Robust performance production and trading activities
Highlights
- Net turnover increased 1% to EUR 5,650 million in 2007
- Net profit increased 15% to EUR 875 million
- Upward trend in customer numbers, customer growth notably in Germany and Belgium
- Customer satisfaction at a high level throughout 2007
Feb 18, 2008 | Amsterdam Nuon reports strong results for 2007
After an excellent fourth quarter Nuon brought the 2007 financial year to a successful conclusion, particularly thanks to a strong performance of the production and trading activities.
The increase in the reported net turnover to EUR 5,650 million (2006: EUR 5,598 million) was mainly attributable to a higher net electricity turnover. The net gas turnover decreased due to the lower sales on account of the relatively warm weather in the first half of 2007. Net turnover excluding incidental items worked out at EUR 5,727 million in 2007 (2006: EUR 5,390 million).
The reported net profit increased 15% to EUR 875 million (2006: EUR 763 million). The net profit in 2006 was strongly influenced by incidental items. Excluding incidental items the net profit in 2007 increased to EUR 982 million (2006: EUR 495 million). The strong performance of the production and trading activities in 2007 was the most important cause of this significant increase. The results from trading activities are strongly influenced by price fluctuations in the markets for raw materials and electricity.
Fourth quarter
The reported net profit increased in the fourth quarter from a loss of EUR 10 million in 2006 to a profit of EUR 210 million in 2007. The favourable development of results was mainly due to higher margins on the production of electricity and increased electricity production due to the improved availability of power stations. In the last three months the sale of gas increased by 30% due to the less warm weather, notably in December 2007.
In a reaction to the results CEO, Ludo van Halderen, comments:
"Nuon can look back on an exceptionally good year. Though the increase in the profit mainly came from our production and trading activities, we see splendid results across the whole company. The favourable results in the past years enable us to continue investing in new technologies in order to make the energy supply more sustainable. Examples are CO2 capture and storage, the introduction of high-performance boilers that generate electricity and the breakthrough of a new generation of solar cell technology."
Market development
The number of Nuon customers in the Dutch consumer market increased slightly in the last quarter of 2007, thus sustaining the upward trend in the third quarter. The customer position for full-year 2007 showed a slight decrease of less than 1% compared to 2006. The total volume of electricity supplied by Nuon to customers in the Dutch consumer market increased by about 1% compared to 2006, while the supplied volume of gas in this market decreased by about 11%, particularly due to the relatively warm weather compared to 2006. In the business market there was a decrease in the market share and supplied volumes compared to 2006. This was mainly related to the loss of a large customer at the beginning of 2007.
The rise in the number of customers in Belgium continued in the fourth quarter. In 2007, the number of customers increased by 24,000 to 256,000. This is partly the consequence of the opening of the market in the Walloon region early in 2007. In Germany Nuon is continuing to expand its customer portfolio. In 2007 the number of electricity customers in Germany increased by over 185,000 to 214,000.
Price level 2008
Consumers in the Netherlands who have a variable contract with Nuon saw virtually no increase in their bill for the supply of energy from 1 January 2008. Assuming average household consumption, the bill increased by 1.6% from 1 January 2008. That is less than one and a half euros per month. On 1 January 2008 Nuon reduced the variable price of electricity by just over 6%. Against this reduction, the gas price increased. The bill for the supply of gas will rise by about 5%, partly due to the linkage of the gas price to the oil price.
Customer satisfaction improves
Customer satisfaction improved in 2007. Research shows that consumers, when asked about satisfaction, rank Nuon first while Nuon is ranked second by business customers. The results are based on external research commissioned by Nuon.
These results are consistent with the quarterly measurement of the administrative performance of energy suppliers by the Office of Energy Regulation (DTe). In the fourth quarter of 2007 Nuon rose to second place in this DTe report with a virtually error-free score on the timeliness of the most elementary customer processes.
The customer satisfaction of Continuon Netbeheer also improved. Continuon was rated first for both small and large consumers.
Incidental items
The power outage in the Tieler- en Bommelerwaard area, caused by an Apache helicopter of the Dutch Air Force, has provisionally led to an extra incidental charge of EUR 14 million. Nuon is currently investigating whether the Ministry of Defence can be held liable for this helicopter incident.
