Statkraft Investor Update European Energy & Utilities Credit Conference 2013
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Agenda 1. 2. 3. 4. 5. Statkraft overview Strategy and market dynamics Financial update Funding and liquidity Summary Appendix 3
Statkraft at a glance NOK 34.1 bn UNDERLYING GROSS REVENUES 2012 NOK 11.1 bn UNDERLYING EBITDA 2012 60.0 TWh POWER GENERATION 2012 16.1 GW INSTALLED CAPACITY 2012 100% OWNED BY THE KINGDOM OF NORWAY A-/Baa1 (stable outlooks) S&P / MOODY S CREDIT RATINGS NO No. 1 power generator (~35%) UK Wind power initiatives EUROPE Trading activities Growth outside Europe through SN Power (60% ownership) SWE No. 4 power generator (~5%) GER Flexible power generation SE EUROPE Hydropower development 4 Hydropower Gas power District heating Wind power Distribution grid
Europe s leader in renewable energy Top 10 renewable electricity producers in Europe 2012 (adjusted 1 ) Electricity production (TWh) Statkraft EDF 49 64 Statkraft s total power generation 2012 Vattenfall Enel Fortum 30 40 46 Gas 3% Wind 1% District heating and bio 2% Verbund 28 Iberdrola 27 E.ON GDF SUEZ Hidroelectrica 18 19 21 Hydro 94% Source: PwC 5 1 Main assumptions: full consolidation of subsidiaries, proportional consolidation of associated companies, energy consumption for pumped hydropower deducted, electricity from long-term purchasing contracts deducted, production outside Europe deducted
Flexible low-cost power producer Low-cost power production dominated by renewable energy - Average hydropower production cost of 10.4 EUR/MWh 1 in 2012 Peak supplier with high degree of flexibility - 80% of installed capacity within highly flexible hydropower - Production optimised relative to power prices and water inflows Substantial reservoir capacity - Europe s largest reservoir capacity (~40 TWh) Unique information base and power market modelling Blåsjø, one of Europe s largest hydropower reservoirs, with multi-year energy storage capacity (7.8 TWh) 6 1 Annual Report 2012: 78 NOK/MWh. Incl. property tax and depreciations, excl. sales costs, overhead, net financial items and tax. Based on normal production from power plants under own management in Norway, Sweden, Germany and the UK.
Long-term contracts stabilize earnings ~ 20 TWh sold on long-term contracts with power-intensive Nordic industry Corresponding to ~ 40% of Statkraft s annual mean power production for Nordic hydropower GWh 30 000 25 000 20 000 15 000 10 000 5 000 0 2013 2015 2017 2019 2021 2023 2025 Statutory priced lease agreements Long-term market contracts Statkraft's share of leasing agreements 7
Key credit strengths Strong market position - a competitive, low-cost and flexible generator of electricity Stable cash flow - a substantial share of long-term industrial supply contracts Capex flexibility - several options within current investment program Solidly owned by the state in one of the most creditworthy countries in the world - the Norwegian state as the sole shareholder (AAA/Aaa) 8
Agenda 1. 2. 3. 4. 5. Statkraft overview Strategy and market dynamics Financial update Funding and liquidity Summary Appendix 9
Response to a changing energy landscape Market challenges Flat energy demand in Europe and more production from new renewables Growing concerns in Europe about security of supply and affordability Traditional utility business model is challenged by a transformed value chain Market opportunities Attractive support schemes driven by European transformation to renewable energy Strong growth in emerging markets New business opportunities closer to end users and through integration of intermittent renewable capacity 10
