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. In addition, Vattenfall’s operations generate a substantial share of regulated revenue from distribution, heat and tendered wind power, which reduces the total risk exposure on the Continent (Germany, the Netherlands as well as the UK). Vattenfall continues to have some price exposure between electricity and used fuel/emissions on the Continent. Such an exposure 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.

Average indicative Nordic hedge prices (SE, DK, NO, FI)¹ as per 31 December 2018

Vattenfall's estimated Nordic¹ hedge ratio (%) as per 31 December 2018

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

1) Vattenfall has stopped its price hedging activity on the Continent as a result of changed risk exposure following the divestment of the German lignite operations.

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

3) Observed yearly volatility for daily price movements for each commodity, based on forward contracts. Volatility normally declines the further ahead in time the contracts pertain to.