“Demand is still low as a result of the economic recession. At the same time, new capacity is being added, especially in renewable energy production, which has led to low electricity prices,” chief executive Øystein Løseth said in a statement.
“Previous market forecasts have been overturned, and what used to be considered ‘normal’ no longer applies. This is the new normal,” he added.
The report stated that low demand and competition from renewable energy sources pushing down prices had spelled “a tough year” for the energy market.
After making a loss in the third quarter, the state-owned utility returned to profit in the fourth quarter, reporting a 16-percent rise in net profit to 6.5 billion kronor ($1.01 billion), on revenue that was 5 percent lower.
Annual net profit rose 53 percent to 16.9 billion kronor, despite an 8-percent slide in revenue to 167.3 billion kronor.
The rise in profit was partly due to a weak result in 2011 when Germany decided to shutter some nuclear reactors.
Vattenfall said it had completed a three-year, 6 billion kronor cost cutting plan one year ahead of schedule, and announced another 3 billion kronor in cost reductions for 2013.
The board proposed a dividend payout of 6.9 billion kronor or 40 percent of the annual profit after tax.
Last year, the payout landed on 4.4 billion kronor.