Vattenfall Full Year Results 2007 Presentations by Lars
Vattenfall Full Year Results 2007 Presentations by Lars Josefsson, CEO and Jan Erik Back, CFO 7 February 2008 © Vattenfall AB 7 Feb 2008
Highlights 2007 - Group Net sales increased 5. 8% to SEK 143, 639 million (135, 802) EBIT increased 2. 7% to SEK 28, 583 million (27, 821) Profit after tax increased 4. 2% to SEK 20, 686 million (19, 858) Net debt decreased by SEK 5, 667 million to SEK 43, 740 million compared with 31 December 2006 © Vattenfall AB 7 Feb 2008 2
Highlights 2007 - Group Return on Net Assets was 16. 6% (FY 2006: 16. 8 %) Return on Equity was 17. 6% (FY 2006: 19. 1%) The Board proposes a dividend of SEK 8, 000 million equivalent to a payout ratio of 40, 5% © Vattenfall AB 7 Feb 2008 3
Highlights Q 4 2007 - Group Net sales decreased 2. 8% to SEK 38, 329 million (39, 428) EBIT increased 24. 7% to SEK 6, 752 million (5, 413) Profit after tax decreased 44. 4% to SEK 3, 676 million (6, 609) Net debt decreased by SEK 784 million to SEK 43, 740 million vs 30 September 2007 © Vattenfall AB 7 Feb 2008 4
EBIT development 5 Quarterly figures, SEK million Bewag consolidated Danish assets consolidated GZE consolidated HEW consolidated Quarterly figures in SEK million, excluding items affecting comparability Last 12 months figures in SEK million, excluding items affecting comparability © Vattenfall AB 7 Feb 2008
Lower nuclear but higher fossil generation Q 4 2007 total: 44. 7 TWh 6 Q 4 2006 total: 44. 8 TWh Other=wind, biofuel, waste 21 % FY 2007 total: 167. 6 TWh © Vattenfall AB 7 Feb 2008 FY 2006 total: 165. 4 TWh 41 %
Higher heat sales Q 4 2007 total: 12. 8 TWh 7 Q 4 2006 total: 10. 9 TWh 21 % FY 2007 total: 36. 2 TWh © Vattenfall AB 7 Feb 2008 FY 2006 total: 35. 2 TWh 41 %
Important events • Unplanned outages at German nuclear plants • Loss of retail customers in Germany but increasing market shares in the Nordic countries • Several changes in senior Management • Continued harsh network regulation in Germany • Major climate initiatives including launching of an ambitous CO 2 reduction target – to cut emissions by 50% until 2030 • Quantitative targets set for each ”strategic ambition” © Vattenfall AB 7 Feb 2008 8
Nuclear update – post outages on 28 June • Damage at German nuclear plant Krümmel has been repaired, some work is still under way • Following the events, the work at the nuclear power plants Brunsbüttel and Krümmel, a testing and renovations programme as well as the instituting of the September 2007 recommendations, is continued. • The plants will remain shut-down until these activities are fully completed. • FY 2007 financial impact totals approximately EUR 201 million (SEK 1, 900 million) Krümmel (1, 346 MW) © Vattenfall AB 7 Feb 2008 Brunsbüttel (771 MW) 9
Important events • Unplanned outages at German nuclear plants • Loss of retail customers in Germany but increasing market shares in the Nordic countries • Several changes in senior Management • Continued harsh network regulation in Germany • Major climate initiatives including launching of an ambitous CO 2 reduction target • Quantitative targets set for each ”strategic ambition” © Vattenfall AB 7 Feb 2008 10
Increased retail customer churn in Germany 11 • Some 250, 000 customers lost in Germany primarily due to: – mounting competition and increased churn – Vattenfall’s notice of price increases as of 1 July – Inadequate information to the general public following the nuclear outages Losses should be viewed against the background of previous very high market shares (>80%, corresponding to nearly 2. 9 million customers) in Berlin and Hamburg Measures taken: • Improved product offers – launched a very competitively priced Internet product “Easy” – Nation-wide offerings • Large-scale dialogue with all customers as well as the general public • Customer advisory council established © Vattenfall AB 7 Feb 2008
