investor presentation hafslund - · pdf fileinvestor presentation march 2018 ......

I N V E S T O R P R E S E N T A T I O N

May 2018

Hafslund

Disclaimer

Certain statements included within this presentation contain (and oral communications made by or on behalf of Hafslund may contain)

forward-looking information, including, without limitation, those relating to (a) forecasts, projections and estimates, (b) statements of

managements' plans, objectives and strategies for Hafslund, such as planned expansions and investments, (c) targeted volumes and costs,

capacities or rates, start-up costs, cost reductions and profit objectives, (d) various expectations about future developments in Hafslund's

markets and governmental regulations, (e) results of operations, (f) margins, (g) growth rates, (h) risk management, as well as (i)

statements preceded by "expected", "scheduled", "targeted", "planned", "propose", "intended" or similar statements.

Although Hafslund believes that the expectations reflected in such forward-looking statements are reasonable, these forward-looking

statements are based on a number of assumptions and forecasts that, by their nature, involve risk and uncertainty. Various factors could

cause Hafslund’s actual results to differ materially from those projected in a forward-looking statement or affect the extent to which a

particular projection is realized. Factors that could cause these differences include, but are not limited to, world economic growth and other

economic indicators, including rates of inflation and industrial production, trends in Hafslund's key markets, energy prices and changes in

governmental regulations.

No assurance can be given that such expectations will prove to have been correct. Hafslund disclaims any obligation to update or revise

any forward-looking statement, whether as a result of new information, future events or otherwise.

2

Agenda

3

• Overview of Hafslund

• The grid industry in Norway

• Hafslund Networks

• Debt structure

• Financials

• Summary

Hafslund – a pure-play utility

* Share of Norwegian grid4

Norway’s largest grid company~ 715,000

customers23% share*

More than 100 years of history

5

1986

Nycomed part of

Hafslund

1898

Hafslund

established

1996

De-merger

Hafslund

Nycomed

2002-2005

• Restructuring

• Integration

• Value creation

2008

• Focus on

renewable

energy

• Spin off:

Infratek

2008-2012

• Established

power sales in

the Nordics

• Spin off:

Security, REC,

venture, fiber,

etc.

2013 -

• An integrated

and focues

energy

company

2014

• Acquisition of

Fortum’s

network

business in

Norway

• Strengthened

focus on

powersales

Sweden and

Finland

2017

• City of Oslo de-

listed Hafslund

and sold

Production, Heat

and Markets to

E-CO and

Fortum

• Hafslund

restructured to a

pure-play grid

company

The restructuring of Hafslund facilitates organic and structural growth

The restructuring of Hafslund

* Full stock exchange notice can be found here: https://newsweb.oslobors.no/message/447015 and the press article from the City of Oslo

can be found here: https://www.oslo.kommune.no/politikk-og-administrasjon/politikk/byradet/for-pressen/pressemeldinger/6

Proposed re-organisationHafslund today

100 %

The City of Oslo

Networks

Hafslund prior to 4 August 2017

MARKETSPRODUCTION

NETWORKS HEAT

NewCo

City of Oslo

• The combined ownership of Hafslund and E-CO is

subject to approval by the City Council of Oslo and

necessary approvals from regulatory authorities.

• The combined ownership is expected to be completed

in second quarter 2018.*

100 %

100 %100 %

https://newsweb.oslobors.no/message/447015

https://www.oslo.kommune.no/politikk-og-administrasjon/politikk/byradet/for-pressen/pressemeldinger/

Details on the restructuring

The restructuring of Hafslund was completed on 4 August 2017

1 E-CO: Production: http://www.e-co.no/Norsk/Forside/Om_E-CO/

2 Fortum: No. of power sales customers: http://apps.fortum.fi/investors/Fortum_Q1_2017_Interim_Report.pdf7

Heat Markets

100 %100 %

100 %

50 %

10 %

Structure prior to transaction Structure after 4 August 2017

Networks

100 %

50 %100 %

Other

shareholders

100 % 54 % 34 % 12 %

Networks Production Heat Markets KEA

KEA

0.7 mill customers 1.7 TWh 1.1 + 1.35 mill customers2

*

0.7 mill customers 3.1 TWh* 1.7 TWh 1.1 mill customers* 3.1 + 10 TWh1

Production

90 %

The City of OsloThe City of Oslo

Hafslund is now a focused grid company 100% owned

by the City of Oslo

• Hafslund is today a pure-play and focused utility with regulated

business.

