04 10 QUARTERLY REPORT
BOARD COMMENTS HIGHLIGHTS AS AT THE 4TH QUARTER OF 2010 The Group s operating revenue was NOK 9,435 million (NOK 8,287 million). The main reason for the increase was higher revenue from the Group s retail business. Operating profit was NOK 1,635 million (NOK 2,271 million). Pre-tax profit amounted to NOK 1,372 million (NOK 2,789 million). Adjusted for unrealised valuation movements and major exceptional items, the Group s operating profit was NOK 1,988 million (NOK 2,218 million) and its pre-tax profit was NOK 1,522 million (NOK 1,494 million). Agder Energi s operations expose it to risk from changes in electricity prices, electricity generation levels, exchange rates and interest rates. In order to hedge and manage cash flows in these areas, the company uses hedging instruments and measures unrealised valuation movements through its profit and loss account. Unrealised valuation movements on power, currency and interest rate contracts have a big impact on the company s financial results. Over the year, valuation movements contributed NOK -151 million before tax, compared with NOK 1,249 million in the year-earlier period. This difference was the main reason for the fall in the Group s pre-tax profit. In 2010, power generation fell by 16 % to 6,586 GWh (7,831 GWh). The average spot price (NO2) was 40.7 øre/kwh (31.1 øre/kwh), up 31 % on the previous year. The Group s tax expense was NOK 621 million (NOK 1,185 million). The effective tax rate was therefore 45.2 % (42.5 %). Profit after tax amounted to NOK 751 million (NOK 1,604 million). Adjusted for unrealised valuation movements and major exceptional items, profit after tax was NOK 859 million (NOK 670 million) for the year. In December the Norwegian and Swedish governments agreed on the basic principles for a common market for Norwegian/Swedish green power certificates, which will be introduced at the start of January 2012. The aim of the proposed market is to increase generation by 26.4 TWh from 2012 to 2020, with 13.2 TWh coming from each country. Agder Energi is well-positioned to benefit from the arrival of the certificate market, with just under 700 GWh of new hydropower generation under construction or in planning. Agder Energi also has a large portfolio of wind power projects through its joint ventures SAE Vind and Dalane Vind. In February 2011, Agder Energi, E-CO, Lyse, Vattenfall and Scottish and Southern Energy signed a letter of intent on the construction of the first grid connection between Norway and the UK. The aim is for the connection, which will have a capacity of 1,200-2,000 MW, to be operational by 2020. Financial key figures Key figures 2010 2009 2008 Operating income NOK mill. 9 435 8 287 7 211 EBITDA NOK mill. 2 071 2 694 2 114 Operating profit NOK mill. 1 634 2 271 1 701 Pre-tax profit NOK mill. 1 372 2 789 1 149 Profit after tax NOK mill. 751 1 604 514 Operating margin % 17.3 27.4 23.6 Return on equity % 20.8 47.4 15.8 Return on average capital employed % 15.3 33.6 16.6 Total return on capital % 10.2 20.2 9.9 Solvency ratio % 20.9 25.5 19.6 Net interest-bearing liabilities/ebitda 3.6 2.2 1.9 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 in Norway, (NGAAP), and the business areas are presented in the quarterly report in accordance with NGAAP. QUARTERLY REPORT 4 TH QUARTER 2010 2
BOARD COMMENTS Quarterly operating profits Accumulated operating profits NOK mill. NOK mill. 1 800 1 600 1 400 1 200 1 000 800 600 400 200 0-200 3 000 2 500 2 000 1 500 1 000 500 0 1 st quarter 2 nd quarter 3 rd quarter 4 th quarter 1 st quarter 2 nd quarter 3 rd quarter 4 th quarter 2008 2009 2010 2008 2009 2010 The Energy business area In 2010, this business area, which consists of the company Agder Energi Produksjon, made an operating profit of NOK 1,541 million (NOK 2,090 million) and a pretax profit of NOK 1,415 million (NOK 1,621 million). Electricity prices in 2010 were higher than in 2009, and the average price in the NO2 region rose by 31 % to 40.7 øre/kwh (31.1 øre/ kwh). Due to the weak performance of the Group s electricity price hedges, the average price it achieved was lower than in 2009. The company generated 2,061 GWh (2,437 GWh) of hydroelectric power in the fourth quarter, 15 % less than in the year-earlier period. It generated 6,586 GWh (7,831 GWh) in 2010, down 16 % on 2009. In the fourth quarter there was once again very little precipitation, and precipitation levels for the year as a whole were significantly below normal. Annual