The European Wind and Solar division of Norwegian state-owned energy company Statkraft AS fell to an underlying loss before interest and tax of NOK 17 million (USD 1.9m/EUR 1.7m) in the third quarter of 2019.
The drop from positive underlying earnings before interest and tax (EBIT) of NOK 99 million a year ago came mainly because of lower power and electricity certificates prices and higher business development costs.
In the meantime, EBIT growth in the Market operations and International power segments more than offset that loss for the company.
Underlying EBIT for Market operations stood at NOK 53 million, versus a negative result of NOK 671 million a year earlier, thanks to improved contribution from dynamic asset management portfolios and origination activities. The segment includes all trading, origination, market access for smaller producers of renewable energy, as well as revenue optimisation and risk mitigation activities related to Continental and Nordic power generation. Key events there included the signing of power purchase agreements (PPAs) for solar farms in Spain.
Statkraft's underlying EBIT from the International power segment, which includes the development, ownership and operations of renewable assets in emerging markets like Brazil and India, jumped by 66% to EUR 315 million.
IMPAIRMENTS
Impairments of NOK 385 million weighed on the European Wind and Solar segment’s IFRS result in the third quarter. Statkraft explained that the increase in power generation capacity in the Nordic region is expected to result in lower income for certain assets, so it recognised an impairment of wind power assets in Sweden. The International power segment also booked NOK 516 million in impairments.
Statkraft pointed out that changes in the energy market outlook have also led to the reversal of previous impairments, so the net effect across all segments was positive with NOK 133 million. This includes a reversal of previous impairments of NOK 1.035 billion in total for German gas-fired power plants.
PROFIT
The Norwegian company reported a lower net profit for the quarter, mainly due to negative currency effects. A weakening of the Norwegian Krone against the euro cost it NOK 912 million. Underlying EBIT, meanwhile, climbed by 8.2%. The table contains more details.
| All in NOK million |
Q3 2019 |
Q3 2018 |
9-mo 2019 |
9-mo 2018 |
| EBIT (loss), underlying |
2,899 |
2,679 |
11,948 |
10,069 |
| - of which EUROPEAN FLEXIBLE GENERATION |
2,509 |
2,939 |
8,699 |
9,540 |
| - of which EUROPEAN WIND AND SOLAR |
(17) |
99 |
233 |
229 |
| - of which MARKET OPERATIONS |
53 |
(671) |
1,405 |
(943) |
| - of which INTERNATIONAL POWER |
315 |
190 |
721 |
535 |
| EBIT IFRS |
2,678 |
2,040 |
11,740 |
9,562 |
| Net profit |
656 |
1,265 |
7,531 |
11,818 |
As visible from the table, the European flexible generation segment, which mainly includes hydro and gas-fired power plants in northwestern Europe, is Statkraft's biggest business today, while the company has big plans for non-hydro renewables. It aims to develop 8,000 MW of onshore wind and solar power by 2025, investing about NOK 10 billion per year towards that goal. Recently it made significant project acquisitions in Latin America and Europe.
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Solar plant in Tamil Nadu. Source:Statkraft BLP Solar Solutions (www.statkraft.com).
