35
Second- quarter 2016 Finn Bjørn Ruyter Oslo, 12 July 2016 Presentation to analysts
Second-quarter 2016
Finn Bjørn Ruyter
Oslo, 12 July 2016
Presentation to analysts
Agenda
2
1 Second-quarter 2016 results
2 Appendix
Second-quarter 2016 highlights
• EBITDA of NOK 695 million and Profit after tax of NOK 273 million are in
line with last year.
• Stable operations in all business areas. Few disruptions and an increase
in operating profit for the Network business segment.
• Power prices in the NO1 price area 0.21 NOK/kWh – up 25 per cent
from last year.
• The Markets segment maintains customer growth.
• Net interest-bearing debt down NOK 1.0 billion compared to last year,
despite of NOK 1.4 billion invested in the last 12 months.
3
Key Figures
1. EBITDA for the group last 12 months4
31.12.15
2.7 2.8
31.03.16 30.06.16
-0.6
3.4 3.3
30.09.15
3.4
30.06.15
EBITDA (NOK mill) Earnings per share (NOK)
Earnings per share
NOK1.4
Net debt / EBITDA (x)1
684 663796
971
695
+11
Q2 2015 Q2 2016Q3 2015 Q4 2015 Q1 2016 Q2 2016
2.5
Q1 2016
1.4
0.0
2.1
1.4
Q2 2015 Q4 2015
1.2
Q3 2015
EBITDA per business area
5
400
147
124
695
Network Production
5
Heat EBITDA
Q2 2016
Other
20
Markets
60 695684 68
EBITDA
Q2 2016
Production
3013
EBITDA
Q2 2015
Heat OtherMarketsNetwork
14
EBITDA Q2 2016 (NOK mill) Change in EBITDA from Q2 2015 (NOK mill)
Slight decrease in number of injuries trailing 12 months.
HSE
1 last 12 months, the total number of injuries per million manhours on own employees and suppliers in our facilities in Hafslund Group excl. Market
2 Industry average for total injuries acc. To Energy Norway's statistics for 2014, for companies in the energy industry, incl. the contractors, but without suppliers6
0injuries
Goal
7.7Injuries per million
hours (H2)
10.9Injuries per million
hours (H2)
Industry average 2Last 12 months per
30.06.2016 1
Production in line with last year. Warmer weather gave slightly lower energy distribution compared
to Q2 2015.
Production and distribution
7
Heat and Production (GWh)
9441 050
681 618
930
278 151
511 722262
Q2 2015 Q3 2015 Q4 2015 Q1 2016
-30
Q2 2016
ProductionHeat
Network (GWh)
-170
Q2 2016
3,856
Q1 2016
5,498
Q3 2015Q2 2015
3,302
6,602
4,026
Q4 2015
Network
Power price development NO1
Source NordPool Spot, and Nasdaq OMX Commodities per
30.06.20168
0.30
0.10
0.20
0.00
0.15
0.05
0.25
NovOctSepAugJulJunMayAprMarJan DecFeb
NOK/kWh
2016 2015
Hedging activity has contributed with positive results in a period with falling power prices.
Developments in forward prices and hedge trading
Source Nasdaq OMX Commodities, Bloomberg. Per 30.06.20169
Forward system prices Q3-16, YR-17 Results from hedging activity (NOK mill)
0.35
0.15
0.25
0.1020162012 2014
0.20
20152013
0.30
NOK/kWh
Q3-16 YR-17
25
86
163
2413
2012 Ytd 20162013 2014 2015
Results per business area
10
NETWORK HEAT PRODUCTION MARKETS
11
• Operating profit up 21 % from last year.
• Stable operations and few disruptions.
• NOK 49 million in reduced operating costs.
• Gain from sale of property NOK 14 million.
200
4001 250
0
1 750
250
500
1 500
0
100
500
300 1 000
750
Last 12 monthsQuarter
Q2 2016Q3 2015 Q4 2015
403350
Q1 2015
332384
304
Q2 2015Q4 2014
378 400
Q1 2016Q3 2014
345
Q2 2014
312
• Maintaining expectations about operating profit for
2016 approximately 20 % higher than 2015.
Development EBITDA (NOK mill)
Q2 2016
Year 2016
Network
EBITDA last 12 monthsEBITDA
NOK million Q2 2016 Q2 2015 Ytd 2016 Ytd 2015
Operating revenue 1 115 1 053 2 296 2 124
Gross margin 734 715 1 424 1 384
EBITDA 400 332 784 635
Operating profit 256 212 493 398
Energy delivery (GWh) 3 856 4 026 10 458 10 160
Number of customers (in 1 000) 691 685 691 685
Investments 209 211 351 373
Status AMS
12
Preparation DeploymentPilot 1 Pilot 2
500 meters 8 000 meters 700 000 metersTest and development
Nov 15 April 16 June 16 End of 18
• Full deployment scheduled from August.
