In a challenging market situation, Vattenfall reports a slight earnings improvement from the underlying operations where lower electricity generation was compensated by increased sales business and a favourable result from trading.
Third quarter report
Business highlights, July–September 2020
- Unusually high hydrological balance puts pressure on Nordic electricity prices
- Inauguration of Princess Ariane wind farm in the Netherlands
- Participation in auction for closure of Moorburg power plant in Hamburg
- Tendering process for the electricity grid in Berlin rejected by the Higher Regional Court. After the end of the quarter, Vattenfall offered to sell the company Stromnetz Berlin to the State of Berlin
- Inauguration of pilot plant for HYBRIT, a partnership project for fossil-free steel production
- Anna Borg named as new President and CEO, effective 1 November
Financial highlights, January–September 2020
- Net sales decreased by 4% (-5% excluding currency effects) to SEK 114,815 million (120,181)
- Underlying operating profit of SEK 17,802 million (16,889)
- Operating profit of SEK 10,030 million (19,715)
- Profit for the period of SEK 1,989 million (14,373)
Financial highlights, July–September 2020
- Net sales decreased by 2% (0% excluding currency effects) to SEK 35,375 million (35,938)
- Underlying operating profit of SEK 4,818 million (3,594)
- Operating profit of SEK 4,743 million (8,677)
- Profit for the period of SEK 3,583 million (6,700)
Vattenfall’s CEO Magnus Hall comments on the interim report for the first nine months 2020:
2020 has been a tumultuous year thus far, and we have seen large price declines in the electricity markets. A high level of precipitation in the Nordic region together with warm weather has pressed prices downward dramatically. However, large differences have appeared between price areas owing to limitations in the electricity grid. On top of this, low fuel prices and lower demand have had a negative effect on prices on the Continent. During the third quarter we saw a slight rebound in all markets. Vattenfall’s electricity generation has been lower due to the closure of Ringhals 2, but also as a result of more maintenance and adaptation of nuclear power to the weak market situation. Poorer conditions for coal-fired power together with the closure of Hemweg 8 in Amsterdam and the sale of operations in Hamburg in 2019 have resulted in a decrease in fossil-based generation.
Underlying earnings improvement, but large, negative one-off effects
Earnings for the first nine months of the year were negatively affected by large write-downs – mainly for coal-fired power generation – of more than SEK 10 billion during the second quarter. Profit for the nine-month period of SEK 2 billion is thereby considerably lower than the SEK 14.4 billion posted for the same period a year ago. Profit for the third quarter was SEK 3.6 billion, which is SEK 3.1 billion lower than the same period in 2019. Profit for the third quarter a year ago included capital gains on the sales of the district heating operations in Hamburg (SEK 3.1 billion) and of the production rights for nuclear power in Germany (SEK 1.5 billion).
Operationally we are delivering favourable earnings despite a turbulent market. Price hedges and a positive contribution from the sales operations and trading have counterbalanced the negative effect of lower electricity prices. Underlying operating profit for the nine-month period and third quarter totalled SEK 17.8 billion and SEK 4.8 billion, respectively, representing increases of SEK 0.9 billion and SEK 1.2 billion, respectively.
Continued steps toward a fossil-free future
During the third quarter we inaugurated the Princess Ariane wind farm (formerly Wieringermeer), the largest of its kind in the Netherlands. It has a capacity of 300 MW, corresponding to the annual consumption of 370,000 households. In addition, the pilot plant was inaugurated for HYBRIT, the partnership project we are involved in for fossil-free steel production with SSAB and LKAB in Luleå, Sweden, where both the Prime Minister and Deputy Prime Minister were in attendance.
Coal-fired power is not competitive at today’s price levels for electricity, fuel and CO2 emissions. This is not surprising, as pressure is being exerted by both political measures and by technological development of renewable production. In Germany we are now participating in an auction to handle the closure of the Moorburg coal-fired power plant in Hamburg.
After the end of the quarter, we made the decision to offer the electricity network business in Berlin for sale. We are looking for cooperation and common agreement with the State of Berlin to get out of the deadlock with long legal proceedings and instead find a better way forward for the business.
This is my final quarterly report as CEO of Vattenfall. I want to express great thanks to all Vattenfall employees and the Board for entrusting me to lead Vattenfall during these eventful years. It has been an extremely exciting journey that will continue as Vattenfall strives to enable fossil-free living within one generation.