We are growing our market shares in Sweden • Vattenfall has exceeded one (1) million customers in the Nordic countries • Vattenfall’s Swedish retail customer market share has grown from 13% to 15%. • Customer satisfaction index has improved • Vattenfall’s products are considered best in the market © Vattenfall AB 7 Feb 2008 12
Important events • Unplanned outages at German nuclear plants • Loss of retail customers in Germany but increasing market shares in the Nordic countries • Several changes in senior Management • Continued harsh network regulation in Germany • Major climate initiatives including launching of an ambitous CO 2 reduction target – to cut emissions by 50% until 2030 • Quantitative targets set for each ”strategic ambition” © Vattenfall AB 7 Feb 2008 13
Management and organisational changes 14 July 2007 Klaus Rauscher resigned as Head of Vattenfall Europe AG and BG Germany. Hans-Jürgen Cramer appointed acting Head of Business Group Germany August 2007 Helmar Rendez appointed new Head of Group Strategies January 2008 BG Germany and BG Poland integrated into BG Central Europe. Tuomo Hatakka appointed Head of BG Central Europe February 2008 Carolina Wallenius appointed new Head of Group Communications February 2008 New composition of Executive Group Management (EGM) © Vattenfall AB 7 Feb 2008
New Group organisation as of 1 January 2008 15 BG Germany and BG Poland have been integrated into BG Central Europe © Vattenfall AB 7 Feb 2008
Important events • Unplanned outages at German nuclear plants • Loss of retail customers in Germany but increasing market shares in the Nordic countries • Several changes in senior Management • Continued harsh network regulation in Germany • Major climate initiatives including launching of an ambitous CO 2 reduction target – to cut emissions by 50% until 2030 • Quantitative targets set for each ”strategic ambition” © Vattenfall AB 7 Feb 2008 16
Rulings from German network regulator 17 May 2007 The higher Regional Court in Düsseldorf overruled the Regulator’s demand for retroactive tariff reduction Jan 2008 Bundesnetzagentur ruling on the Distribution business for DSO Berlin and Hamburg (tariffs valid until end of 2008): • 16% cut on applied tariff in Berlin meaning 10% lower tariff level compared with 2007 • 18% cut on applied tariff in Hamburg meaning virtually unchanged tariff level compared with 2007 Jan 2008 Ruling on the Transmission business (tariff valid until end of 2008) • 15% cut on applied tariff meaning about 4% higher tariff level compared with 2007. However, costs for e. g. balancing power have increased. © Vattenfall AB 7 Feb 2008
Important events 18 • Unplanned outages at German nuclear plants • Loss of retail customers in Germany but increasing market shares in the Nordic countries • Several changes in senior Management • Continued harsh network regulation in Germany • Major climate initiatives including launching of an ambitous CO 2 reduction target – to cut emissions by 50% until 2030 • Quantitative targets set for each ”strategic ambition” © Vattenfall AB 7 Feb 2008
Vattenfall has published a global Climate Map For more information see www. vattenfall. com © Vattenfall AB 7 Feb 2008 19
Vattenfall’s CO 2 emissions reduction target © Vattenfall AB 7 Feb 2008 20
Important events • Unplanned outages at German nuclear plants • Loss of retail customers in Germany but increasing market shares in the Nordic countries • Several changes in senior Management • Continued harsh network regulation in Germany • Major climate initiatives including launching of an ambitous CO 2 reduction target – to cut emissions by 50% until 2030 • Quantitative targets set for each ”strategic ambition” © Vattenfall AB 7 Feb 2008 21
