second-quarter 2015 presentation to analysts...second-quarter 2015 presentation to analysts finn...

Second-quarter 2015 presentation to

analysts

Finn Bjørn Ruyter, CEO

Oslo, July 10 2015

Second-quarter 2015 highlights

• Profit after tax of NOK 279 million – up NOK 111 million on the previous

year on the back of a higher operating profit and lower financial

expenses.

• EBITDA of NOK 684 million, against NOK 624 million in comparable prior-

year quarter. Improvements in three of four business segments.

• The highest result since 2007, despite low power prices.

• Stable operations and few operational stoppages for Network, plus results

improvement due to acquired networks business.

• Equity ratio of 32 percent, up one percentage from last year.

2

EBITDA second-quarter 2015 and change from

2014

3

EBITDA Q2 2015 Change in EBITDA from Q2 2014

121

19

332

133

80

684

OtherMarketsNetwork EBITDAHeatProduction

10

20

7

46

22

ProductionEBITDA

Q2 2014

624

MarketsNetworkHeat

684

EBITDA

Q2 2015

Other

NOK mill

2Q152Q14

Seasonally falling NO1 price

Source: nordpoolspot.com4

NO1 2Q15 marked by late snowmelt and hydrological surplus

NO1 2Q14 marked by work on the transmission grid and spring floods

System price vs. NO1 price Price areas Nordics

Significant

price difference

due to

temporarily

limited

transmission

capacity and

spring floods

Price fall due

to late

snowmelt and

hydrological

surplus

0,10

0,15

0,20

0,25

0,30

0,35

NO

K/k

Wh

System price (NOK/kWh) NO1-Oslo (NOK/kWh)

1H 15 production volume ~ 5 % above normal –

1H 14 ~ 20 % above normal

*Normal = Median water flow last 10 years5

Water flow and maximum capacity utilization give the premises… …for actual production volume

616817

Normal

944

1 559

1H20151H2014

966

1 783

1st quarter

2nd quarter

0

500

1 000

1 500

2 000

2 500

3 000m3/sek.

Jun SepApr Jul Oct DecMay NovAugMarFebJan

Max. capacity utilization2014 Normal *2015

GWh

Cool weather has delayed the snowmelt

Source: Senorge.no, amount of snow in percent of median (1981-2010)6

Amount of snow – June 30th, 2014 Amount of snow – June 30th, 2015

Delayed snowmelt can increase inflow in 2H15

2Q152Q14

Strong hydrological balance

Source: Nena (hydrological balance for the Nordics)7

-15

-10

-5

0

5

10

15

20

25

30

Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Apr-15 May-15 Jun-15

TW

h

Hydbal Nordics (TWh)

Power prices against last year

Source for price data:www.nordpoolspot.com and www.nasdaqomx.com/commodities June 30th, 2015.8

0,00

0,05

0,10

0,15

0,20

0,25

0,30

Apr Jun JulMayJan MarFeb

NOK/kWh

Nov DecOctSepAug

Oslo price (NO1) 2015 Forward prices 2015Oslo price (NO1) 2014

Forward

0.00

0.50

0.10

0.20

0.30

0.40

2003200220012000 2018P2017P2016P2015201420132006 20112010200920082007 2024P2023P2022P2021P2020P2019P

NOK/kWh

20052004 2025P2012

Long term power prices

Source: www.nordpoolspot.com and www.nasdaqomx.com/commodities July 2nd, 2015. 9

• Potential upside in the CO2-price

• Phase-out of nuclear generators

• New interconnectors+

• Expected power surplus in the

Nordics

• Continued CAPEX-reductions for

new renewable energy production

-

Historical system prices and forward prices

Second-quarter profits 2012 – 2015

10

684

624

569

510

279

168151140

0

100

200

300

400

500

600

700

201520142012 2013

NOK million

Profit after taxEBITDA

Production

• Volume on par with normal levels, but

slightly lower than last year.

• Hedging activity contributed of NOK

24 million (NOK 29 million) in the

quarter.

• More snow than normal leads to

expected production 7 percent above

normal levels in the third quarter.

• Decision regarding construction of

new generator (Vamma 12) expected

autumn 2015.

