“VATTENFALL IS A NEW COMPANY NOW”

New company Vattenfall has to get “lean and mean” to beat competitors when it comes to performance and cost. At the same time, gaining knowledge and speed in areas where Vattenfall wants to grow is equally essential.

That’s what it takes to make 2017 into a successful year, says Stefan Dohler, Vattenfall’s CFO in this interview, part of a series of articles with members of the Executive Group Management.

Former CFO Ingrid Bonde used the expression ’Vattenfall is on a tough journey through the desert until better times arrive’. Times are still tough and her successor Stefan Dohler, who used to be a sailor in his younger days, uses a more seamanlike metaphor to describe the current situation.

“Things looks better, since we’ve now cleared the deck and have set a straight course. But we are still in rough waters and we need all hands on deck, so no time to relax.”

Dohler means it is too early to have a clear opinion of the outcome of 2017, but mentions some major events during last year that has given Vattenfall wind in its sails.

“We have major impairments behind us, we have clarity about the German nuclear fund solution and we have executed the sale of the German lignite operation.”

“Furthermore, the Swedish parliament agreed to abolish the nuclear capacity tax and reduce the real estate tax for our hydro power plants.”
“Consequently, we are significantly improved our risk position.”

Still, the economic environment for the whole energy industry is very demanding. Stiff competition puts pressure on margins and results. How is Vattenfall doing?
“Prices can still deteriorate and it’s too early to say if we have seen the bottom and the related consequences for our asset values. The best way to protect our strong position is to focus on our performance and cost competitiveness. Simply be better and faster than our competitors. Of course this requires further efforts by the whole organisation.”

That sounds a bit like a standard answer from a CFO. Can you be more specific?
“We are slimming the organisation, a project that is affecting HR, Procurement and Finance, and we have ongoing efforts in IT operations and the German customer service. But don’t get me wrong; cost effectiveness is not the single key to success. Although we need to be best in class and strive for top performance and cost reductions in all of our Business Areas and Corporate Functions, we also need to gain knowledge and to speed up in those areas we want to grow in.”

Vattenfall’s first large-scale solar farm in southwest Wales is located adjacent to the Parc Cynog wind farm.

What areas do you have in mind?
“We have shown that we are successful in the wind business, but have not taken similarly large steps in e.g. e-mobility or into electrification of the heating and industry sectors. Also decentralised solutions like combined solar and battery solutions, micro gas-powered combined heat and power plants for buildings and electrical heat pumps are still at a sub-scale stage.”

“Today´s clear trend is an orientation towards sustainable energy systems where electricity is key, and this offers tremendous opportunities for companies like Vattenfall and we should be decisive but selective, fast and not half-hearted to seize this opportunities.”

Can we afford such growth into new areas?
“We do have the financial strength to do so if we keep focus on performance improvements. Remember, our operations and the underlying performance provide positive figures. I am confident we can fund profitable business opportunities in these new, growing areas.”

What are your concerns for 2017?
“Our conventional gas and power plants on the continent are still under margin pressure. They have difficulties reaching profitability when spreads are so low.”

So how would you summarise the overall situation for Vattenfall?
“Last year was a very important year when Vattenfall took a decisive step towards a renewable energy system. My reflection is that we are somewhat of a new company now. Vattenfall has made impressive and partially painful downsizings during the last few years, from 38,000 co-workers in 2010 to today’s around 20,000, so we have ensure that the steering and the size of our corporate functions are adjusted to Vattenfall´s new size and structure.”

“However, it’s not all about downsizing. We also must ask what capabilities we need, to be able to support Vattenfall´s strategy. For example, digital competence is an area where we need a joint effort between business and IT, to make us understand and capture opportunities of a digital world. With advanced analytics of data we can better understand our customers’ needs and also find successful ways to communicate with customers in digital ways. At the same time there is significant potential in operation and maintenance optimisation and predictive maintenance that we can unlock though advanced analytics.”

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