Interim report January-September 1999

Interim report January-September 1999 Steady improvement in Birka Energi's performance Sales volumes of heating remain stable despite the warm weather Cooling sales continue to climb Electricity sales volumes hold steady Electricity prices still low Interest rates historically low Financing drive underway Acquisitions Holding in Ekerö Energi increased to 79% Holding in Ockelbo Kraft increased to 86% The third quarter of 1999 saw Birka Energi continuing to show stable profit growth relative to last year. Sales volumes and margins rose despite the warm weather and tougher competition in the deregulated electricity market. Lower costs and the continued expansion of the group's heating and cooling operations contributed to this growth. The group's results were also boosted by historically low interest rates. Acquisitions and restructuring Birka Energi is continuing to play an active role in the restructuring of the Nordic power market and has acquired shares in Ekerö Energi from Ekerö Municipality during the year. The company subsequently made a public offer for Ekerö Energi and now has a 79% holding. The autumn brought the acquisition of additional shares in Ockelbo Kraft AB, increasing the company's holding to 86%. The third quarter saw Birka Energi selling 9% of Birka Service AB and 35% of subsidiary Birka Teknik & Miljö AB to the Fortum group. Financial performance The following includes pro forma figures for 1998 for comparative purposes. The pro forma accounts have been prepared largely to take account of the amortisation of surplus values etc and of interest payable on loans in connection with the merger. No adjustments have been made to take account of the impact of anticipated synergies on earnings. Net sales during the period totalled SEK 8 901 million (8 544). Electricity sales volumes for the first nine months fell by just over 2% to 17 969 GWh (18 393). Lower electricity prices resulted in a slight drop in income from electricity sales, though an increase in hydroelectric power (HEP) output, along with lower costs in areas such as property tax on HEP, meant that profit was higher than last year in this area. Nuclear power output was lower than normal on account of the summer coast-down and longer audit periods. Birka Energi's net power purchases, via the power exchange and bilateral contracts, totalled 2 522 GWh during the period. Despite the warm weather, extra sales meant that Birka Energi managed to sell 85 GWh more heating in the first nine months than during the same period in 1998. Sales for the period totalled 5 003 GWh (4 918), while cooling sales amounted to 137 GWh (80). The group's operating profit rose to SEK 1 899 million (1 530) and its operating margin to 21.3% (17.9%). This increase was largely attributable to Birka Värme, Birka Kraft and Birka Marknad. Profit after net financial items rose to SEK 759 (283) million, and the group's financial items were SEK 107 million better than last year, despite the loans raised in connection with the merger. Falling market rates have translated into lower interest charges than last year. Investments The group's total net investments, excluding acquisitions, amounted to SEK 1 355 million (1 469), with most of the investments focusing on subsidiaries Birka Nät and Birka Värme. In the case of Birka Nät, these related primarily to reinvestment in the existing network, while the investments at Birka Värme related mainly to the expansion of the heating and cooling operations. A total of SEK 775 million was spent on acquisitions. Cashflow and financing The group generated a net cash inflow from operating activities of SEK 2 233 million and a net outflow after investing activities of SEK 607 million. The group's net interest-bearing liabilities rose SEK 206 million during the period to SEK 29 680 million, including pension liabilities, on 30 September 1999. The equity/assets ratio held steady at 35.3%. 1999 has brought a drive to refinance Birka Energi's interest-bearing liabilities. The group invited both Moody's and Standard & Poor's to give it a credit rating, resulting in a Baa1 from Moody's and a BBB+ from Standard & Poor's. Several major loan programmes got off the ground during the year. May saw several banks cooperating on the medium-term note (MTN) programme, which has a framework of SEK 5 000 million and allows Birka Energi to issue new notes at any point. In June Birka Energi also set up a programme allowing the group to issue commercial paper for up to a total of SEK 5 000 million. The group has successfully issued notes and commercial under the above programmes to the tune of just over SEK 2 500 million and SEK 3 000 million respectively. Birka Energi has also set up a global MTN programme for EUR 1 000 million, under which it issued debentures for EUR 500 million to major investors during October. These have been listed on the stock exchange in London. Consolidated profit and loss account Pro forma SEK million Jan-SepJan-Sep 1998 1999 1998 Net sales, excluding energy tax 8 901 8 544 12 686 Other operating income 389 544 501 Operating costs -6 219 -6 433 -9 260 Depreciation and write-downs of -1 225 -1 152 -1 fixed assets 475 Share in associated companies' 53 27 41 profits Operating profit 1 899 1 530 2 493 Financial income 130 334 191 Financial costs -1 270 -1 581 -1 620 Profit after financial items 759 283 1 064 Profit in subsidiaries before - -496 acquisition Profit before tax 759 283 568 Minority interests -2 -5 -3 Tax -211 -79 -168 Net profit for the period 546 199 397 Consolidated balance sheet SEK million 30/09/99 31/12/98 Assets Fixed assets 66 280 64 435 Current assets 3 751 3 981 Liquid assets 516 513 Total assets 70 547 68 929 Shareholders' equity and liabilities Shareholders' equity 23 946 23 397 Minority interests 960 939 Provision for deferred taxes 9 889 9 421 Other provisions 1 358 1 420 Interest-bearing liabilities 31 078 30 552 Non-interest-bearing 3 316 3 200 liabilities Total shareholders' equity and 70 547 68 929 liabilities Consolidated cash flow analysis SEK million Jan-Sep 1999 Operating activities Cash flow before change in 2 044 working capital Change in working capital 189 Cash flow from operating 2 233 activities Investing activities Acquisitions and net investment -1 485 in other financial fixed assets Net investment in tangible -1 355 fixed assets Cash flow from investing -2 840 activities Financing activities Change in loans and other long- 603 term liabilities Cash flow from financing 603 activities Net change in liquid assets -4 Further information is available from: Tomas Bruce (President and CEO), tel +46 8 671 7960 or +46 70 771 7960 Lars-Håkan Ellenius (Vice President Finance and CFO), tel +46 8 671 7969 or +46 70 727 0386 Merril Boman (Vice President Communications), tel +46 8 671 7951 or +46 70 590 7975 This report has not been reviewed by Birka Energi's auditors. ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1999/11/05/19991105BIT00200/bit0001.doc http://www.bit.se/bitonline/1999/11/05/19991105BIT00200/bit0002.pdf