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HS Orka announces 28% increase in gross profits for the first 6 months of 2011

Reykjanes geothermal power plant of HS Orka, Iceland (source: flickr/ ThinkGeoEnergy, creative commons)
Alexander Richter 28 Aug 2011

Icelandic HS Orka releases its financial results for the first half of 2011, reporting an increase in gross profits to $13.1 million due to an increase in revenue and investments in drilling at Reykjanes.

In a release by Canadian Alterra Power Corp. (TSX: AXY), the company announces that Icelandic geothermal company HS Orka hf (“HS Orka”), held 75% by Alterra, released its audited financial and operating results for the six month period ended June 30, 2011.

HS Orka prepares its financial statements in accordance with International Financial Reporting Standards and the statements are reported in Icelandic krona (“ISK”). These results can be accessed at http://www.hsorka.is

Highlights comparing the six month period ended June 30, 2011 to the six month period ended June 30, 2010 (based on amounts converted into US$ at an average rate of US$0.00782 per ISK for the six month period ended June 30, 2010 and at an average of US$0.00868 per ISK for the six month period ended June 30, 2011):

Revenue increased by 19.1% from $27.7 million to $33.0 million due to an increase in retail sales, higher aluminum prices, an improved currency conversion rate and a 1.7% increase in electricity production. Approximately 46% of the HS Orka’s power sales agreements are indexed to the price of aluminum.

Gross profit increased by 28.0% from $9.3 million to $11.9 million due to the increase in revenue, offset by an increase in the pension, salary and depreciation expenses in 2011 and by the higher currency conversion rate.

EBITDA increased by 12.9% from $11.6 million to $13.1 million, including $1.9 million in one-time arbitration costs and pension plan expenses. EDITDA for the 12 month period ended June 30, 2011 was $24.1 million.

During the quarter ended June 30, 2011, HS Orka invested $4.9 million to drill exploratory well RN-30 at Reykjanes. Results are expected later this year. RN-30 is part of the planned expansion of the Reykjanes plant capacity from 100 MW to 180 MW in two phases pending permitting and new power purchase agreements with one or more power purchasers. As at June 30, 2011, HS Orka had invested approximately $46.5 million for this expansion.

HS Orka generated a net income increase of $25.2 million, moving from a net loss of $18.7 million to a net income of $6.5 million. The increase in net income was due to the increase in EBITDA and recognition of a non-cash gain in fair value of embedded derivatives in sales contracts in 2011 compared to a loss in 2010, partially offset by non-cash currency losses and higher non-cash income tax expense in 2011.”

Source: release by Alterra Power via e-mail