• The company is 100% owned by the City of Oslo, which has AAA

rating from S&P and Aaa rating from Moody’s.

• The regulated business ensures stable cash flows and attractive

returns.

• As the biggest, in an area with population growth, and one of the

most efficient grid companies in Norway, Hafslund has a solid

fundament for further increased profitability and growth.

• The company has leading expertise in developing, building and

operating electricity grids.

• Hafslund wants to take part in the expected consolidation of the

utillity industry in Norway.

Source: City of Oslo, «Byrådssak 72/17».

* Hafslund also has ownership in a few smaller companies such as Bio-El Fredrikstad AS (100%), Hafslund Handel AS (100%), Fredrikstad

Energi AS (49%), Trøgstad Elverk AS (49%) and Rakkestad Energi AS (33%). See appendix for detailed legal structure.8

City of Oslo

Oslo Energi Holding AS

Hafslund AS*

Hafslund Nett AS

100 %

100 %

100 %

Networks

Agenda

9




• Debt structure

• Financials

• Summary

The Norwegian grid industry is highly fragmented

Hafslund is by far the largest grid company in Norway

* RAB = regulated asset base (Nw. Avkastningsgrunnlag / NVE-kapital)

Source: NVE, income calculation for 2018 based on 2016 figures, excluding Statnett (TSO).10

0

1

2

3

4

5

6

7

8

9

1 5 9

13

17

21

25

29

33

37

41

45

49

53

57

61

65

69

73

77

81

85

89

93

97

10

1

10

5

10

9

11

3

11

7

12

1

12

5

12

9

13

3

13

7

RA

B*

(NO

K b

n)

Norway has a total of 130 grid companies The 10 largest grid companies in Norway (2016)

Hafslund (2017)

RAB: NOK 9,8 bn

Median RAB of

NOK ~100 mill

Hafslund (2017)

RAB: NOK 9,8 bn

2,0

TR

ØN

DE

RE

NE

RG

I

1,9

4,3

EID

SIV

A

LY

SE

SK

AG

ER

AK

BK

K

3,53,1

4,1

AG

DE

R

NT

E

2,01,7

TR

OM

S

HA

UG

ALA

ND

HA

FS

LU

ND

9,8

5,3

There is still potential for further growth

Source: company websites11

Hafslund is one of the largest grid companies

in the Nordics… …but is small in an European context

Over 26 mill. grid customers

3.2 mill. grid customers

35 mill. grid customers




709,000

+40%

HafslundVattenfall

930,000

870,000

990,000

Radius Elnet

910,000

EllevioE.ON


Number of customers

Hafslund is one of the most efficient grid companies in Norway

The grid industry is a fully regulated natural monopoly

• The grid industry is regulated by NVE*.

• On average, the grid industry is allowed to

obtain an annual return equal to a rate of return

on the regulated asset base (RAB).

• The allowed rate of return (NVE rate) is

calculated based on a WACC** methodology.

For 2017 the return was 6.2%, while the rate

was 6.3% in 2016.

• Each grid company can obtain a higher or lower

return based on their operational efficiency

compared to all grid companies in Norway.

• The most cost efficient grid companies will

obtain the highest return.

