First quarter 2022: War in Ukraine dominated energy market sentiment

The war in Ukraine and its related market volatility pose great challenges for the European energy system. In the wake of what was a financially exceptional year, the expectation is that this year will be more normal.

Vattenfall’s President and CEO Anna Borg comments on the interim report for January-March 2022:

“We are two months into Russia’s invasion of Ukraine. The war is a humanitarian catastrophe and, first and foremost, my thoughts go out to those affected. Indirectly and in the course of things, the war affects us all; and fuel and energy issues have gained importance in many people’s agendas. As a direct outcome of the war, Vattenfall has decided to halt purchases of coal and nuclear fuel from Russia and on EU level there are broad discussions considering stopping imports of Russian gas.

Electricity prices, which declined at the end of the year, have returned to record levels. In both Germany and France, politicians have signalled that gas may need to be rationed next winter. The war has laid bare the risks of Europe’s dependence on fossil fuels and the importance of ensuring that we have a secure energy supply. The energy transition needs to be accelerated and we must all come together to reach that goal while we, as a society, also need to ensure that we can all afford to power and heat our homes.

The war has caused gas prices to shoot up further, which has driven up coal prices and also, to some degree, emission rights. Accordingly, electricity prices on the Continent have risen significantly which also had a major effect on electricity prices in southern Sweden. Disparities in electricity prices between price areas in the Nordic countries reached record levels in March. Mild, wet, and windy weather drove prices down in the north while transmission network constraints prevented electricity from reaching the south.

Price area differences had major impact on results

Profit for the period declined by SEK 4.4 billion to SEK 6.1 billion, where returns from the Nuclear Waste Fund were impacted negatively by falling prices in the equity and fixed income markets. Underlying operating profit fell by SEK 2.5 billion to SEK 9.5 billion. The results from our large-scale power generation were affected negatively by the price area differences mentioned above and our achieved price was EUR 20/MWh; the comparable figure was EUR 33/MWh for the previous year. In addition to this, our heat business was affected negatively by high gas prices.

Our wind business continued to deliver strong results, thanks to higher prices, new capacity, and more wind. We inaugurated our first hybrid park — Haringvliet — where we combine wind and solar power as well as battery capacity to exploit the inherent technology synergies while reducing our carbon footprint, for example by sharing infrastructure. Moreover, we received the final go-ahead for the offshore wind farm Norfolk Vanguard in the United Kingdom. Our customer business is also performing well and Vattenfall is seen as a stable supplier in times of great market uncertainty.

Partnerships as an accelerating force

It was recently announced that HYBRIT, our fossil-free steel partnership with LKAB and SSAB, will receive EUR 143 million in funding from the EU Innovation Fund to demonstrate a complete value chain on an industrial and commercial scale for hydrogen-based iron and steel production. We are grateful for this support and look forward to continuing to work together towards net zero emissions.

Partnerships across sectors and collaboration between private and political initiatives as well as stable and forward-looking regulation are fundamental in order to succeed with the energy transition. I hope that the united Europe we are seeing right now can be an accelerating force to achieve this.”

Anna Borg
President and CEO

Business highlights, January–March 2022

  • Continued high and volatile electricity prices and record-high differences between price areas in the Nordics
  • The Swedish government decided to permit a final repository of spent nuclear fuel and radioactive waste
  • Strong customer growth in Germany and continued expansion of charging solutions for electric vehicles
  • Planning consent granted for the offshore wind farm Norfolk Vanguard in England and awarded rights to develop a floating wind farm off the coast of Scotland
  • Inauguration of the biofuel-fired heat plant, Carpe Futurum, in Uppsala
  • Vattenfall has decided to stop purchasing coal and nuclear fuel from Russia
  • HYBRIT to receive EUR 143 million in support from the EU Innovation Fund as announced after the end of the quarter

Financial highlights, January–March 2022

  • Net sales increased by 30% (27% excluding currency effects) to SEK 59,579 million (45,911)
  • Underlying operating profit of SEK 9,504 million (12,053)
  • Operating profit of SEK 12,783 million (13,385)
  • Profit for the period of SEK 6,064 million (10,423)

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