Vattenfall has got off to a good start in 2021 with positive earnings performance, the report for the first quarter shows.
Vattenfall’s President and CEO Anna Borg comments on the interim report for the first three months 2021:
“Operation of our large-scale power generation was stable, and growth and development projects in district heating and wind power reached new milestones. The electricity market has recovered from last year’s record-low price levels. We are however seeing continued challenges for transmission of electricity between countries and price areas.
Higher electricity prices but continued transmission bottlenecks
The cold weather early in the year contributed to high electricity prices. Rising costs for CO2 emission allowances and fuel drove electricity prices up further on the Continent, but without any major impact in the Nordic countries. In fact, we had record-large differences between the Nordic and German futures markets and significant transmission bottlenecks during the quarter. Improved transmission capacity between price areas and countries is a prerequisite for the energy transition, continued electrification and lower CO2 emissions in society.
Strong earnings performance and efficient operations
Profit for the period increased by SEK 3.5 billion to SEK 10.4 billion. In addition to improved earnings from operating activities, the return from the Swedish Nuclear Waste Fund also made a positive contribution owing to a stronger stock market. Underlying operating profit increased by SEK 1.9 billion to SEK 12.1 billion. Power generation in the Nordic countries benefited from higher electricity prices, where our flexible hydro power plants adapted their volumes to higher demand. This also compensated for lower nuclear power volumes following the closure of Ringhals 1. Our CO2 emissions have decreased substantially with the closure of the coal-fired Moorburg power plant in Hamburg, and we are now also seeing effects in the form of lower operating costs.
Wind power was affected by unfavourable weather conditions and showed lower earnings despite new capacity. During the quarter we signed a large Corporate PPA (Power Purchase Agreement) for part of the volume from the Hollandse Kust Zuid wind farm in the Netherlands, which reduces the project risk. Part of our wind power business in the future will be focused on value creation in the development process. In connection with the first quarter interim report, we are reporting the sale of the Grönhult onshore wind farm, one of our first develop-to sell projects.
Industrialisation of the production process is continuing for HYBRIT, our Swedish partnership project for fossil-free steel. Together with SSAB and LKAB we are now establishing a demonstration plant for production of 1.3 million tonnes of fossil-free sponge iron, the raw material for steel, in Gällivare. The plant will be completed in 2026.
Legal disputes moving in right direction
In Germany we welcome an agreement that has been signed with the German government that will effectively terminate all disputes on compensation for the German nuclear phase-out. We look forward to continued work on phasing out fossil fuels in Germany and now have our focus on conducting our other operations in the country.
In Sweden, the Administrative Court in Linköping has ruled in favour of the electricity network companies as well as in line with Vattenfall’s assessment that the revenue frame regulation for the 2020-2023 regulation period is unlawful. The Swedish Energy Markets Inspectorate (Ei) has appealed this decision to the Administrative Court of Appeal. It is my hope that we can soon leave this type of legal processes behind us. We need favourable conditions for the electricity grid to enable the energy transition and the increase in electrification that is taking place here and now.”
Business highlights, January–March 2021
- Agreement on compensation for nuclear phase-out in Germany
- Sale of part of production from Hollandse Kust Zuid 1-4 wind farm through long-term Power Purchase Agreement
- Sale of Grönhult onshore wind power project
- Start of construction of Vattenfall’s first district heating network in the UK – Brent Cross South in London
- Start of district heating production at Amsterdam South Connection
- Favourable ruling by Administrative Court on electricity network companies’ revenue frames for the period 2020-2023
- HYBRIT – Demonstration plant for production of fossil-free sponge iron planned in Gällivare
Financial highlights, January–March 2021
- Net sales decreased by 5% (-1% excluding currency effects) to SEK 45,911 million (48,160)
- Underlying operating profit of SEK 12,053 million (10,187)
- Operating profit of SEK 13,385 million (12,313)
- Profit for the period of SEK 10,423 million (6,900)