third-quarter 2015 presentation to analysts - microsoft · pdf filethird-quarter 2015...

Third-quarter 2015 presentation to

analysts

Finn Bjørn Ruyter, CEO

Oslo, 22 October 2015

Agenda

1) Third-quarter 2015 results

2) Theme: Network – integration and AMS

3) Appendix

2

Third-quarter 2015 highlights

• A good EBITDA of 663 million, which is on par with last year, driven by solid operations in all

business segments.

• Profit after tax of NOK 237 million (NOK 71 mill) is a significant improvement on the previous

year as a result of lower financial expenses and negative non-recurring effects in 2014.

• Integration of Networks business completed. Operating profit Network for 2015 expected 10

percent higher than 2014.

• 60 percent lower power prices offset in part by higher production volumes and hedging

activities.

• Equity ratio of 33 percent is an increase of 3 percentage points from last year.

• Adopted investment new generator at Vamma with annual output of 1.0 TWh, of which about

220 GWh in increased renewable production. Scheduled for completion in spring 2019.

3

Development EBITDA** and power price

* Spot prices are quarterly averages of NO1. Source. www.nordpoolspot.com

** EBITDA for business areas Production, Heat, Network and Markets. (Excluding Other business)4

620618

538

0

150

300

450

600

750

900

0.1

0.2

0.4

0.3

0.0

Q3 2014

0.25

Q3 2012

0.27

Q3 2013 Q3 2015

NOK/kWh

0.10

EBITDA**

NOK million

453

0.13

EBITDA

+16 %

Spot

price

-53 %

Average EBITDA

Average spot priceSpot prices *

EBITDA

3Q15

compared to

average Q3

last 3 years:

EBITDA third-quarter 2015 and change from 2014

5

EBITDA Q3 2015 Change in EBITDA from Q3 2014

121

350

143

43

663

6

HeatProduction Network Markets Other EBITDA

15

5

3

4

21

NetworkEBITDA

Q3 2014

MarketsProduction EBITDA

Q3 2015

Heat Other

656

663NOK million NOK million

Power prices against last year

Source for price data: www.nordpoolspot.com og www.nasdaqomx.com/commodities 16 October 20156

0,00

0,05

0,10

0,15

0,20

0,25

0,30

NOK/kWh

JunMay Jul OctAug Sep Nov DecAprMarFebJan

Oslo price (NO1) 2015Oslo price (NO1) 2014

Production

• The result is characterized by high

production, low power prices and high

hedging result.

• Production 14 percent above normal.

• Electricity prices on the Nord Pool

spot (NO1) NOK 0.10 per kWh in the

quarter - down 60 percent from last

year.

• Result from hedging NOK 69 million

(NOK -1 million).

• Hedging ratio next six months 37

percent - hedging price 0.064

NOK/kWh higher than market price.

7

163 163 155 143 142 159

70

121 121

0

40

80

120

160

200

0

150

300

450

600

750

Q3 13 Q4 13 Q1 15Q4 14Q3 14Q2 14Q1 14 Q3 15

Quarter

NOK mill

Last 12 months

NOK mill

Q2 15

Development EBITDA

NOK million Q3 2015 Q3 2014 YTD 2015 YTD 2014

Operating revenue 179 207 538 647

Gross margin 185 213 533 647

EBITDA 121 142 312 440

Operating profit 111 130 276 404

Revenue (NOK/kWh) 0.17 0.23 0.19 0.23

Production volume (GWh) 1 050 814 2 609 2 598

Investments 4 7 21 11

Expected completed in spring 2019

Building of new generator at Vamma decided

8

Facts:

Investment 920 NOK mill.

Installed effect 128 MW

Production Vamma 12 1 000 GWh

Increased renewable

production220 GWh

Increased renewable energy production, increased flexibility and reduced risk in Hafslund's power generation

Rationale new generator

9

• Less vulnerable to failures and loss in production

• Postponing necessary upgrading of the current main

generator

• The oldest generators becomes flood aggregates

• Increased flexibility for future maintenance

Reduce risks

Profitable growth

• Increases total production in Vamma with about 16%

• Increased production electricity certificates entitled from

2019 through 2035

Hydropower – Waterway flow and capacity

utilization

* Normal = Median waterflow last 10 years10

0

500

1 000

1 500

2 000

2 500

3 000

m3/sec.

