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© Vattenfall AB
VattenfallQ3 Results 2007
Presentations by
Lars G. Josefsson, CEO and
Jan Erik Back, CFO
31 October 2007
31 Oct 2007© Vattenfall AB
2Highlights – 9M results 2007
Net sales rose9.3% to SEK 105,310 million (96,374)
EBIT decreased 2.8% to SEK 21,225 million (21,827)
Profit after tax increased 28.4% to SEK 17,010 million (13,249) due to reduction of German corporate income tax
Net debt decreased by SEK 4,883 million to SEK 44,524 million compared with31 December 2006
31 Oct 2007© Vattenfall AB
3Highlights – Q3 results 2007
Net sales rose12.9% to SEK 31,589 million (27,990)
EBIT increased 37.9% to SEK 4,557 million (3,304)
Profit after tax increased 88.3% to SEK 3,523 million (1,871) due to reduction of German corporate income tax
31 Oct 2007© Vattenfall AB
4Highlights – Q3 results 2007
Net debt decreased by SEK 2,241 million to SEK 44,524 million vs 30 June 2007
Return on Net Assets was 15.7% LTM (FY 2006: 16.6%)
Return on Equity was 20.5% LTM (FY 2006: 19.1%)
Net Gearingwas 37% as of 30 Sept 2007 vs 46% as of 31 December 2006
LTM = Last twelve months
31 Oct 2007© Vattenfall AB
5EBIT development
Quarterly figures, SEK million
Quarterly figures in SEK million, excluding items affecting comparability
Last 12 months figures in SEK million, excluding items affecting comparability
02,0004,0006,0008,000
10,00012,00014,00016,00018,00020,00022,00024,00026,00028,00030,000
HEW consolidated
Bewag consolidated
GZE consolidated
Danish assets consolidated
31 Oct 2007© Vattenfall AB
6
10.5
7.70.4
18.7
Increased fossil and hydro power generation
41 %
10.6
16.8
0.46.7 Hydro
NuclearFossilOther
Heat: Q3 2007 total: 3.8 TWh Heat Q3 2006 total: 3.0 TWh
Electricity:Q3 2006 total: 34.5 TWh
Electricity:Q3 2007 total: 37.3 TWh
Other=wind, biofuel, waste
0.9
1.8
1.2
1.2
0.7
1.1
Nordic
Germany
Poland
31 Oct 2007© Vattenfall AB
7Electricity spot price development
Monthly Spot Average
15
25
35
45
55
65
75
85
jan-05 apr-05 jul-05 okt-05 jan-06 apr-06 jul-06 okt-06 jan-07 apr-07 jul-07
NordPool (SYSEUR) EEX
As of 26 Oct
31 Oct 2007© Vattenfall AB
8Nordic hydrological balance
Hydrological Balance and System Price 1996 - 2007
-50
-40
-30
-20
-10
0
10
20
30
40
0
100
200
300
400
500
600
700
800
900
1000
System Price
Hydrological Balance
SYSSEK/MWhTWh
1996 199919981997 2003200220012000 2004 2005 2006 2007
Source: Markedskraft and Nord Pool
31 Oct 2007© Vattenfall AB
9Increasing electricity forward prices
Daliy Forward Closing Prices
20,00
25,00
30,00
35,00
40,00
45,00
50,00
55,00
60,00
65,00
jan-05 apr-05 jun-05 sep-05 dec-05 mar-06 jun-06 sep-06 dec-06 mar-07 jun-07 sep-07
ENOYR-08 EEXYR-08 ENOYR-09 EEXYR-09
EUR/MWh
31 Oct 2007© Vattenfall AB
10Oil, coal, gas and CO2 allowances
0
20
40
60
80
100
120
140
0
10
20
30
40
50
60
70
80
Oil (USD/bbl), Brent Front Month Coal (USD/t), API#2, Front Year Emission allowances CO2 (EUR/t), 2008 Gas (EUR/MWh), NBP, Front Year
USD EUR
31 Oct 2007© Vattenfall AB
11
EUR/tonne
CO2 allowances
0
5
10
15
20
25
30
35
jan-
06
apr-
06
jul-0
6
okt-
06
jan-
07
apr-
07
jul-0
7
okt-
07
2007
2008
31 Oct 2007© Vattenfall AB
12Nuclear update – post outages on 28 June
• Damage at German nuclear plant Krümmel has been repaired, some work is still under way (e.g. installation of new transformer).