power generation was the second lowest in the history of Agder Energi. At the close of the year, hydrological resources (water and snow) were significantly below normal. The tax expense for the year amounted to NOK 625 million (NOK 824 million), with the decrease being due to lower pre-tax profit, as well as a NOK 168 million reduction associated with changes in deferred resource rent tax. The effective tax rate for the business area was 44.2 % (50.8 %). Profit after tax for the year amounted to NOK 790 million (NOK 797 million). The business area invested NOK 186 million (NOK 207 million) in 2010, most of which related to reinvestments and investments required by the authorities. The Network business area This business area, which consists of the company Agder Energi Nett, had NOK 1,418 million (NOK 1,017 million) of operating revenue in 2010. Operating profit rose to NOK 386 million (NOK 220 million). The main reason for the improvement was higher revenues, but lower operating expenses also contributed. The increase in revenue was due to compensation for past years energy not QUARTERLY REPORT 4 TH QUARTER 2010 3
BOARD COMMENTS Winter in the mountains of Setesdal. supplied (KILE) and pension expenses, as well as an increase in the cap on the rates that grid operators can charge. The compensation for energy not supplied and pension expenses are one-off items in 2010, and we therefore expect the business area s profit to be lower in 2011.The business area invested NOK 311 million (NOK 421 million) in 2010. The reduction was due both to a harsher winter at the start of 2010, as well as a slight fall in overall investment levels. The Market business area This business area comprises LOS, LOS Bynett, Nettkonsult, Sopran and Agder Energi Varme. Operating profit for the year amounted to NOK 113 million (NOK 72 million). In a tough competitive environment, LOS maintained its share of the retail electricity supply market in Agder. LOS continued to increase volumes to the commercial market. The company supplied a total volume of 8,677 GWh (7,307 GWh) during 2010. In 2010 LOS acquired Statoil s electricity business, which supplies around 4 TWh annually. The acquired portfolio represents annual turnover of around NOK 1.2 billion, and this turnover has been included in the company s accounts as of the start of the fourth quarter. AE Varme made an operating profit of NOK 12 million (NOK 11 million). In 2010 it supplied 120 GWh (92 GWh) of heating and cooling energy. The growth in volume was due to growth in its customer base and lower temperatures in the first and fourth quarters of the year. Profit from net energy sales did not grow as strongly, as much of the increase in volumes had to be covered with oil and electricity. After Returkraft started supplying energy from its waste-to-energy plant at Langemyr in Kristiansand towards the end of the year, the proportion of renewable energy and profitability are both expected to increase in 2011. The business area invested NOK 114 million (NOK 69 million) in 2010. The connection to Returkraft s waste-to-energy plant was the biggest single project. The debt collection company Sopran made an operating profit of NOK 6 million (NOK 8 million) for the year. The company s turnover rose compared with QUARTERLY REPORT 4 TH QUARTER 2010 4
BOARD COMMENTS last year as a result of Vestfold Inkasso AS merging with Sopran. LOS Bynett is responsible for the Group s fibre optic cable business in the counties of Agder and Vestfold. It made an operating profit of NOK 3 million (loss of NOK 6 million). Nettkonsult supplies planning and design services in the areas electricity supply, telecommunications and electrical safety. Nettkonsult comprises three companies which made a combined operating profit of NOK 11 million (NOK 1 million). Nettkonsult s order book at the end of the year was satisfactory. The Contracting business area This business area, which consists of the Otera Group, made an operating profit of NOK 16 million (NOK 50 million) in 2010. In 2010 profit was boosted by changes to pension plans, and on an underlying basis the Otera Group therefore made a loss. The deterioration was largely due to a challenging market as a result of the credit crisis, as well as adverse weather conditions in the first quarter of the year. The business area s order book is satisfactory, and is higher than at the same time last year. Cash flows and capital adequacy. Cash flow from operating activities fell to NOK 287 million (NOK 1,375 million) for the year. The decline in relation to the previous year was mainly attributable to an increase in working capital. In total the Group invested NOK 882 million (NOK 1,081 million) in 2010. Net financial losses for the year came to NOK 263 million (gain of NOK 518 million), a deterioration of NOK 781 million over the previous year. Gains on unrealised forward exchange contracts amounted to NOK 194 million (NOK 1,056 million) and losses on realised forward exchange contracts were NOK 56 million (NOK 340 million), and these two items were the main explanation for the deterioration. The realised loss in 2010 was mainly the result of hedges for fixed-price contracts in the retail business, whilst the loss in 2009 related to both the retail and power generation businesses. In addition, the Group made an unrealised foreign exchange gain on Euro-denominated loans of NOK 11 million (NOK 155 million). Average interest-bearing debt rose by NOK 1,000 million to NOK 6,520 million (NOK 5,520 million) over the course of the year. The average annual interest rate on the Group s debt portfolio was 4.3 % (4.6 %). The Group had a liquidity buffer of NOK 1,295 million (NOK 1,080 million) at the close of the year, consisting of unused credit facilities and unrestricted liquid assets. The Group wrote down the value of its financial assets by NOK 100 million (NOK 80 million), as a result of writing down its ownership interest in Ventelo. Wage costs in 2010 were affected by a one-off item relating to pension expenses. In the past, pensioners with a defined benefit plan used to have their pension benefits adjusted in line with any increase in the National Insurance Scheme s basic amount. In 2010 the way in which pensions are adjusted was modified, meaning that in the future pensioners with defined benefit plans will see their benefits adjusted by general wage inflation less 0.75 percent. This one-off item reduced the pension expense for the year by around NOK 150 million. In the fourth quarter, AE Venture sold its subsidiary Elsmart Solutions to Powel. In 2010 AE Venture made several investments in renewable energy, and the value of the company s portfolio increased significantly over the course of the year. Operations and working environment At the close of the year the Group had 1,692 (1,714) full-time and temporary employees, representing 1,647 (1,673) full-time equivalents. Sickness absence was 4.4 % (4.4 %). During the year, 48 (31) occupational accidents resulting in injury were recorded. Most of these occurred at Otera. Of the accidents, 15 (17) resulted in total lost time of 83 (202) days. The accident figures are equivalent to a lost time injury frequency (number of LTIs per million work hours) of 5 (5.5), a total injury frequency (number of injuries, whether or not they resulted in lost time, per million work hours) of 16.1 (12.8) and an injury severity rate (number of days lost per million work hours) of 27.8 (68.7). Outlook At the start of 2011, the Group s hydrological resources (water and snow) were significantly below normal, and precipitation so far in 2011 has been less than normal. Electricity prices fluctuate a great deal, and are affected by hydrological conditions and the prices of oil, gas, coal and CO2. Future contracts for electricity in 2011 indicate that prices will remain at roughly the same level as last year. In the event of normal precipitation levels for the rest of the year, we expect electricity generation to be low and revenue from power generation to fall in 2011. Kristiansand, 15 February 2011 The Board of Directors of Agder Energi AS QUARTERLY REPORT 4 TH QUARTER 2010 5
PROFIT AND LOSS ACCOUNT 4 th quarter Year (Figures in NOK) 2010 2009 2010 2009 Energy sales 2 729 1 664 7 000 5 846 Transmission income 431 357 1 226 967 Other operating income 499 397 1 563 1 472 Unrealised value changes, energy contracts -195-164 -354 2 Total operating income 3 464 2 254 9 435 8 287 Energy purchases 1 965 899 4 721 3 061 Transmission expenses 65 52 270 165 Other cost of sales 194 217 648 770 Wages and salaries 100 157 783 775 Depreciation and write-downs 112 114 436 423 Property tax and licence fees 45 45 181 177 Other operating expenses 268 197 761 645 Total operating expenses 2 749 1 681 7 800 6 016 Operating profit/loss 715 573 1 635 2 271 Profit/loss from associated companies and joint ventures -10-34 -27-53 Financial income 34 2 46 22 Unrealised value changes, currency and interest rates 12 160 203 1 