Interim report for Graninge AB (publ) January - March 2001

Interim report for Graninge AB (publ) January - March 2001 · Operating income for the first quarter amounted to MSEK 699, a decrease of 30 per cent attributable to the sale of Forest &Timber operations. · Profit before tax is reported at MSEK 208, an increase of 36 per cent. · The improvement in profit is the result of high production in the hydropower plants and high spot prices. Profit in electricity operations after depreciation rose by 88 per cent. · An agreement was signed with the municipality of Norrtälje to acquire the transmission networks and electricity sales in Norrtälje Energi. · Additional hydropower investments were made through the acquisition of 18 per cent of the shares in Gulsele Kraft AB. Income and profit The Graninge Group's operating income for the first three months of the year was MSEK 699, a 30 per cent decrease compared with the same period of last year that is attributable to the sale of Forest & Timber operations to Scaninge Timber AB in July 2000. For comparable units - now comprising electricity, network and district heating operations - net sales rose by 2 per cent. Profit after net financial items is reported at MSEK 208, which represents an increase of 36 per cent. Scaninge, the associated company reports a minor loss for the first quarter. Part of this, MSEK -6 (-), is included in the result of Graninge. Electricity operations - high production and high prices Behind the improvement are well filled reservoirs and unseasonably heavy run-off, which made it possible to start the year with very high production in the hydropower plants. The Swedish plants produced a total of 846 GWh in the first quarter, which is 24 per cent more than in the first quarter of last year and 15 per cent higher than normal. The Finnish power plants also showed high production and generated a total of 96 GWh, which is 32 per cent more than the normal volume. Furthermore, the market price has risen. Although it is normal for electricity prices to go up during the winter, anticipation of a weak spring flood in Norway has pushed up the price to levels we have not seen since 1995/96, the driest year on record from a power production standpoint. One factor behind the price increase is that the Norwegians have started to import large volumes of power in order to conserve the energy stored in the reservoirs. In addition, the shortage of snow in Norway has forced up prices in the forward market as well. On April 30 at closing time the price of summer contracts for delivery during the period May-September was close to NOK 190/MWh, nearly a 100 per cent increase since early January. The rising forward prices have in turn driven up prices in the consumer segment. Households with electric heating, which could sign one-year agreements at a level of 14 öre/kWh one year ago, are now forced to pay 10-12 öre/kWh more for the same electricity. In order to cover the risks associated with the sale of electricity, many electricity sellers have taken the opportunity to widen their margins. A new reminder of the risks - and the true costs in electricity sales - came in the beginning of February when a cold snap hit Sweden full force, causing market prices to surge to over SEK 1/kWh. It is not viable to hedge the price in the forward market; since the cold weather leads to higher consumption that must be covered with power purchased at the current market price. Graninge sells more electricity than is produced in the company's power plants. Deliveries of electricity amounted to 1,332 GWh, the same level as in the first quarter of the preceding year. Electricity operations reported a profit after depreciation of MSEK 141 (75) for the period, an increase of 88 per cent. Network operations - still stable The Group's network operations continued to show stable development. The cold weather led to an 8 per cent increase in transmission on the local networks to 980 GWh. Transmission on the regional networks has also increased, partly due to higher production in the hydropower plants that supply power to the network. Connection of new customers remained high, particularly in the Stockholm area. Network operations reported a profit after depreciation of MSEK 83 (80) for the period, an increase of 4 per cent. District heating operations - rising oil prices impair profit Both February and March were colder than normal, and as a result deliveries of district heating and so-called ready heating increased by 4 per cent to a total of 330 GWh. While the heat pumps in Järfälla enjoyed a very favourable production period, the whole profitability in district heating operations has been impaired by high oil prices. Aside from heat pumps, district heating is primarily based on biofuels, though oil is used for peak loads during the winter. Consequently, the tariff adjustments that have been made to cover the higher cost of oil will be visible only on annual basis. District heating operations reported a profit after depreciation of MSEK 14 (24) for the period, a decrease of 42 per cent. Acquisition of networks and hydropower Graninge and Närvärme Sverige have signed an agreement for a joint acquisition of the shares in the municipally-owned energy company Norrtälje Energi AB. Graninge will purchase the transmission networks and electricity sales operations with annual turnover of 240 GWh and 14,000 customers, and Närvärme Sverige will acquire the district heating business with annual turnover of 125 GWh and broadband operations. The agreement is preliminary pending the approval of the municipal council later this spring. The purchase price for Graninge Group is just above MSEK 200. When the transaction is completed, Graninge will increase its share of customers in the Stockholm area by around 15 per cent. The transaction will thus strengthen Graninge's position in the region. Graninge has also reinforced hydropower production capacity through the purchase of Birka Energi's shares in Gulsele Kraft AB, corresponding to 18.3 per cent of the share capital. Graninge already held 31.7 per cent of the shares and will thus own half of the company as of 1 July 2001, when the transfer of ownership takes place. As part of the agreement, Graninge has obtained a one-year option to purchase power from Birka Energi. In total, the transaction is worth MSEK 318. Gulsele Kraft AB owns the Gulsele and Hällby hydropower plants on the Ångerman River and also has rights to a share of power from the Edensforsen power plant. Gulsele Kraft's production amounts to 700 GWh in a normal year. The other owners in Gulsele are Vattenfall, with 35 per cent, and Sydkraft, with 15 per cent. Graninge Kalmar Energi reached an agreement with the municipality of Sävsjö to acquire 50 per cent of the shares in Sävsjö Energi AB for a price of MSEK 19.5. The agreement must be approved by the municipal council. As part of the transaction, Sävsjö Energi will purchase 25 per cent of the shares in Graninge Kalmar Energi's wholly owned subsidiary Sävsjö Träbränsle AB for MSEK 4. Sävsjö Träbränsle is a trader and producer of biofuel in the form of wood powder, pellets and briquettes. Sävsjö Energi delivers around 60 GWh of electricity to nearly 3,500 customers and district heating operations distribute 14 GWh to customer in Sävsjö and Rörvik. In addition, 15 GWh of LPG is supplied to 24 major gas customers in Sävsjö. In mid-January, Graninge and the municipality of Strömsund agreed to merge their district heating operations in northern Jämtland. This took place through the transfer of Graninge's district heating operations in Hoting and Hammerdal to the municipally-owned Jämtlandsvärme AB, which is active in Strömsund and Backe. The municipality of Strömsund owns 72 per cent and Graninge 28 per cent of this company, reflecting the value of the contributed operations. Total deliveries amount to 50 GWh. Investments and net financial items The Group's investments in new plant and equipment during the first quarter totalled MSEK 38, compared with MSEK 56 last year, a decrease of 32 per cent. Last year's figure also included Forest & Timber. The decrease for comparable units was 16 per cent. Net financial items are reported at MSEK -24 (-51), a decrease resulting from the Group's redemption of loans with proceeds from the sale of Forest & Timber operations. This is also the foremost explanation why consolidated net debt had fallen to MSEK -2,023 at the end of March this year, compared with MSEK -3,985 in the corresponding period of 2000. Net debt at year-end was MSEK -2,191. Kramfors, 2 May 2001 Lars Enslöf Managing Director ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2001/05/02/20010502BIT01070/bit0001.doc The full report http://www.bit.se/bitonline/2001/05/02/20010502BIT01070/bit0001.pdf The full report