DecNovOctSepAugJulJunMayAprMarFebJan

Max. capacity utilization2015 Normal *2014

Production volume

* Normal = 3.100 GWh based on 10 years data adjusted for efficiency improvements.11

0

100

200

300

400

GWh

FebJan Nov DecSepAugMar OctApr May Jun Jul

2015Normal* 2014

Heat

12

112161

116

201

-50

0

50

100

150

200

250

0

50

100

150

200

250

300

350

9

Q2 14

-919

Q1 15Q3 14 Q4 14

Quarter

NOK mill

Q2 15 Q3 15Q1 14Q4 13Q3 13

6

Last 12 months

NOK mill

6

• Satisfactory performance in a quarter

with normally low energy demand and

low energy prices.

• New customers with an annual heating

requirement of 12 GWh connected in

the quarter.

• Low production costs due to a high

proportion of baseload (waste).

• Result from hedging of NOK 9 million

(NOK -2 million).

• Hedging ratio next six months 50

percent - hedging price 0.091

NOK/kWh higher than the market price.

Development EBITDA


Operating revenue 76 82 646 615

Gross margin 61 44 397 337

EBITDA 6 (9) 226 161

Operating profit (30) (109) 119 (13)

Production volume (GWh) 151 143 1 056 1 009

Gross margin (NOK/kWh) 0.43 0.38 0.39 0.33


Production volume

13

0

60

120

180

240

300

GWh

DecNovOctSepAugJulJunMayAprMarFebJan

20152014Normal *

Network

14

286 266 279 312 345 378304 332 350

0

100

200

300

400

0

200

400

600

800

1 000

1 200

1 400

Q2 15

Quarter

NOK mill

Last 12 months

NOK mill

Q1 15Q4 14Q3 14Q2 14Q1 14Q4 13Q3 13 Q3 15

• Integration of acquired distribution

activities completed.

• Stable operations and profit in line

with last year.

• Low transmission losses and few

malfunctions provides increased

margin compared to last year.

• With normal energy demand in Q4,

expected operating profit for 2015 is

about 10 percent higher than 2014.

• Progressively higher level of

investment as a result of increased

activity in the AMS project.

Development EBITDA


Operating revenue 1 019 1 029 3 143 2 960

Gross margin 729 701 2 113 1 979

EBITDA 350 345 985 935


Delivered volume (TWh) 3.2 3.0 13.4 11.9


Markets

15

83 96

140 126 140

78

181

133 143

0

50

100

150

200

0

100

200

300

400

500

600

Quarter

NOK mill

Q2 15Q1 15Q4 14Q3 14Q2 14Q1 14Q4 13Q3 13 Q3 15

Last 12 months

NOK mill

• A good result in a quarter with low

energy demand.

• Good margins and increased number

of benefit products from electricity

sales in Norway.

• Weak earnings from electricity sales

Sweden and Finland due to the

establishment of a new operating

platform to facilitate further growth.

• Power sales with a result of NOK 82

per customer after tax (NOK 56).

• 1,045,000 customers at the end of the

third quarter, of which 319,000 outside

Norway.

Development EBITDA


Operating revenues 888 1 187 4 209 4 518

Gross margin 383 308 1 144 1 029

EBITDA 143 140 456 406


Sold volume (GWh) 3 017 2 974 12 687 12 487

Change in net debt during the quarter

16

663

Paid interest

-53

EBITDANet debt Q2 2015

9 887

9 728

Net debt Q3 2015Net investments

-284

Change in working

capital etc

-138

Paid taxes

-29

NOK million

Solidity development last years

* EBITDA for core business (Production, Heat, Network and Markets) last 12 months..17

Debt / EBITDA *Equity ratio (percent)

Q3 2015

3.6

Q3 2014

4.1

Q3 2013

4.0

Q3 2012

4.8

30%

Q3 2013 Q3 2015

31%

Q3 2012

28%

33%

Q3 2014

Summary of third-quarter 2015 profit

18

76 64 663656

EBITDA Q3 15Operating

expenses

Gain/loss

financial items

5

Gross marginEBITDA Q3 14

236

79

111

237

663

Profit after

tax Q3 15

Financial

expenses

DepreciationEBITDA Tax

Change in EBITDA from Q3 2014 Profit after tax Q3 2015

Earnings per

share NOK 1.21

Of which NOK 44

million value

change on loans

Outlook

19

• Operating profit Network 2015 expected about 10 percent higher than 2014.