• However, following the events, deviant installations of some anchors were detected at Brunsbüttel and Krümmel. The evaluation of the findings is still in progress.
• Both plants will remain disconnected from the grid until all replacement work is finished, all questions are clarified and all relevant measures are taken.
• Q3 financial impact totals approximately EUR 60 million (SEK 555 million)
Krümmel (1,346 MW) Brunsbüttel (771 MW)
31 Oct 2007© Vattenfall AB
13Increased retail customer churn in Germany
• Some 200,000 customers lost in Germany primarily due to:– mounting competition in the retail market and customers being increasingly
inclined to switch electricity suppliers– Vattenfall’s notice of price increases as of 1 July, which resulted in very negative
customer reactions – Inadequate information to the general public following the nuclear outages
• Losses should be viewed against the background of 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– expanded marketing activities throughout Germany, i.e. to areas outside our core
German markets in Berlin and Hamburg
• Launched a large-scale dialogue, inviting all customers as well as the general public to put questions to Vattenfall
• Establishment of a customer advisory council
31 Oct 2007© Vattenfall AB
14We are growing our market shares in Sweden
• We have now exceeded one (1) million customers in the Nordic countries
• Our 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
31 Oct 2007© Vattenfall AB
15Major ongoing investment projects
• Lillgrund – the world’s 3rd largest offshore wind power farm soon to be fully operationable (48 windmills, 110 MW)
• Schwarze Pumpe – the world’s first CCS oxyfuel pilot plant, to be commissioned in August 2008. Agreement on CO2 storage is now in place.
• Boxberg – 675 MW lignite power plant under construction
• Moorburg – 1,640 MW CHP plant still pending final approval from the City of Hamburg
• Reopening of the Reichwalde lignite mine in Germany
• Extensive transmission grid investments in Germany
• Several renewable energy projects in Germany and Sweden
31 Oct 2007© Vattenfall AB
16EU’s 3rd Energy package launched 19 September
• This offers a unique opportunity to further improve the market’s function and to speed up market development through integration of national markets into regional markets and finally the Internal Market for Energy
• We believe that an integrated energy market is a prerequisite for the competitiveness of Europe
• We believe having Regional System Operators (RIO) is the best way to achieve integration
• We are positive to creating an Agency for Cooperation of National Energy Regulators
• We support the proposed new Network for Transmission System Operators (ENTSO)
• We believe, however, that additional measures are needed to reach the target
Vattenfall’s response:
31 Oct 2007© Vattenfall AB
17Vision and growth strategy remains firm
• Vattenfall’s vision is to be a leading European energy company
• Within our “growth ambition” we will
– Continue to be an integrated company and focus on generation of electricity and heat
– Expand in core and geographically close markets where value can be created
– Use both M&A and greenfield investments as tools for growth
• More focus on renewables, CCS, nuclear and CHP
• Increased focus on our “benchmark ambition” and operational performance
© Vattenfall AB
Financials
Jan Erik Back, CFO
31 Oct 2007© Vattenfall AB
19
Amounts in MSEK Q3 2007 Q3 2006 Change FY2006 LTMIFRS IFRS %
Consolidated income statement
* IAC = items affecting comparability
Net sales 31,589 27,990 12.9 135,802 144,738
Cost of products sold 24,335 21,956 10.8 96,844 105,575
Gross profit 7,254 6,034 20.2 38,958 39,163
Operating profit (EBIT) 4,557 3,304 37.9 27,049 26,447
Operating profit, excl. IAC* 4,542 3.286 38.2 26,676 26,373
Financial income 472 841 -43.9 3,839 3,623
Financial expenses -1,515 -1,184 28.0 -5,363 -5,758
Financial net -1.043 -343 -204.1 -1,524 -2,135
Profit before taxes 3,514 2,961 18.7 25,525 24,312
Taxes 9 -1,090 -5,667 -693
Profit for the period 3,523 1,871 88.3 19,858 23,619
31 Oct 2007© Vattenfall AB
20Cash flow development
-40,000
-30,000
-20,000
-10,000
0
10,000
20,000
30,000
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
-99 2000 2001 2002 2003 2004 2005 2006 2007
Free cash flow fromoperations - Rolling 4quarter (1)
Cash flow beforefinancing activities -Rolling 4 quarter
(1) Cash Flow from operating activities minus reinvestments
1) Figures according to Sw GAAP until Q4 2004.
