n.v. Nuon (Nuon) has reported net turnover of EUR2.23 billion for the first quarter of 2009, compared with the net turnover of EUR1.83 billion in the year-ago quarter. It has also reported a net profit of EUR181 million for the first quarter of 2009, compared with the net profit of EUR245 million in the year-ago quarter.
Commenting on the results Oystein Loseth, chairman of the management board, said:
The increased turnover did not translate into a correspondingly higher net profit, mainly due to the higher costs in this quarter, including those attributable to strategic processes and the unbundling. The fact that the number of customer contracts in Belgium and Germany is still growing and is also rising in the Netherlands points to a solid market basis. This quarter was memorable on account of the choice of Vattenfall as the strategic partner for Nuon’s production and supply company. Another highlight, several weeks later, was the Ministry of Economic Affairs’ agreement to our unbundling plan, which creates a solid financial basis for Alliander and for Nuon’s production and supply company.”
The total volume of electricity supplied increased by 4% and the volume of gas by 11% compared to last year. These increases relate to the relatively colder months at the start of the year. Prices in the consumer market were higher at the start of 2009 than in 2008 because the sharp increases in raw material and electricity prices in 2008 are being passed on in gas and electricity prices in 2009. In July 2009, prices in the Netherlands are expected to fall by about 5% for electricity and about 35% for gas.
Operating profit in the first quarter of 2009 decreased to EUR256 million compared to EUR316 million in 2008. Operating expenses increased to EUR423 million. This increase was largely due to the costs of strategic processes such as the unbundling of n.v. Nuon into a production and supply company and network company Alliander. This led to higher ICT and personnel expenses; since 1 July last year both companies have been operating as independent entities. The expansion of gas production activities and activities in the field of installation and insulation also contributed to the increase in costs.
The gross margin increased 6% to EUR728 million compared to last year. This increase is attributable to the gas gross margin, which increased to EUR177 million (Q1/2008: EUR122 million) as a result of the margin on new gas extraction activities and a higher margin on gas storage. The gross margin on electricity decreased due to the increase in purchasing prices and a lower margin on the production of electricity. This was partly offset by the positive contribution that the trading results and other fair value movements made to the electricity margin. The introduction of the capacity charge led to a lower gross margin on the transportation of electricity and gas in the first quarter of 2009. The gross margin on heating and other activities decreased, mainly as a result of the estimated negative effect of the recently adopted Heat Distribution Act.
Market development
The number of Nuon’s electricity and gas customers in the Netherlands increased in the first quarter of 2009. The number of customers for gas and electricity amounted, in round figures, to 1.9 and 2.3 million respectively, while growth in Germany and Belgium continued. Compared to the first quarter of 2008, the number of electricity customers in the German consumer market increased by 35,000 to 275,000 and the number of Belgian customers rose by 20,000 to 280,000.
Operating cash flow and net debt position
The first quarter of 2009 saw an operating cash outflow of EUR307 million, compared to an operating cash inflow of EUR3 million in the same period last year. This decrease was mainly caused by a significant increase in working capital as a result of the cold weather. The amount that Nuon receives in advance from customers remains constant throughout the year, while turnover in the winter months is relatively higher. This effect was clearly visible in the cold first quarter of 2009.
Gross investments in the first quarter increased by 23% to EUR193 million (Q1/2008: EUR157 million). In addition to the ongoing investments in the network and existing production capacity, Nuon also invested in the new Nuon Magnum power station, despite a delay in the granting of the permit. Investments were also made in the Helianthos, the developer of solar cell foil, and in the new gas storage facility in Zuidwending, while plans for a new offshore wind farm were announced after the quarter-end.
Free cash flow decreased in this first quarter to EUR468 million negative. This decrease compared to the same period in 2008 (EUR131 million) was attributable to the lower operating cash flow and higher investments. This resulted in net debt of EUR1,096 million at the end of the first quarter (31 December 2008: EUR642 million).
Strategy
In the first quarter of this year Nuon announced that it had chosen the Swedish company Vattenfall as its strategic partner for its production and supply company. The Ministry of Economic Affairs agreed to the unbundling plan shortly after the end of the quarter.