Landsvirkjun‘s results for the first six months of the year 2010

30.8.2010

The interim financial statements include the consolidated interim financial statements of Landsvirkjun and its subsidiaries. Following are the key figures for the period from January to June 2010:

• Cash from operation amounted to USD 110 million.
• Profit for the period amounted to approx. USD 16 million.
• EBITDA amounted to USD 143.8 million, including the effect of realised aluminium hedges. EBITDA ratio is 80% of turnover.
• The value of embedded derivatives related to the Company‘s energy sale agreements decreased by USD 183.2 million during the period as the price of aluminium was relatively low at the end of June.
• The Company continues to control costs and limit investments and strong focus is placed on liquidity management.
• • Investments amounted to USD 25 million during the period compared to USD 60 million for the same period 2009.
  • Net repayment of loans during the period amounted to USD 98 million.
  • At the end of June, cash and cash equivalents amounted to USD 179 million. In addition, the Company has access to a Revolving Credit Facility, which is undrawn by USD 282 million. Liquidity thus amounted to around USD 461 million, which in addition to cash from operation will be sufficient to cover all obligations of the Company throughout the year 2012.
  • Key ratios reflect positive development in the Company's performance.
• Landsvirkjun‘s total assets amounted to USD 4.6 billion and net liabilities amounted to USD 2.6 billion and have decreased by USD 263 million from year end 2009.
• Landsvirkjun‘s equity amounted to USD 1.6 billion and equity ratio was 34.5%.

The interim financial statements of Landsvirkjun are prepared in accordance with International Financial Reporting Standards (IFRS) and they are presented in USD, which is the functional currency of the parent company. In accordance with the IFRSs, realised aluminium hedges due to electric power sales agreements are recognised among financial items. Landsvirkjun's management believes that a more fair view of the Company is given by recognising realised aluminium hedges among the Company's revenues and also present an income statement in a specific statement at the beginning of the financial statements. The change does not affect net income, balance sheet items or cash flow, but it affects single items in the income statement.

The Group‘s revenues amounted to USD 180 million during the period compared to USD 179 million for the same period in the previous year taken into account hedges and are similar between periods. During the period from January to June 2010, the Company expensed the amount of USD 4.8 million due to aluminium hedges whereas during the same period in the year 2009 the Company's income on such hedges amounted to USD 40 million. Realised hedges are recognised among financial income and expenses in the interim financial statements, together with interest expenses, which decreased from USD 45.9 million during the first six months of the year 2009 to USD 39.4 million for the same period this year, mainly due to a decrease in floating rates both in the US and in Europe. Operating expenses less depreciation and impairment loss amounted to USD 36 million during the period compared to USD 34.9 million during the same period in the previous year. Finance expenses in excess of finance income amounted to USD 70 million during the period excluding hedges compared to USD 27.9 million during the same period in the previous year, which is mainly explained by a decrease in the fair value of embedded derivatives in energy sale agreements related to aluminium price and positive foreign exchange difference. Fair value changes and foreign exchange gains are for the main part unrealised, which must be taken into account in the overall evaluation of the Company's performance. Average nominal interests on long-term loans were around 2.2% during the period compared to 2.5% in the previous year.

The outlook for the year is good. Aluminium price outlook is relatively positive though the development in coming periods is uncertain. Interest rates in the main markets remain relatively low, which is favourable for Landsvirkjun as a major part of its loans is on floating terms. The Company expects good cash generation in the near term. The Company's net income will continue to be affected by fair value changes in embedded derivatives and exchange rate changes. The Company has access to liquid assets and loans, which in addition to cash from operation will ensure that the Company will be able to meet its current obligations throughout the year 2012. Despite good position the Company continues to work on the refinancing and the objective is to finalize long term refinancing so that the Company will not need further financing after 2012.

Landsvirkjun will not undertake large scale projects unless long term financing is secured. Inquiries and visits from potential electricity buyers shows that the demand for electricity from Landsvirkjun is high and the Company has thus hopes that this demand will lead to higher energy prices in new sales agreements.

Landsvirkjun's Interim Financial Statements January - June 2010

Key figures in the interim financial statements (USD thousand):