Price hedging

Vattenfall continuously hedges its future electricity generation through sales in the forward and futures markets. Spot prices therefore have only a limited impact on Vattenfall's earnings in the near term.

With the current portfolio structure, the dominant risk exposure is coupled to Nordic nuclear and hydro power baseload generation. Vattenfall’s price hedging strategy is therefore focused on the Nordic generation assets.

While Vattenfall has some price exposure between electricity and used fuel/emissions on the Continent (Germany, the Netherlands and the UK), Vattenfall’s operations in the region generate a substantial share of regulated revenue from distribution, heat and tendered wind power, which reduces the total risk exposure and has a lower risk profile than the outright power exposure in the Nordic countries.

The market price risk of Vattenfall’s production assets and hedges for electricity, fuel prices and emissions as well as the ancillary trading market price risks are monitored daily.

Indicative Nordic1 hedge prices and hedge ratio as per 30 September 2021

  2021 2022 2023
EUR/MWh 28 29 28
Hedge ratio (%) 69 78 41

1) Sweden, Denmark, Finland

Vattenfall's estimated Nordic hedge ratio (%) as per 30 September 2021

2021 69
2022 78
2023 41

Sensitivity analysis – Continental portfolio (DE, NL, UK)2

  +/- 10% price impact on future profit before tax, MSEK3
Market quoted 2022 2023 2024 Observed yearly volatiliy
Electricity +/- 606 +/- 1,382 +/- 1,252 19%-25%
Coal -/+  33 -/+      43 -/+      30 21%-22%
Gas -/+  39 -/+  1,238 -/+    972 16%-33%
CO2 -/+  34 -/+     440 -/+    446 38%-39%

2) Vattenfall’s continental portfolio is mainly exposed to clean spark spreads. Vattenfall hedges these production margins, which in turn affects reported sensitivity figures for electricity, gas and CO2 emission allowances.

3)The denotation +/- entails that a higher price affects operating profit favourably, and -/+ vice versa.

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