Hitaveita Suðurnesja - Financial Statement Release

- Interim Financial Statements 30 September 2009

HS Orka Reports Rise in Profit and Equity ratio				
HS Orka hf. - Interim Financial Statements 30 September 2009			
The interim financial statements of HS Orka hf. were approved in a Board of
Directors' meeting today 16 November 2009.				 
Due to special circumstances and request of the shareholders the Company now
present an Interim Financial statements for the 9 months reporting period ended
30 September 2009. Up until now the Company has solely presented annual and
semi annual financial statements. 				 
Main matters				
The comprehensive income of the period amounts to ISK 2,641 million.		
Equity ratio was 23.0%, whereas it was 16.3% at the beginning of the year.


Since the beginning of the reporting period, aluminum price has increased.
Therefore, the future value of aluminum plant agreements (fair value changes of
embedded derivatives) has increased by in excess of ISK 2.2 billion. However,
at the same time there is also a foreign exchange loss of around ISK 1.2
billion.  					 
The comparative figures are for a 12 month period in 2008 instead of 9 months
and are not comparable.   This is due to difficulties of generating the 9 month
figures for 2008 as the Company was demerged into two companies in December
2008.  Whereas HS Veitur hf., took over the exclusive licence operation of
Hitaveita Suðurnesja hf. The operation pertaining to HS Veitur hf. is presented
as discontinued operation in comparative figures in the Company's interim
financial statements. 				 
The Company's profit during the 9 month period 2009 amounted to ISK 2,226
million compared to loss of ISK 11,682 million during the 12 month period 2008.
After taking into account income and expenses recognised under equity,
comprehensive income of the period amounted to ISK 2,641 million compared to
loss off ISK 4,744 million for the 12 month period in year 2008. 				 
According to the statement of comprehensive income, HS Orka hf.'s operating
revenue in the period amounted to ISK 4,357 million compared to ISK 5,425
million for the 12 month period in year 2008. Operating revenue is expected to
increase by 7% for a twelve month period. The increase in revenue is partly due
to service fees for services provided to HS Veitur hf., but the companies have
entered into a service agreement thereon.				 
Production cost and cost of sales amounted to ISK 3,024 million compared to ISK
3,066 million for the 12 month period in year 2008.  The increase is mainly due
to operational costs in cleaning geothermal wells at Reykjanes for the first
time, in addition to cost of services provided to HS Veitur hf. 			 
In July  2009, the Company sold land and geothermal heat rights to the City of
Reykjanes.  The sales value amounted to ISK 854 million and recorded gain on
the sale amounted to ISK 784 million.				 
Other operating expenses amounted to ISK 382 million compared to ISK 376
million for the 12 month period of year 2008.  Included in other operating
expenses 2009 is impairment loss of intangible assets amounting to ISK 142
million.   Other operating expenses less impairment loss amounted to ISK 240
million.  Due to the current market condition management expects that future
planned projects will be delayed and after assess the recoverable amount of the
development cost the company fully impaired development cost at Hallkellsholar.
Net finance income amounted to ISK 615 million in the period compared to net
finance loss in the amount of ISK 15,516 million for 12 month period in 2008. 
The weakening of the Icelandic krona against foreign currencies lead to a ISK
1,225 million foreign exchange loss whereas in the previous year foreign
exchange loss amounted to ISK 10,408 million. Interest expenses amounted to ISK
791 for the 9 month period compared to ISK 1,037 million for the 12 months
period in 2008.  No finance expenses were capitalised during the period
compared to ISK 34 million in 2008. Increase in fair value of the Company's
embedded derivatives amounted to ISK 2,157 million in the period compared to a
decrease of ISK 2,687 million for 12 months period in 2008.  				 
Share in profit of associates amounted to ISK 229 million compared to loss of
ISK 264 million for 12 month period in 2008.  Translation gain of associates
amounted to ISK 415 million and is recorded as other comprehensive income.  The
translation gain is due to a change in a reporting currency of an
associate.
According to the balance sheet as at 30 September 2009, HS Orka hf.'s assets
amounted to ISK 37,350 million. Assets increased by ISK 871 million from the
beginning of the year.
HS Orka hf.'s liabilities amounted to ISK 28,774 million according to the
balance sheet, whereof short term liabilities amounted to ISK 5,581 million.
Liabilities have decreased by ISK 1,770 million from the beginning of the year.
Long term liabilities decreased by ISK 8 million. Short term liabilities
decreased by ISK 1,762 million, which is mainly explained by the payment of
interest bearing short term liabilities and payment of short term liabilities
due to cost of projects. 
The Company does not meet with the covenants of loan agreements on minimum
equity ratio and operating ratios.  The company has now reached an agreement
with NIB (Nordic Investment Bank) and CEB  (Council of Europe Development Bank)
and an agreement with EIB (European Investment Bank) is at a final stage. In
accordance with the agreements the two banks have issued waiver letters
concerning the company's breach of the original covenants for a certain period
of time and replace them with new temporary covenants. Loan agreements with
covenants in breach are presented in accordance with its original contract
terms.				 
HS hf.'s equity amounted to ISK 8,576 million at the end of the period.  Equity
ratio was 23.0%, whereas it was 16.3% at the beginning of the year. At the
beginning of the year, equity amounted to ISK 5,934 million. The increase in
equity is explained by the profit of the period and a translation difference
due to an associate.				 "Operating outlook for HS Orka hf. is good, provided that the Company will be
able to conclude an agreement with all the creditors on new covenants etc on
existing loans.  The Company's activity is growing and it will continue working
on increased power production. Research will be carried out on further power
plant options and various licences are being obtained in relation thereto. The
largest single projects are research drilling and other preparation for new
power plants in addition to increased brine re-injection. "
Following are the main figures in the interim financial statements in ISK
thousand: See attachment.

Attachments:

hs_orka_interim_fs_30092009.pdf

fréttatilkynning 30 09 english.pdf