Reykjavík Energy in good position to increase investments
24. aug 2020
Orkuveitan
The interim consolidated financial statements of Orkuveita Reykjavíkur (OR; Reykjavík Energy) for the first six months of year 2020 show constancy in operational results and that the group is well positioned to increase investments to ease the downturn in Iceland’s economy. EBIT amounted to ISK 8.1 billion compared to ISK 8.2 billion for same period 2019 and EBITDA increased year-on-year; was ISK 13.9 billion through Q2 2019 but ISK 14.4 billion now. The OR Group’s interim consolidated financial statements were approved today by the Board of Directors. Besides the parent company, the group comprises the wholly owned subsidiaries Veitur Utilities, ON Power, Reykjavík Fibre Network, and Carbfix.
OR Interim Financial Statements Q2 2020
Bjarni Bjarnason, OR’s CEO, says the Group’s solid finances and stability in operations allow it to increase investments and thereby counter the adverse economic effects of the Covid-19 pandemic. Reykjavík Energy’s liquid funds have never been larger.
Decreased impact of calculated metrics
Along with the stability in operational results, the impact of calculated metrics on bottom-line results have decreased since the presentation of the Company’s Q1 results. The financial statements are in accordance with IAS 34 on interim financial statements and it follows that changes in expected income from long-term contracts are included in the income statement. The reduction in aluminum prices from the beginning of the year, which affects income from electricity sales, is then calculated many years in advance but is entered in each financial statement. The effect of this on the Group’s total performance in the first three months of this year was very large, or just over ISK 10 billion. This decreased by ISK 1.9 billion in the second quarter. These metrics do not affect the company's operating profit, cash position or ability to invest, but do affect the calculated overall result of the interim financial statements. It is now negative by ISK 0.9 billion, while the corresponding figure was positive by ISK 3.3 billion after the first half of 2019.
Bjarni Bjarnason, CEO:
Now that there is a crisis in society due to the virus, we see how important it is to have managed to turn Reykjavík Energy’s finances for the better in its time. Since the economic contraction due to Covid 19 began late last winter, the companies in the group have had the power to shoulder social responsibility. This has been shown, among other things, in increased investments and an increase in the number of summer employees.
Reykjavík Energy’s operating results after the first half of this peculiar year show that we have the strength to continue to contribute.
Like sometimes before, we see in the Group’s financial statements a significant fluctuation due to calculated figures that neither affect EBIT nor cash flow. They are negative this time around, but it does not affect Orkuveita Reykjavíkur's ability to be among those who will pull the wagon on our way out of the economic downturn in society. However, risk aversion, inherent in the Reykjavík Energy Group’s financial structure, mitigate for these effects on the income statement with strengthening of the financial position and increased equity ratio.
The pandemic has, of course, had a considerable effect on the operations of OR and its subsidiaries, just like the rest of the world. We were well prepared for it with contingency plans and the responsibility that staff have shown in communication with customers and among themselves has prevented the epidemic from affecting the Group’s services. We have made several changes in our day-to-day behavior, many of which have proven beneficial and will be permanently imposed when we have averted the threat from Covid-19.
| 2016 | 2017 | 2018 | 2019 | 2020 | |
|
Amounts are in ISK millions at each year’s price level |
1.1.-30.6. | 1.1.-30.6. | 1.1.-30.6. | 1.1.-30.6. | 1.1.-30.6. |
| Revenues | 20,955 | 21,612 | 23,167 | 23,502 | 24,272 |
| Expenses | (8,215) | (8,063) | (8,626) | (9,571) | (9,879) |
| thereof energy purchase and transmission | (3,133) | (2,898) | (3,112) | (2,870) | (2,824) |
| EBITDA | 12,741 | 13,549 | 14,541 | 13,931 | 14,393 |
| Depreciation | (5,303) | (4,706) | (4,616) | (5,728) | (6,284) |
| EBIT | 7,438 | 8,842 | 9,926 | 8,203 | 8,109 |
|
Result of the period |
5,029 | 7,311 | 4,200 | 3,349 | (900) |
|
Cash flow statement: |
|||||
|
Received interest income |
57 | 124 | 99 | 207 | 174 |
|
Paid interest expense |
(1,890) | (2,013) | (2,267) | (2,726) | (2,655) |
|
Net cash from operating activities |
11,774 | 12,652 | 10,988 | 13,330 | 12,520 |
|
Working capital from operation |
10,617 | 11,707 | 12,048 | 10,027 | 11,164 |
|
Liquid funds |
30.6.2016 | 30.6.2017 | 30.6.2018 | 30.6.2019 | 30.6.2020 |
|
Deposits and marketable securities |
1,441 | 4,127 | 6,259 | 7,112 | 13,091 |
|
Cash and cash equivalents |
7,049 | 14,151 | 10,917 | 14,912 | 15,097 |
|
Liquid funds total |
8,490 | 18,278 | 17,176 | 22,024 | 28,187 |
|
Key financial ratios |
30.6.2016 | 30.6.2017 | 30.6.2018 | 30.6.2019 | 30.6.2020 |
|
Equity ratio |
38.3% | 42.6% | 47.3% | 47.4% | 47.2% |
|
Current ratio |
0.9 | 1.1 | 1.1 | 1.1 | 1.0 |
|
Net cash from operating activities / Net debt |
6.0 | 4.7 | 5.7 | 5.0 | 5.6 |
|
Intererst coverage |
5.6 | 5.7 | 4.6 | 4.6 | 4.3 |
| ROCE | 5.1% | 6.4% | 6.6% | 4.8% | 4.2% |
