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 30 June 2019

EUR/MWh 2019 2020 2021
  29 32 33

Vattenfall's estimated Nordic hedge ratio (%) as per 30 June 2019

Illustration - Vattenfall's estimated Nordic1 hedge ratio (%) as per 30 June 2019. See also table on this page.
Year 2019 2020 2021
Hedge ratio (%) 69 49 28

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

  +/- 10% price impact on future profit before tax, MSEK2
 
Market quoted 2020 2021 2022 Observed yearly volatiliy3
Electricity +/-  1,921 +/-  1,950 +/- 1,776 19%-25%
Coal -/+ 188  -/+ 170 -/+ 166  21%-26%
Gas -/+ 885  -/+ 822 -/+  778 18%-21%
CO2 -/+ 557 -/+ 610 -/+ 532 46%-50%

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.

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