Interim report january - march 2002

interim report january - march 2002 * Earnings amounted to SEK 1.3 billion * High levels of hydroelectric power production and nuclear power availability * Modernization of Oskarshamn 1 proceeding according to plan * Additional shares acquired in Norwegian company Hafslund * Reduced ownership in consulting and data operations Comments by group ceo Sydkraft's operations are developing favorably. A good start was made during the first three months of 2002, despite the mild weather. Energy sales showed a positive trend. Today, electricity sales are profitable, which means that the Marketing & Sales Business Sector is once again reporting positive earnings following a difficult 2001 during which an operating loss was reported. Prices on the Nord Pool Exchange have declined slightly due to the warm weather. Thanks to the preceding year's forward contracts, Sydkraft's electricity production has been sold at relatively high prices to date this year. Electricity production based on both hydroelectric and nuclear power functioned well. Reservoir water levels remained at a high level during the period. On a couple of occasions during the past winter, southern Sweden experienced severe weather conditions, which caused major problems for some 50 000 electricity customers in primarily Småland, Blekinge, Halland and northeastern Skåne. The Group's customers have been provided with information to the effect that Sydkraft will compensate all customers who were without electricity for periods of more than 24 consecutive hours. The customers entitled to such compensation have received a total of approximately SEK 15 M. Group subsidiary ElektroSandberg, which showed a deficit during 2001, reversed the negative trend following streamlining and restructuring measures. Work at hand and order bookings are currently satisfactory. Our expansion continues Some time ago, in Norway, we acquired Vattenfall's shares in the publicly listed company, Hafslund, in which we now have a holding of slightly more than 25%. Hafslund is one of Norway's foremost energy companies, with substantial electricity production, distribution and sales. Earlier this year Sydkraft, through its subsidiary, Sydkraft Danmark A/S, acquired the co-generation plant in Prästø and recently purchased Western Sjælland County's co-generation plant and district heating operations in Nykøbing. This was the third acquisition made by Sydkraft in Denmark in less than a year and strengthens Sydkraft Danmark's position as one of the most active of the new players in the Danish energy market. Sydkraft is also engaged in several activities in Poland. Recently, a contract was signed to acquire 51% of the shares in the district heating company serving the town of Slupsk in northern Poland. This is the largest acquisition made to date by Sydkraft in Poland. Slupsk, which is located about 20 km from the Baltic coast and has a population of about 120 000, is not far from the communities of Koszalin, where Sydkraft has a 32% holding in the local district heating company, and Ustka, where Sydkraft has signed a preliminary agreement to acquire 34% of the shares in the local district heating company. Company divestments Since the beginning of the current year, Sydkraft's workforce has been reduced by more than 1 000 employees. The subsidiary Sycon and the majority holding in WM-data Ellips have been divested. Danish company Carl Bro acquired Sycon in return for Sydkraft receiving an 11% stake in Carl Bro, among other considerations, and WM-data acquired the majority holding in WM-data Ellips in a similar manner, whereby Sydkraft received a holding in WM-data. These two transactions are a logical continuation of the companies' expansion. Sydkraft's aim has been to develop Sycon into Sweden's leading technical consulting company. Carl Bro/Sycon is now the largest technical consulting company in the Nordic region, with approximately 3 200 employees. WM-data Ellips will develop more rapidly as a subsidiary in an IT group than it would with Sydkraft as principal owner. At the same time, Sydkraft retains 40% of the shares in the company and can thus continue to benefit from WM-data Ellips' specialist skills and know-how. Nuclear power is needed According to the Government's energy bill, which was presented in mid- March, nuclear power will be phased out in Sweden in future through an agreement to be reached with representatives of the nuclear power industry. We at Sydkraft consider that there is a need for nuclear power but, as we have said before, if it is to be phased out it would be preferable to reach a voluntary agreement rather than to invoke the Decommissioning Act. The company is prepared to discuss the question of future energy supply, which for many years into the future will include nuclear power. At the same time, all of the conditions need to be discussed in depth and naturally we shall be making firm demands during these discussions. One of our demands is that we want to see a guaranteed and environmentally compatible supply of electricity over time that will assure growth and well-being. Sweden's industry, which belongs to our customers, must not be placed at a disadvantage. Another demand is that tax on nuclear power be eliminated. For Sydkraft, this amounts to approximately SEK 550 M annually. This tax should be abolished immediately; it doesn't warrant being the only production tax in the EU, particularly within an electricity market that is open to competition. Vision and values Work to implement Sydkraft's corporate values model, which includes the company's vision, values, core brand values and interaction between management and personnel is continuing and has been assigned high priority. Increased cooperation and a shared vision and values will generate better results. Customers must perceive our products and services as adapted to their needs and good value for money, simple and convenient, innovative and new. Customers must perceive the company's personnel as being accessible, reliable and creative. Customers must feel that Sydkraft is a pioneer, that we contribute to quality of life and create confidence and expectations. The Sydkraft brand is important and valuable. It is the link to our history, the strength in our current position and the foundation for our future. Sydkraft has been a subsidiary of the E.ON Group since May 2001. Forecast Earnings for 2001 were affected to a significant extent by the capital gains arising from the sale of the holdings in HEW and E.ON AG. Excluding such effects, and bearing in mind the current market situation and the prevailing price scenario, it is estimated that earnings in 2002 will be in line with the level achieved in 2001. Lars Frithiof Sydkraft has adapted its consolidation principles and presentation to harmonize with those of the E.ON Group. This means that Sydkraft no longer applies the proportional consolidation method and that at functionally divided Income Statement is now being used. While comparative figures for 2001 have been recalculated in a corresponding manner, the figures for earlier fiscal years have not been recalculated. ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2002/05/17/20020517BIT00180/wkr0001.doc The full report http://www.waymaker.net/bitonline/2002/05/17/20020517BIT00180/wkr0002.pdf The full report