Vattenfall increased the profit by about 25 per cent and met its financial targets. This is set out in the year-end report for 2019.
When Vattenfall's CEO Magnus Hall and CFO Anna Borg summarise the past year, they have reason to be pleased. Despite the storm Alfrida in Sweden in early 2019 and milder weather than normal, Vattenfall delivered excellent results.
Good increase in profit
Profit for the period rose from SEK 12 billion to almost SEK 15 billion, and the underlying operating profit rose to just over SEK 25 billion. Turnover also increased.
"Both profit and underlying operating profit for the period increased by around 25 per cent for the full year of 2019. Furthermore, we succeeded in achieving our financial targets. We have every reason to be proud of this," Magnus Hall says.
The financial targets are set by its owner an applies to the return on capital employed (ROCE) and funds from operations in relation to the adjusted net debt (FFO/adjusted net debt).
"It is an important step on the way to showing that our goal of enabling fossil-free living within one generation is a profitable business strategy," Anna Borg says.
Good availability in nuclear power and hydro power
The 2019 results are burdened by the costs for the storm Alfrida which totalled around SEK 800 million. The storm affected Sweden in early 2019, causing long power outages for thousands of customers. In addition, warm weather negatively affected sales of both heat and gas. However, price hedging and more renewable generation contributed to improved earnings. Ringhals 2 was closed at the end of December.
"Power Generation has had very good availability within both nuclear power and hydro power and we are seeing an increased contribution from Wind thanks to installation of new capacity. In the heat business, we are working hard to phase out our dependence on fossil fuels, which is very important for us in order to have a profitable and healthy operation in the future. In addition, Markets has produced very good trading results, and Customers & Solutions has made a fine contribution despite challenging market conditions and it has even been able to grow, above all in Germany," Anna Borg says.
Several steps towards fossil-free living
2019 also entailed Vattenfall taking a number of steps on the way to enabling fossil-free living within one generation. In Denmark the Horns Rev 3 wind farm was brought into operation, and in the Netherlands, Vattenfall won the important contract to build Hollandse Kust Zuid 3&4. In June, Vattenfall issued a green corporate bond, thus securing SEK 5 billion for renewable investments. Towards the end of the year, two coal-fired power plants were closed in Germany and the Netherlands.
The Swedish state receives part of the profit
The excellent financial performance means that Vattenfall's Board of Directors is proposing a dividend of SEK 7.245 billion to Vattenfall's owner, the Swedish state. The decision regarding a dividend will be made by the AGM at the end of April.
This is how the different parts of Vattenfall's business performed in 2019:
Customers & Solutions achieved an underlying operating profit of just over SEK 1.3 billion, some 5 per cent better than 2018, primarily due to an increased customer base in Germany and a higher contribution from sales in the Nordic region and the Netherlands.
Power Generation increased its underlying operating profit by over 60 per cent from SEK 9.4 billion to SEK 15.4 billion. The increase was primarily due to better results from price hedges compared with 2018. Electricity generation was in line with 2018. Trading operations contributed SEK 1.8 billion to the underlying operating profit, approximately SEK 1.2 billion more than 2018.
Wind inaugurated two wind farms, Horns Rev 3 (407 MW) and Slufterdam (29 MW), which contributed to increased generation. Lower electricity prices reduced the effect. Underlying operating profit increased by just over 10 per cent to almost SEK 4.2 billion.
Heat experienced challenges during 2019 with squeezed margins, partly due to increased costs for emissions allowances. Two coal-fired power plants were closed, Reuter C in Berlin, and Hemweg 8 in Amsterdam. Underlying operating profit fell from SEK 771 million to SEK 550 million.
Distribution broke a new record in 2019 in terms of network investments in Sweden, investing SEK 5.1 billion in the Swedish electricity network. However, future investments will be affected by new regulation with substantially lower revenue frames for the operation. Underlying operating profit was SEK 5 billion, which is SEK 1.3 billion lower than the year before. The decrease was largely due to costs after the storm “Alfrida”.
- Continued customer growth, especially in Germany
- Growth in offshore wind power with inauguration of Horns Rev 3 (407 MW) in Denmark and winning tender for Hollandse Kust Zuid 3&4 (~750 MW) in the Netherlands
- Permanent closure of Ringhals 2
- Acquisition of sales company DELTA Energie in the Netherlands
- Closure of the coal-fired power plants Hemweg 8 in Amsterdam and Reuter C in Berlin
- Transfer of district heating operations in Hamburg
- Extensive repair work on electricity network following the storm “Alfrida”
- Reduced revenue frames for distribution operations in Sweden for the period 2020–2023
- New CO2 reduction targets approved by the Science Based Targets initiative
- Net sales increased by 9% (7% excluding currency effects) to SEK 166,360 million (152,091).
- Underlying operating profit increased by 26% to SEK 25,095 million (19,883).
- Operating profit increased by 26% to SEK 22,141 million (17,619).
- Profit for the period rose by 24% to SEK 14,861 million (12,007).
- Net sales increased by 3% (1% excluding currency effects) to SEK 46,179 million (45,020).
- Underlying operating profit increased by 77% to SEK 8,207 million (4,627).
- Operating profit decreased by 42% to SEK 2,427 million (4,189).
- Profit for the period decreased by 84% to SEK 488 million (3,100).