HNA/HNB - Hafslund Q2 2010: Improved performance and positioning within the end-user market in Sweden

Hafslund generated sales revenues of NOK 3.0 billion in the second quarter, a rise of 31 percent compared with the previous year. This is attributable in part to higher wholesale prices on Nord Pool, a factor that has affected power sales revenues in particular.

The Group's EBITDA, excluding the impact on profits stemming from the investment in REC of NOK 786 million, shows an improvement of NOK 233 million compared with the prior year. All units, with the exception of heating and bioenergy, which is still in a start-up phase, returned improved profits compared to the prior year.

Higher electricity prices compared to prior year, but lower production volume

Sales revenues from electricity generation operations in the second quarter totalled NOK 289 million, an increase of NOK 24 million on 2009. This should be viewed in the context of the fact that wholesale prices on Nord Pool were 23 percent higher than during the corresponding period of 2009. Electricity generation totalled 829 GWh, which was 73 GWh lower than last year, primarily as a result of the snow melting later. This output figure is also 11 percent below normal levels.

District heating: greater demand and stable prices

From a seasonal perspective, the second quarter is normally a poor quarter for district heating, accounting for around 16 percent of production in a standard year. Higher demand for district heating combined with an increase in customers resulted in output rising by 46 GWh against the second quarter of 2009. This generated sales revenues of NOK 136 million, which represents a 28 percent rise on last year.

Continued improvements in profits from grid operations

Power grid operations generated sales revenues of NOK 1,050 million in the second quarter, which represents a rise of NOK 278 million on last year. In the same way as for the first quarter, this rise should be viewed against higher reinvoiced costs from Statnett, which came to NOK 406 million, up NOK 237 million on 2009. On the basis of sales revenues for the quarter, the forecast revenue ceiling for 2010 as a whole is NOK 2,874 million (excluding reinvoiced costs from Statnett), which is NOK 413 million higher than for 2009. The main reason for the rise in the revenue ceiling forecast is increased compensation for grid losses based on higher electricity prices, and a higher cost base for Hafslund Nett and the power grid sector in general.

Grid operations continued to perform strongly, posting an operating profit of NOK 138 million, which represents an increase of 23 percent on last year.

Power sales: solid profits and establishment in Sweden

Power sales revenues amounted to NOK 1,391 million in the second quarter, which represents an increase of 48 percent on last year. The increase is primarily attributable to higher wholesale prices on Nord Pool, although increased energy sales also made a contribution.

Operating profits totalled NOK 185 million, an increase of NOK 142 million on the second quarter of 2009. This should be viewed in the context of improved margins during the first part of the quarter, after a challenging market situation had resulted in two poor preceding quarters. In addition, the company applied an effective risk management and hedging strategy during the difficult market conditions that characterised the first half of the year. At 2,947 GWh, energy sales for the quarter were up 13 percent on last year and made an important contribution to the improvement in profits. This result is attributable to increased demand and to a six percent rise in the number of customers compared with 2009. The operating profit for the first six months of the year corresponds to profit per customer after tax of NOK 252.

The trend in the Nordic region is towards the creation of a common Nordic end-user market for electricity, and several players are currently working to position themselves across the borders of the Nordic countries. This is the background for Hafslund's decision to gain a foothold in Sweden through the acquisition of two companies during the second quarter. Hafslund has purchased 49 percent of the shares in the power sales company Energibolaget i Sverige Holding AB (EBS), with an option to purchase the remaining shares in 2013, along with 100 percent of the shares in Göta Energi AB, another power sales company. These two companies provide a sound strategic positioning for Hafslund in Sweden and the Nordic region and have different profiles that complement each other well. Both acquisitions have been approved by the Swedish anti-trust authorities.

Highlights in the second quarter of 2010:

For further information please contact:

Financial Director Morten J. Hansen:
Mobile: + 47 908 28 577
E-mail: mjh@hafslund.no

SVP Communications & CR Karen Onsager:
Mobile: + 47 920 87 007
E-mail: karen.onsager@hafslund.no

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