Vattenfall Profits Plunge on Weak Coal and Nuclear Assets

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--Sweden's state-owned Vattenfall AB (Stockholm, Sweden) has posted its largest ever financial operating loss due to financial write downs associated with its nuclear power and coal operations.

The operating loss rocketed to 38 billion Swedish crowns ($4.4 billion) in the second quarter, compared with a loss of 1.6 billion crowns ($186 million) a year earlier. The loss includes more than 36 billion crowns ($4.2 billion) in impairments. The company also cited "very low electricity prices," which put pressure on margins from conventional generation.

The write-downs included $2 billion on weak profits and the planned closure of its Ringhals 1 and Ringhals 2 nuclear reactors in Sweden. There was an additional $1.7 billion written down against its coal-mining operations in eastern Germany and a further $465 million against its coal-fired Moorburg power plant in Hamburg, Germany.

Vattenfall, which is overhauling its power generation operations toward mainly renewable energy, has been attempting to divest itself of fossil-fuel assets in recent years. Last year, Industrial Info reported that Vattenfall plans to sell off 9,000 megawatts (MW) of lignite coal-fired power plants in Germany. For additional information, see November 10, 2014, article - Vattenfall to Sell German Coal Operations.

Earlier this month, the company announced the sale of its Nordjylland combined heat and power (CHP) plant near Aalborg, Denmark, which would complete the company's exit from the Danish conventional power sector. It sold the Amager Power Station in 2013 and Fyns Power Station in 2014. For additional information, see July 16, 2015, article - Vattenfall Exiting Denmark's Fossil Fuel Power Market.

"Wholesale electricity prices continued to fall during the second quarter," said Magnus Hall, president and chief executive officer of Vattenfall. "The low electricity prices are having an ever greater impact on Vattenfall's earnings, as our forward contracts entered into in previous years at higher prices are gradually expiring. Very low electricity prices have put pressure on margins for conventional generation. As a result of this, Vattenfall's board of directors has decided to recognize impairment losses. Naturally, this is a very negative development and unfortunately reflects the world we live in."

He added: "Vattenfall's strategic transformation, with greater customer focus and more renewable power generation, continues. The business area organization that we have now implemented provides favourable conditions to accelerate the pace of this transformation, but we must also continue working hard to reduce our costs."

In May, Vattenfall decided to shut the Ringhals 1 and 2 nuclear reactors early, blaming falling profits and rising costs. The oldest of the company's seven operational reactors, Ringhals 1 and 2 have generating capacities of approximately 870 MW each.

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