Landsvirkjun's financial performance, 2006

March 12, 2007

In 2006, profits from the Landsvirkun group operations totalled ISK 3.503 billion. At year's end, the company's total assets amounted to ISK 243.2 billion, and the equity ratio was 25.1%.

Based on historical cost accounting, the company's financial report was compiled using the same accounting procedures as in the previous year.

The key figures from the annual financial report are (in ISK millions):

GROUP

	2006	2005	2004	2003
Operating revenues	21,298	15,552	13,701	13,009
Operating expenses:
Operating and maintainance expences	6,378	5,913	4,691	4,498
Depreciation	5,131	4,904	5,347	5,274
Total operating expences	11,509	10,817	10,038	9,772
Operating profit	9,789	4,735	3,663	3,237
Interest revenues and (interest cost)	(26,201)	1,596	3,532	(1,686)
Profit (loss) before taxes	(16,412)	6,331	7,195	1,551
Income tax	19.863
Minority interest	52	(37)	0	0
Profit	3,503	6,294	7,195	1,551
Total assets	243,219	181,985	154,685	134,528
Equity capital	61,107	58,003	51,377	41,180
Minority interest	1,668	1,720	0	0
Liabilities	180,444	122,262	103,308	93,348
Net cash provided by operations	9,643	5,927	4,622	5,601
Investments	45,382	28,582	20,897	16,877
EBITDA	14,920	9,639	9,010	8,512
Equity ratio	25,1%	31,9%	33,2%	30,6%

Altogether, earnings decreased by ISK 2.791 billion compared to the previous year. Increases in operating income were largely due to an increase in the energy prices to heavy industry. Operating costs (excluding depreciation) totalled ISK 6.378 billion, as compared to ISK 5.913 billion the previous year.

Financial expenses beyond financial income amounted to ISK 26.201 billion, mainly to be explained through exchange rate losses on long-term loans. Exchange losses are primarily unrealised, a fact to keep in mind when considering company standing. The exchange loss on long-term loans results above all from a drop in exchange rates of the Icelandic krona during the year. The average nominal interest rate on long-term loans was around 4.6% in 2006, but approximately 3.5% the previous year. At the end of 2006, 82% of the company's long-term loans were in foreign currency.

Electricity companies have been exempt from income tax in Iceland, but in accordance with Act No. 50 of 2005, they became liable for income tax as of 1 January 2006. Landsvirkjun's accrued tax assets have been entered as income in the annual financial report; they total ISK 19.862 billion at year-end 2006.

In 2003, construction began in the power plant project associated with the Kárahnjúkar mountains, following an agreement on energy sales to Fjarðaál, a subsidiary of Alcoa. A 690-MW power plant is to be built, and transmission lines to be laid to Reyðarfjörður. It is anticipated that the first of six station generators will commence operation in July 2007. A more detailed description of the project can be found on the website of the power project, at www.karahnjukar.is. At the end of 2006, construction costs towards Kárahnjúkar Power Plant totalled ISK 88.8 billion, of which ISK 33.4 billion was expended in 2006. The cost of building transmission infrastructure was ISK 9.1 billion.

The 2007 outlook for Landsvirkjun's operations is bright. Fljótsdalur Station, the powerhouse of  Kárahnjúkar Power Plant, will be taken into use this year, and income from energy sales to heavy industry will considerably increase the company's gross earnings. Nonetheless, currency developments will again play a major role in the year's results. Having decided to increase its emphasis on expansion abroad, Landsvirkjun has established a subsidiary, Landsvirkjun Invest ehf. The equity capital of this company is expected to be ISK 4 billion.

For more information, contact Stefán Pétursson, Director of the Financial Division, by telephoning +354 515 9000.

The Landsvirkun annual financial report will be presented at the company's annual meeting on 26 April 2007.

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