243 Financial expenses -220-256 -485-694 Net financial items -184-128 -263 518 Profit/loss before tax 531 445 1 372 2 789 Tax on profits 139 148 387 811 Resource rent tax 46 104 234 374 Tax 185 252 621 1 185 Profit/loss after tax 346 193 751 1 604 Including minority s % 2 3 4 7 Including majority s % 344 190 747 1 597 Profit per share (NOK) 128 70 277 591 Profit per share, diluted (NOK) 128 70 277 591 COMPRENHENSIVE INCOME Profit/loss after tax 346 193 751 1 604 Actuarial gains/losses on defined benefit pension plans -167 133-167 133 Valuation gains on cash flow hedges 44 0 44 0 Income tax on other comprehensive income 34-37 34-37 Total comprehensive income 257 289 662 1 700 Including minority s % 2 3 4 7 Including majority s % 255 286 658 1 693 QUARTERLY REPORT 4 TH QUARTER 2010 6
BALANCE SHEET (Figures in NOK) 31.12.10 30.09.10 31.12.09 Deferred tax assets 462 640 572 Intangible fixed assets 221 193 200 Tangible fixed assets 11 134 11 058 10 876 Investments in associated companies and joint ventures 175 131 130 Other financial fixed assets 635 656 597 Total fixed assets 12 627 12 678 12 375 Assets classified as being held for sale 0 66 68 Stocks 28 27 22 Receivables 2 584 1 100 1 483 Derivatives 1 209 673 659 Liquid assets 249 57 68 Total current assets 4 070 1 923 2 300 TOTAL ASSETS 16 697 14 601 14 675 Paid-in capital 1 856 2 072 2 072 Retained earnings 1 606 1 235 1 639 Minority interests 26 28 29 Total equity 3 488 3 335 3 740 Deferred tax 294 298 316 Provisions for commitments 1 705 1 736 1 759 Long-term interest-bearing liabilities 5 894 5 402 4 307 Total long-term liabilities 7 893 7 436 6 382 Current interest-bearing liabilities 1 727 1 488 1 637 Tax payable 444 511 766 Derivatives 1 803 1 041 1 001 Other current interest-free liabilities 1 342 790 1 149 Total current liabilities 5 316 3 830 4 553 TOTAL EQUITY AND LIABILITIES 16 697 14 601 14 675 QUARTERLY REPORT 4 TH QUARTER 2010 7
CASH FLOW STATEMENT 4 th quarter 01.01-31.12 (Figures in NOK) 2010 2009 2010 2009 Cash flow from operations Profit/loss before tax 530 445 1 372 2 789 Depreciation and write-downs 112 115 436 423 Unrealised value changes, energy, currency and interest rate contracts 182 4 150-1 245 Profit/loss from associated companies and joint ventures 10 34 27 53 Tax paid -65-453 -811-836 Change in net operating capital, etc. -915-342 -887 191 Net cash flow from operations -146-197 287 1 375 Investment activities Investments in tangible and intangible fixed assets -223-217 -732-785 Company purchases/financial investments -75-22 -142-244 Net changes in lending -63 7-114 -61 Sales of tangible and intangible fixed assets 0 2 12 3 Company sales/financial investments 68 6 94 6 Net cash flow from investment activities -293-224 -882-1 081 Financing activities Taking out new long-term liabilities 524 273 2 291 1 002 Paying off long-term liabilities -64-18 -645-1 248 Net changes in current liabilities 272 176 31 761 Paid dividends -100 1-900 -968 Net cash flow in financing activities 632 432 777-453 Net changes in liquid assets 193 11 182-159 Liquid assets at the beginning of the period 57 57 68 227 Liquid assets at the end of the period 250 68 250 68 QUARTERLY REPORT 4 TH QUARTER 2010 8
EQUITY CAPITAL STATEMENT Paid-in Retained Total Minority Total (Figures in NOK million) capital earnings majority interest equity Equity, 1 January 2009 2 072 937 3 009 15 3 024 Profit for the year 0 1 597 1 597 7 1 604 Actuarial gains/losses on defined benefit pension plans 0 96 96 0 96 Commitments relating to purchases of minority interests 0-26 -26 0-26 Dividend paid 0-967 -967-2 -969 Changes as a result of acquisitions, etc. 0 2 2 9 11 Equity 31.12.09 2 072 1 639 3 711 29 3 740 Profit for the year 0 747 747 4 751 Reduction of share capital -216 216 0 0 0 Foreign currency translation differences 0 1 1 0 1 Valuation gains on cash flow hedges 0 32 32 0 32 Actuarial gains/losses on defined benefit pension plans 0-120 -120 0-120 Dividend paid 0-900 -900 0-900 Changes of a result of acquisitions, etc. 0-9 -9-7 -16 Equity 31.12.10 1 856 1 606 3 462 26 3 488 BUSINESS AREAS Operating profit in accordance with GAAP 4 th quarter Year (Figures in NOK million) 2010 2009 2010 2009 Energy 602 618 1 541 2 090 Network 138 104 386 220 Markets 34 0 113 72 Services 25 7 16 50 Parent company/other /eliminations 47-65 -31-196 Group (GAAP) 845 665 2 025 2 236 QUARTERLY REPORT 4 TH QUARTER 2010 9
www.ae.no Design: Dale+Bang - Photo: Arild Danielsen - Cover photo: Winter in the mountains of Setesdal.