Statkraft: Results remain strong as power prices continue to drop

(Oslo, Norway, 7 May 2024) – Net operating revenues was NOK 19.6 billion in Q1 2024 compared to 23.5 billion in the comparable quarter last year when the European energy crises caused extraordinary market conditions. Underlying EBIT decreased to NOK 13.5 billion (NOK 17.5 billion), while profit after tax was NOK 6.8 billion (NOK 10.2 billion).Energy markets continued to normalise and power prices dropped sharply, driven by lower gas prices, a mild winter and reduced demand. European power prices in the first quarter fell by 31 per cent in the Nordic region and 42 percent in Europe/Germany compared to the extraordinary high prices in the same quarter last year. Statkraft signed several long-term power contracts, including power purchase agreements with Alcoa Norway and Hydro Energi in Norway, as well as Bürgerwindpark Jevenstedt in Germany.Statkraft divested the Ballymacarney solar project (199 MW) in Ireland for NOK 1.8 billion.On 18 March Statkraft announced the appointment of Birgitte Ringstad Vartdal as President and CEO of Statkraft with effect from 1 April.
 

“I am satisfied with the strong results despite much lower power prices in the first quarter. We continue to deliver strong performance in power generation and energy management, and high value-creation in trading and origination. We are well positioned with a solid and scalable business model that provides us with the flexibility needed to quickly adapt to changing market conditions," says Statkraft CEO, Birgitte Ringstad Vartdal.

The average system price in the Nordic region was 58.3 EUR/MWh, down 26.8 EUR/MWh from extraordinary prices in the first quarter of 2023 and about the same level as the fourth quarter of 2023. The price area differences in Norway continued to decrease, with prices in the southern price areas (NO1 and NO2) still facing higher prices than the rest of the country.

Higher nuclear availability, slightly higher wind power generation and lower total export contributed to continued decline in Nordic power prices. Temperatures in Norway were slightly higher than normal. Nordic reservoir levels decreased during the first quarter to 76% of median by the end of March and is currently at 81.4% of median, equivalent to 23.7% of full capacity.

Statkraft’s generation was higher than the same quarter last year and above normal for the period, mainly driven by Norwegian and Brazilian hydropower.

Operating expenses fell sequentially from the fourth quarter but were slightly higher than the same quarter last year. The increase was driven by a higher activity level, mostly related to business development activities, a higher number of FTEs, salary adjustments and currency effects, partly offset by lower performance related remuneration.

Underlying EBIT was NOK 13.5 billion, compared to NOK 17.5 billion in the same quarter last year, driven by the significantly lower power prices and hedging gains both in Nordics and Europe, partly offset by reversal of a NOK 2.6 billion provision related to Baltic Cable, the abolishment of high-price contribution on Norway, and higher Norwegian power generation.

The Nordics segment was the main contributor to the results with an underlying EBIT of NOK 12.0 billion despite significantly lower power prices compared to last year. The Markets segment delivered a strong underlying EBIT of NOK 1.4 billion in the quarter, primarily related to origination activities.

Statkraft reported profit before tax of NOK 14.0 billion, including negative net financial items of NOK 1.9 billion. Net financial items in the quarter included negative currency effects, primarily driven by a weaker NOK vs. EUR, GBP and USD. Profit after tax was NOK 6.8 billion.

Statkraft continues to develop a broad portfolio of hydro, wind, solar, and battery energy storage projects, mainly in the business areas Nordics and Europe. In addition, the company announced plans to double investments and maintenance in the Norwegian hydropower plants to NOK 4 billion annually towards 2030 and to initiate five large capacity upgrades.

Investments in the quarter were NOK 4 billion, of which NOK 2.6 billion was related to new power generation capacity, grid service and battery projects, and 0.6 billion was maintenance investments, mainly in Nordic hydropower assets.

Statkraft has a record-high committed investment activity for 2024 of NOK 32 billion, including Enerfin.

The geopolitical situation and market conditions are changing, power prices in Europe have dropped sharply and technology costs have increased substantially. Also, the cost of capital has increased, affecting project profitability, valuations and access to capital, and development in market regulations and support policies is delayed.

“Even as costs are higher and the situation has become more challenging, the energy transition is moving faster driven by continued growth in demand for more renewable energy capacity. The opportunities to deliver profitable projects continues. Statkraft has built a significant ability to scale pipeline and execute projects. The flexible business model, strong projects portfolio, and an organisation fit to execute on the opportunities in the energy transition, means Statkraft is well positioned for further growth,” says Ringstad Vartdal.

Statkraft has developed a strong portfolio of new renewables projects, including bringing greenfield projects to investment decisions and executing several value-creating M&As, most notably the acquisition of Enerfin which is expected to close in the second quarter. This transaction will further strengthen the company’s position in two of its core markets, Spain and Brazil.

“Our investments and development activities strengthen Statkraft for the future, but in the shorter term tie up capital and require more prioritisation going forward. We will therefore look to free up available investment capacity, including divesting the Enerfin portfolio in Canada, USA, Colombia, Chile and Australia, exploring divestment of our district heating business and bringing a new co-owner into Silva Green Fuel and invite new shareholders into Statkraft's EV Charging company Mer. Through our on-going annual strategic review process, we will sharpen our strategy, review our targets and prioritise the projects with the best fit and profitability for Statkraft. Our strategic direction stands, and we will continue our efforts every day to renew the way the world is powered,” Ringstad Vartdal says.

Attachments

Interim Report Q1 2024 Presentation Q1 2024