11

177 163 163 155 143 142 159

70

121

0

40

80

120

160

200

0

150

300

450

600

750

Q4 14Q3 14Q2 14Q1 14Q4 13Q3 13Q2 13

Last 12 months

NOK mill

Quarter

NOK mill

Q2 15Q1 15

Development EBITDA

NOK million Q2 2015 Q2 2014 YTD 2015 YTD 2014

Operating revenue 193 203 359 440

Gross margin 186 209 348 434

EBITDA 121 143 191 298

Operating profit 108 131 166 274

Power price (NOK/kWh) 0.19 0.20 0.21 0.22

Production volume (GWh) 944 966 1 559 1 783

Investments 5 1 17 4

Production volume

* Normal = 3100 GWh based on 10 years data adjusted for efficiency improvements.12

0

100

200

300

400

GWh

FebJan Nov DecSepAugMar OctApr May Jun Jul

2015Normal* 2014

Heat

13

112161

116

201

37

-50

0

50

100

150

200

250

0

100

200

300

400

Quarter

NOK mill

Last 12 months

NOK mill

Q2 15

19

Q1 15Q4 14Q3 14

-9

Q2 14

9

Q1 14Q4 13Q3 13

6

Q2 13

• Satisfactory results in a quarter with

normally low energy demand and low

power prices.

• Operational improvements and organic

growth compensates for lower power

prices over time.

• Colder weather and growth increased

production by 13 percent.

• Price hedging contributed NOK 5

million (NOK 5 million).

• 50 percent hedging ratio next 6

months.

EBITDA development


Operating revenue 131 131 570 533

Gross margin 79 71 336 292

EBITDA 19 9 220 170

Operating profit (17) (28) 149 96

Production volume (GWh) 278 247 905 866

Gross margin (NOK/kWh) 0.30 0.29 0.38 0.32


Production volume

14

0

60

120

180

240

300

GWh

DecNovOctSepAugJulJunMayAprMarFebJan

20152014Normal *

Network

15

283 286 266 279 312 345 378304 332

0

100

200

300

400

0

200

400

600

800

1 000

1 200

1 400

Q1 14Q4 13Q3 13Q2 13

Quarter

NOK mill

Last 12 months

NOK mill

Q1 15Q4 14Q3 14Q2 14 Q2 15

• Expected profit in line with or slightly

higher than in 2014.

• Increase in expected profit due to

lower power prices reducing costs

associated with energy losses in the

grid.

• Purchased network business

contributes to increased energy

deliveries and profit for first half of

2015.

• Higher investment activity mainly due

to increasing AMS investments.

EBITDA development


Operating revenue 1 053 950 2 124 1 932

Gross margin 715 678 1 384 1 278

EBITDA 332 312 635 591


Delivered volume (TWh) 4.1 3.5 10.2 8.6


Markets

16

71 83 96

140 126 140

78

181

133

0

50

100

150

200

0

100

200

300

400

500

600

Quarter

NOK mill

Q4 14 Q1 15

Last 12 months

NOK mill

Q3 14Q2 14Q1 14Q4 13Q3 13Q2 13 Q2 15

• Good results in a quarter with low

energy demand.

• Markets with a nordic growth strategy.

• 2015 characterized by establishment

of operating platform in Sweden and

Finland in order to facilitate further

customer growth.

• 1,062,000 customers, including

321,000 in Sweden and Finland –

decrease of 7,000 customers in

Finland and Sweden in the quarter.

EBITDA development


Operating revenues 1 233 1 246 3 322 3 331

Gross margin 361 332 761 721

EBITDA 133 126 313 266


Sold volume (GWh) 3 895 3 814 9 670 9 513

Change in net debt during the quarter

17

105

123

487

308

285

684

Net debt Q1 2015 EBITDA Paid interest

9 263

Paid dividendsPaid taxes Change in working

capital etc

Net debt Q2 2015

9 887

Net investments etc

NOK mill

Solidity development last years

* EBITDA for core business (Production, Heat, Network, and Markets, last 12 months)18

Debt / EBITDA *Equity ratio (percent)

Q2 14

4.2

3.6

Q2 15

4.7

Q2 12

4.3

Q2 13Q2 13

26%

Q2 12

32%

Q2 15

31%

29%

Q2 14

Summary of second-quarter 2015 profit

19

684

28624

EBITDA Q2 15Operating

expenses

20

Gain/loss

financial items

12

Gross marginEBITDA Q2 14

232

49

124

279

684

Profit after

tax Q2 15

Financial

expenses

DepreciationEBITDA Tax

Change in EBITDA from Q2 2014 Profit after tax Q2 2015

Earnings per

share NOK 1.43

Includes gain on

loan portfolio of

NOK 33 million

(NOK -17 million)

Outlook

20

• Planning of new generator at Vamma power plant going

according to plan – a decision expected autumn 2015.