Vattenfall’s strategic ambitions - targets 22 Long-term goal Goal 2008 -2010 Customer satisfaction index score of 70 for retail customers Customer satisfaction index score of 63 for retail customers Halve CO 2 emissions by 2030 compared with 1990 levels 3% reduction in CO 2 emissions (approx. 1 million tonnes/year) Profitable growth 10 % market share in the future, integrated European energy market 10% increase in market share in electricity and heat generation Benchmark for the industry Vattenfall will belong to the upper quartile of the industry 11% improvement in productivity, corresponding to cost reduction of SEK 5 bn from 2006 level Commitment score of 81 Commitment score of 75 Strategic ambition Number One for the customer Number One for the environment Employer of choice © Vattenfall AB 7 Feb 2008
Financials Jan Erik Back, CFO © Vattenfall AB 7 Feb 2008
Consolidated income statement FY 2007 SEK million IFRS FY 2007 FY 2006 Change IFRS Net sales Cost of products sold Gross profit Operating profit (EBIT) Operating profit, excl. IAC Financial income Financial expenses Financial net Profit before taxes Taxes Profit for the period * IAC = items affecting comparability © Vattenfall AB 7 Feb 2008 % 143, 639 135, 802 -103, 404 -96, 428 40, 235 39, 374 28, 583 27, 821 28, 497 27, 448 2, 276 3, 839 -6, 926 -6, 135 -4, 650 -2, 296 23, 933 25, 525 -3, 247 -5, 667 20, 686 19, 858 5. 8 7. 2 2. 7 3. 8 -40. 7 12. 9 -102. 5 -6. 2 -42. 7 4. 2 24
Consolidated income statement Q 4 2007 SEK million IFRS Q 4 2007 Q 4 2006 Change IFRS Net sales Cost of products sold Gross profit Operating profit (EBIT) Operating profit, excl. IAC Financial income Financial expenses Financial net Profit before taxes Taxes Profit for the period * IAC = items affecting comparability © Vattenfall AB 7 Feb 2008 % 38, 329 -27, 791 10, 538 6, 752 6, 776 173 -2, 225 -2, 052 4, 700 -1, 024 3, 676 39, 428 -29, 561 9, 867 5, 413 5, 449 1, 520 -1, 854 -334 5, 079 1, 530 6, 609 -2. 8 -6. 0 6. 8 24. 7 24. 4 --20. 0 ---7. 5 ---44. 4 25
Electricity price development 26 Volatile spot prices. Picking up again after sharp declines in 2006 and 2007 Increasing forward prices © Vattenfall AB 7 Feb 2008
Above normal hydrological balance Nordic countries © Vattenfall AB 7 Feb 2008 27
Hedging position as of 31 December 2007 % hedged of planned electricity generation (percentage values are rounded) © Vattenfall AB 7 Feb 2008 28
CO 2 allowances EUR/tonne © Vattenfall AB 7 Feb 2008 29
Oil, coal, gas and CO 2 allowances © Vattenfall AB 7 Feb 2008 30
Vattenfall’s cost of NAP 2 31 • Lower allocation of CO 2 allowances than expected. • German electricity generating sector must carry the German burden. • Material financial impact on Vattenfall’s German operations, less in Nordic and Poland Germany Deficit of CO 2 allowances: Estimated net cost (after tax) & cash flow effect Denmark Deficit of CO 2 -certificates: Estimated net cost (after tax) & cash flow effect Poland Deficit of CO 2 -certificates: Estimated EBIT effect © Vattenfall AB 7 Feb 2008 28 -33 mn ton 400 -500 MEUR p. a. from 2008 1. 8 mn ton (approximately) 26 -28 MEUR p. a. from 2008 0. 7 -1. 0 mn ton 14 -20 MEUR p. a. from 2008
EBIT Full Year 2007 vs 2006 © Vattenfall AB 7 Feb 2008 32
EBIT Q 4 2007 vs Q 4 2006 © Vattenfall AB 7 Feb 2008 33
EBIT Full Year 2007 vs 2006 – secondary segments © Vattenfall AB 7 Feb 2008 34
EBIT Q 4 2007 vs Q 4 2006 – secondary segments © Vattenfall AB 7 Feb 2008 35
Financial targets and outcome Key Ratio Targets 2007 Return on Equity (Ro. E) 15 % on average equity 17. 6% Return on Net Assets (Ro. NA, excl. IAC) 11 % before tax (= 15 % Ro. E recalculated into the Groups Ro. NA requirement) 16. 6% Cash flow interest coverage after maintenance investments 3. 5 – 4. 5 times Credit Rating Single A category rating Dividend pay-out 40 -60 % © Vattenfall AB 7 Feb 2008 36 6. 4 A 2/AStable outlook 40. 5 % * *) Proposed dividend