• Accumulated AMS-investments of NOK 393 million as at 30 June 2016.
13
300150
0
0
450
600300
15050
-50
250
100
200
5
Q1 2015
201
Q4 2014
116
19
Quarter Last 12 months
Q1 2016
285
Q3 2015Q3 2014Q2 2014
-99
Q4 2015
157
6
Q2 2015 Q2 2016
• Seasonally a quarter with low energy demand.
• Increase in power prices contribute positively to the
gross margin (NOK/kWh) but the effect is mitigated
by lower production volume and negative hedge
trading results.
• Increased operating costs due to higher
maintenance activity and improvement measures.
• Hedge ratio next six months at 50 %.
• New customers connected in the first six months of
2016 with a total yearly heating requirement of 10
GWh (4 GWh).
Development EBITDA (NOK mill)
Q2 2016
Heat
EBITDA last 12 monthsEBITDA
NOK million Q2 2016 Q2 2015 Ytd 2016 Ytd 2015
Operating revenue 126 131 671 570
Gross margin 79 79 424 336
EBITDA 5 19 290 220
Operating profit (30) (17) 220 149
Production volume (GWh) 262 278 984 905
Gross margin (NOK/kWh) 0.36 0.30 0.46 0.38
Investments 27 20 41 30
Heat - Volume and fuel mix
1: Normal = expected production in 2016 provided normal temperatures14
0
50
100
150
200
250
300
350
JunJan NovOctAprMar May DecSepAugJulFeb
20152016 Normal1
Production volume (GWh) Fuel mix (GWh)
Q2 2016
262
511
Q2 2015 Q3 2015
151
278
Q4 2015 Q1 2016
722
Bio oil, natural gas, oil
Pellets Heat pumps
WasteElectricity
15
150
0
120
40
300
450
80
600
0
160
95
Last 12 months
Q4 2015
91
Q3 2015
119
Q2 2015
117
Q2 2016
147
Q1 2016Q1 2015
135153
65
Q4 2014
129
Q3 2014Q2 2014
Quarter
Development EBITDA (NOK mill)
• Increase in power prices and normal production
volume.
• Revenue (NOK/kWh) of 0.21 is NOK 0.02 higher
than last year and in line with power price NO1.
• Results from hedging activity NOK 2 million (NOK 24
million).
Q2 2016
Other
• Hedge ratio next six months at 37%.
• Estimated production in Q3 approximately 870 GWh -
6% below normal levels.
Production
EBITDA EBITDA last 12 months
NOK million Q2 2016 Q2 2015 Ytd 2016 Ytd 2015
Operating revenue 199 176 352 327
EBITDA 147 117 242 181
Operating profit 136 105 221 158
Revenue (NOK/kWh) 0.21 0.19 0.23 0.21
Production volume (GWh) 930 944 1 548 1 559
Investments 62 5 127 16
Production and water flow
1: Normal production = 3100 GWh based on 10 years data adjusted for efficiency improvements.
2: Normal = Median water flow last 10 years16
0
500
1 000
1 500
2 000
2 500
3 000
DecSep Oct NovJan AugAprMarFeb JulMay Jun
Normal 22015 Max. capacity utilization2016
0
100
200
300
400
DecJun OctSepFebJan Aug NovMayMar Apr Jul
2016 Normal 12015
Water flow and capacity utilization (m3/sec)Production (GWh)
17
Facts
Investment NOK 920 mill
Installed effect 128 MW
Production Vamma 12 ~ 1 000 GWh
Increased renewable energy
production
~ 228 GWh
Completion scheduled before the 2019 spring flood.
Construction of Vamma 12 according to plan
Status - progress
Investment incurred per 30.06.16 NOK 248 mill
Ground construction to finish autumn 2016.
Startup concrete construction autumn 2016.
Startup installation autumn 2018.
18
80
160
40
0
120
240 600
450
300
150
0
200
Quarter Last 12 months
Q2 2015
145
Q4 2015
92
186
Q4 2014
153
Q2 2016
134
Q3 2014 Q1 2016
124
208
Q3 2015
13785
Q2 2014 Q1 2015
• Satisfying operating profit in a quarter with low
energy demand.
• Improved gross margin as a result of growth in the
customer base.
• Increase in market activity and growth-related costs.