• Following co-location of operating center functions in Oslo

autumn 2015, the most important milestones in the network

business integration work in will be completed.

• Power sales with a Nordic growth strategy, 2015 characterized

by the establishment of operating platform in Sweden and

Finland.

• At the end of first-half, the forward price for delivery of power in

the second-half of 2015 was NOK 0.19 per kWh, down NOK

0.07 per kWh from 2014.

Appendix

21

Group profit and loss account

22


Operating revenue 2 610 2 550 60 6 387 6 284

Cost of energy (1 295) (1 263) (32) (3 605) (3 552)

Gross margin 1 315 1 287 28 2 781 2 731

Gain/loss financial items 49 37 12 60 48

Operating expenses (679) (700) 20 (1 380) (1 401)

EBITDA 684 624 60 1 461 1 379

Depreciation and write-downs (232) (216) (16) (436) (418)

Operating profit 452 408 44 1 025 961

Interest expences (81) (96) 15 (176) (189)

Market value change loan portfolio 33 (17) 50 60 (33)

Financial expenses (49) (114) 65 (116) (223)

Pre-tax profit 403 294 109 909 739

Tax (124) (126) 2 (272) (14)

Profit after tax 279 168 111 636 725

Earnings per share (EPS) in NOK 1.43 0.86 0.57 3.26 3.71

Group balance sheet

23

NOK million 2015-06-30 2015-03-31 Q1 15 2014-12-31

Intangible assets 2 956 2 962 (6) 2 970

Fixed assets 19 074 19 021 53 19 011

Financial assets 1 046 832 213 786

Accounts receivables and inventory 1 866 2 307 (441) 2 703

Cash and cash equivalents 265 1 060 (795) 742

Assets 25 207 26 182 (975) 26 212

Equity (incl. min. int.) 8 154 8 246 (92) 7 877

Allocation for liabilities 4 018 3 937 81 3 858

Long-term debt 8 485 8 188 297 8 692

Other current liabilities 1 723 2 186 (463) 2 668

Short-term debt 2 827 3 624 (798) 3 117

Equity and liabilities 25 207 26 182 (975) 26 212

Net interest-bearing debt 9 887 9 263 624 10 577

Equity ratio 32 % 31 % 1 % 30 %

Cash flow

24

NOK million Q2 2015 Q2 2014 Year 2014

EBITDA 684 624 60 2 795

Paid interests (105) (115) 10 (452)

Paid tax (123) (124) 1 (58)

Marketvalue changes and other liquidity adjustments (18) (28) 10 (67)

Change in working capital, etc. (290) (206) (84) (64)

Total cash flow from operations 148 151 (2) 2 154

Net operations and expansion investments (271) (1 191) 920 (1 896)

Net purchase/sale of shares etc. 0 (332) 332 (379)

Cash flow from investments activities (271) (1 523) 1 252 (2 275)

Cash flow to down payments and interests (123) (1 372) 1 249 (121)

Earnings per share

Profit after tax Q3 2012 negatively affected NOK 551 million relating to extraordinary write-downs and provisions.

Profit after tax Q1 2014 was positively impacted by NOK 288 million related to tax waived claims regarding Hatros.

Profit after tax Q3 2014 negatively affected by NOK 93 million relating to write-downs Bio-el and secondary networks Søndre Nordstrand25

-0.06 3.83

Per quarterNOK

2012 2013 2014

2.85 **

1.060.86

0.36 ***

1.83

1.43

1.071.081.05

-2.97 *

0.91

1.50

1.15

0.770.72

5.14

*

**

***

2015

3.26

Capital employed and return on capital employed

2013 - Includes the sale of shares in Infratek with gain of NOK 90 million

2014 - Includes write-downs of Bio-El and secondary networks Søndre Nordstrand of NOK -127 million .