2) Figures according to IFRS from Q1 2005.
MSEK
31 Oct 2007© Vattenfall AB
21Return on equity
0%
5%
10%
15%
20%
25%
30%
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Rolling 4-quarterIFRS excl IAC
Rolling 4-quarter SwGAAP excl IAC
Average 4-years (16quarter) Sw. GAAP.IFRS from Q42004. Excl. IACRequirement 15%
31 Oct 2007© Vattenfall AB
22Financial targets and outcome
Q3 2007
Single A category ratingCredit Rating
3.5 – 4.5 times
Cash flow interest coverage after maintenance investments
11 % before tax (= 15 % RoE recalculated into the Groups RoNA requirement)
Return on Net Assets(RoNA, excl. IAC)
Return on Equity (RoE)
TargetsKey Ratio
15 % on average equity 20.5%1
15.7%*
7.0*
A2/A-
Stable outlook
1) Q3 2007 figure = LTM
40-60 %Dividend pay-out 40 %2
2) Paid in May 2007
31 Oct 2007© Vattenfall AB
23EBIT Q3 2007 vs Q3 2006
3 304
4 557
942
619
356
60
648
540
0
1 000
2 000
3 000
4 000
5 000
6 000
Q3 2006 Price Volume O&M Sales and
admin
Write-downs Other Q3 2007
Millions of SEK
31 Oct 2007© Vattenfall AB
24EBIT 9M 2007 vs 9M 2006
21 827 21 225
2 192
1 289
308 835
3 697
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
16 000
18 000
20 000
22 000
24 000
26 000
28 000
Q1-Q3 2006 Price Volume O&M Sales andadmin
Depreciations Other Q1-Q3 2007
Millions of SEK
31 Oct 2007© Vattenfall AB
25
3 304
4 557
896
338 552
68 212
-191122
0
1 000
2 000
3 000
4 000
5 000
Q3 2006 Generation Heat Networks Markets Other Q3 2007
Millions of SEK
VTSSales
EBIT Q3 2007 vs Q3 2006 – secondary segments
VTS= Vattenfall Trading Services
31 Oct 2007© Vattenfall AB
26EBIT 9M 2007 vs 9M 2006 – secondary segments
21 827 21 225
2 651
1 383 1 279457 134
-1 214
756
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
16 000
18 000
20 000
22 000
24 000
26 000
Q1-Q3 2006 Generation Heat Networks Markets Other Q1-Q3 2007
Millions of SEK
Sales
VTS
VTS= Vattenfall Trading Services
31 Oct 2007© Vattenfall AB
27Hedging position as of 30 September 2007
% hedged of planned electricity generation (percentage values are rounded)
Nordic
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
remaining 2007 2008 2009
Germany & Poland
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
remaining 2007 2008 2009
31 Oct 2007© Vattenfall AB
28Highlights Q3 2007 - Nordic
• EBIT almost flat compared with Q3 2006
• Sharp decline in Nordic spot prices mitigated by hedging.
