Vattenfall splits after massive writedown

The state-owned energy giant is shearing off its Nordic operations from its continental business, as Vattenfall announced on Tuesday it was writing down its assets by 29.7 billion kronor ($4.5 billion).

Vattenfall splits after massive writedown

“Vattenfall is changing its organizational structure to achieve greater financial and strategic flexibility,” the company said in a statement.

“Vattenfall is also writing down 29.7 billion of the value of the company’s assets as a consequence of market development and higher business risks.”

The split will come into effect in 2014, with the company citing the uncertainty of whether Europe will develop a single energy market as a core motivation for its decision.

“Like other European energy producers, Vattenfall is affected by the increasingly gloomy market prospects. The company now makes the assessment that the market will not recover in the foreseeable future,” the statement continued, adding that the writedown would not affect the company’s cash flow.

The writedowns have been made across its assets, shearing 14.5 billion kronor from the value of its gas and hard coal-fired power plants in the Netherlands, 4.1 billion off hard coal-fired power plants in Germany, and 2.5 billion off combined heat and power plants in the Nordic region. Another 8.6 billion has been lobbed off other components to the business.

While Swedish commentators reacted with shock to news of the writedown on Tuesday, the company underlined that it was still operating at a profit. The business daily Dagens Industri, however, noted that the decision would axe 24.5 billion kronor of profits, due to the tax implications of the writedown.

“The impairments are significant and this is obviously a difficult task. But this is the reality we are facing and we have to react according to what we know about the marketplace today,” said Vattenfall’s Chairman Lars G Nordström and CEO Øystein Løseth.

“We have to take steps that we deem are necessary to ensure in the long term a sustainable and strong Vattenfall.”

The company also announced that it would continue its cost-cutting and streamlining, while putting its investments on a diet – reducing them to 105 billion kronor from 135 billion up until 2017.

“Investment projects already approved will be prioritized with a continued focus on renewable energy.”

Ann Törnkvist

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Sweden to double wind energy production in next four years

Wind energy is set to double its share of Sweden's power supply over the next four years as a string of giant projects come online.

Sweden to double wind energy production in next four years
The Gabrielsberget wind project in Västerbotten. Photo: Swewind
The contribution of wind energy is scheduled to grow from 17TWh in 2018 to 35 TWh in 2022, taking wind's share from 12 percent to 25 percent of total power produced. 
Charlotte Unger, chief executive of the Swedish Wind Energy Association trade body said the pro-renewable policy decisions had been driving growth. 
“Sweden has the best regulatory regime for wind power projects from a European perspective, and therefore production costs the least here,” she told Swedish state broadcaster SVT.  “Investors have confidence in wind power in Sweden, and that's because of the policies that exist.” 
The largest new wind farm is the giant Markbyygden project outside Piteå, which is expected to supply 10TWh per year as it comes online in stages from this year, making it one of Europe's largest wind farms.  
Other major projects are the Överturingen wind farm in Västernorrland, Åskälen in Jämtland, and Valhalla in Gävleborg. 
The new farms will make up for the shutdown of two reactors at the Ringhals nuclear power station in 2019 and 2020. 
Because the majority of the new wind power projects are in the northern counties of Norrland, Västerbotten and Jämtland, the shift will require Sweden's state-owned grid operator Svenska Kraftnät to rapidly improve capacity, especially in central Sweden. 
But Niclas Damsgaard, the grid company's senior market strategist, said he believed the company would be able to keep pace with the growth. 
“It's going to work, but all this will mean an increase in risk. In an extreme case, some major industrial consumers may not be able to buy as much power as they want, but it's not going to mean difficulties across the country.”  
Unger said that if the new production exceeded Sweden's own needs, then the excess could be exported into Europe, reducing the continent's coal use. 
Between 2022 and 2040, the Swedish Wind Energy Association hopes to double the amount of wind power produced in  once again, taking it to half of Sweden's total power use.