Sweden

Sweden

Wind partly offsets Vattenfall heating losses

SWEDEN: A SEK 1.2 billion (€115.3 million) increase in underlying profit of Vattenfall's wind unit has helped offset a SEK 2.1 billion (€201.8 million) fall in its heating business in the first nine months of the year.

Vattenfall completed its European Offshore Wind Development Centre in summer 2018
Vattenfall completed its European Offshore Wind Development Centre in summer 2018

According to its January-September financial report, Vattenfall said underlying profit in its wind business reached SEK 1.9 billion (€182.6 million) in 2018, up from SEK 0.7 billion (€67.3 million) a year a earlier.

Net sales for its wind business grew 27% in the first three quarters of the year to SEK 7.84 billion (€753.4 million).

In the third quarter (July-September) alone, net sales were up 46% year-on-year to SEK 2.27 billion (€218 million), and underlying operating profit grew to SEK 264 million (€25.4 million) from a SEK 300 million loss (€28.8 million loss) in Q3 2017.

The state-owned utility said positive results for its wind unit were due to capacity additions and currency effects.

Vattenfall Wind key figures Jan-Sep 17 Jan-Sep 18 Jul-Sep 17 Jul-Sep 18
Net sales (SEK million) 6,140 7,839 1,546 2,270
Underlying operating profit (SEK million) 752 1,902 -300 264
Electricity generation (TWh) 5.1 5.3 1.4 1.5

Wind’s positive results helped, but could not fully, offset the losses in the firm’s heating business.

It saw underlying operating profits fall from SEK 2.4 billion (€230.6 million) across the first nine months of 2017, to just SEK 260 million (€25 million) in the same period of 2018.

In Q3, it witnessed an underlying operating loss of SEK 765 million (-€73.5 million), greater than the SEK 321 million loss (-€30.8 million) of a year earlier.

The fall in operating profits came despite an increase in net sales over both the third quarter and the first nine months of 2018, due to higher prices.

"The underlying operating profit decreased mainly due to deteriorated spreads with higher costs for coal, gas and CO2 emission allowances, which resulted in lower electricity generation for the period January–September," the firm said.

"Above all, generation has increased – nuclear power is doing particularly well… In addition, several of our wind power investments have been constructed and phased into the grid.

"This combination, added to a strict cost control, puts us on a stable level despite our heat business challenges," said Vattenfall's CFO Anna Borg.

For the Vattenfall Group as a whole, underlying operating profit for the nine months of the year fell 4.6% to SEK 15.26 billion (€1.47 billion), with Q3 underlying operating profit also falling 22% year-on-year to SEK 2.13 billion (€204.7 million).

Grids

The firm also said it had launched a review in to its grid investments strategy from 2020, following new legislation by the Swedish government.

The new law would mean "a significant reduction in the permitted income of grid operators", Vattenfall said.

"Not only have regulations been changed a number of times, which is a problem for operations that require stable investment terms and conditions, but the WACC [weighted average cost of capital] upper limit has also been set to a level that is lower than the European average.

"This leads to lower profitability and a significantly lower cash flow which causes a need for a slower rate of investment in a time when we would need to invest more in new data centres, electric vehicle charging, more renewables and growing cities," said Borg.

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