"Despite the decline in results compared to the same period last year, we're satisfied with the first quarter results," says Bård Mikkelsen, Statkraft's President and Chief Executive Officer. "Taking into account that the spot price so far this year has been 40 per cent lower than during the first quarter 2003, the result is good and several of the Group companies have also produced better results so far this year than for the first quarter of last year."
Market developments in the first quarter of 2004 were characterised by prices being lower than in the same period last year. This must be seen in connection with the special situation in the power market a year ago, when electricity prices were extremely high. The average spot price on the Nordic Power Exchange was NOK 0.247/kWh in the first quarter of this year, compared to NOK 0.399/kWh for the same period in 2003, and NOK 0.166/kWh in the first quarter 2002.
Market developments in the first quarter of 2004 were characterised by prices being lower than in the same period last year. This must be seen in connection with the special situation in the power market a year ago, when electricity prices were extremely high. The average spot price on the Nordic Power Exchange was NOK 0.247/kWh in the first quarter of this year, compared to NOK 0.399/kWh for the same period in 2003, and NOK 0.166/kWh in the first quarter 2002.
In the first quarter of this year, the total power consumption in the Nordic region was 113.5 TWh, or 1.4 per cent more than in the same period last year. The total power consumption in Norway was 35.9 TWh, an increase of 7.2 per cent compared to the same period in 2003. Nordic power production during the period came to 110.5 TWh, or almost 5 per cent more than in the first quarter of last year. The Nordic market imported 3 TWh.
The Statkraft Group produced 9.9 TWh during the first quarter, 2 TWh less than in the same period in 2003. Combined with lower prices, this meant that the Group's revenues fell by NOK 879 million to NOK 3 442 million. Industrial contracts and licence power at politically determined prices made up just over 70 per cent of Statkraft SF's production during the period.
Both the power-transmission and operating costs were lower than for the same period last year, and the Group's operating income came to NOK 2 184 million for the first quarter, compared to NOK 2 846 million for the same period in 2003. The parent company, Statkraft SF, contributed just over 70 per cent of the operating income.
The share of the results of associated companies increased by NOK 351 million to NOK 778 million. This increase is due to several of the associated companies achieving better power-sales results this year than for the same period last year.
Stakes in other companies
Statkraft is still making efforts to comply with the competition authorities' order to sell its shares in Hedmark Energi (HEAS) and E-CO Vannkraft, plus other production capacity, in connection with its purchase of the ownership shares in Agder Energi and Trondheim Energiverk.
During the first quarter, Statkraft entered into an agreement with the regional owners of HEAS giving Statkraft an option to sell its HEAS shares and the regional owners a corresponding right to buy them. Statkraft's shareholding in the company is to be clarified by 30 June 2006.
In February of this year, Statkraft signed a contract with Nord-Trøndelag Elektrisitetsverk (NTE) regarding the sale of Statkraft's stake in KØN (Power stations in Øvre Namsen) as part of fulfilling the conditions relating to Trondheim Energiverk. This transaction is expected to be carried out during the first half of this year.
Corporate form
In April, the Norwegian government presented a parliamentary bill (Proposition to the Storting no. 53 (2003-2004)) regarding the Norwegian state's ownership of Statkraft SF. This bill deals, among other things, with issues relating to the company's organisation, capitalisation and strategy.
The bill proposes transferring Statkraft SF's operations and assets to a wholly owned limited company and organising the company according to a group model, with Statkraft SF as the group's parent company. In the bill, the government does not propose contributing more capital to the company, as the board of directors has requested. The government is aiming for a continued high dividend level, stated to be at least 75 per cent of the Group's net income.
"We're pleased that the government is proposing an organisational form that is the same as that of other companies in this sector," says Bård Mikkelsen, Statkraft's President and CEO. "We're also pleased that the bill supports the main features of Statkraft's strategy. However, an unchanged equity and a dividend level that is far higher than that of comparable companies will make it difficult to implement the strategy."
Statkraft's future focus will be on the bill's consequences and how the bill is dealt with by the Norwegian parliament, something that is expected to take place during the spring session. The bill assumes that the transfer from the state-owned enterprise to a new limited company will take effect on 31 August 2004 at the earliest and by 31 December 2004 at the latest.
Prospects
Provided the market continues to develop as normal for the rest of the year, the result of ordinary operations is expected to be slightly better for 2004 than it was for 2003. However, there is still a great deal of uncertainty relating to this. In addition, the result will be affected by large one-off items. We will achieve an accounting gain of around NOK 1 billion after tax on the sale of our stake in KØN (Power stations in Øvre Namsen). This will be offset by the stamp duty payable on the proposed reorganisation of Statkraft.
