The third quarter was characterised by the turbulent markets and there is major uncertainty ahead of the winter. Vattenfall’s financial position is however strong and the underlying results for the period were stable.
Vattenfall’s President and CEO Anna Borg comments on the interim report for January-September 2022:
“Based on enquiries to our customer support and the public debate at large, we know that many of our customers feel anxious ahead of the winter. Vattenfall is actively engaged in initiatives and dialogues that can help mitigate effects of the current situation. For example, we support our customers by providing advice about energy savings and various types of contracts. It is important to reduce energy consumption in Europe in the short term, especially at peak times, since lower electricity consumption affects both individual customers’ energy bills and contributes to lower market prices for electricity.
Major market uncertainty following summer
Electricity market prices continue to fluctuate greatly around historically high levels. High fuel prices remain the primary driver of electricity prices on the Continent; that in Germany and the Netherlands have been three to four times higher than in Q3 2021. In the Nordic countries, particularly in southern Sweden, prices have been affected by the Continent but unfavourable weather and wind conditions also impacted, especially in August. Even as fuel and electricity rates have declined somewhat, the situation remains strained. The delayed restart of Ringhals 4 is naturally particularly unfortunate in this situation. The reactor is expected to come back online on 31 January 2023.
Stable result and strong financial position
Profit for the period declined by SEK 24.9 billion to SEK 17.0 billion. This is mainly due to major positive one-off effects during 2021 related to the sale of our electricity distribution business in Berlin and compensation for the early closure of German nuclear power. Underlying operating profit increased by SEK 1.8 billion to SEK 23.8 billion, primarily driven by our wind business.
Our sales operations also performed well as customers increasingly chose Vattenfall because of our greater capacity to handle market uncertainty as an integrated utility. Price area differences continued, however, to impact our Nordic power portfolio negatively. Looking ahead, we see major uncertainties related to intermediate goods and fuel costs, but also higher credit risks driven by the market situation.
Several market actors have experienced difficulties as a result of major outflows of margins related to futures contracts. Vattenfall has had net inflows of margin calls and our financial position is strong. In order to safeguard our strong financial position, we are currently engaged in optimising our business flows and pre-emptively building up additional liquidity buffers to be able to manage future outflows.
Important to continue investments in new energy
During the quarter, Vattenfall used its option to continue to develop the wind farm project N-7.2 off the German North Sea Coast, that is expected to produce fossil-free electricity corresponding to the annual electricity consumption of over a million households. In the Netherlands, all the foundations have now been installed and the first electricity has been delivered from Hollandse Kust Zuid, which will be the world's largest wind farm when commissioned next year. In our partnership for fossil-free steel, HYBRIT, the pilot plant for hydrogen storage has now started, and test findings show that the quality of fossil-free sponge iron produced via the HYBRIT process is higher than its fossil counterpart.
Our society needs secure and fossil-free electricity that is affordable. Also, sectors such as transportation and industry need to be electrified, not least for the sake of competitiveness. That is why it is more important than ever that we do not slow down and take the necessary steps for a decarbonised future. Vattenfall contributes to this by investing in all types of fossil-free electricity production and power grids.”
First nine months 2022
Business highlights, July–September 2022
- Turbulent market and continued major price differentials among Nordic price areas
- Postponed restart of Ringhals 4 nuclear reactor
- Foundation installation completed and delivery of first electricity from offshore wind farm Hollandse Kust Zuid in the Netherlands
- Exercised option to continue to develop the offshore wind power project N-7.2 in Germany which is expected to cover the electricity consumption for over one million households
- Joint venture with Midlothian Council to invest in low carbon energy solutions in Scotland
- Upgrades to regional grid progressing with the inauguration of a regional grid station in Stockholm and detailed planning for a 150-kV transmission line in Luleå
Financial highlights, January–September 2022
- Net sales increased by 38% (34% excluding currency effects) to SEK 160,825 million (116,590)
- Underlying operating profit of SEK 23,844 million (22,090)
- Operating profit of SEK 36,707 million (52,521)
- Profit for the period of SEK 16,980 million (41,912)
Financial highlights, July–September 2022
- Net sales increased by 47% (41% excluding currency effects) to SEK 53,076 million (36,125)
- Underlying operating profit of SEK 6,232 million (4,782)
- Operating profit of SEK 12,192 million (22,926)
- Profit for the period of SEK 6,684 million (18,277)