Increased capex programme 37 SEK 173 bn 2008 -2012 (2007 -2011 was SEK 134 bn) • Boxberg power plant (675 MW) • Moorburg power plant (1, 640 MW) • Reichwalde mine • Nuclear capacity upgrade • Network improvements • German and Nordic wind power • Life-time extensions generation assets in Sweden and Germany © Vattenfall AB 7 Feb 2008
Consolidated balance sheet SEK million IFRS 31/12/07 31/12/06 Change IFRS Non-current assets Current assets Total assets Equity Capital Securities Interest-bearing liabilitites Interest-bearing provisions Pension provisions Tax liabilities Other non-interestbearing liabilitites Total equity and liabilities © Vattenfall AB 7 Feb 2008 38 % I 264, 864 251, 893 73, 372 71, 273 338, 236 323, 166 124, 132 107, 674 9, 341 8, 911 57, 848 62, 664 56, 250 49, 217 17, 735 16, 877 26, 632 33, 460 46, 298 338, 236 44, 363 4. 4 323, 166 5. 1 2. 9 4. 7 15. 3 4. 8 -7. 7 14. 3 5. 1 -20. 4 4. 7
Cash flow development © Vattenfall AB 7 Feb 2008 39
Net debt development SEK million Acquisition of Bewag and GZE shares 40 Acquisition of Elsam shares Dividend paid Capital Securities SEK 9. 3 billion © Vattenfall AB 7 Feb 2008
41 Thank you for your attention © Vattenfall AB 7 Feb 2008
Back-up slides © Vattenfall AB 7 Feb 2008
Highlights 2007 - Nordic • EBIT decreased by 696 SEK million to SEK 12 591 million (-5, 2%) • Higher Fuel and O&M costs – mainly due to Danish operations. • Lower results in Distribution due to the storm ”Per” (290 MSEK) and provsions for restructuring measures (160 MSEK). • Higher electricity generation due to increased hydro-, fossil- and wind power. • All windmills at the Lillgrund windpower farm are now generating electricity. © Vattenfall AB 7 Feb 2008 43
Key data – BG Nordic * Excl. intra group transactions ** Excl. items affecting comparability (IAC) *** At the end of the period **** Full time equivalents (FTE) © Vattenfall AB 7 Feb 2008 44
Highlights 2007 - Germany 45 • EBIT increased by SEK 1, 454 million to SEK 15 338 million (+10, 5%). • BU Mining & Generation increased its result, despite nuclear outages and impairment losses for pumped storage plants of 1 110 MSEK, thanks to higher prices as well as hedging. • BU Heat improved its result from the electricity business, mainly due to higher electricity prices. • Warm weather and storms in the beginning of the year had a negative effect on the BU Heat and BU Distribution businesses. • Higher feed-in from windpower caused higher EEG costs. • NAP 2 - Total national emissions cut to 453 million tonnes per year. (NAP 1 was 499 million tonnes). Vattenfall estimates an annual deficit of 28 -33 million tonnes. Estimated cost (after tax) totals EUR 400 -500 million. © Vattenfall AB 7 Feb 2008
Key data – BG Germany Amounts in SEK billion Q 4 2007 46 Q 4 2006 % Change FY 2007 FY 2006 Net sales External net sales * EBIT ** 29. 8 20. 6 2. 8 28. 5 20. 0 1. 9 4. 6 3. 0 47. 4 112. 5 77. 5 15. 4 101. 5 70. 0 13. 7 Net assets *** 67. 8 61. 8 9. 7 67. 8 61. 8 Electr. generation, TWh Heat generation, TWh 19. 2 5. 6 19. 6 4. 4 -2. 0 27. 3 72. 8 14. 8 76. 2 15. 5 19 656 19 821 Employees **** * Excl. intra group transactions ** Excl. items affecting comparability (IAC) *** At the end of the period **** Full time equivalents (FTE) © Vattenfall AB 7 Feb 2008
Highlights 2007 - Poland • EBIT almost flat compared with FY 2006. • BU Distribution’s results decreased due to tariff reductions which could only partly be compensated by higher volumes. • Lower heat volumes and prices were compensated by higher prices on electricity. • Significant positive effect in BU Heat, due to sold excess CO 2 allowances. © Vattenfall AB 7 Feb 2008 47
Key data – BG Poland Amounts in SEK billion Net sales External net sales * EBIT ** Net assets *** Electr. generation, TWh Heat generation, TWh Employees **** * Excl. intra group transactions ** Excl. items affecting comparability (IAC) *** At the end of the period **** Full time equivalents (FTE) © Vattenfall AB 7 Feb 2008 Q 4 2007 48 Q 4 2006 % Change FY 2007 FY 2006 2. 8 2. 6 0. 3 2. 7 2. 5 0. 03 3. 7 4. 0 --- 9. 8 9. 3 1. 1 9. 4 9. 0 0. 9 10. 9 8. 8 23. 9 10. 9 8. 8 1. 3 4. 1 1. 0 3. 3 30. 0 24. 2 3. 8 10. 7 3. 3 11. 2 2 740 2 836
