Sweden ‘warned’ of Vattenfall’s Nuon buy

The Swedish government was told that allowing part state-owned energy giant Vattenfall to buy Dutch company Nuon would add little profit and instead risk costing Swedish citizens, a new report has revealed.

Sweden 'warned' of Vattenfall's Nuon buy

Management consultants McKinsey looked into the merits of a would-be purchase and stated that “a bigger buy would entail risk and would not created value per se,” Sveriges Television (SVT) reported on Wednesday after the report was declassified.

The report further stated that the deal meant Vattenfall may have to ask its owners, the Swedish state, for additional funds.

Then Enterprise Minister Maud Olofsson told SVT that she did not wish to comment the Nuon purchase, but said she had made attempts to persuade Vattenfall ‘to calm down’ its expansion bid.

In July, when Vattenfall announced it was writing down the value of its assets, the political opposition called for an independent inquiry into the Nuon affair.

RELATED STORY:Vattenfall writedown wakens Nuon spectre

The 2009 purchase made Vattenfall one of the three biggest electricity generators in the Netherlands. But three years on, most of July’s massive writedown arose from the company’s Nuon operations, with many observers saying the company overpaid for its Dutch subsidiary.

Sweden’s Financial Markets Minister Peter Norman underlined that the government had nothing to do with the board of the state-owned company’s decision to buy the Dutch power company, although credit rating agency Moody’s noted in 2011 that “The Swedish state exercises long-term active ownership over the company and views value creation as a paramount goal for Vattenfall”.

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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.