Birka Energi Interim report, January - September 2000

Birka Energi Interim report, January - September 2000 Some improvement in third quarter profits compared with 1999 Increased hydroelectric power production Deregulated nuclear power Continued pressure on end-customer electricity prices Substantial new sales of district heating and cooling [REMOVED GRAPHICS] Some improvement in third quarter profits During the third quarter, Birka Energi's profits showed a slight improvement compared with the corresponding period in 1999, and the previous year's fall in profits was thus to some extent slowed down. Throughout the first six months, pressure on electricity prices and the mild winter considerably reduced profits. The third quarter was characterised by stiff competition and price pressure in the electricity market. In addition, significant differences in electricity prices between Sweden and Norway continued to characterise the power market. On the power exchange, spot prices were periodically higher than system prices, which affected the Group's power division positively. At the same time, however, the electricity business met with an increase in the costs of purchasing power, which, due to continued pressure on end-customer prices, could not be passed on to the customers. Nevertheless, for the Group as a whole, the effect of price differences on profits was in fact marginal. Following the summer's ample inflow, the supply of hydroelectric power was very good while nuclear power production dropped compared to last year. Temperatures in the Stockholm region remained close to normal, which in turn meant that the volume of heating sales was normal for the period. New sales of district heating and cooling developed well. Financial performance The Group's net turnover at the end of the third quarter is slightly higher than in the previous year, at SEK 9 620 million (8 901). The acquisition this spring of electricity sales, network and heating businesses has contributed to the increase in turnover. The Group's total sales of electricity during the period amounted to 18.1 TWh (18.0). In-house power production was 15.2 TWh (15.7), of which hydroelectric power production accounted for 8.9 TWh (8.1) and nuclear power production for 5.6 TWh (6.9). The Group's total electricity turnover, including own consumption for heating production and coverage of network losses, amounted to 19.1 TWh (19.7). Heating sales amounted to 6.3 TWh (5.0). The drop in sales caused by the mild start to the year has not yet been recovered. Due to acquisitions, the sales volume during the period nevertheless increased compared with the previous year. New sales of heating within existing network areas were also sound. Rising oil prices during the year led to an initial hike in heating prices from September onwards. Sales of cooling continued to remain at a good level and amounted to 181 GWh (137) during the period. Sales of gas, on the other hand, dropped to 280 GWh (302) compared with the previous year. The electricity distribution business was reinforced during the third quarter by the acquisition, in June, of Stora Enso's regional network in Dalarna. Distributed volume amounted to 20.9 TWh (17.3), representing a 21% increase compared with the previous year. The operating profit for the Group was SEK 255 million lower than the previous year. Stiffening competition in electricity sales and the low, gradually falling price level for electricity has put pressure on electricity sales margins. In addition, low sales volumes at the beginning of the year resulted in lower profits for the heating division. Compared with the pro forma figures for 1998, this year's operating profit represents an improvement of approximately SEK 100 million. The operating profit includes SEK 35 million relating to the payment of surplus funds from SPP. According to SPP, total surplus funds for Birka Energi Group companies amount to around SEK 170 million. The remaining impact on profits for the year 2000 will be accounted for in the fourth quarter. Net financial income/expense for the Group amounted to SEK -1 305 million (-1 140). Due to higher market interest rates and increased borrowing in conjunction with acquisitions, negative net financial income/expense have increased by SEK 165 million compared with the previous year. The profit after financial income and expense was SEK 339 million (759), representing a decrease of SEK 420 million compared with the previous year. Of this decrease, SEK 255 million relates to the business itself and the other SEK 165 million to financing activities. During the third quarter, the profit after financial income and expense improved by SEK 63 million compared with the previous year. Acquisitions and sales [REMOVED GRAPHICS] Birka Energi continues to take advantage of the restructuring of the energy market in order to reinforce and refine the structure of both the business itself and its range of services. Acquisitions of electricity sales, along with electricity and district heating distribution businesses connected to its own existing networks, continues to increase the company's customer base and opportunities for greater efficiency. During the third quarter, Birka Energi acquired the remaining shares in Birka Energy Securities AB (Birka Ensec), making this a completely owned subsidiary. The Group's financial energy trading will be handled within this company which means that the energy trading presently undertaken by Birka Energi AB will next year be transferred to Birka Ensec. Cash flow and financing [REMOVED GRAPHICS] Cash flow from ongoing business amounted to SEK 1 769 million (2 233). The lower result compared with the previous year had a negative effect on the cash flow. The Group's total net investments in intangible and tangible fixed assets, excluding company acquisitions, amounted to SEK 1 369 million (1 355). The greater part of these investments was undertaken within Birka Värme and Birka Nät. Birka Värme's investments relate mainly to expansion within the heating and cooling businesses. The investments in network activities are essentially in the form of reinvestments in already existing networks. Investments in the acquisition of subsidiaries amounted to SEK 2 165 million (1 485). Cash flow after investments amounted to SEK -1 644 million (-607). Compared with the same period in the previous year, cash flow was affected by the acquisitions that were made in the second quarter. The balance sheet total, which amounted to SEK 74 575 million (70 547), has increased compared with the previous year. This increase is the result of company acquisitions undertaken during the latter part of 1999, the expansive level of investment in the district heating business, and major acquisitions during the second quarter of 2000. Since the beginning of the year, the balance sheet total has increased by SEK 2 139 million. A decision has been reached regarding the disposal of office premises, to the estimated value of around SEK 500 million. Other assets, such as minority holdings in peripheral power plants or isolated and small network areas, may also be sold off. Shareholder's equity amounted to SEK 23 857 million (23 946). Interest- bearing net loan liabilities amounted to SEK 30 714 million (28 609), representing an increase of SEK 988 million since the beginning of the year. Interest-bearing net liabilities, including pension allocations, has increased by SEK 1 000 million since the beginning of the year. Stockholm, November 2000 Tomas Bruce President and CEO This report has not been the subject of special review by the Group's auditors. For further information, contact: Tomas Bruce, President and CEO, Tel +46 (0)8 671 79 60 or +46 (0)70 316 14 14 Lars-Håkan Ellenius, Executive Vice President and CFO, Tel +46 (0)8 671 79 69 or +46 (0)70 676 79 69 Merril Boman, Executive Vice President Communications, Tel +46 (0)8 671 79 51 or +46 (0)70 590 79 75 [REMOVED GRAPHICS] ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2000/11/03/20001102BIT01020/bit0001.doc http://www.bit.se/bitonline/2000/11/03/20001102BIT01020/bit0002.pdf