• Forward system price as of Q3 for delivery of power in 2015 at 0.19 NOK/kWh (0.20 NOK/kWh for Q4) and for delivery in 2016 at 0.20 NOK/kWh.

• Q4 and Q1 with seasonally high energy demand for Heat and Markets.

• Power generation with expected production in Q4 around normal (760 GWh).

• New generator at Vamma will produce about 220 GWh electricity certificates eligible new production in 2019.

• AMS project conducting pilot tests and start-up deployment in 2016.

Agenda



3) Appendix

20

Integration acquired network business in Østfold

completed

• In line with the Group's strategy of organic and structural growth in the network business

• Optimal geographic match

• Synergies and improved relative efficiency

• Stable returns and enhanced dividend capacity

* Regulatory asset base21

Facts acquired network business(As of May 2014)

• Network business in Østfold

acquired 1 May 2014

• Large parts of the distribution

network in Østfold

• About 103,000 customers

• Transferred volume '13: 2.5 TWh

• 96 employees

• RAB* '13: NOK 953 million

• Investment: NOK 1.36 billion. incl.

• 49% in Trøgstad Elverk

• 49 % in Fredrikstad Energi (FEAS)

• 35 % in Fredrikstad Nett (FEN)

Rationale

Hafslund 100 %

owner

Hafslund partial

owner / none

Group profitability and balance sheet strengthened during the integration period

Hafslund a stronger infrastructure company

* The increase includes only Fortum Distribution and not indirect ownership of FEAS and FEN; figures for Hafslund Nett and Fortum Distribution

per 31.12.2013

Source: NVE; E-rapp 2012, Inntektsramme 201422

Acquired network business in Østfold

Group’s profit and balance

• Debt financed

• Stable cash flow from operations and increased investment requirements due to increased activity and AMS

• Group with solid financial strength - strengthened from before acquisition

Profit Equity ratio

2 8842 795

2 446

1 0811 003747

last 12

months

20142013

EBITDA Profit after taxes

30.09.15

33%

31.12.14

30%

31.12.13

30%

Equity ratio

Number of customers* and geography

185

Hafslund

Nett

674

571

103

Skagerak

Nett

183184

BKK Nett Agder

Energi

Nett

+ 18 %

No. customers (in thousands)

NOK ~45 million in synergies for 2016 - increasing to NOK ~60 million in annual effect

after deploying AMS

Synergies and regulatory effect

23

Synergies

Harmony effect

• Onetime compensation for loss of income by the acquisition as a result of reduced efficiency

measurement (DEA) compensated by harmony effect

• Allowed revenue for 2016 is expected to include a harmony effect that will reduce overall surplus

revenue

Staffing

IT

AMS

Co-location

Administration

Other

Customer/operations

Workforce reduction taken out through natural turnover

Integration IT Hafslund Network’s IT platform

Lower investments and future operating costs AMS

Majority of employees and operations center co-located in Oslo

Economies of scale on staff and support services

Stronger expertise and new operating model provides a foundation for

efficient operations

Economies of scale in customer service

2. Took over shares

3. Decided one operation center

and joint AMS

1.Agreed purchase

Apr.

Jun.

5.Placement of all employees

6.Merger

Dec.

8.Co-localization

9.IT conversion

7. New organization, joint finance and HR systems

10. Transfer ofcustomer services

4.Decided localization and new operating model

12. Termination deliveryagreement with Fortum

11.Joint operationscenter

...rapid integration important for realizing synergies and startup AMS deployment

14 months from acquisition to integration

completed

24

2014 2015

Integration

completed →

Ready for

AMS

deployment

Sep.