• Higher electricity generation due to increased hydro and nuclear power.
• Lower results in Distribution due to a provision of approx. SEK 100 million for restructuring measures.
• Lower results in Heat due to an impairment loss of SEK 195 million of a CHP plant in Finland.
• The Lillgrund windpower farm has started to generate electricity. When fully operational it will be the largest windpower farm in Sweden and the third largest offshore farm in the world.
31 Oct 2007© Vattenfall AB
29Key data – BG Nordic
* Excl. intra group transactions** Excl. items affecting comparability (IAC)*** At the end of the period**** Full time equivalents (FTE)LTM = last twelve months
Q3 Q3 % FY FY Amounts in SEK billion 2007 2006 Change LTM 2006 2005
Net sales 9.2 7.4 +23.7 45.8 40.1 42.0External net sales * 8.6 10.4 -17.6 43.6 48.2 40.7EBIT ** 1.5 1.6 -2.2 11.8 13.2 13.7
Net assets *** 87.0 81.8 + 6.4 n.a. 81.7 77.2
Electr. generation, TWh 18.9 16.4 +15.2 90.8 84.9 89.8Heat generation, TWh 1.2 1.1 +9.1 10.8 8.5 7.3
Employees **** 9 540 9 477 +0.7 n.a. 9 158 8 788
31 Oct 2007© Vattenfall AB
30Highlights Q3 2007 - Germany
• Significantly higher EBIT, + SEK1,279 million to SEK 3,173 million (+67,5%). (+ 71.2% excl. IAC).
• Main part of EBIT improvement pertains to an impairment loss of SEK 931 million in Q3 2006 in business unit Distribution.
• Mining & Generation increased its result despite unplanned nuclear outages thanks to higher fossil power and successful hedging.
• NAP2 - Total national emissions cut to 453 million tonnes per year (NAP1 was 499 million tonnes). Vattenfall estimates a yearly deficit of approx. 28-33 million tonnes. Estimated cost (after tax) totals EUR 400-500 million
• Continued pressure from the Regulator (BNetzA) on transmission tariffs
• Lowered German corporate income tax by approx. 10 percentage points. The impact on profit after tax is 950 MSEK for Q3 and 2,850 for 9M 2007
31 Oct 2007© Vattenfall AB
31Key data – BG Germany
* Excl. intra group transactions** Excl. items affecting comparability (IAC)*** At the end of the period**** Full time equivalents (FTE)LTM = last twelve months
Q3 Q3 % FY FY Amounts in SEK billion 2007 2006 Change LTM 2006 2005
Net sales 26.0 22.0 +18.1 111.2 101.5 105.0External net sales * 17.9 15.2 +18.1 76.8 69.9 70.3EBIT ** 3.2 1.9 +71.2 13.7 12.9 10.3
Net assets *** 67.3 62.4 +7.9 n.a. 61.8 68.7
Electr. generation, TWh 17.7 17.7 - 73.2 76.2 75.9Heat generation, TWh 1.8 1.2 +50.0 13.6 15.5 15.4
Employees **** 19 742 20 025 -1.4 n.a. 19 821 20 096
31 Oct 2007© Vattenfall AB
32Highlights Q3 2007 - Poland
• EBIT decreased by 37% from SEK 125 million to SEK 79 million (-50.4% excl IAC).
• EBIT reduction pertains mainly to Distribution due lower volumes and squeezed margins.
• Business unit Heat reports a marginally lower operating profit.
• Business unit Sales reports a slightly better result.