• Customer growth of 8,000 in the quarter and 30,000
in the first half of 2016. Development EBITDA (NOK mill)
Q2 2016
Markets
EBITDA last 12 monthsEBITDA
NOK million Q2 2016 Q2 2015 Ytd 2016 Ytd 2015
Operating revenues 1 368 1 247 3 721 3 348
Gross margin 401 367 866 776
EBITDA 124 137 332 323
Operating profit 99 116 285 282
Number of customers (in 1 000) 1 080 1 062 1 080 1 062
Sold volume (GWh) 3 985 3 895 10 618 9 672
NETWORK HEAT PRODUCTION MARKETS
Group summary
19
Change in EBITDA, and profit after tax
20
3533 695684
EBITDA
Q2 2016
Operating
expenses
Gross margin
13
EBITDA
Q2 2015
Gain/loss
financial items
225
56
141
273
695
EBITDA
Q2 2016
Depreciation Profit after
tax Q2 2016
TaxFinancial
expenses
Earnings per
share NOK 1.40
Profit after tax Q2 2016 (NOK mill)Change in EBITDA from Q2 2015 (NOK mill)
Investments
21
Investments, excluding acquisitions (NOK mill) Growth investments towards 2020
Vamma 12
NOK 920 mill.
District heating
+260 GWh
Marked
Organic customer
growth
550
1 298
786
2014 2015 2017 P 2018 P
901
2016 P2013 Ytd 2016
Group Average Group
Average 2016P-2018P: NOK 1.8 bn.Network
AMS NOK 2.4 bn.
~10 000 new customers
yearly
Hafslund’s goal is to maintain BBB+ shadow rating
Change in net interest bearing debt
1: EBITDA for for the group last 12 months22
310
126
586
307
695
Net debt
30.06.16
Dividends
paid
8 896
Net
investments
Change in
working
capital etc
Paid interest
and tax
8 262
Net debt
31.03.16
EBITDA
30.06.1631.03.16
2.82.7
31.12.15
3.3
30.09.15
3.43.4
30.06.15
33%
31.12.15 30.06.1631.03.16
35%
30.09.1530.06.15
36%32% 34%
Equity ratio (%)
Net debt / EBITDA (x)1Change in net debt in the quarter (NOK mill)
Outlook
• Operating profit 2016 Network expected about 20% higher than for 2015
• At the end of Q2 2016 Oslo price for delivery of power in 2016 (spot price Ytd and forward
prices) quoted at 0.22 NOK/kWh against 0.18 NOK/kWh in 2015.
• Increased levels of investment driven by AMS and Vamma 12. Average annual investment level
of NOK 1.8 billion next three years, compared to an average of NOK 1.0 billion (excl.
acquisitions) last three years.
• Profit after tax for 2016 assumed to be on par with 2015.
23
Agenda
24
1 Second-quarter 2016 results
2 Appendix
Oslo price (NO1) historic and forward
Source: NordPool Spot, Nasdaq OMX
Prices per 30.06.201625
0.40
0.00
0.20
0.30
0.50
0.10
2012201120102009 20202019201820172016201520142013
NOK/kWh
200220011999 2000 20082007200620052003 2004
Power price - Oslo price Period average
0.20 NOK/kWh
Group profit and loss account
26
NOK million Q2 2016 Q2 2015 D Ytd 2016 Ytd 2015
Operating revenue 2 779 2 610 169 7 001 6 387
Cost of energy (1 451) (1 295) (156) (4 041) (3 605)
Gross margin 1 328 1 315 13 2 959 2 781
Gain/loss financial items 82 49 33 79 60
Operating expenses (715) (679) (35) (1 373) (1 380)
EBITDA 695 684 11 1 666 1 461
Depreciation and write-downs (225) (232) 7 (454) (436)
Operating profit 470 452 18 1 212 1 025
Interest expences etc (73) (81) 8 (142) (176)
Market value change loan portfolio 17 33 (16) 26 60
Financial expenses (56) (49) (8) (115) (116)
Pre-tax profit 414 403 10 1 096 909
Tax (141) (124) (17) (333) (272)
Profit after tax 273 279 (7) 763 636
Earnings per share (EPS) in NOK 1.4 1.43 (0.04) 3.91 3.26
Group balance sheet
27
NOK million 2016-06-30 2016-03-31 D Q1 2016 2015-06-30
Intangible assets 2 909 2 923 (14) 2 956
Fixed assets 19 404 19 310 94 19 074
Financial assets 593 761 (168) 1 046
Accounts receivables and inventory 1 615 2 420 (805) 1 866
Cash and cash equivalents 527 1 676 (1 149) 265
Assets 25 048 27 090 (2 042) 25 207
Equity (incl. min. int.) 9 096 9 452 (356) 8 154
Allocation for liabilities 3 663 3 613 51 4 018
Long-term debt 7 409 8 332 (923) 8 485
Other current liabilities 2 059 1 653 406 1 723
Short-term debt 2 821 4 040 (1 219) 2 827
Equity and liabilities 25 048 27 090 (2 042) 25 207
Net interest-bearing debt 8 896 8 262 634 9 887
Equity ratio 36 % 35 % 1 % 32 %
Group cash flow
28
NOK million Q2 2016 Q2 2015 D Ytd 2016 Ytd 2015
EBITDA 695 684 11 1 666 1 461
Paid interests (84) (105) 21 (228) (278)
Paid tax (226) (123) (103) (362) (228)
Marketvalue changes and other liquidity adjustments (68) (18) (50) (61) (24)
Change in working capital, etc. (52) (290) 238 864 745
Total cash flow from operations 265 148 117 1 879 1 676
Net operations and expansion investments (314) (271) (43) (550) (476)
Net purchase/sale of shares etc. 7 0 7 128 0
Cash flow from investments activities (307) (271) (36) (422) (476)
Cash flow to down payments and interests (42) (123) 81 1 456 1 200
Capital employed and return on capital employed
1: Includes write-downs in Bio-El and secondary networks at Søndre Nordstrand of NOK -127 million..
