QUARTER

4 BOARD COMMENTS The Otra River between Evje and Bygland in Aust-Agder. Energy business area. This business area, which consists of the company Agder Energi Produksjon, posted an operating profit of NOK 831 million (NOK 1,140 million) and a profit before tax of NOK 736 million (NOK 849 million). During the first half of the year energy prices were higher than during the same period last year and the average area price in NO2 increased by 21% to 39.9 øre/kwh (32.9 øre/kwh). Due to low contributions from the group s energy hedging activities, the prices achieved so far this year have been lower than for last year. HEP generation in the 2 nd quarter fell by 19% to 1,178 GWh (1,459 GWh). Generation for the 1 st six months was 3,573 GWh (4,013 GWh), which was a drop of 11% compared to the previous year. This decline in access to resources continued during the 2 nd quarter and so far this year it has been considerably lower than it would have been in a normal year. At the end of the first half of the year both reservoir supplies and supplies of resources (water and snow) were considerably lower than during a normal year. Tax amounted to NOK 375 million (NOK 466 million) for the 1 st half of the year, and this business area had a true tax rate of 51.0% (54.9%). Its profit after tax was NOK 361 million (NOK 383 million). Investments to the tune of NOK 62 million (NOK 69 million) were made during the first half of the year, and most of the projects involved reinvestments and investments imposed by the authorities. AE Produksjon has applied for a licence to build the Skjeggedal power station in Åmli. This power station will have an installed output of up to 7 WM and will be able to generate around 20 GWh annually - equivalent to the energy consumption of 1,000 detached houses. Network business area. This business area, which consists of the company Agder Energi Nett, posted an operating income of NOK 701 million (NOK 513 million) for the 1 st six months of the year. Its operating profit increased to NOK 194 million (NOK 114 million). An QUARTERLY REPORT 2 ND QUARTER

5 BOARD COMMENTS increase in the income framework is the main reason for this improvement. This increase is attributable both to KILE (Compensation for Unsupplied Energy) and previous years pension expenses, as well as a general increase in the income framework for the network companies. Investments were made to the tune of NOK 147 million (NOK 223 million). This reduction is due to both a tougher winter and a slight drop in total investment levels. Markets business area. This business area comprises the following companies: LOS, LOS Bynett and LOS Bynett Vestfold. Its operating profit for the first half of the year was NOK 48 million (NOK 48 million). LOS has managed to retain a stable share of the private market in Agder despite a tough competitive situation. The volume of energy supplied by LOS to the corporate market is still increasing. This company supplied a total volume of 4,084 GWh (3,738 GWh) during the first half of the year. At the beginning of July LOS purchased Statoil s electricity operations which comprise annual deliveries of around 4 TWh. This acquired portfolio represents an annual turnover of around NOK 1.2 billion. LOS Bynett is responsible for the group s fibre optics initiative in Agder and Vestfold. It posted an operating loss for the first half of the year of NOK 1 million. Services business area. This business area, which consists of the Otera group, Nettkonsult, Agder Energi Varme and Sopran, posted an operating loss for the first half of the year of NOK 8 million (NOK 39 million). The Otera group posted an operating loss of NOK 16 million (NOK 29 million). This reduction in profits can primarily be attributed to a challenging market as a result of the financial crisis, as well as difficult weather conditions during the winter. The group suffered a drop in turnover of 17% compared to the corresponding period last year. Its order reserves are satisfactory and are the same as for the same period last year. Nettkonsult provides planning and project planning services in the field of electricity supply and telecommunications and electricity safety. This company posted an operating profit of NOK 1 million (minus NOK 1 million). Nettkonsult s order reserves were satisfactory at the end of the period. At the end of the first six months of the year Nettkonsult s electricity safety operations were transferred to its wholly-owned subsidiary, Nettkonsult Elsikkerhet. AE Varme posted an operating profit of NOK 5 million (NOK 8 million). It supplied 63 GWh (46 GWh) of heating and cooling energy during the 1 st half of the year. This increase in volume is attributable to customer growth and lower temperatures during the first few months of the year. Nevertheless, the contribution provided by energy sales was reduced due to the fact that much of the increase in volume during the winter had to be supplied by using oil and electricity. When heat deliveries from Returkraft commence at the end of 2010, an increase is expected in both the renewables percentage and profitability. Investments so far this year have amounted to NOK 56 million (NOK 69 million). Connection to Returkraft s waste incineration plant at Langemyr is the company s largest individual project. The debt collection company Sopran posted an operating profit of NOK 2 million (NOK 5 million) for the first half of the year. This company s sales have increased when compared to the corresponding period last year due to the fact that Vestfold Inkasso AS has now been merged into Sopran. Cash flow and capital. Cash flow from operations was reduced to NOK 147 million (NOK 787 million) for the first half of the year. This reduction compared to the same period last year is largely attributable to increased tax and working capital. NOK 357 million (NOK 642 million) was spent on investment activities. Around half of the group s investments related to the electricity network. Net financial items for the first half of the year amounted to a deficit of NOK 19 million (NOK 390 million), which is a drop of NOK 408 million compared to the same period last year. Unrealised value changes in currency contracts of NOK 188 million (NOK 657 million) and contributions from realised currency contracts of minus NOK 56 million (minus NOK 237 million) are the main reason for this reduction. Unrealised value changes in interest rate contracts amounted to a deficit of NOK 39 million (NOK 10 million). Average interest-bearing liabilities increased by NOK 780 million during the first half of the year to NOK 6,120 million (NOK 5,340 million). The average annualised interest rate for the group s loan portfolio was 4.3% (4.6%). The group had liquidity reserves amounting to NOK 1,112 million (NOK 823 million) at the end of the period in the form of non-utilised loan frameworks and unrestricted liquid assets. The group sold its head office at Tangen in Kristiansand in July. This sale has not affected the accounts for the first half of the year. Operations and the environment. At the end of the first half of the year QUARTERLY REPORT 2 ND QUARTER

