Magnus Hall, Vattenfall’s CEO, could look back at another quarter of stable development for Vattenfall when he presented the third quarterly report for 2017 on Friday 27 October.
All in all, the underlying operating profit for the first nine months of the year was 16.0 billion SEK, which is 1.4 billion SEK higher than the same period 2016. For the period July to September the underlying operating profit was 2.8 billion SEK.
During the quarter, Vattenfall’s biggest onshore windfarm so far, Pen y Cymoedd in Wales, was inaugurated, adding 228 MW renewable production to the wind portfolio. Also, several initiatives in the area of decentralised solutions were launched, such as InHouse in Sweden, Haus-Strom in Germany and leasing of solar panels to private customers in Germany and the Netherlands.
“It has been another good quarter where we have seen continued stable financial development but also a lot of other highlights in the business, for example the investment decision on the Wieringermeer 180 MW wind farm in the Netherlands as well as good customer growth. But we also know that we need to become more efficient in our operations which is why we have launched the cost and efficiency program called Golf, with the target of saving 2 billion SEK by 2020, ” Magnus Hall says.
Business areas Generation and Distribution were the main contributors for the good result of the quarter. On the other side, the result of BA Customers & Solutions suffered from increased margin pressure while Heat and Wind reported a negative underlying operating profit for the quarter. The reason for this is partly seasonal, CFO Stefan Dohler explains:
“We have a typical seasonality especially for the Heat business, where there is not much incoming revenue during this period of the year. In the Wind business we are growing and adding new capacity, but during this typically low-wind quarter we had some issues with cable outages that negatively affected the production volume,” he says.
The nuclear capacity tax in Sweden was reduced by 90 percent from 1 July and contributed positively to the result by 0.8 billion SEK. The boards of Vattenfall and Ringhals will consider the required investments for Ringhals’s reactors 3 and 4 later this year.
“For Forsmark the decision to invest in independent cooling was made last year. . The decision for Ringhals will come later in the year but I am hopeful of the outcome. But I am very hopeful. And it shows how important it was to take this nuclear capacity tax issue off the table,” Hall says.
Compared to 2016, electricity spot prices were more than 10 percent higher during the third quarter this year. However, Stefan Dohler sees no reason to celebrate at this moment.
“Prices are picking up at the moment, but we should not be overexcited. The market is still over supplied and there will be more pressure coming from decentralised solutions and renewables. There is also the question what will happen to the CO2-price on the continent. The over-capacity will disappear over time, but we shouldn’t over-interpret the current pick up in prices,” Dohler says.
For Vattenfall, continued lean and efficient operations are in focus. During the autumn the staff and support functions are being reviewed with the target to reduce costs by 2 billion SEK by 2020.
“The timeline for the Golf project is set, which means that by the end of the year we should be able to come with a specified plan on where these costs will be taken out and how we want to change the way we work in the staff and support functions. This will be done in close cooperation with the business and I think we are well on the way here,” he says.
This Q3 report will be Stefan Dohler’s last official Vattenfall assignment. After 20 years at Vattenfall he is now taking on new challenges and will be succeeded by Anna Borg, current head of BA Markets.
Interview with Vattenfall’s CEO Magnus Hall and CFO Stefan Dohler
- Growth in onshore wind with investment decision for Wieringemeer (180MW) and acquisition of neighbouring project Wieringermeer extension (115MW)
- Improved availability in nuclear and completion of yearly revisions
- Program launch to increase efficiency in staff functions (SEK 2 billion cost reduction target by 2020)
- Pushing the transition to electric vehicles through the EV100 initiative
- Launch of climate smarter energy solutions, InHouse (SE), Haus-Strom (DE) and solar lease (DE, NL)
- Net sales decreased by 5% to SEK 96.8 billion (101.4)
- Underlying operating profit increased to SEK 16.0 billion (14.6)
- Electricity generation of 92.2 TWh (86.3)