Financial results hit by lower power generation

In the first nine months of 2019, Agder Energi’s underlying net income was NOK 84 million. The equivalent figure for the same period of 2018 was NOK 612 million.

- The main reason why our net income fell was a lower contribution from our hydroelectric business as a result of significantly lower power generation and lower achieved prices than in the same period the previous year. Our hedging strategy is designed to stabilise our financial performance, but the electricity prices we achieved through our hedging instruments were lower than spot prices. The contribution from our electricity transmission business was also weak in 2019. This was partly due to extensive upgrades to the electrical grid to make it more reliable, says CEO Steffen Syvertsen.  

Lower hydroelectric power generation 

There was little snowfall last winter, so the Group’s hydrological resources, i.e. the amount of water in its reservoirs and drainage basins, as well as of snow in the mountains, was lower than normal at the start of the year. Hydroelectric power generation was therefore lower than in a typical year.  

Results should return to normal in 2020 

- From the beginning of 2019 until the end of September, we have generated significantly less electricity than we did in the same period last year. Over the course of the year, our hydrological resources have recovered, and at the end of the third quarter they were higher than normal. This water has not yet been converted into electricity, and assuming normal precipitation levels over the coming period, we expect our financial results to return to normal in 2020, says Syvertsen.  

In the first nine months of 2019, Agder Energi generated 4,892 GWh of clean, renewable hydroelectric power. That is equivalent to the average annual energy consumption of around 300,000 households. By comparison, it generated 6,333 GWh in the year-earlier period, so there was a decline of 23 percent.  

Lower achieved prices 

Selling electricity is Agder Energi’s most important source of revenue. Prices in the electricity market are influenced by factors such as precipitation, temperatures, fossil fuel prices and CO2 quotas. In order to reduce revenue fluctuations caused by variations in these factors, Agder Energi therefore uses so-called hedging instruments to reduce risk and uncertainty.  

- Agder Energi’s hedging strategy is designed to ensure more stable and predictable financial results over the long term. As of the end of September, our hedging activities had caused the electricity prices we achieved in the first nine months to be lower than spot prices, says Syvertsen.  

In the first nine months of 2019, the average spot price of electricity in Agder Energi’s region was 38.5 øre per kilowatt hour (kWh), compared with 40.2 øre per kWh in the equivalent period last year. That is four percent lower than last year.  

- The prices of future contracts for the rest of the year suggest that electricity prices will be lower in 2019 than in 2018, says Syvertsen.  

Low sickness absence rate 

The Group’s sickness absence rate has remained at low levels in recent years, and for the first nine months of 2019 it was 2.6 percent, compared with 3.5 percent last year.  

- We take a proactive approach to health and safety throughout the Group and focus on risk-reduction and encouraging everyone to work as safely as possible, says Syvertsen.  

Reducing the risk of power cuts 

In 2019, Agder Energi Nett has implemented a series of measures to reduce the risk of power cuts. One of them is an extensive programme of clearing trees along high voltage power lines. Mapping and cutting down dangerous trees outside the normal line clearing corridor reduces the risk of power outages. So far in 2019, Agder Energi Nett has spent NOK 75 million on this programme.  

New prize for innovation 

Agder Energi has received many prizes for innovation, and in September it was voted the third most innovative enterprise in Norway by Innovasjonsmagasinet. The jury cited Agder Energi’s operations in Germany and the joint project with Microsoft as examples of innovation and business development. 

- Innovation is a priority area for us, and this prize is a recognition of what we have done so far in terms of innovation. It is also an inspiration to continue working to develop new solutions for the energy market of the future, says Syvertsen.  

Enabling new small hydro plants 

In September, a milestone was reached in the project to upgrade the Høgefoss distribution network in Nissedal Municipality in Telemark. The upgrade lays the foundations and is a prerequisite for the expansion of Høgefoss power station and the development of new small hydro plants in the area. 

The project involves building a new substation at Høgefoss, creating a new 132 kV line between the substation and Dynjanfoss power station and installing new switchgear at Dynjanfoss. The remaining stages of construction will be completed in the autumn of 2019 and in 2020. 

QUICK FACTS: 

See our quarterly report for more detailed information: 

Agder Energi Quarterly Report 3 2019.pdf