2012-03-16 15:00:00 CET

2012-03-16 15:00:06 CET


REGULATED INFORMATION

Islandic English
Orkuveita Reykjavíkur - Financial Statement Release

Six billion increase in operating profit 


Reykjavik, 2012-03-16 15:00 CET (GLOBE NEWSWIRE) -- Orkuveita Reykjavíkur's
(OR) operating profit doubled in year 2011 from the previous year and was ISK
6.4 billion higher in 2011 than 2010. There was a reduction in salaries as well
as other operating costs and revenues increased. All aspects of the company‘s
action plan, which was approved a year ago, were as scheduled. 

The OR annual consolidated financial statements for 2011 were approved by the
Board og Directors today. It has been prepared in accordance with International
Financial Reporting Standards (IFRS). The financial statements are attached. 

Bjarni Bjarnason, CEO of Orkuveita Reykjavikur:

Last month saw the completion of thorough streamlining of OR's operations. It
has been a challenging project and not without pain but the employees has
performed exceptionally well.

The results of these large-scale are now apparent. The debt burden is,
nevertheless, heavy and fluctuations in external factors have a major impact on
the financial results. Aluminium prices and exchange rate fluctuations
delivered ISK 14 billion in revenue 2010 but a similar amount of expenditure in
2011. 

OR's Board of Directors has taken important steps to protect the operations
from fluctuations in interest rates and aluminium prices. Although systematic
risk management and risk reducing contracts are of great importance, it is
vital that company operations are in good order. 

                               Managers' Overview

All amounts are in ISK million at the price level for each year



--------------------------------------------------------------------------------
Operations                2006      2007      2008      2009      2010      2011
Operating income        18.101    21.364    24.168    26.013    27.916    33.626
Operating expenses     (9.551)  (11.449)  (12.517)  (13.042)  (13.964)  (12.391)
EBITDA                   8.550     9.914    11.652    12.970    13.951    21.235
Depreciation           (4.504)   (5.538)   (6.953)   (7.814)   (7.962)   (8.881)
Operating profits        4.046     4.376     4.699     5.157     5.989    12.354
 EBIT                                                                           
Realised financial       (684)   (2.431)   (3.364)   (4.258)   (3.424)   (3.635)
 income and expenses                                                            
Profit before            3.361     1.945     1.334       898     2.565     8.719
 unrealised financial                                                           
 income                                                                         
Unrealised financial   (6.786)     6.365  (89.435)   (4.812)    14.201  (16.027)
 income                                                                         
Profit before income   (3.425)     8.310  (88.101)   (3.914)    16.766   (7.307)
 tax acc. yearly                                                                
 statements                                                                     
                             0         0       (0)         0         0         0
Income tax               2.846   (1.794)    15.064     1.398   (3.037)     6.751
Profit                   (579)     6.516  (73.037)   (2.516)    13.729     (556)
--------------------------------------------------------------------------------



                          Reduction of operating costs

Streamlining operations at OR has delivered significantly improved operating
performance. Operating costs, excluding energy purchased for resale, declined
by ISK 1.7 billion between years 2010 and 2011. Further reductions in
expenditure can be expected as a result of the number of employees who accepted
an offer for early retirement, which was expensed in 2011. Employee numbers at
OR have decreased by approximately 200 since their number peaked in 2008.
Various expenditures associated with accommodating employees have decreased
correspondingly. 

[Graphics in attached press release]

                           OR and owner‘s action plan

In March 2011 Reykjavik Energy and its three owners agreed on an action plan
tackling the Company's challenges. The plan covers years 2011 through 2016 and
its principle aim is to improve the company‘s cash flow by ISK 50 billion
during the period. The main features are: 



---------------------------------------------------------
Action                                   Amount 2011-2016
Postpone investments in utility systems          30 b.kr.
---------------------------------------------------------
Reduce operating costs                            5 b.kr.
Sale of assets                                   10 b.kr.
---------------------------------------------------------
Subordinated loans from owners                   12 b.kr.
Increasing tariffs                                8 b.kr.
---------------------------------------------------------
Total                                            50 b.kr.
---------------------------------------------------------

OR publishes interim and year-end progress reports. According to the progress
report published today, all elements of the action plan are on schedule. If the
action plan‘s presumptions concerning external factors hold, OR will succeed in
handling all of its liabilities. 

              Improved operating performance the basis of success

OR‘s debts are substantial and the company‘s equity ratio is too low. Improved
operating profits and actions carried out in collaboration with owners will
enable the company to cope with loan repayments during the coming years; we can
then expect an increase in equity ratio. 

[Graphics in attached press release]