Strategic focus areas and ambitions European Flexible Generation Trading and Origination Hydropower in Emerging Markets First priority to maintain & develop Nordic hydropower asset base Maximize long term value of Statkraft s asset base Develop T&O business in selected global markets and exploit customer oriented activities Build integrated operations in South East Europe, South America and South Asia Wind Power Onshore portfolio optimisation and selected investments Become lead operator in offshore wind power District Heating Become a mature and amongst the most profitable district heating players in Norway and Sweden 11
Allocation of investments 2014-2018 Geographical allocation Technology allocation Emerging markets 38 % Onshore WP 18 % District heating Trading & 3 % origination 3 % Innovation 3 % Europe ex Norway 19 % Norway 43 % Offshore WP 9 % Hydropower 64 % 12
Strengthening financial platform Measures already taken - Long-term contracts with power intensive industry - Sale of E.ON shares - Transfer of hydropower plants from Statkraft SF to Statkraft AS through contribution in kind - Ongoing restructuring of International Hydropower - Sale of wind farm in Chile - Gas-fired power plants Robert Frank/Emden in cold reserve, Naturkraft in light preservation Focus on cost efficiency 13
Solid base in the Nordic region Estimated annual contribution after committed capex (2018) EBITDA Power generation (72 TWh) Europe outside Nordic 11 % Outside Europe 8 % Europe outside Nordic 13 % Outside Europe 5 % Nordic outside Norway 14 % Norway 67 % Nordic outside Norway 10 % Norway 72 % Increased diversification, but still dominated by Norwegian hydropower 14
Nordic-European power market integration Current transmission capacity between Nordic and Europe of 4000 MW Planned capacity increase of ~5500 MW ahead of 2020 Increased value opportunities for Statkraft s flexible Nordic hydropower plants Power transmission cables (MW) Planned expansions 15 Source: Statnett
International Hydropower long term strategic cooperation Statkraft and Norfund have signed Heads of Agreement to continue partnership - Intention to restructure and prolong strategic cooperation - Focusing on hydropower in emerging markets - South East Europe - South America - South Asia - South East Asia - Africa - Central America Strengthen performance by establishing one project execution unit Replace current 2013-2015 put option program for SN Power - Intention to establish a revised put/call option program for the period 2017 onwards 16
Agenda 1. 2. 3. 4. 5. Statkraft overview Strategy and market dynamics Financial update Funding and liquidity Summary Appendix 17
Highlights 9m 2013 Solid result from operations - Higher Nordic power prices and increased production capacity Currency effects impact net profit - Negative effects offset by translation effects Investment activity according to plan - Gross investment of NOK 6.5 billion - Two onshore wind farms and one hydropower plant completed - Investment decision to construct two hydropower plants in Albania Sale of all shares in E.ON Transfer of hydropower plants and asset swap in Norway to optimize operations 18
Key figures NOK million 9m 2013 9m 2012 2 2012 2 Gross Revenues 1 32 552 27 092 38 910 EBITDA 1 8 602 7 830 11 347 Net profit -2 147 6 511 4 671 Improved revenues due to higher prices EBITDA increased by 10% Weakened NOK against EUR brings net profit down - Currency effects are mainly unrealised - The effects are more than offset by currency translation effects included in other comprehensive income strengthening equity 19 1 Adjusted for unrealised changes in value on energy contracts and significant non-recurring items 2 All 2012 figures converted after implementation of IFRS 11 as of 2013