* The Norwegian Water Resources and Energy Directorate. For more information regarding the regulations, please see: www.nve.no/english

** Weighted average cost of capital12

0

4

8

6

2

10

12

6,2

2016

9,7

6,6

20152014

7,8

6,8

2013

10,3

2017

6,36,3

8,1

Return, %

2012

7,0

4,2

6,5

ROCE Hafslund NVE rate

Historical NVE rate and ROCE for Hafslund

There is a high need for cooperation and consolidation in the industry

Increased need for grid efficiency

Source: NVE publication “Status og prognoser for kraftsystemet 2016», December 2016. Investment need including Statnett.13

Increased customer expectations and

investment needs … … high need for

High investment level ahead:

- Investment need in the Norwegian

grid of NOK 140 bn. coming 10

years

Capital

Competence

Stable

regulation

Electrification Aging grid Extreme

weather

ICT and cyber

security

Regulatory trend towards more separation between grid business and other businesses in the utility value chain

Solid and stable regulatory framework

* In Norway, there is three grid levels; Central grid, regional grid and distribution grid. The TSO, Statnett owns the central grid, while the ~130 grid

companies own the regional grid and distribution grid. 14

ProductionCentral grid/

Statnett

Distribution

grid*Retail

CustomerDownstreamUpstream

Enterprise

Private

Power Exchange

Agenda

15




• Debt structure

• Financials

• Summary

* RAB = regulated asset base; ROCE = return on capital employed16

Key data

Number of customers ~715,000

Energy delivered 2017 19.6 TWh

Share of Norwegian grid ~ 23%

RAB 2017 NOK 9.8 bn.

ROCE 2017 10.3%

Efficiency score 2018 (e) 113%

Regulated revenue 2018 (e) NOK 2.9 bn.

Snapshot

• Critical infrastructure

• Located in the extended Oslo region,

with significant population growth

• Regional and distribution grid

• Natural monopoly, fully regulated

through the Energy Act

• One of Norway’s most efficient grid

operators with high uptime

Hafslund: The largest grid operator in Norway

17

Priorities: Growth and operational efficiency

Hafslund’s network area

AMS

Hafslund to invests NOK 2.1

billion in AMS to 700‘ customers

by 2019

Organic growth

- Automatic meters (AMS)

- Reinvestments in the grid

- Population growth

Structural growth

- Primarily in geographical proximity

Operational efficiency

- High uptime and low costs

- Exploit benefits of digitalization

- Leading competence environment

AreaStrategic priorities

Target:

The best grid company in Norway

Status AMS

18

Roll-out phase

700 000 total

power meters

August

2016

• Full scale roll-out of power meters started in August 2016.

• Roll-out is going as planned.

• Accumulated investments of NOK 1,332 mill per Q1 2018.

Total project cost estimate of NOK 2.1 billion, reduced

from NOK 2.4 billion.

Pilots

March

2018

Ultimo

2018

550 000

installed

power meters

Roll-out plan

H2 2016

H1 2017

H2 2017

H1 2018

H2 2018

Not Hafslund

There is further potential for improved operations, investments and development of a modern power grid in eastern Norway. Hafslund seeks both organic and structural growth.

Strong track record from grid acquisition in 2014

19

Today Hafslund owns both the regional and distribution

grid in Oslo, Akershus and most of Østfold

Grid in Østfold:

- 100,000 customers

- NOK 1 bn in RAB

✓ NOK 60 mill. in

reduced operational

costs annually

✓ Increased

competence

✓ Improved

coordination

Hafslund Networks Hafslund Networks

Until 2014 Fortum owned most of the distribution grid in the

county of Østfold, while Hafslund owned the regional grid

A robust grid is key for green and sustainable solutions

Source: Ruters annual report 2015, SSB.no 20

Population growth and

electrification

Increased share of

renewable energy

• A robust grid is required to ensure

efficient deployment of all

renewable power generation, both

in Norway and in Europe.

• Higher degree of variable

renewable power into the system

requires more capacity and

smarter grids.

Smart grid and

smart cities

• A strong grid is needed to meet

the increased power demand due

to population growth and

electrification.

• Electrification of transport can

alone reduce Oslo's emissions by

up to 900,000 tons of CO2

annually.

• Smart cities and smart grids are

essential to meet tomorrow's

renewable society.

• Digitalization of the network will

increase the quality of power

supplied and facilitate increased

energy savings.

