The financial statements of Hitaveita Suðurnesja hf. (HS hf.) were approved in
a Board of Directors' meeting today, 12 February 2008.
"The financial statements of Hitaveita Suðurnesja are now for the first time
prepared on the basis of the International Financial Reporting Standards
(IFRS). Upon the adoption of the standards the Company's equity increased by
ISK 1,201 million at year end 2006 in comparison to the previous GAAP but the
implementation of the standards is further discussed here below. Comparative
figures for 2006 have been adjusted in accordance with the new standards."
The Company's profit during the year amounted to ISK 3,480 million, compared to
ISK 2,877 million the previous year.
According to the income statement HS hf.'s operating revenue for the year
amounted to ISK 7,660 million, compared to ISK 5,897 million the previous year.
Revenue increases thus by 30% or ISK 1,763 million. The increase relates mainly
to electric power sale to Nordural, which increased by ISK 587 million and a
lump sum of ISK 626 million from the United States Government due to the
resignation of an electric power purchase agreement for the defence force.
Operating expenses less depreciation amounted to ISK 3,420 million compared to
ISK 2,853 million the previous year. Increase in operating expenses relates to
an increase in cost of production, sale and distribution of electric power.
Net financial income amounted to ISK 1,330 million during the year compared to
ISK 11 million the previous year. The reinforcement of the Icelandic krona
against foreign currencies leads to a foreign exchange gain of ISK 922 million
but during the year 2006, foreign excange loss amounted to ISK 1,320 million.
Interest expenses decreased between years by ISK 177 million or from ISK 633
million to ISK 426 million mainly due to an interest rate swap concluded at
year end 2006.
In accordance with the International Financial Reporting Standards, the Company
presents effects of embedded derivatives in electric power agreements concluded
by the Company. Income on fair value changes of the Company's embedded
derivative agreements amounted to ISK 827 million during the year compared to
ISK 1,106 million the previous year.
According to the balance sheet, HS hf.'s assets at year end 2007 are recorded
at the book value of ISK 36,790 million. Assets increased by ISK 4,457 million
from the beginning of the year, mainly due to the Company's investments in
Reykjanes power station and Power plant 6 in Svartsengi, in addition to the
change in the market value of derivative agreements.
HS hf.'s liabilities amounted to ISK 16,814 million according to the balance
sheet, whereof short term liabilities amounted to ISK 3,428 million.
Liabilities increased by ISK 1,377 million between years. The increase is due
to the Company's borrowings in relation to Power plant 6 in Svartsengi.
HS hf.'s equity amounted to ISK 19,976 million at year end 2007. Equity ratio
was 54%. At the beginning of the year, equity amounted to ISK 16,896 million
and equity ratio was 52%.
"Operating outlook for Hitaveita Suðurnesja is good. Power plant 6 in
Svartsengi, a power plant of 30 MW, was activated before the end of year 2007
and income from electric power sale to large scale industry will considerably
increase the Company's total income. The Company's activity will grow and
system development will continue incident to increased population in the
Company's service area and increased power processing. Researches will be
carried out on further power plant options and various licences are being
obtained in relation thereto. The biggest single projects are a new water
instillation in the Vestman Islands, research drilling and other preparation
for new power plants, in addition to increased down pumping, work end of
Powerplant 6 and construction of supply systems."
Effects of the implementation of the IFRS
The financial statements of Hitaveita Suðurnesja are now for the first time
prepared on the basis of the IFRS. The adoption of the standards leads to
assessment changes in assets and liabilities and the presentation of the income
statement and the balance sheet.
The financial statements of Hitaveita Suðurnesja 2007 are prepared on the bases
of those accounting methods discussed in the notes to the financial statements
on accounting methods. This also applies to comparative figures for the year
2006 and the opening balance sheet as at 1 January 2006, as changes take effect
on that date, also mentioned as the implementation date. Amounts in the opening
balance sheet as at 1 January 2006 have been adjusted in accordance with the
IFRS but were previously presented in accordance with Icelandic law and GAAP.
The total effect of the transition to the IFRS on the Company's equity is an
increase of ISK 1,201 million at year end 2006.
The main changes in the assessment of assets and liabilities upon the
implementation of the IFRS at year end 2006:
- In accordance with IAS 39 the Company has entered embedded derivativs at
fair value which lead to an increase in equity by ISK 2,114 million.
- Connection fees are now recognised over 15 years wich equals to the average
useful life of a distribution system but was previously recognised when
connection took place. The change decreased book value of equity at year end
2006 by ISK 432 million.
- Shares in associated companies are entered on the basis of the equity
method in the financial statements. The change decreased book value of
equity by ISK 127 million.
- Upon the implementation of the IFRS, methods of capitalisation of research
cost were changed in accordance with IAS 38. The effect of this change lead
to a decrease in equity by ISK 25 million.
- Classification of development cost was changed in accordance with IAS 38.
The change lead to a decrease in operating assets to the amount of ISK 921
million and intangible assets increase by ISK 921 million.
- The overall effect of the implementation of the IFRS on income tax is that
equity decreased by ISK 328 million.
Further information is provided by Júlíus Jónsson, Managing Director of
Hitaveita Suðurnesja hf., tel. 422 5200/860 5208.