YTD prices up in the Nordic Electricity, average monthly price EUR/MWh 80 60 40 20 0 2010 2011 2012 2013 2014 Nord Pool, system price EEX, base Nord Pool, system forward EEX, base forward Compared with YTD 2012 weaker hydrological balance drives prices up in the Nordic - System price: 38.9 EUR/MWh 33% Increasing share of renewables and high coal-fired power production drive prices down in Germany - Spot price: 37.9 EUR/MWh 12% 20
Nordic hydro reservoirs Nordic reservoir water levels 100 Below normal inflow and reduction in reservoir levels % 80 60 40 20 2013 2012 Median 1 At the end of September Nordic reservoirs were 90.6 TWh corresponding to 88.4% of normal 0 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 Week 1 Median 1990-2012 21
Statkraft production Monthly power generation TWh 6 4 Change from 2012: YTD production 9% Hydropower production 10% Wind power production 48% Gas-fired power production 28% 2 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2012 2013 (TWh) Hydro Wind Gas/bio Total 9m 2013 37.9 0.9 0.8 39.6 9m 2012 42.0 0.6 1.1 43.7 FY 2012 57.6 0.8 1.6 60.0 FY 2011 46.0 0.8 4.7 51.5 22
Underlying EBITDA development 16000 8000 0 NOK million 11951 15 161 10 851 11347 7830 8602 FY2009 FY2010 FY2011 FY2012 9m2012 9m2013 YTD 13/YTD 12 + 10% Underlying EBITDA 1 increased by 10% YTD Primarily due to price effects New wind farms and transferred leased power plants improves production capacity Slight increase in long-term contracts Moderate increase in operating costs 23 1 Adjusted for unrealised changes in value on energy contracts and significant non-recurring items
Net profit breakdown Underlying 1 EBITD 9m 2012 > 9m 2013 Underlying 1 EBITDA 9m 2013 > Net Profit 9m 2013 NOK million 1 903 7 830 1 014-242 8 602-2 076 125 400-8 827-2 274-2 147 9m 2012 Adj. EBITDA Revenues Operating expenses 9m 2013 Adj. Unrealised changes in Depreciation Impairments/ nonrecurring Share of profit from Net financial items Tax 9m 2013 Net profit ex. dep. EBITDA energy associates contracts items and JVs Underlying EBITDA +10% vs. 9m/12 Booked net profit effected by negative unrealised currency effects amounting to NOK 6 878 million. In 9m 2012 positive currency effects were NOK 4 460 million. 1 Adjusted for unrealised changes in value on energy contracts and significant non-recurring items 24
Solid cash position Cash flow year-to-date NOK million 16 000 +9 578 12 000 +5 585 +817 +460-3 451 +423 9 316 8 000-3 015 5 440 4 000-6 521 0 Cash reserves 01.01 From operations Dividend from associates Change in short and long term items Investment activities Sale of noncurrent financial assets Changes in debt Dividend/ group contribution paid Share issue to minorities, currency effects Cash reserves 30.09 Sale of non-current assets mainly regards E.ON SE shares (NOK 8.515 million) and Sheringham Shoal transmission grid (NOK 957 million) 25
Agenda 1. 2. 3. 4. 5. Statkraft overview Strategy and market dynamics Financial update Funding and liquidity Summary Appendix 26
Balance sheet and debt overview Balance sheet per 30.09.2013 Debt currency distribution Current assets Other noncurrent assets NOK 150bn 16% 5% 10% NOK 150bn 30% Interest-free liabilities Associates and JVs 25% Interest-bearing liabilities Property, plant and equipment 68% 45% Equity Assets Equity and liabilities 27
Balanced debt maturity and mixed funding sources Debt maturity profile Q3 2013 Distribution of funding sources NOK million 8 000 6 000 4 000 NIB lån 1% External loans subsidiaries 12% NOK Bond Issues 36% 2 000 0 2013 2015 2017 2019 2021 >2023 EUR Bond Issues 51% 28