31 Oct 2007© Vattenfall AB
33Key data – BG Poland
Q3 Q3 % FY FY Amounts in SEK billion 2007 2006 Change LTM 2006 2005
Net sales 1.9 1.9 +3.1 9.6 9.4 8.8External net sales * 1.9 1.8 +5.9 9.1 9.0 8.8EBIT ** 0.1 0.1 -50.4 0.8 0.9 0.8
Net assets *** 10.0 8.3 +20.3 n.a. 8.8 9.3
Electr. generation, TWh 0.6 0.3 +100.0 3.5 3.3 3.4Heat generation, TWh 0.9 0.7 +28.6 10.0 11.2 11.4
Employees **** 2 736 2 824 -3.1 n.a. 2 836 3 029
* Excl. intra group transactions** Excl. items affecting comparability (IAC)*** At the end of the period**** Full time equivalents (FTE)LTM = last twelve months
31 Oct 2007© Vattenfall AB
34
Amounts in MSEK 30/9/07 30/9/06 Change 31/12/06 IFRS IFRS %
Consolidated balance sheet
Non-current assets 257,489 266,242 -3.3 251,893
Current assets 67,127 61,543 9.1 71,273
Total assets 324,616 327,785 -1.0 323,166
Equity 119,679 94,118 27.2 107,674
Interest-bearing liabilitites 66,341 72,222 -8.1 71,575
Interest-bearing provisions 52,280 48,412 8.0 49,217
Pension provisions 17,424 17,345 0.5 16,877
Deferred tax liabilities 25,403 40,104 -36.7 29,875
Other non-interest-bearing liabilitites 43,489 55,584 -21.8 47,948
Total equity and liabilities 324,616 327,785 -1.0 323,166
31 Oct 2007© Vattenfall AB
35Net debt development
SEK million
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
Capital Securities SEK 9.1 billion
Acquisition of Elsam shares
Acquisition of Bewag and GZE shares
Dividend paid
31 Oct 2007© Vattenfall AB
36
Questions & Answers
© Vattenfall AB
Backup slides
31 Oct 2007© Vattenfall AB
38
Amounts in MSEK 9M 2007 9M 2006 Change IFRS IFRS %
Consolidated income statement
* IAC = items affecting comparability
Net sales 105,310 96,374 9.3
Cost of products sold 75,911 67,180 13.0
Gross profit 29,399 29,194 0.7
Operating profit (EBIT) 21,225 21,827 -2.8
Operating profit, excl. IAC* 21,115 21,418 -1.4
Financial income 2,103 2,319 -9.3
Financial expenses -4,095 -3,700 10.7
Financial net -1,992 -1,381 -44.2
Profit before taxes 19,233 20,446 -5.9
Taxes -2,223 -7,197 -69.1
Profit for the period 17,010 13,249 28.4
31 Oct 2007© Vattenfall AB
39
Amounts in MSEK Q3 2007 Q3 2006 Change FY 2006 LTMIFRS IFRS %
Funds from operations (FFO) 6,002 5,625 6.7 35,673 32,667Change in working capital 261 1,769 -85.2 -466 1,290Cash Flow from operating activities 6,263 7,394 -15.3 35,207 33,957Investments -4,310 -4,749 -9.2 -16,534 -18,327Divestments 239 289 -17.3 1,720 935Cash and cash equivalents in aquired/divested companies 2 39 -94.9 -686 10Cash Flow from investing activities -4,069 -5,107 -20.3 -15,647 -17,382Cash Flow before financing activities 2,194 2,287 -4.1 19,560 16,575Cash Flow from financing activities -8,259 -634 -10,742 -18,870Cash Flow for the period -6,065 1,653 8,818 -2,295Net debt at the end of the period -44,524 -55,380 -19.6 -49,407 -44,524
Consolidated cash flow statement
31 Oct 2007© Vattenfall AB
40Key ratios
Key Ratios (% unless otherwise stated) Q3 2007 Q3 2006 LTM
RoNA (1) 15.7 15.7
RoE (1) 20.5 20.5
Operating margin 14.4 11.8 18.3
Pre-tax profit margin 11.1 10.6 16.8
Cash Flow interest coverage aftermaintenance investments, times 4.7 6.9 7.0
FFO/net debt (1) 69.0 69.0
Equity/assets ratio 36.9 28.7 36.9
Net Gearing - Net debt/equity, times 0.37 0.59 0.37
Capitalisation - Net debt/net debt + equity 27.1 37.0 27.1
1) Q3 2007 value = LTM
31 Oct 2007© Vattenfall AB
41Net asset development
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
MSEK
Acquisition of Elsam shares
Acquisition of Bewag and GZE shares
Consolidation of Danish
assets
31 Oct 2007© Vattenfall AB
42
Amounts in SEK million
As of Sep 30, 2007 Treasury Germany Poland NordicTotal %
Cash and bank 968 1,034 467 5943,063 14
Interest-bearing investments 4,683 5,419 63 31610,481 48
Special Funds 2,578 2,578 12
Brunsbüttel 5,335 5,673 26
Shares 22 22
Total 5,651 14,389 531 90921,480 100
Undrawn committed credit facilities amount to 9,577 SEK million and other undrawn credit- and overdraft facilities amount to 10,859 SEK million.