New electricity meters to 700,000 Hafslund

customers

*AMS – Automatic Metering Infrastructure

25

AMI mandatory by 2019 AMS mandatory by 2019

AMS AMS

AMS a comprehensive logistics and customer project with an investment of about NOK

2.4 billion

Rollout AMS

26

2015 2016 2017 2018

1 Jan

2019

AMS

rolled

out

Contracts, preparation, testing and piloting Rollout

Pilot 1

500

customers

Pilot 2

10,000

customers

Hafslund Network’s 700,000 meters shall be replaced with the assistance of subcontractors

Meter change - effective and purposeful

27

DialogueMeter

replacementNew meter1 2 3

• Letters and booking

• Advertising

• Media and Social Media

• www.hafslundnett.no

Agenda



3) Appendix

28

Appendix

29

Group profit and loss

30


Operating revenue 2 158 2 507 (349) 8 545 8 791

Cost of energy (836) (1 261) 425 (4 441) (4 813)

Gross margin 1 322 1 246 76 4 104 3 978

Gain/loss financial items 19 24 (5) 78 72

Operating expenses (678) (614) (64) (2 058) (2 015)

EBITDA 663 656 7 2 124 2 035

Depreciation and write-downs (236) (382) 146 (672) (799)

Operating profit 427 275 152 1 452 1 236

Interest expences (123) (126) 2 (300) (315)

Market value change loan portfolio 44 (11) 55 105 (44)

Financial expenses (79) (136) 57 (195) (359)

Pre-tax profit 348 138 209 1 256 877

Tax (111) (67) (44) (383) (81)

Profit after tax 237 71 166 873 796

Earnings per share (EPS) in NOK 1.21 0.36 0.85 4.47 4.08

Group balance sheet

31

NOK million 2015-09-31 2015-06-30 Q2 15 2014-12-31

Intangible assets 2 966 2 956 10 2 970

Fixed assets 19 133 19 074 59 19 011

Financial assets 1 164 1 046 119 786

Accounts receivables and inventory 1 727 1 866 (139) 2 703

Cash and cash equivalents 337 265 72 742

Assets 25 328 25 207 121 26 212

Equity (incl. min. int.) 8 388 8 154 233 7 877

Allocation for liabilities 4 043 4 018 25 3 858

Long-term debt 8 136 8 485 (349) 8 692

Other current liabilities 1 989 1 723 266 2 668

Short-term debt 2 772 2 827 (54) 3 117

Equity and liabilities 25 328 25 207 121 26 212

Net interest-bearing debt 9 728 9 887 (159) 10 577

Equity ratio 33 % 32 % 1 % 30 %

Cash flow

32

NOK million Q3 2015 Q3 2014 Year 2014

EBITDA 663 656 7 2 795

Paid interests (53) (54) 1 (452)

Paid tax (29) 142 (171) (58)

Marketvalue changes and other liquidity adjustments (13) (8) (5) (67)

Change in working capital, etc. (166) (368) 202 (64)

Total cash flow from operations 402 368 34 2 154

Net operations and expansion investments (296) (253) (43) (1 896)

Net purchase/sale of shares etc. 12 (11) 23 (379)

Cash flow from investments activities (284) (264) (20) (2 275)

Cash flow to down payments and interests 118 104 14 (121)

Earnings per share

Profit after tax Q3 2012 negatively affected NOK 551 million relating to extraordinary write-downs and provisions.

Profit after tax Q1 2014 was positively impacted by NOK 288 million related to tax waived claims regarding Hatros.

Profit after tax Q3 2014 negatively affected by NOK 93 million relating to write-downs Bio-el and secondary networks Søndre Nordstrand33

-0.06 3.83

Per quarterNOK

2012 2013 2014

0.36 ***

0.86

2.85 **

1.50

1.071.081.21

1.43

1.83

1.060.77

0.911.05

-2.97 *

0.72

1.15

5.14

*

**

***

2015

4.47

Capital employed and return on capital employed

2013 - Includes the sale of shares in Infratek with gain of NOK 90 million

2014 - Includes write-downs of Bio-El and secondary networks Søndre Nordstrand of NOK -127 million .

