Interim Report January - March 1999

Interim Report January - March 1999 Birka Energi's profit for the quarter improved compared to preceding year * Improved profit * Increased sales volumes for heating and cooling * Good supply of hydroelectric power * Continued low electricity rates Acquisitions * Lidingö Energi AB, 20,000 customers * Eksjö Elförsäljning AB, 6,000 customers * Additional shares in Ockelbo Kraft AB, making this a subsidiary The Group's profit for the first quarter shows an improvement as compared to the preceding year. Low energy costs and sustained margins within electricity sales are recognised as the primary reasons for the increase in profit. Supplies of both hydroelectric power and nuclear power during the first quarter have been good. This has caused the Group's hydroelectric power production to be higher than normal. The good water supply has also caused the electricity rates on the stock exchange to be lower and gradually fall, both regarding forward rates and spot rates. Birka Energi's strength on the deregulated energy market is the Group's wide product mix. The Group maintains a good balance of electricity sales, electricity production and electricity distribution as well as a unique leading position in district heating. Birka Värme represents 30% of the Group's operating income. The market position is further strengthened by the fact that many large heating customers are becoming more interested in integrated supplies including both electricity and district cooling as well as energy optimisation. Birka Energi's most important goal for 1999 is to quickly establish the new organisation and to take advantage of the economies of scale and synergy opportunities of the merger between Stockholm Energi and Gullspång Kraft. This is why the Group is focusing on the following strategies: * Continued market activities focused on the most important customer segments for electricity and heating. * Increased and environmentally driven business development in collaboration with customers. * Extensive operational development focused on competence development, efficiency measures and cost rationalization. The Birka Energi trademark launch has been prepared during the first quarter. Starting in June, Group products on the business market will be under the Birka Energi trademark and under the Hemel trademark on the consumer market. Birka Energi continues to play an active roll in the structural changes taking place on the energy market. Additional acquisitions have been made during the year, providing the Group with 26,000 new customers. Birka Energi's business structure consists of Birka Marknad, Birka Kraft , Birka Nät, Birka Värme, Birka Service and Birka Teknik & Miljö. Birka Marknad is the Group's common marketing and sales organisation. Birka Support is responsible for shared administrative services. Birka Energi currently consists of approximately 90 companies. Work is in process to bring the legal structure and the operative structure into balance. Sales and income Pro-forma accounting for 1998 has been applied below as a comparison. Adjustments have been made in the pro-forma accounting primarily for depreciation on surplus values and interest expenses for increased borrowing in connection with the merger. Adjustments for effects on earnings of expected synergies have not been made. Net sales for the first quarter amounted to MSEK 3891 (3787). Birka Energi has been able to maintain its energy sales volume in spite of stiffer competition on the electricity market. Electricity sales for the first quarter amounted to 7179 GWh (7145). The greater part of the Group's power sales are from the Group's own production. During the period, Birka Energi's net power acquisitions, via the stock exchange and bilateral contracts, amounted to 1300 GWh. Heating sales during the period exceeded the total for the corresponding period of the preceding year by 400 GWh, partly due to new investments, but also to the fact that the first quarter of 1999 was colder than the corresponding period in 1998. Sales for the first quarter of 1999 amounted to 3168 GWh (2765). Cooling sales have doubled to 25 GWh (12) compared with the first quarter of the preceding year. The Group's operating income has improved to MSEK 1250 (987). The operating margin has increased from 25% to 31%. The increase in profit is largely found in Birka Marknad and Birka Kraft and is primarily due to the fact that low and falling electricity rates reduce power costs, which has facilitated sustained margins on the electricity market. Birka Värme also shows an improved result compared with the preceding year. The income after net financial items has improved to MSEK 880. The Group's net financial items are MSEK 50 better than the preceding year despite increased borrowing in connection with the merger. Falling market interest rates have resulted in lower interest expenses than the preceding year. Investments (excluding acquisitions) The Group's total net investments excluding acquisitions amounted to MSEK 355 (350). The greater part of the investments was within Birka Nät and Birka Värme. The investments in the network operations are for the most part reinvestments in the network. Birka Värme's investments primarily concern expansion investments regarding heating and cooling. Cash flow and financial position The Group's cash flow from current operations amounted to MSEK 433 during the first quarter. The cash flow after investments amounted to MSEK -682. The Group's interest bearing net liabilities as per 31 March 1999 amounted to MSEK 30.236 including pension obligations, an increase by MSEK 762 since year- end. The equity ratio of the Group was 35.5%, compared to 35.3% at year-end. Group income statement Pro-forma Amounts in MSEK Jan. - Mar. Jan. - 1998 1999 Mar. 1998 Net sales excl. selective 3,891 3,787 12,686 taxes Other operating income 132 112 501 Operating expenses -2,389 -2,565 -9,260 Depreciation and write- -396 -357 -1,475 downs of fixed assets Shares in associated 12 10 41 companies Operating income 1,250 987 2,493 Financial income 38 71 191 Financial expenses -408 -491 -1,620 Income after financial 880 567 1,064 items Profit/loss in - - -496 subsidiaries prior to acquisition Income before taxes 880 567 568 Minority share -2 -2 -3 Taxes -251 -152 -168 Net profit/loss for the 627 413 397 year Group balance sheet Amounts in MSEK 1999-03-31 1998- 12-31 Assets Fixed assets 65,414 64,435 Current assets 4,284 3,981 Liquid assets 527 513 Total assets 70,225 68,929 Shareholders' equity and liabilities Shareholders' equity 24,024 23,397 Minority shareholding 941 939 Provision for deferred 9,895 9,421 taxes Other provisions 1,428 1,420 Interest bearing 31,343 30,552 liabilities Non-interest bearing 2,594 3,200 liabilities Total shareholders' 70,225 68,929 equity and liabilities Group cash flow statement Jan. - Amounts in MSEK Mar. 1999 Current operations Cash flow before changes in 1,328 working capital Changes in working capital -895 Cash flow from current operations 433 Investment activities Acquisitions and net investments -760 in other financial assets Net investments in tangible assets -355 Cash flow from investment -1,115 activities Financial activities Changes in loans and other long- 696 term liabilities Cash flow from financial 696 activities Net changes in liquid assets 14 For more information, please contact: Managing Director Tomas Bruce, tel. +46 (0)8-671 7960 or Economy and Finance DirectorLars-Håkan Ellenius, tel. +46 (0)8-671 7969. This report has not been reviewed by the auditors of Birka Energi. ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1999/05/28/19990528BIT00230/bit0001.doc http://www.bit.se/bitonline/1999/05/28/19990528BIT00230/bit0002.pdf