Financial strength and rating Current ratings FFO/NET DEBT 2 (UNADJUSTED 3 ) A-/Stable Baa1/Stable Rating target Maintain current ratings with S&P and Moody s FFO/Net Debt thresholds as main KPI 1 4 FFO of NOK 8 131 million (8 580 in 2012) Net interest bearing debt of NOK 28 668 million (34 960 in 2012) 29 1 Please see rating publications on Statkraft s web page, under Financial information, for full assessments 2 Calculated 12 months rolling 3 Rating agencies apply own adjustments 4 2012 recalculated after implementation of IFRS 11 in 2013
Liquidity position Available liquidity and target Liquidity and market access NOK million 30 000 25 000 20 000 15 000 10 000 Cash and Cash equivalents Credit Line NOK 12bn Revolving Credit Facility (5+1+1 year) signed 19 January 2011 - Second extension agreed in 2013-14 counterparties NOK 1bn in committed credit line renewed on a yearly basis 5 000 0 2010 2011 2012 Q3 2013 Revolving Credit Facility EMTN Programme EUR 6bn - EUR 2,6bn available under current Programme No commercial papers outstanding Liquidity capacity target 1 : >1.5x projected payments over next six months 30 1 Liquidity capacity defined as cash and cash equivalents, plus committed revolving credit facilities, plus projected receipts for the next six months
Funding overview FUNDING STRATEGY Funding centralized on group level Flexibility through diversification of funding sources and maintaining sufficient back-stop facilities Funding need Funding sources Funding need going forward determined by cash flow from operations and capex NOK 4.0bn debt maturities in H2 2014 National budget for 2014 indicates zero/marginal dividend in 2014 Norwegian bond and Commercial Paper market Euro bond market Swedish bond market Sterling and Swiss Franc bond markets considered 31
Agenda 1. 2. 3. 4. 5. Statkraft overview Strategy and market dynamics Financial update Funding and liquidity Summary Appendix 32
Providing pure energy A flexible and competitive generator of low-cost electricity - Dominated by renewable energy Flexible plans for growth - European renewable energy production - Hydropower outside Europe Balanced investment plan to maintain credit strength Proven support from Norwegian government through its 100% ownership 33
Agenda 1. 2. 3. 4. 5. Statkraft overview Strategy and market dynamics Financial update Funding and liquidity Summary Appendix 34
Statement of Comprehensive Income Third Quarter Year to date The year NOK million 2013 2012 2013 2012 2012 COMPREHENSIVE INCOME PROFIT AND LOSS Sales revenues 9 560 5 959 32 513 25 050 36 447 Other operating revenues 415 160 1 117 637 1 103 Gross operating revenues 9 975 6 119 33 630 25 687 37 550 Energy purchase -5 377-3 351-16 131-12 701-18 172 Transmission costs -227-227 -717-763 -1 026 Net operating revenues 4 371 2 540 16 782 12 223 18 352 Salaries and payroll costs -814-798 -2 288-2 225-3 046 Depreciation, amortisation and impairments -918-643 -2 265-1 876-4 814 Property tax and licence fees -420-363 -1 246-1 045-1 345 Other operating expenses -976-825 -2 428-2 353-3 469 Operating expenses -3 128-2 630-8 227-7 498-12 674 Operating profit/loss 1 243-90 8 554 4 724 5 679 Share of profit/loss from associates and joint ventures -59 281 400 1 069 871 Financial income 75 57 179 843 996 Financial expenses -357-295 -972-984 -1 301 Net currency effects -1 924 1 942-6 878 4 460 4 468 Other financial items -298-285 -1 156-250 -1 822 Net financial items -2 504 1 419-8 827 4 068 2 341 Profit/loss before tax -1 320 1 610 127 9 862 8 890 Tax expense -361-972 -2 273-3 351-4 220 Net profit/loss -1 681 638-2 147 6 511 4 671 Of which non-controlling interest 58 47 269 369 230 Of which majority interest -1 738 591-2 415 6 142 4 440 OTHER COMPREHENSIVE INCOME Changes in fair value of financial instruments -198 798-599 962 337 Estimate deviation pensions -63-186 -15 1 045 Items recorded in other comprehensive income in associates and joint arrangements - -80 145-241 320 Currency translation effects 2 119-1 802 7 918-3 807-4 536 Other comprehensive income 1 858-1 084 7 650-3 101-2 833 35 Comprehensive income 177-446 5 503 3 410 1 838 Of which non-controlling interest 4-279 658-48 -156 Of which majority interest 172-167 4 845 3 458 1 994