6 BOARD COMMENTS the group had 1,682 (1,636) permanent and temporary employees who were responsible for a total of 1,640 (1,593) man-years. Absence from work due to illness has so far this year amounted to 4.4% (4.7%). There was an increase in the number of accidents at work during the first half of the year, but there was a substantial reduction in the degree of severity and the consequences of these. Twenty three (13) accidents at work involving personal injury were recorded for the group during the second quarter. These all occurred in Otera. Of these accidents, 6 (6) resulted in absences totalling 22 (87) days. The group s accident figures give an H1 classification (injuries resulting in absence per million working hours) of 4.4 (4.1), an H2 classification (injuries with and without absence per million working hours) of 16.1 (9.6) and an F classification (days off work as a result of injuries per million working hours) of 18.9 (64.9). Future outlook. The dry weather continued during the 2 nd quarter and water flow was considerably lower than usual during the first half of the year. At the end of the quarter the group had reserves (water and snow) that were considerably lower than at the same time last year. There are huge variations in energy prices and these are affected by hydrological conditions and the prices of oil, gas, coal and CO 2. The forward prices for energy are indicating higher levels for the remainder of 2010 when compared to last year. If the group has normal access to its resources during the remainder of the year then it can expect to see a drop in energy generation and lower income from current energy sales. Risk and uncertainty factors. Agder Energi s earnings for the remainder of the year will be influenced by a number of factors. The contribution provided by net energy sales is the most important factor affecting the group s underlying profitability developments. Both changes in energy prices and access to resources (water and snow) will have a considerable impact on net energy sales. Because energy sales are conducted in Euros, the figures reported in Norwegian krone will be affected by fluctuations in the EUR/NOK exchange rate. Changes in the actual value of the group s hedging contracts relating to energy, exchange rates and interest rates will also affect the group s results. Board statement. We confirm that, to the best of our knowledge, the summary of the group s half-yearly accounts for the period 1 January to 30 June 2010, has been prepared in accordance with IAS 34 Interim Financial Reporting and that the information contained in the half-yearly report provides a true picture of the company s and group s assets, liabilities, financial position and overall profits, as well as a true representation of the information contained in the fourth subsection of Section 5-6 of the Norwegian Securities Trading Act. Kristiansand, 26. August 2010 The Board of Agder Energi AS Sigmund Kroslid Mette Gundersen Bente Zeline Rist Tønnes Seland Oluf Ulseth Chairman of the Board Deputy Chariman board memeber Board member Board member Jon Brandsar Kristin Steenfeldt-Foss Elisabeth Morthen Johan Ekeland Board member Board member Board member Board member Oddvar E. Berli Øyvind Østensen Rolf Bjarne Eriksen Tom Nysted Board member Officer Board member Board member Chief Executive QUARTERLY REPORT 2 ND QUARTER