Net asset development MSEK © Vattenfall AB 7 Feb 2008 Acquisition of Bewag and GZE shares 49 Acquisition of Elsam shares Consolidation of Danish assets
Consolidated cash flow statement SEK million IFRS Q 4 2007 Q 4 2006 FY 2007 FY 2006 IFRS Funds from operations (FFO) IFRS 10, 909 9, 527 34, 049 35, 673 Change in working capital -2, 527 481 -1, 718 -466 Cash Flow from operating activities 8, 382 10, 008 32, 331 35, 207 -6, 753 291 -6, 116 301 -18, 964 925 -16, 534 1, 720 Investments Divestments Net investment following the trans. between Vattenfall and Dong Cash and cash equivalents in aquired/divested companies Cash Flow from investing activities Cash Flow before financing activities Cash Flow from financing activities Cash Flow for the period Net debt at the end of the period © Vattenfall AB 7 Feb 2008 50 -686 -1 7 2 -147 -6, 463 -5, 808 -18, 037 -15, 647 1, 919 4, 200 14, 294 19, 560 2, 024 3, 943 1, 816 6, 016 -18, 662 -4, 368 -10, 742 8, 818 -43, 740 -49, 407
Break down of group liquidity 51 Amounts in SEK million As of Dec 31, 2007 Treasury. Germany Poland Nordic Total Cash and bank 1, 031 1, 395 452 1, 116 3, 995 18 Interest-bearing investments 4, 259 5, 712 139 516 10, 626 47 Special Funds 2, 593 11 Brunsbüttel 5, 422 24 Shares Total 22 5, 290 15, 145 % 22 592 1, 632 22, 658 100 Unused committed credit facilities amount to SEK 9, 574 million and other undrawn credit- and overdraft facilities amount to SEK 11, 413 million. © Vattenfall AB 7 Feb 2008
Break down of group debt 52 Amounts in SEK million As of Dec 31, 2007 Treasury. Germany Poland Nordic Subordinated perpetual Capital Securities 9, 341 MTN 652 1 EMTN 30, 946 46 Liabilities to assoc. companies 7, 106 4, 000 Liabilities to minority shareholders © Vattenfall AB 7 Feb 2008 51 14 17 5, 740 5, 791 9 9, 354 14 1, 072 6, 273 130 1, 878 Total 130 7, 619 67, 190 10, 324 % 11, 106 Bank loans and others 49, 117 Total
Adjusted gross and net debt SEK million 53 31 Dec 2007 31 Dec 2006 Gross debt -67 190 -71 575 Present value of net pension obligations (incl actuarial gains/losses) -17 073 -19 670 Mining & environmental provisions -11 975 -10 295 50% of Hybrid securities 4 671 4 455 = Adjusted gross debt -91 566 -97 085 Cash & short term investments 23 450 22 168 German nuclear "Solidarvereinbarung" -3 224 -3 076 Minority owner´s share of German nuclear subsidiaries cash position -3 531 -3 594 = Adjusted cash & short term investments 16 695 15 498 -74 871 -81 587 = Adjusted net debt © Vattenfall AB 7 Feb 2008
Vattenfall debt maturity profile 54 SEK million Excluding loans from associated companies and minority owners Dec 31, 2007 Dec 31, 2006 Duration (years) 3, 3 1) 3, 3 Average time to maturity (years) 6, 7 1) 6, 6 Net debt (SEK bn) 43, 7 49, 4 1) Based on external debt. Excluding Capital Securities the duration is 2, 6 years and average time to maturity 6, 5 years. © Vattenfall AB 7 Feb 2008
Group provisions (IFRS) up by 1. 8% © Vattenfall AB 7 Feb 2008 31 Dec 2007 31 Dec 2006 SEK 97, 689 million SEK 95, 969 million 55
Return on equity © Vattenfall AB 7 Feb 2008 56
Key ratios 57 Key Ratios (% unless otherwise stated) Ro. NA (1) 16. 6 16. 8 Ro. E (1) 17. 5 18. 7 Operating margin (1) 19. 8 Pre-tax profit margin (1) FY 2007 FY 2006 Q 4 2007 20. 2 17. 7 16. 6 18. 5 12. 3 6. 4 7. 9 Cash Flow interest coverage after maintenance investments, times (1) FFO/net debt 77. 8 72. 2 Equity/assets ratio 36. 7 33. 3 36. 7 35. 2 45. 9 35. 2 26. 1 31. 5 Net Gearing - Net debt/equity Capitalisation - Net debt/net debt + equity 1) Excluding items affecting comparability © Vattenfall AB 7 Feb 2008 3. 9 26. 1
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