Alongside the costs of compensation and emergency provisions resulting from this power outage, the incidental items in this quarter consisted of a provision for loss-making contracts, costs arising from a ruling of the DTe in a pricing dispute, fair value movements of energy commodity contracts, sufferance tax costs, merger costs and impairments. These items aggregated to a charge of EUR 56 million after taxation in the fourth quarter of 2007 (Q4/2006: a charge of EUR 62 million). In the financial year 2007 incidental items and fair value movements had a negative impact on net profit of EUR 107 million (2006: a gain of EUR 268 million).
Operating cash flow and net debt position
The operating cash flow for 2007 worked out at EUR 1,159 million compared to EUR 1,008 million in the previous year. The increase was principally due to the higher operating results. This increase was partly offset by higher prepayments for corporation tax related to provisional tax assessments for previous years. In 2007 tax prepayments amounted to EUR 284 million as opposed to EUR 99 million in 2006.
The net cash position at the end of 2007 amounted to EUR 293 million. On 31 December 2006 the net debt position was still EUR 72 million. The improvement in net debt relative to last year was mainly the consequence of the positive free cash flow. The relatively cash balance is maintained in connection with the significant investment programmes for the coming years.
Investments
The investments in property, plant and equipment amounted in 2007 to EUR 523 million (2006: EUR 583 million). Alongside the ongoing investments in the quality of the grids, preparations were also made in 2007 for strategically important projects such as the gas-fired part of the electricity power station in Eemshaven.
Solvency and interest cover
The solvency amounted at the end of 2007 to 48.8% (31 December 2006: 47.5%). The improvement was caused by the reduction in net debt and by an increase in shareholders’ equity, partly due to the profit for 2007. The interest cover worked out at 45.0 (2006: 15.1). Nuon’s financial policy stipulates that this ratio must be at least 5.0.
Ratings Nuon
Since 14 September 2007 Nuon’s credit ratings are as follows:
| Credit ratings | Standard & Poor’s | Moody’s |
| n.v. Nuon short term | A-1 | P-1 |
| n.v. Nuon long term | A+ (negative outlook) | A2 (stable outlook) |
| Nuon Power Generation B.V. | A (negative outlook) | A3 (stable outlook) |
Dividend proposal
The Supervisory Board and the Management Board propose to pay out a dividend of EUR 413 million. This corresponds with 45% of the net profit after taxation, excluding the incidental items after taxation that did not lead to cash flows in the 2007 financial year. The adoption of the 2007 dividend proposal will take place at the General Meeting of Shareholders on Tuesday 22 April 2008 in Amsterdam.
In 2007 a total of EUR 362 million was paid out. This amount consists of a dividend payment for the financial year 2006 of EUR 325 million and an extra payment of 5% chargeable to the reserves of EUR 37 million.
Financial forecast
The Management Board, in consultation with the Supervisory Board, has adopted the policy not to issue any statements regarding expected financial results for the company in the future. Accordingly, the Management Board shall not issue a forecast for the results for the financial year 2008.
Unbundling of energy companies
On 3 August 2007 the Ministry of Economic Affairs published the Royal Decree imposing the unbundling of energy companies in conformity with the Independent Network Operation Act (WON). This means that Nuon must be unbundled by no later than 1 January 2011. Nuon has meanwhile started with the preparations for the implementation of these obligations.
The WON also obliges energy companies to transfer the management of their high-voltage grids of 110 kV and higher to the national grid manager TenneT by 1 January 2008. TenneT has designated itself as manager in conformity with the provisions of the WON. In view of the complexity of the implementation and the need to safeguard security of supply, the transfer of the management initially concerned the part of the high-voltage grids of 110 kV and higher that does not fall within a cross-border lease agreement. Nuon and TenneT are currently discussing the further implementation of the grid management.
Profile Nuon
Nuon is an ambitious energy company, serving 2.6 million consumers and organisations with over 10,000 employees in the Netherlands, Belgium and Germany. Nuon produces, transports and delivers electricity, gas, heating and cooling, and engages in energy trading in the major international markets. Nuon also supplies additional services and technological innovations to businesses and consumers. In doing so, Nuon aims to provide a reliable, sustainable and affordable energy supply.
With a turnover of EUR 5.6 billion in 2006, Nuon occupies a prominent position in the Dutch energy market. The shares are held by local and regional authorities.