First nine months 2021: Stable result in turbulent market

Vattenfall’s President and CEO Anna Borg comments on the interim report for January-September 2021

“The situation in Europe’s electricity markets recently has been dramatic, to say the least, with high prices and historically high volatility. This is a problematic development for many of our customers. In the Nordic countries, low precipitation especially in Norway and lower wind speeds have pushed up prices. On the Continent, significantly higher costs for CO₂ emission allowances and fuel prices have led to record-high prices in several markets. For example, the price of natural gas has grown five-fold compared with a year ago. Despite the strong recovery from last year’s very low price levels, Vattenfall’s achieved price in the Nordic countries was lower than the corresponding period a year ago. This can be credited to the price hedges we have taken out to stabilise earnings and to effects from growing differences between price areas in Sweden, where northern Sweden has considerably lower price levels than the southern areas due to transmission bottlenecks.

Significant one-off effects

Profit totalled SEK 41.9 billion for the nine-month period and SEK 18.3 billion for the third quarter. The sale of Stromnetz Berlin had a positive effect on profit for the quarter of SEK 8.4 billion before tax, and on top of this the value of our energy derivatives grew by SEK 10.5 billion as a result of the sharp upturn in the market.

Operating activities are showing stable performance. Underlying operating profit increased by SEK 4.3 billion to SEK 22.1 billion for the period January–September but was essentially unchanged compared with the same quarter a year ago. The high electricity and fuel prices benefited our power generation and trading businesses, but at the same time contributed to lower earnings in heat and electricity distribution.

The market situation is also having a large effect on our adjusted net debt, which has decreased by SEK 100 billion since the start of the year. This is mainly due to the net change in margin calls received following the sharp price increases for gas and electricity on the Continent. Excluding this effect, the key ratio FFO/adjusted net debt was 36.1%.

The sale of 49.5% of Hollandse Kust Zuid to BASF was completed in September. The transaction did not affect profit for the period, but contributed to a further strengthening of our balance sheet. The strengthening of our financial position is a conscious decision we have made to prepare ourselves ahead of the coming years’ ambitious investment plan to be able to contribute to the energy transition.

Step towards a fossil-free future

In early September I attended the inauguration of Kriegers Flak, the largest wind farm in Scandinavia, together with the Crown Prince of Denmark and the Danish Minister for Industry, Business and Financial Affairs. The project was completed ahead of schedule despite the pandemic and will boost Denmark’s wind power generation by 16%.

Recently we raised our emissions target to be in line with the 1.5°C target set in the Paris Agreement and to achieve net zero emissions by 2040. Our new target is approved in accordance with the Science Based Targets Initiative. Next week the world’s focus will be directed to COP26, which will be held in Glasgow. It is my strong hope that the world can unite on accelerating the pace of the transition and that more countries will embrace the 1.5°C goal. We have only seen the beginning of a record-large transition that is not only necessary; it is also full of opportunities for those that choose to embrace it and want to play a part in leading development.”