2: Last 12 months29
21%
Markets
Production
21%
48%
2%
7%
Heat
Network
Other
8.3%
20141 2015 20162
9.2%
10.0%
Capital employed NOK 21.6 bn. as of 30.06.2016 Return on capital employed (%)
Loans – portfolio data
30
Debt maturity profileNOK million
Loans at maturity next
12 monthsNOK million
0
2 000
1 000
2016
701
1 706
1 324
20182017 2019
1 4601 710
2026+
350
2025
70
2024
370470
813
2023
490
2020 2021 2022
Other loansBonds
800
600
400
0
200
300
700
Apr May JunMarJanDec FebNov
488
OctSep
336
500
AugJul
Other loansBonds
Q2 16 Q1 16 D
Bonds 76 % 72 % 4 %
Commercial papers 0 % 3 % -3 %
Other loans 24 % 25 % -1 %
NOK million Q2 16 Q1 16 D
Nominal value - market value of loans (191) (207) 17
Market value interest rate and fx derivatives* 30 (23) 53
Average interest incl. derivatives (%) 3.4 % 3.4 % 0.0 %
Loans at maturity next quarter 336 300 36
Unused drawdown facilities 3 800 3 800 0
*) Incl. currency derivatives under hedge accounting
Key figures
31
Production Ytd 2016 Ytd 2015
Capital employed 4 606 4 448
Sales price (NOK/kWh) 0.23 0.21
Production volume (GWh) 1 548 1 559
Heat Ytd 2016 Ytd 2015
Capital employed 4 473 4 582
Avg. district heating income (NOK/kWh) 0.72 0.65
Gross margin (NOK/kWh) 0.46 0.38
Sales volume (GWh) 984 905
Group Ytd 2016 Ytd 2015
Capital matters
Total assets 25 048 25 207
Capital employed 21 552 21 513
Equity 9 096 8 154
Market capitalization 13 330 11 066
Equity ratio 36 % 32 %
Net interest-bearing debt 8 896 9 887
Profitability
EBITDA 1 666 1 461
Earnings per share (EPS) 3.91 3.26
Cash flow per share 9.63 8.59
Network Ytd 2016 Ytd 2015
Capital employed 10 392 9 879
Gross margin 1 424 1 384
Energy delivery (TWh) 10 458 10 160
Number of customers (in 1 000) 691 685
NVE-capital (regulatory) 8 300 7 501
Markets Ytd 2016 Ytd 2015
Capital employed 1 545 1 816
- of this working capital (79) 250
Number of customers (in 1 000) 1 080 1 062
Volume power sales (GWh) 10 618 9 672
Shareholders as at 30.06.2016
32
# 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 5 327 3 953 9 280 4.8 % 4.6 %
4 MP Pensjon PK 5 1 929 1 934 1.0 % 0.0 %
5 Folketrygdfondet 74 784 858 0.4 % 0.1 %
6 Greenwich Land Securities AS 84 323 408 0.2 % 0.1 %
7 Nordnet 70 335 405 0.2 % 0.1 %
8 JP Morgan Chase Bank 20 336 356 0.2 % 0.0 %
9 New Alternatives Fund, Inc 328 0 328 0.2 % 0.3 %
10 Skandinavisk Enskilda banken 26 254 280 0.1 % 0.0 %
Total, 10 largest shareholders 111 312 73 965 185 277 94.9 % 96.4 %
Other shareholders 4 116 5 793 9 909 5.1 % 3.6 %
Total 115 428 79 758 195 186 100 % 100 %
Definitions
33
Group
Capital employed Equity + Net Interest-bearing debt + Net tax positions
Equity ratio (in %) (Equity incl. Minority interests / Total assets) X 100
Debt / EBITDA Net debt at the end of the quarter / EBITDA last 12 months
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 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
– Tel: + 47 909 19 325
• Head of Finance and Investor Relations, Martin S. Lundby
– Tel: +47 416 14 448
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