Hafslund's operations earned more in 2025 while its owners kept a thinner slice

Operating profit up a lot, net profit up much less

Operating profit up 22.6%. Net profit up only 11.8%. That is Hafslund AS in 2025, and the two numbers do not sit comfortably together.

Hafslund is an Oslo-based energy group with hydropower at its core. Its group accounts follow IFRS, the international accounting standard, and cover calendar years in Norwegian kroner. In 2025 revenue rose 17.9%, from NOK 14.2bn to NOK 16.7bn. Operating profit, the result of running the business before interest and tax, climbed from NOK 9.1bn to NOK 11.2bn. The operating margin widened from 64.4% to 67.0%, a gain of 2.6 pp.

Net profit, what is left for the owners, went from NOK 3.8bn to NOK 4.2bn. The net margin moved the opposite way, from 26.5% to 25.1%. The business got more out of each krone of sales. The owners kept less of it.

The gap itself is the story. Operating profit of NOK 11.2bn against net profit of NOK 4.2bn means most of what the plants earned in 2025 never reached the last line. And because operating profit grew by NOK 2.1bn while net profit grew by only NOK 444m, the share of operating profit that survived to the bottom shrank compared with 2024.

Why a power producer leaks between the lines

Start with the top half. An operating margin of 67.0% would be extraordinary in retail or manufacturing. In hydropower it is less strange. Once a dam and turbines are built, the water is free, the staff is small and most costs are fixed. When power prices or volumes rise, much of the extra revenue drops straight into operating profit. That is why operating profit grew faster than sales.

The bottom half works differently. Two large blocks sit between operating profit and net profit, and each has its own logic.

The first is tax. Norwegian hydropower producers pay a resource rent tax, a special levy on the return from using the rivers, on top of ordinary corporate tax. The chain runs like this: power earns more, operating profit rises, the resource rent base rises with it, and because the levy is built to capture a large share of the extra return, the tax charge grows faster than the profit it is charged on. Net profit then lags behind operating profit, precisely in a good year.

The second is financing. A business built on plants that last for decades usually carries a lot of debt. The chain here: the balance sheet grows, more of it is funded by liabilities, interest costs rise, and interest is paid whatever the power price does. Even a strong operating year then delivers less to the owners than the operating line suggests.

Both chains produce the same pattern, and Hafslund's accounts do not settle which one drove the gap.

A balance sheet that outgrew its equity

The balance sheet gives the financing chain some weight. Total assets grew from NOK 95.8bn to NOK 104bn. Equity grew too, by 5.3% to NOK 50.5bn, but more slowly. The equity ratio, equity as a share of total assets, fell from 50.0% to 48.3%, down 1.7 pp. Everything above the growth in equity was funded by liabilities. If a meaningful part of that is interest-bearing debt, it would feed the gap between operating and net profit in 2025 and keep feeding it afterwards.

Cash rose 28.5% to NOK 10.7bn, an increase of NOK 2.4bn. That is not alarming on its own. Energy groups often hold cash ahead of investment, and Norwegian resource rent tax is paid with a delay, so a good year tends to leave cash on the balance sheet that is already spoken for.

One more figure keeps 2025 in proportion. Revenue of NOK 16.7bn is still below the NOK 18.7bn the group booked in 2023. For a power producer, revenue follows the electricity price at least as much as the volume sold. The 2025 rise is a recovery from a weaker 2024, not a new peak.

The ratio to work out on your own figures

This pattern is not confined to power companies. Any business with high fixed costs, meaningful debt or a tax regime that bites harder in good years can show a rising operating margin and a falling net margin in the same year. Management tends to watch the first. Owners and lenders live off the second.

The test takes a few minutes. Take your last two years and divide net profit by operating profit for each. The result is the share of operating profit that reaches the owners. If that share fell while the operating margin rose, something between the two lines grew faster than the business.

Then ask your finance team for a short list of what sits in that gap: interest, foreign exchange results, write-downs of investments, current tax and deferred tax. Sort the items into two columns. In the first, those that move with profit, such as tax. In the second, those that move with the balance sheet, such as interest on debt. The first column rises in good years and falls in bad ones, so you can plan around it. The second column rises because of decisions made earlier, and it stays when the good year ends.

Finally, set the equity ratio beside it. If total assets grew faster than equity, you know the growth was borrowed in some form, and you know which line of next year's income statement will carry the cost.

A strong year for the plants, a modest one for the owners

Hafslund's 2025 was a strong operating year, with operating profit up 22.6% and the operating margin up 2.6 pp. It was a much quieter year for the people who own the company, because a larger share of each operating krone stopped somewhere on the way down. I would watch the tax note and the net financial items before I would watch the power price: the price decides how much the rivers earn, but those two lines decide how much of it stays.