January 28, 2023

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Energy price shock for Fjordkraft owner – E24

Elmera Group warns that the earnings forecast for 2022 will not be reached after significant volatility in the electricity market.

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Fjordkraft owner Elmera Group warns that its consumer segment will post a negative adjusted operating profit in the fourth quarter, meaning the group will not reach its 2022 profit estimate.

The reason is difficult market conditions, the group said in an announcement on the stock exchange.

Large fluctuations in electricity prices, first a decrease in October and November and then an increase in December, had negative impacts on the group’s hedging agreements, according to the report.

At the same time, many clients have switched from variable contracts to spot agreements.

On the Oslo Stock Exchange, investors responded by dropping the stock by 15 percent after the news.

When expectations are not

Previously, Elmera projected an adjusted operating result of NOK 500 to 550 million in 2022, which the group no longer believes it will achieve.

Next year, Elmera now expects an adjusted operating profit of around NOK 500 million.

An increase in interest rates will also have a negative impact. Elmira writes that higher interest rates and the continued rise in electricity prices in the future means that interest expenses related to energy purchases are expected to rise “significantly” in 2023 compared to 2022.

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In the third quarter, Elmera generated adjusted operating profit of NOK 121 million, an increase of 33 percent over the same period last year. In the consumer market, strong margins on variable contracts helped lift the score.

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In the fourth quarter last year, Elmera had an adjusted operating result of NOK 141 million.

negative effects

After the November 1 rule change, price increases in the changed agreements must be reported 30 days in advance.

But because customers don’t have a long commitment period against it, future electricity deliveries have become unpredictable in periods of large price swings and changes in consumer preferences, according to the group.

Al Meera estimates that the share of customers in the consumer segment with variable contracts will drop from 27 percent to less than 15 percent in the fourth quarter.

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In order to manage the price risk in the portfolio with variable agreements, Elmera itself entered into contracts for portions of the rated electricity shipments.

Almira wrote that the value of these futures contracts was negative in October and November as a result of lower electricity prices in the spot market.

In addition, the hike in electricity prices in December had a negative impact on variable agreements whose price was not guaranteed in Fjordkraft.

Elmera also states that it has gained about 20,000 additional customers so far in the fourth quarter.