CEO Bård Mikkelsen on preliminary result for 2002 Statkraft SF

 Press release

 

(Oslo, 6 March 2003) Statkraft Group recorded gross pre-tax income of NOK 4,098 million in 2002 and net income of NOK 2,478 million. Compared to the preceding year this was a decline of NOK 2,471 million and NOK 1,864 million respectively. However, the 2001 results were unusually high as a result of taking to income compensation and sales gains. If such one-time items are excluded from the accounts the results for 2002 are at virtually the same level as 2001, before and after taxes.

 

In the fourth quarter of 2002, Statkraft recorded gross pre-tax income of NOK 2,158 million and net income of NOK 1,237 million. The 2002 results are unaudited and preliminary.

"We are satisfied with the results for 2002", says Mr. Bård Mikkelsen, President and Chief Executive Officer. "The year had unusual variations in precipitation and temperature, and the power market was characterised by massive fluctuations in prices. As a result our revenues varied a great deal during the year, but 2002 seen as a whole was a satisfactory year for Statkraft".

The results in more detail

Seen as a whole, the year 2002 was dry, with inflow in Norway and Sweden almost 10 per cent lower than the norm. However, variations during the year were considerable. In the first half of the year inflow was almost 15 per cent higher than the norm, while in the second half of the year there was a deficit of as much as 50 per cent.

 

The impact on power prices was considerable and at its lowest in July 2002 the average spot price was NOK 0.116 per kWh and at its highest in December it reached NOK 0.544 per kWh. The average spot price for the first nine months of the year was NOK 0.146 per kWh, which is NOK 0.046 lower than in the same period in 2001. This resulted in revenue in the period being considerably lower than in the same period in the preceding year. In the fourth quarter, the average price was NOK 0.364 per kWh, which is NOK 0.193 per kWh higher than in the preceding year, boosting revenue compared to the fourth quarter of 2001. On average for 2002 as a whole the spot price was NOK 0.201 per kWh, compared to NOK 0.187 per kWh in 2001.

 

In 2002, Statkraft's gross operating revenues amounted to NOK 10,889 million. Of this, NOK 6,951 came from the parent company, Statkraft SF, while NOK 3,938 million represents contributions from subsidiaries. The subsidiaries' share rose by NOK 2,841 million compared to the preceding year as a

 

 

result of acquisitions. Skagerak Energi AS is consolidated in the accounts with effect from 1 October 2001 and Trondheim Energiverk from 1 January 2002.

 

Operating income in 2002 amounted to NOK 5,476 million. The subsidiaries' share of operating income rose by NOK 1,064 million as a result of the new acquisitions, while Statkraft SF's operating income was virtually unchanged when adjusted for one-time items.

 

Statkraft's finance costs rose significantly from the year before, mainly as a result of the major acquisitions. The increase was NOK 1,039 million and net financial costs amounted to NOK 2,249 million.

 

With effect from 1 January 2003, the Storting (Parliament) has adopted amendments to the Act governing state owned enterprises. These amendments imply that the Government's obligations for the state owned enterprises' liabilities are terminated, but the amendment is only made effective for loans and other obligations that are established after the date the amendments come into effect. The Government's liability for obligations entered into before the amendments come into effect are therefore not changed. For these loans, a guarantee premium that is currently set at 0.6 per cent will be charged.

 

In all the result gave a 13.0 per cent pre-tax return on equity and a 7.8 per cent return after tax.

"Viewed in light of the significant challenges in the market during the year, the return on capital invested is satisfactory", says Mikkelsen. "The return from current operations is at about the same level as last year".

 

Acquisitions and the Norwegian Competition Authority

In 2002, Statkraft carried out the largest acquisitions in the history of the company and purchased shares in other companies for almost NOK 16 billion. Statkraft acquired 100 per cent of the shares in Trondheim Energiverk AS and 45.5 per cent of the shares in Agder Energi AS. In addition, Statkraft increased is stake in Bergenshalvøens kommunale kraftselskap (BKK) from 26 per cent to 49.9 per cent, and its ownership in Sweden's Sydkraft from 35.7 per cent to 44.6 per cent.

 

The Norwegian Competition Authority has approved the acquisition of the shares in Agder Energi AS. However, as part of the approval, certain remedial measures have been imposed on Statkraft, which imply that it must sell its shareholdings in Hedmark Energi Holding AS and E-CO Vannkraft AS. In addition, 1 TWh of production capacity in the south of Norway must be sold if transmission capacity to that part of the country is not increased by 200 MW.

 

The acquisition of shares in Trondheim Energiverk was also subject to the approval of the Competition Authority. In February 2003, the Ministry of Labour and Government Administration decided to uphold the Competition Authority's intervention against the share acquisition. This means that Statkraft must sell all the shares in Trondheim Energiverk, sell that part of the company that generates power or sell other power production facilities.

"The grounds given by the Ministry of Labour and Government Administration in the Agder and Trondheim cases are bottlenecks in the power grid", says Mikkelsen. "Statkraft and its alliance partners are operating in a Nordic market where significant bottlenecks must be considered to be a temporary nature so long as Statnett and its sister organisations in the other Nordic countries properly play their role. Temporary bottlenecks should not be used to influence long-term structural development".

 

Prospects

In 2003, work on further developing Statkraft Group will continue in line with the company's strategy. It will also focus sharply on securing the company's competitiveness and financial basis in light of the termination of the Government guarantees resulting from the amendments to the Act governing state owned enterprises.

 

 

 

Statkraft enters 2003 with water reservoir levels that are lower than normal. Assuming that inflow and market conditions in 2003 are about what they are in a normal year, Statkraft expects that the result of its ordinary operations will be somewhat lower than in 2002. However, the market situation at the beginning of 2003 is more volatile than usual due to low reservoir levels and there is a great deal of uncertainty surrounding the development of the financial results.

 

Efforts to find rational structures and thus trigger off synergies in the Statkraft Alliance will be intensified. The return from this part of the operation is expected gradually to rise.