2015 – Last 12 months26

Capital employed NOK 21.5 billion per

30.06.2015Return on capital employed

Markets

9%

Network 46%

Other

4%Heat

21%

Production

20%

2015 ***2014 **2013 *

8.3%8.0%

8.5%

*

**

***

Loans – portfolio data

27

Debt maturity profileNOK million

Loans at maturity next 12 monthsNOK million

743

300400

0

1 000

2 000

3 000

2021

420

2020

701

2019

1 706

2018

1 460

2017

1 410

2016

2 143

2015

700

2022 20242023

Other loansBondsCommercial paper

400

500

300300

0

200

400

600

JunMayAprMarFebJanDecNovOctSepAugJul

Other loansCommercial paper Bonds

Q2 15 Q1 15

Bonds 77 % 73 % 4 %

Commercial paper 6 % 3 % 3 %

Other loans 17 % 24 % -7 %

NOK million Q2 15 Q1 15

Nominal value - market value of loans (294) (326) 33

Market value interest rate and fx derivatives (47) (48) 1

Average interest incl. derivatives (%) 3.8 % 3.8 % 0.0 %

Proportion of loan portfolio with fixed

interest (%)55 % 51 % 4 %

Loans at maturity next quarter 0 986 (986)

Unused drawdown facilities 3 800 3 800 0

Key figures

28

Group YTD 2015 YTD 2014

Capital matters

Total assets 25 207 25 321

Capital employed 21 513 21 528

Equity 8 154 7 814

Market capitalization 11 066 10 121

Equity ratio 32 % 31 %

Net interest-bearing debt 9 887 10 548

Profitability

EBITDA 1 461 1 379

Earnings per share (EPS) 3.26 3.71

Cash flow per share 8.59 7.97

Power Generation YTD 2015 YTD 2014


Sales price (NOK/kWh) 0.21 0.22

Production volume (GWh) 1 559 1 783

Heat YTD 2015 YTD 2014


Sales price District heating (NOK/kWh) 0.65 0.60

Gross margin (NOK/kWh) 0.38 0.32

Sales volume (GWh) 905 866

Network YTD 2015 YTD 2014


Regulated gross margin for the year 2 614 2 432

NVE-capital (regulatory) 7 501 7 225

Markets YTD 2015 YTD 2014


- of this working capital 377 294

Volume power sales (GWh) 9 670 9 513

Shareholders as of 30.06.2015

29

# ShareholderClass A shares

held

Class B share

heldTotal Ownership

Share of

voting rights

1 City of Oslo 67 525 37 343 104 868 53.7 % 58.5 %

2 Fortum Forvaltning AS 37 853 28 706 66 559 34.1 % 32.8 %

3 Kommunal Landspensjonskasse 5 201 2 848 8 049 4.1 % 4.5 %

4 MP Pensjon PK 0 1 979 1 979 1.0 % 0.0 %

5 Gjensidige Forsikring 0 1 000 1 000 0.5 % 0.0 %

6 Folketrygdfondet 85 784 869 0.4 % 0.1 %

7 Skandinaviska Enskilda Banken 18 400 418 0.2 % 0.0 %

8 Greenwich Land Securities AS 83 317 400 0.2 % 0.1 %

9 New Alternatives Fund, Inc 328 0 328 0.2 % 0.3 %

10 JP Morgan Chase Bank 10 313 323 0.2 % 0.0 %

Total, 10 largest shareholders 111 103 73 691 184 794 94.7 % 96.3 %

Other shareholders 4 325 6 067 10 392 5.3 % 3.7 %

Total 115 428 79 758 195 186 100 % 100 %

Definitions

30

Group

Capital employed Equity + Net Interest-bearing debt + Net tax positions

Equity ratio (in %) (Equity incl. Minority interests / Total assets) X 100

Earnings per share Profit after tax / Average no. of shares outstanding

Cash flow per share Net cash from operations / Average no. of shares

Return on equity last 12 months Result after tax last 12 months / Average equity (incl. Minority interests) last 12 months

Return on capital employed last 12 months Operating profit last 12 months / Average capital employed last 12 months

Hedge ratio Hydro powerRatio of the estimated production portfolio hedged in the period (excluding fixed-price

contracts)

Hedge ratio District heatingRatio of the estimated net power price exposure hedged, by: Sales reduced with

electricity use and 1/3 heat pumps

Investor information

• Additional information is available from Hafslund’s website:

– www.hafslund.no

– You can subscribe to Hafslund press releases

• Group CFO, Heidi Ulmo

– [email protected]

– Tel: + 47 909 19 325

• Financial Director and Investor Relations contact, Morten J. Hansen

– [email protected]

– Tel: +47 908 28 577

31

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