Strong performance for E-CO Energi in 2017

2017 was a very good year for the E-CO Energi Group. Smooth operations, high production availability, successful production management and higher actual power prices, as well as the acquisition of Hafslund Produksjon, contributed to a net profit for the year of MNOK 1 038. Through the acquisition of Hafslund’s hydropower production activities, E-CO Energi strengthened its position as Norway’s second largest hydropower producer, increasing its mean production to some 14 TWh. The Board of Directors proposes a dividend of MNOK 650.


FKF power plant at Kykkelsrud – photo: Bo Mathisen

In 2017, the E-CO Energi Group switched to IFRS-based reporting (the EU-approved International Financial Reporting Standards) with effect for accounting purposes as from 1 January 2016. The accounting figures for 2016 have been adjusted from Norwegian Generally Acceptable Accounting Principles (NGAAP) to the international standard. E-CO Energi has chosen not to apply hedge accounting to power revenues, but rather to continue the Group’s hedging strategy unchanged. The recognition of changes in unrealised values on the hedging instruments will lead to larger fluctuations in operating revenues and profits compared with NGAAP. Another major difference is that Oppland Energi (E-CO Energi owns 61.4 per cent) is now included as a subsidiary of the Group, rather than through gross consolidation on a prorated basis of E-CO Energi’s stake on the income statement and balance sheet under NGAAP.The 2017 accounts were also heavily influenced by the acquisition of 90 per cent of the shares in Hafslund Produksjon in early August 2017. The acquisition was a step in a larger restructuring of Oslo Municipality’s ownership in the energy sector. The agreed debt free cash free enterprise value for Hafslund’s power production was MNOK 7 750, of which E-CO Energi’s 90 per cent stake totalled MNOK 6 975. E-CO Energi’s purchase price, adjusted inter alia for investments up until the transaction date, added up to MNOK 7 118. The purchase was funded by MNOK 3 000 of the purchase price being added to equity as a non-cash contribution, and MNOK 4 118 in new loans. Equity was further reinforced by converting MNOK 1 000 of our subordinated loan to equity.

Consolidated operating revenues added up to MNOK 3 592 in 2017, up MNOK 882 from 2016. In addition to higher power prices and a change in the unrealised result from power derivatives, the increase is ascribable to the acquisition of Hafslund’s power production operations. The average actual selling price for 2017 was 0.281 NOK/kWh (0.254 NOK/kWh), which was 5 per cent (8 per cent) higher than the weighted hourly spot prices for Oslo and Bergen (NO1 and NO5). E-CO Energi outperformed the market price due to the prudent management of hydropower resources during the year, as well as through a successful pricing strategy. The Group’s power production aggregated 12 194 GWh (11 215 GWh). Excluding Hafslund Produksjon, the Group’s power production aggregated 10 840 GWh, down 375 GWh from 2016. Hafslund’s power production was calculated from the date of acquisition, 4 August 2017.

Operating profit of MNOK 2 235 in 2017 mark an increase of MNOK 796 from last year. The increase must generally be seen in the context of higher power prices, an operating profit of MNOK 302 from the acquisition of Hafslund Produksjon, and unrealised gains of MNOK 57 from power derivatives in 2017, compared with an unrealised loss of MNOK 225 in 2016.

The net profit for the year of MNOK 1 038 marks an improvement of MNOK 533 from 2016. The proposed dividend of MNOK 650 is equivalent to 75 per cent of the net profit for the year, less MNOK 114 for the minority shareholders’ percentage of the net profit/(loss) for the year in subsidiaries and MNOK 57 in unrealised gains on derivatives.

The E-CO Energi Group had investments in capital equipment of MNOK 549 (MNOK 401) in 2017, made up of investments in maintenance as well as in renewable energy production. E-CO Energi has ongoing investments in the new power plants at Rosten, Nedre Otta and Vamma 12 which, collectively, will generate roughly 740 GWh more renewable energy each year.

“Our performance was very good in 2017. It’s been a good year of operations with no serious injuries, and we have seen the successful integration of Hafslund’s production operations. The company is well prepared for the challenges that tomorrow will bring in the energy market”, remarks Tore Olaf Rimmereid, President and CEO.

Key figures

(Amounts in MNOK) 2017 2016 2015*
Performance
Operating revenues 3 592 2 710 2 511
EBITDA 2 574 1 747 1 621
Operating profit/(loss) 2 235 1 439 1 347
Profit before taxes 1 987 1 248 1 116
Net profit for the year 1 038 505 533
Balance sheet
Total assets 30 458 19 203 15 636
Equity 12 364 7 163 5 911
Net interest-bearing debt 10 664 8 217 7 268
Other
Power production (GWh) 12 194 11 215 10 561
Number of employees 198 172 177
* The figures for 2015 are based on consolidated accounts drawn up in accordance with Norwegian Generally Accepted Accounting Principles (NGAAP).

Contacts:

Tore Olaf Rimmereid President and CEO +47 909 92515
Morten J. Hansen Acting CFO +47 908 28577
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