German writedown cuts Vattenfall’s Q1 income

Vattenfall's interim Q1 net income fell by more than half after the company revealed a writedown from the sale of its high-voltage grids in Germany was significantly higher than expected. At the same time, the energy giant earned large profits from this winter's high electricity prices across the Nordic region.

On March 12th, Vattenfall announced it would sell its high-voltage grids in Germany to Belgium’s Elia System Operator and Australia’s Industry Funds Management for nearly 8 billion kronor ($1.1 billion). “We are very pleased,” said then-Vattenfall CEO Lars G. Josefsson.

However, the company issued an interim Q1 report showing a 5.3 billion kronor ($728.12 million) writedown on the transaction. As a result, return on equity fell to 6.6 percent, far below the government’s performance level requirement of 15 percent over a business cycle of five to seven years.

“This is not acceptable to us in the long run and we will put a lot of effort into reversing this trend,” said Norwegian Øystein Løseth, the company’s new CEO, when he presented the report.

Moderate Party energy policy spokesperson Anna Kinberg Batra urged Vattenfall, which earned large sums from high electricity prices during the winter, to contribute to the renewal of nuclear reactors.

“The next time it gets cold, and that will happen again, nuclear energy has to work,” she wrote in an open letter to Løseth.

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Swedish energy firm racks up giant losses

UPDATED: Swedish energy giant Vattenfall recorded losses amounting to nearly 29 billion kronor ($3.4 billion) on Tuesday as the company continued its battle against increasingly tough market conditions.

Swedish energy firm racks up giant losses
Vattenfall chief executive Magnus Hall on Tuesday. Photo: Fredrik Persson/TT

Hit by asset write-down charges worth 36 billion kronor, Sweden's Vattenfall reported a net loss of 28.812 billion kronor in the second quarter of the year, a huge drop from 2.3 billion kronor in the same period in 2014.

The state-owned energy firm, a major provider of electricity in northern Europe, has been struggling to improve profits for several years, suffering from weak demand and plunging electricity prices.

It attributed 17 billion kronor of the total asset write-downs to the same fall in profits which led to a shock announcement earlier this year that it planned to close Ringhals 1 and 2 in south-western Sweden.

It said at the time that the two reactors were too costly to keep in production until 2025 as previously planned.

“This is of course very negative but unfortunately reflects the reality we're living in,” said its chief executive Magnus Hall in a statement on Tuesday morning.

It also wrote down an additional 15 billion kronor on its lignite, or brown coal, assets in Germany.

Earlier this year Vattenfall announced that 1,000 workers were being let go as part of a series of bids to curb losses, including speeding up the sale of the German plants.

It reported a total turnover of 36.1 billion kronor in the second quarter of 2015 on Tuesday, down from 36.6 billion in the same period last year.

Hall said that the work to tighten the belt was continuing “to identify further reductions in costs”.

Since the Vattenfall Group bought energy giant Nuon in 2009, a deal which has been hotly debated in Sweden, the firm's assets have been written down by over 52 billion kronor. 

Many energy providers in Europe have made huge asset write-downs in the last two years because of weak demand for electricity against a background of sluggish economic activity.

They have also been caught out by the US shale energy boom, which has pushed down the price of coal for power generation, undermining the profitability of new gas-powered plants and some investment programmes.

Vattenfall employs more than 30,000 and has operations in Sweden, Finland, Denmark, Germany, the Netherlands and Britain.