Statkraft, a Norwegian utility, finds that energy buyers are more hesitant to sign long-term contracts.
Statkraft's CEO stated that the wider economic uncertainty is causing buyers to be less willing to sign long-term agreements for power. The utility also reported a decline in its core earnings during the third quarter.
Statkraft, a state-owned company, reported that its earnings before interest and taxes for the period July-September fell from $3 billion to $129.44 million. This is a drop of 3.0 billion crowns compared to 1.3 billion crowns if you compare it with 1.0 billion crowns a year ago. Statkraft reported a loss of 714 millions crowns for the period.
The main reason for this was the steep decline in its Markets division, which deals with energy sales and trading. It recorded an EBIT underlying of 6 million crowns during the third quarter. This is down from 1.4 billion crowns one year ago.
Birgitte Vartdal, CEO of the company, said this at the end of the earnings presentation.
She said that our market activities were less active in the third quarter, compared to last year's very strong third quarter.
She said that the market developments in oil and gas are driven by less fundamentals than by events which are more difficult to predict.
Vartdal said that industrial clients were also reluctant to sign agreements for power supply because of factors such as tariff uncertainty, cost inflation, and the demand for their products.
If you're not sure, don't lock in long-term deals.
The CEO said that the results of the market business will continue to change over time due to changes in volatility and the market conditions.
Statkraft's Nordic power generation, which is dominated by hydropower, remains the main contributor to its earnings.
Vartal has overseen the strategic shift in focusing on core regions and technology. He divested from international markets, and stopped new offshore wind and hydrogen projects. ($1 = 10.0431 Norwegian crowns) (Reporting by Nora Buli. Jane Merriman edited the article.
(source: Reuters)
