Orkuveita Reykjavikur (Reykjavik Energy) returns a ISK 7.2 billion profit in Q1 2010

Results continue to improve in Orkuveitu Reykjavikur (OR) operations. Profit
after taxes amount to ISK 7.2 billion for the first quarter of 2010, the fourth
quarter of 2009 returned ISK 8.8 billion profit. The interim financial
statements of Orkuveita Reykjavikur was authorised at a board meeting today. 

OR´s EBITDA for the first quarter of 2010 amounted to ISK 4.2 billion. Profit
before income tax amounted to ISK 10.1 billion. Calculated income taxes amount
to ISK 2.9 billion resulting in a profit of ISK 7.2 billion. 

OR paid ISK 597 million interest during the first quarter of 2010. The
corresponding amount in 2009 amounted to ISK 1.805 million. Interest expense
decreases by more than two thirds between the periods, or ISK 1.208 million.
The reason for this is that OR had to seek finance in Icelandic markets in the
year 2009, where interest rates are more than tenfold that of the average
interest rate of OR loans, which is 0.88%. 

The results of the curtailing in OR´s operations can be clearly seen in the
interim financial statements. Other operating expenses excluding energy
purchase, depreciation and amortisation and salary expenses, decrease from the
first quarter of 2009 by ISK 84 million, or 9.3%. 

Orkuveita Reykjavikur Interim Financial Statements are in accordance with
International Financial Reporting Standards as adopted by the EU. 

Highlights of the first quarter of 2010:

Orkuveita Reykjavikur´s operations returned a profit of ISK 7.187 million for
the first quarter of 2010. The first quarter 2009 resulted in a profit of ISK
1.812 million. 
 
Operating revenues for the first quarter amounted to ISK 7.422 million.
Operation revenues for the first quarter of 2009 amounted to ISK 6.541 million. 

EBITDA of the Company for the first quarter of 2010 was ISK 4.232 million and
ISK 3.335 million for the first quarter of 2009. 
 
Financial income and expenses were positive for the first quarter and amounted
to ISK 7.916 million. The amount for the first quarter 2009 was positive by ISK
703 million. 
 
Total assets 31 March 2010 were ISK 292.119 million and were ISK 281.526
million at year-end 2009. 
 
Equity of the Company 31 March 2010 was ISK 47.793 million and was ISK 40.657
million at year-end 2009. 
 
Total liabilities of the Company 31 March 2010 was ISK 244.326 million compared
to ISK 240.868 million at year-end 2009. 
 
The equity ratio was 16.4% as at 31 March 2010 compared to 14.4% at year-end
2009. 
 
Other issues
OR finances it´s investments with foreign loans, due to the great interest rate
difference between Iceland and other countries. The difference has been around
and above 10 percent. With the currency collapse of the Icelandic krona the
loans of OR in other currencies increased. This had a negative effect on OR´s
equity. 
The repayment period of OR´s investment loans reach to the year 2027. The
repayment in Icelandic kronas is therefore subject to the evolvement of the ISK
currency against other currencies. During the length of the credit period OR
takes advantage of the differing interest rate. The lower interest payments
have an effect on cash flow, operating results, equity ratio and the need for
re-financing of the Company. OR´s customers also enjoy the favourable interest
rate difference with a low service charge. 
 
Prospects
The company continues to work on the enlargement of the power plant at
Hellisheiði. The Company intends to commission the plant's 4th phase,
production of hot-water, later this year, and the 5th phase, production of 90
MW electricity, in the latter half of 2011. 

On 20 November 2009 Orkuveita Reykjavikur signed a loan agreement with the
European Investment Bank with favourable terms for financing half of the 5.
phase cost and for half of the cost of the intended 90 MW power plant at
Hverahlid. The construction of the power plant at Hverahlid will not begin
until sales contracts of electricity have been made without reservations and
financing on acceptable terms has been fully secured. Discussions with possible
buyers are ongoing. 

The Icelandic krona has strengthened by 2.5% in the first quarter of 2010 and
has strengthened by another 2.8% to date. Orkuveita Reykjavikur´s future equity
position will be determined largely by the position of the Icelandic Krona in
regards to foreign currency. 

For further information contact Hjörleifur B. Kvaran, CEO Orkuveita
Reykjavikur, tel.: +354 516 6000