Agenda

21




• Debt structure

• Financials

• Summary

All the interest-bearing debt was moved to Hafslund AS as part of the restructuring. Hafslund AS has after the restructuring established a new revolving credit facility of NOK 2.5 bn, providing Hafslund with a robust financing structure with sufficient liquidity to cover at least the next 12 months’ maturities.

Loan portfolio Hafslund AS after restructuring

NIBD = net interest-bearing debt; EBITDA estimated last twelve months as per 30 December 2017 for Hafslund AS including subsidiaries.22

Interest-bearing debt per category as of 31 March 2018

(MNOK)

Cash

1,447

Bonds

1,742

Bank loans

5,148

Net interest

bearing debt

5,443

Key metrics loan portfolio

MNOK March 18

Gross interest-bearing debt 6,890

Net interest-bearing debt 5,443

Average coupon rate 2.7%

Average time to maturity 3.2 years

Share of fixed interest rate 33%

NIDB / EBITDA 3,3x

Hafslund AS debt maturity profile per 31 March 2018

23

Loans at maturity next 12 months (MNOK) Debt maturity profile (MNOK)

51

500

JulJunApr Mai Aug FebSep Oct Nov Dec

369

Jan Mar

Commercial papers Bonds Bank loans

420

70 70

280

2020

2,006

2018 2019 20222021 2023 2024 2025 2026 2027+

1,1511,240

470370

813

Commercial papers Bank loansBonds

Information from the City of Oslo regarding the debt

structure in Hafslund AS

24

City of Oslo stock exchange notice on 26 April:

“Hafslund AS will own Distribution as a fully

regulated grid company, and ensure stabile future

earnings for its owners and lenders. The Company

will aim to maintain a credit profile which will form

basis for borrowing terms and conditions

comparable with those of Hafslund ASA today. It is

expected that all existing interest-bearing debt in

Hafslund ASA is transferred to Hafslund AS and

that parts of this debt will be redeemed to achieve

the desired balance sheet, dividend capacity and

creditworthiness for Hafslund AS.”

Summons to bond holder meetings on 13 June:

The City of Oslo has not resolved a cash dividend from Hafslund AS to

the City of Oslo in 2017, after completion of the announced transactions.

Furthermore, it is the City of Oslo's assessment that the estimated cash

holdings in Hafslund AS specified in the balance sheet will be sufficient

to reduce the gross interest-bearing debt so that Hafslund AS as a well-

established grid company can maintain comparable borrowing terms

with today's Hafslund ASA. Gross interest-bearing debt is expected to

become approximately equal to net interest-bearing debt during the first

half of 2018. Hafslund AS' capital need will increase somewhat by the

end of 2018, partly due to the completion of the rollout of automatic

meters (the AMS project). It is not expected that the net interest-bearing

debt / EBITDA in Hafslund AS will exceed 5x.

Agenda

25




• Debt structure

• Financials

• Summary

Historical financials – Hafslund AS (I)

Hafslund AS figures includes the reported business area Networks and Other business for Hafslund AS

Source: Hafslund ASA annual report 201626

2 000

1 600

400

800

-400

1 200

0

1 659

1 654

1 435121

1 045

2012

980

2013

54

2016

1 314

1 161

1 107

-65

2017

1 388

197

20152014

-41

1 5851 634

1 675

5

Other business NetworksHafslund AS

Historical EBITDA – Hafslund AS (MNOK)

Other business primarily includes:

• Staff and support functions.

• Embriq (sold 2015).

• Incineration plants Østfold (partly

sold in 2015 and 2016, only Bio-El

Fredrikstad left from 2017).

• Results from affiliated companies;

Fredrikstad Energi (49%), Trøgstad

Elverk (49%) and Rakkestad

Energi (33%).

Acquisition of Fortum

Distribution AS in 2014

Historical financials – Hafslund AS (II)

Hafslund AS figures includes the reported business area Networks and Other business for Hafslund AS

Source: Hafslund ASA annual report 201627

1 600

2 000

0

800

400

1 200

579726 1 602

2017

37

674

0

963

1 602

926

20142013 2015

52

532

47

2012

556

497

59

10

1 019

2016

1 009

Hafslund AS Other business Networks

Historical Investments (excl. acquisitions) – Hafslund AS (MNOK)

Other business primarily includes:

• Staff and support functions.