2015 – Last 12 months34

Capital employed NOK 21.5 billion as of

30.09.2015Return on capital employed

4%

Network

8%

48%

Markets

Heat

Other

21%

Production

19%

8.3%

2013 * 2015 ***

8.0%

2014 **

9.2%

*

**

***

Loans – portfolio data

35

Debt maturity profileNOK million

Loans at maturity next 12 monthsNOK million

743

300400

0

1 000

2 000

3 000

2021

420

2020

701

2019

1 706

2018

1 460

2017

1 410

2016

2 143

2015

700

2022 20242023

Other loansBondsCommercial paper

400350

500

300300

0

200

400

600

SepAugJulJunMayAprMarFebJanDecNovOct

Other loansCommercial paper Bonds

Q3 15 Q2 15

Bonds 77 % 77 % 0 %

Commercial paper 6 % 6 % 0 %

Other loans 17 % 17 % 0 %

NOK million Q3 15 Q2 15

Nominal value - market value of loans (250) (294) 44

Market value interest rate and fx derivatives (83) (47) (36)

Average interest incl. derivatives (%) 3.8 % 3.8 % 0.0 %

Proportion of loan portfolio with fixed

interest (%)57 % 55 % 2 %

Loans at maturity next quarter 700 0 700

Unused drawdown facilities 3 670 3 800 (130)

Key figures

36

Group YTD 2015 YTD 2014

Capital matters

Total assets 25 328 25 609

Capital employed 21 688 21 456

Equity 8 388 7 675

Market capitalization 11 241 9 751

Equity ratio 33 % 30 %

Net interest-bearing debt 9 728 10 459

Profitability

EBITDA 2 124 2 035

Earnings per share (EPS) 4.47 4.08

Cash flow per share 10.65 9.85

Power Generation YTD 2015 YTD 2014


Sales price (NOK/kWh) 0.19 0.23

Production volume (GWh) 2 609 2 598

Heat YTD 2015 YTD 2014


Sales price District heating (NOK/kWh) 0.63 0.60

Gross margin (NOK/kWh) 0.39 0.33

Sales volume (GWh) 1 056 1 009

Network YTD 2015 YTD 2014


Regulated gross margin for the year 2 652 2 432

NVE-capital (regulatory) 7 526 7 217

Markets YTD 2015 YTD 2014


- of this working capital 34 235

Volume power sales (GWh) 12 687 12 487

Stockholders as of 30.09.2015

37

# ShareholderClass A shares

held

Class B share

heldTotal Ownership

Share of

voting rights

1 City of Oslo 67 525 37 343 104 868 53.7 % 58.5 %

2 Fortum Forvaltning AS 37 853 28 706 66 559 34.1 % 32.8 %

3 Kommunal Landspensjonskasse 5 201 2 848 8 049 4.1 % 4.5 %

4 MP Pensjon PK 0 1 979 1 979 1.0 % 0.0 %

5 Gjensidige Forsikring 0 1 000 1 000 0.5 % 0.0 %

6 Folketrygdfondet 85 784 869 0.4 % 0.1 %

7 Skandinaviska Enskilda Banken 17 405 418 0.2 % 0.0 %

8 Greenwich Land Securities AS 83 317 400 0.2 % 0.1 %

9 New Alternatives Fund, Inc 328 0 328 0.2 % 0.3 %

10 JP Morgan Chase Bank 14 309 323 0.2 % 0.0 %

Total, 10 largest shareholders 111 107 73 691 184 798 94.7 % 96.3 %

Other shareholders 4 321 6 067 10 388 5.3 % 3.7 %

Total 115 428 79 758 195 186 100 % 100 %

Definitions

38

Group

Capital employed Equity + Net Interest-bearing debt + Net tax positions

Equity ratio (in %) (Equity incl. Minority interests / Total assets) X 100

Earnings per share Profit after tax / Average no. of shares outstanding

Cash flow per share Net cash from operations / Average no. of shares

Return on equity last 12 months Result after tax last 12 months / Average equity (incl. Minority interests) last 12 months

Return on capital employed last 12 months Operating profit last 12 months / Average capital employed last 12 months

Hedge ratio Hydro powerRatio of the estimated production portfolio hedged in the period (excluding fixed-price

contracts)

Hedge ratio District heatingRatio of the estimated net power price exposure hedged, by: Sales reduced with

electricity use and 1/3 heat pumps

Investor information

• Additional information is available from Hafslund’s website:

– www.hafslund.no

– You can subscribe to Hafslund press releases

• Group CFO, Heidi Ulmo

– [email protected]

– Tel: + 47 909 19 325

• Financial Director and Investor Relations contact, Morten J. Hansen

– [email protected]

– Tel: +47 908 28 577

39

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