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Vattenfall braces during tumultuous 2020

By: Tom Russell 27/10/2020 Vattenfall

General Windfarms

Swedish energy giant Vattenfall has issued its interim report for the first nine months of 2020. Between January and September 2020 net sales decreased by 4% to SEK 114,815 million (SEK 120,181 in 2019). Underlying operating profits of SEK 17,802 million were recorded in 2020, up 5% compared to the same period of 2019 (SEK 16,889 million). Operating profit dropped to SEK 10,030 million, from SEK 19,715 in 2019. Profit for the period of SEK 1,989 million, 14,373.

Vattenfall noted that earnings for the first nine months of the year were negatively affected by large write-downs – mainly for coal-fired power generation – of more than SEK 10 billion during the second quarter.

Magnus Hall commented: "2020 has been a tumultuous year thus far, and we have seen large price declines in the electricity markets. A high level of precipitation in the Nordic region together with warm weather has pressed prices downward dramatically. However, large differences have appeared between price areas owing to limitations in the electricity grid. On top of this, low fuel prices and lower demand have had a negative effect on prices on the Continent. During the third quarter we saw a slight rebound in all markets. Vattenfall’s electricity generation has been lower due to the closure of Ringhals 2, but also as a result of more maintenance and adaptation of nuclear power to the weak market situation. Poorer conditions for coal-fired power together with the closure of Hemweg 8 in Amsterdam and the sale of operations in Hamburg in 2019 have resulted in a decrease in fossil-based generation."

In the company's Wind Business Area, net sales increased to SEK 9,606 million between January and September in 2020, compared to SEK 9 502 million in the same period of 2019. This was attributed to new capacity, mainly the Horns Rev 3 offshore wind farm in Denmark. It was largely countered by lower electricity prices and lower availability for offshore wind power, owing to increased maintenance work.

Underlying operating profit decreased as a result of higher costs, mainly driven by new capacity and higher depreciation, and more project activity in construction and development. Electricity generation increased as a result of new capacity and higher wind speeds.

In the third quarter, net sales in the company's wind business dropped from SEK 3 084 million in 2019 to SEK 2 656 million in 2020. Underlying operating profit also decreased from SEK 623 million in 2019 to SEK 253 million this year. Vattenfall stated this was the result of lower availability of offshore wind power and lower electricity prices. This was partly offset by new capacity.

At the end of August, the last foundation for Vattenfall's Kriegers Flak offshore wind farm was installed. Although the work was conducted under special circumstances, due to COVID-19, the installation was completed on schedule, within a little more than three months. Kriegers Flak will be the largest offshore wind farm in Denmark, with a total capacity of 605 MW, which corresponds to the electricity consumption of approximately 600,000 Danish households. The next step of the project will involve installation of cables and turbines. The wind farm is expected to be operational at the end of 2021.

To remind, Anna Borg was recently appointed President and CEO of Vattenfall, effective 1 November. Since 2017, Anna Borg has been Vattenfall's CFO. Among other things, she has been Senior Vice President for Vattenfall's Business Area Markets, led the Nordic Sales business, the Swedish Heat business as well as the European B2C business. Anna Borg has also been Senior Vice President Nordics at Klarna.

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Vattenfall braces during tumultuous 2020

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