• Embriq (sold 2015).

• Incineration plants Østfold (partly

sold in 2015 and 2016, only Bio-El

Fredrikstad left from 2017).

• Results from affiliated companies;

Fredrikstad Energi (49%), Trøgstad

Elverk (49%) and Rakkestad

Energi (33%).

Consolidated balance sheet Hafslund AS per

31 March 2018

* Balance sheet prior to the restructuring.28

NOK million 31.03.18 31.12.17 30.09.17

Intangible assets 624 624 624

Property, plant and equipment 12,095 11,937 11,610

Financial assets 319 321 336

Receivables and inventories 664 1,335 720

Cash and cash equivalents 1,447 1,105 2,066

Assets 15,149 15,323 15,355

Equity (controlling interests) 4,916 4,762 4,656

Equity (attributable to minority) 0 0 0

Provisions 1,076 1,224 1,167

Long-term interest-bearing liabilities 5,951 6,462 6,504

Current interest-bearing liabilities 939 1,197 1,803

Current non-interest-bearing liabilities 2,267 1,678 1,225

Liabilities and equity 15,149 15,323 15,355

Equity share 32% 31% 30%

Net debt / EBITDA 3,3x 4.0x 3.9x

Hafslund Network – solid historical performance

Source: Hafslund annual report 2016 and Q4 2017 report.29

Network: NVE rate and regulated asset base (RAB) Network: Return on capital employed (ROCE)

Network: EBITDA* Network: Investments

Acquisition of Fortum

Distribution AS

8

10

0

12

4

8

2

10

66

0

2

4 6.26.8

6.36.6

4.2

6.3

%NOKb

8.8

2015

7.97.6

2013 20172014

9.8

20162012

6.1 6.3

NVE-rate RAB

6

8

4

2

0

12

10

2014

7.87.0

8.1

2012

10.3

2013

6.5

2015 2016

9.7

2017

%

ROCE

0,0

1,0

2,0

1,5

0,5

NOKb

2017

1,0 1,1

2012

1,7

2016

1,4

2013

1,7

20152014

1,3

EBITDA

1.0

2.0

1.5

0.0

0.5

1.0

NOKb

1.6

2016 2017

0.7

0.5

2013

0.5

2014

0.9

2012 2015

Acquisitions Investments

Agenda

30




• Debt structure

• Financials

• Summary

Hafslund – a pure-play utility

31

• The largest grid company in Norway with

709,000 customers

• Natural monopoly and fully regulated business

• High operational efficiency and stable returns

• Solid cash flow and strong credit metrics

• Seeking organic and structural growth

• 100% owned by the City of Oslo, rated AAA

by S&P and Aaa by Moody’s

Summary

Robust capital

structure

Profitable growth

Health, Safety and Environment

High operational

efficiency

Sustainable

solutions

Stable

regulations

Key priorities

Legal structure for Hafslund AS

32

Fredrikstad Energi AS971 644 494

Energy Future Invest AS982 293 111

49%

Norwegian Crystal AS998 602 734

2.8%

50%

Østfoldbadet AS979 932 790

4.82%

Hafslund AS

918 705 066

Rakkestad Energi AS968 398 083

Trøgstad Elverk AS978 645 178

33%

49%

Kraftcert AS914 881 722

33%

Hafslund Handel AS976 501 543

Bio-El Fredrikstad AS913 436 407

Hafslund Nett AS

980 489 698

100% 100%100%

REN AS979 986 211

9.56%

100% owned

Minority interests

Additional information

• Additional information is available from Hafslund’s website:

www.hafslund.no

• CFO, Heidi Ulmo

[email protected]

Tel: + 47 909 19 325

• Head of Finance and Investor Relations, Martin S. Lundby

[email protected]

Tel: +47 416 14 448

33

investor presentation hafslund - · pdf fileinvestor presentation march 2018 ......

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