7 PROFIT AND LOSS ACCOUNT 2 nd quarter 1 st 6 months Year (Figures in NOK) Energy sales 1,256 1,124 3,204 3,152 5,846 Transmission income Other operating income ,472 Unrealised value changes, energy contracts Total operating income 1,722 1,371 4,377 4,247 8,287 Energy purchases ,965 1,638 3,061 Transmission expenses Other cost of sales Wages and salaries Depreciation and write-downs Property tax and licence fees Other operating expenses Total operating expenses 1,607 1,361 3,493 3,087 6,016 Operating profit/loss ,160 2,271 Profit/loss from associated companies and joint ventures Financial income Unrealised value changes, currency and interest rates ,243 Financial expenses Net financial items Profit/loss before tax ,550 2,789 Tax on profits Resource rent tax Tax ,185 Profit/loss after tax ,604 Including minority s % Including majority s % ,597 Profit per share (NOK) Profit per share, diluted (NOK) EXTENDED PROFIT AND LOSS ACCOUNT Profit/loss after tax ,604 Estimated differences, pensions Tax, estimated differences, pensions Total profit/loss ,700 Including minority s % Including majority s % ,693 QUARTERLY REPORT 2 ND QUARTER

8 BALANCE SHEET (Figures in NOK) Deferred tax assets Intangible fixed assets Tangible fixed assets 10,962 10,897 10,718 10,876 Investments in associated companies and joint ventures Other financial fixed assets Total fixed assets 2,506 12,292 12,518 12,375 Assets classified as being held for sale Stocks Receivables 1,258 1,556 1,243 1,483 Derivatives Liquid assets Total current assets 2,158 2,373 2,170 2,300 TOTAL ASSETS 14,664 14,665 14,688 14,675 Paid-in capital 2,072 2,072 2,072 2,072 Retained earnings 1,282 1, ,639 Minority interests Total equity 3,377 4,187 2,944 3,740 Deferred tax Provisions for commitments 1,727 1,719 2,212 1,759 Long-term interest-bearing liabilities 4,950 4,656 4,094 4,307 Total long-term liabilities 6,978 6,679 6,619 6,382 Current interest-bearing liabilities 2,006 1,117 1,937 1,637 Tax payable ,149 Derivatives 1, ,348 1,001 Other current interest-free liabilities 809 1, ,149 Total current liabilities 4,309 3,799 5,125 4,553 TOTAL EQUITY AND LIABILITIES 14,664 14,665 14,688 14,675 QUARTERLY REPORT 2 ND QUARTER

9 CASH FLOW STATEMENT 2 nd quarter 1 st 6 months Year (Figures in NOK) Cash flow from operations Profit/loss before tax ,549 2,789 Depreciation and write-downs Unrealised value changes, energy, currency and interest rate contracts ,245 Profit/loss from associated companies and joint ventures Tax paid Change in net operating capital, etc Net cash flow from operations ,375 Investment activities Investments in tangible and intangible fixed assets Company purchases/financial investments Net changes in lending Sales of tangible and intangible fixed assets Company sales/financial investments Net cash flow from investment activities ,081 Financing activities Taking out new long-term liabilities , ,002 Paying off long-term liabilities ,165-1,248 Net changes in current liabilities 797 1, , Paid dividends Net cash flow in financing activities Net changes in liquid assets Liquid assets at the beginning of the period Liquid assets at the end of the period QUARTERLY REPORT 2 ND QUARTER

10 EQUITY CAPITAL STATEMENT Paid-in Retained Total Minority Total (Figures in NOK million) capital earnings majority interest equity Equity, 1 January , , ,024 Profit for the year 0 1,597 1, ,604 Estimate differences, pensions Commitments relating to purchases of minority interests Paid dividends Changes as a result of acquisitions, etc Equity, 31 December ,072 1,639 3, ,740 Profits so far this year Paid dividends Changes of a result of acquisitions, etc Equity, 30 June ,072 1,282 3, ,377 BUSINESS AREAS Operating profit in accordance with GAAP 2 nd quarter 1 st months Year (Figures in NOK million) Energy ,140 2,090 Network Markets Services Parent company/other /eliminations Group (GAAP) ,037 1,241 2,236 QUARTERLY REPORT 2 ND QUARTER

11 Design: Dale+Bang - Photo: Arild Danielsen - Cover photo of the Otra River between Evje and Bygland in Aust-Agder.