First nine months 2021: Stable result in turbulent market

“Our underlying operations remain stable, we continue to deliver on our strategy and during the quarter we concluded several important projects and transactions,” Vattenfall’s President CEO Anna Borg says in a comment to the interim report.

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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.”

Business highlights, July–September 2021

  • Higher electricity prices owing to a lower hydrological balance, lower wind speeds, and higher prices for fuel and CO2 emission allowances
  • Significant one-off effects had a positive impact on the profit for the period. Higher electricity and gas prices resulted in temporary high cash inflows due to increased margin calls received
  • Sale of Stromnetz Berlin completed on 1 July. The purchase price was EUR 2.1 billion
  • Inauguration of Scandinavia’s largest wind farm, Kriegers Flak in Denmark
  • Strong increase in producers and customers wanting to connect to the electricity grid
  • Customer growth and expansion in e-vehicle charging solutions in Germany and the Netherlands
  • Continued steps to enable the expansion of district heating networks in Amsterdam and London

Financial highlights, January–September 2021

  • Net sales increased by 2% (5% excluding currency effects) to SEK 116,590 million (114,815)
  • Underlying operating profit of SEK 22,090 million (17,802)
  • Operating profit of SEK 52,521 million (10,030)
  • Profit for the period of SEK 41,912 million (1,989)

Financial highlights, July–September 2021

  • Net sales increased by 2% (4% excluding currency effects) to SEK 36,125 million (35,375)
  • Underlying operating profit of SEK 4,782 million (4,818)
  • Operating profit of SEK 22,926 million (4,743)
  • Profit for the period of SEK 18,277 million (3,583)

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