Statement of Financial Position NOK million 30.09.2013 30.09.2012 31.12.2012 31.12.2011 STATEMENT OF FINANCIAL POSITION ASSETS Intangible assets 3 812 3 468 3 242 3 136 Property, plant and equipment 98 491 89 483 88 665 85 195 Investments in associates and joint ventures 15 545 16 225 15 924 15 080 Other non-current financial assets 2 791 13 329 10 714 12 163 Derivatives 4 994 5 524 5 397 4 687 Non-current assets 125 634 128 028 123 942 120 261 Inventories 1 310 1 165 1 588 977 Receivables 8 617 7 201 9 604 9 272 Short-term financial investments 453 450 457 455 Derivatives 4 457 4 549 4 996 5 356 Cash and cash equivalents (included restricted cash) 9 316 3 583 5 440 8 605 Current assets 24 153 16 948 22 084 24 664 Assets 149 787 144 976 146 026 144 925 EQUITY AND LIABILITIES Paid-in capital 49 104 45 569 45 569 45 569 Retained earnings 10 779 11 357 9 934 12 840 Non-controlling interest 7 487 7 116 6 934 7 241 Equity 67 370 64 043 62 437 65 651 Provisions 20 481 21 929 20 035 21 350 Long-term interest-bearing liabilities 35 993 29 268 33 517 31 820 Derivatives 4 918 6 239 6 038 4 673 Long-term liabilities 61 391 57 436 59 591 57 842 Short-term interest-bearing liabilities 2 183 7 410 7 108 5 467 Taxes payable 3 494 3 530 3 246 3 411 Other interest-free liabilities 11 239 8 377 9 341 6 960 Derivatives 4 110 4 180 4 303 5 596 Current liabilities 21 026 23 497 23 999 21 433 Equity and liabilities 149 787 144 976 146 026 144 925 36
Statement of Cash Flow Third Quarter The year NOK million 2013 2012 2012 STATEMENT OF CASH FLOW CASH FLOW FROM OPERATING ACTIVITIES Profit before tax 127 9 862 8 890 Profit/loss on sale of non current assets -92-7 -28 Depreciation, amortisation and impairments 2 265 1 876 4 814 Profit/loss from the sale of business 117 - - Profit/loss from the sale of shares, and associates and joint ventures -153 - -81 Share of profit/loss from associates and joint ventures -400-1 069-871 Unrealised changes in value 6 191-2 650-1 452 Taxes -2 471-2 903-4 426 Cash flow from operating activities 5 585 5 108 6 846 Changes in long term items -459-131 -225 Changes in short term items 919 3 107 1 710 Dividend from associates 817 1 414 1 958 Net cash flow operating activities A 6 862 9 499 10 290 CASH FLOW FROM INVESTING ACTIVITIES Investments in property, plant and equipment, maintanance -797-668 -1 065 Investments in property, plant and equipment, new capacity* -5 722-6 328-8 396 Proceeds from sale of non-current assets 9 578 42 126 Business divestments, net liquidity inflow to the Group 327 - - Business combinations, net liquidity outflow from the Group** 69 90-54 Loans to third parties -439-449 -670 Repayment of loans 62 11 8 Considerations regarding investments in other companies -23-2 418-2 433 Net cash flow from investing activities B 3 057-9 721-12 484 CASH FLOW FROM FINANCING ACTIVITIES New debt 389 2 477 7 919 Repayment of debt -3 840-3 097-4 573 Dividend and group contribution paid -3 015-4 244-4 293 Share issue in subsidiary to non-controlling interests 108 149 167 Net cash flow from financing activities C -6 358-4 714-780 Net change in cash and cash equivalents A+B+C 3 561-4 937-2 974 Currency exchange rate effects on cash and cash equivalents 315-85 -191 Cash and cash equivalents 01.01 5 440 8 605 8 605 Cash and cash equivalents 30.09/31.12 9 316 3 583 5 440 37 Unused commited credit lines 12 000 12 000 12 000 Unused overdraft facilities 2 214 2 200 2 205 Restricted Cash -261-758 -232
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