Break down of group liquidity
31 Oct 2007© Vattenfall AB
43
Amounts in SEK million
As of Sep 30, 2007 Treasury Germany Poland Nordic Total %
Subordinated perpetual Capital Securities 9,082 9,082 14
MTN 839 839 1
EMTN 30,526 30,526 46
Liabilities to assoc. companies 6,909 4,261 11,170 17
Liabilities to minority shareholders 49 5,132 5,181 8
Bank loans and others 559 6,433 142 2,410 9,544 14
Total 47,915 10,743 142 7,542 66,341 100
Break down of group debt
31 Oct 2007© Vattenfall AB
44Vattenfall debt maturity profile
Sep 30, 2007 Sep 30, 2006
Duration (years) 3,7 1) 3,7
Average time to maturity (years) 6,5 1) 6,1
Net debt (SEK bn) 44,5 55,4
SEK million
Excluding loans from associated companies and minority owners
1) Based on external debt. Excluding Capital Securities the duration is 3,1 years and average time to maturity 6,3 years.
0
2000
4000
6000
8000
10000
12000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036
2006 09 30
2007 09 30
31 Oct 2007© Vattenfall AB
45Adjusted Gross & Net debt
SEK million 30 Sept 2007 30 June 2007 30 Dec 2006
Reported gross debt (IFRS) 66 341 67 996 71 575 + PV of net pension obligations (incl actuarial gains/losses) 20 320 20 208 19 670 + Mining & environmental provisions 11 308 11 297 10 295 - 50% of Hybrid securities -4 541 -4 555 -4 455 = Adjusted gross debt 93 428 94 946 97 085
Reported cash & short term investments 21 480 20 849 22 168 - German nuclear "Solidarvereinbarung" -3 136 -3 147 -3 076 - Minority owner's share of German nuclear cash position -3 499 -3 540 -3 594 = Adjusted cash & short term investments 14 845 14 162 15 498
Adjusted gross debt 93 428 94 946 97 085 - Adjusted cash & short term investments -14 845 -14 162 -15 498 = Adjusted net debt 78 583 80 784 81 587Reported net debt 44 524 46 765 49 407
31 Oct 2007© Vattenfall AB
46Development of adjusted net debt
-81,6
23,9
-11,6-7,6
-0,7 -1,0
-0,1
-78,6
Adjusted netdebt Dec 31,
2006
Cash flow fromoperatingactivities
Cash flow frominvestingactivities
Dividend paid Pensionprovisions and
similarcommittments
Miningprovisions and
otherenvironmentalundertakings
Others Adjusted netdebt Sept 30,
2007
SEK billion
31 Oct 2007© Vattenfall AB
47
17345
26447
9756
40104
2234
4464 551117424
28140
11308
25403
1476
43547002
Pensions
Nuclear
Mining
Taxes
Other
Personnel
Legal
Group provisions down by 10.2%
30 Sept 2007
SEK 95,107 million
30 Sept 2006
SEK 105,861 million
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