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VATTENFALL

Tough times ahead for Swedish energy giant

Swedish energy giant Vattenfall could face asset write-downs of around eight billion kronor ($942m) as electricity prices are set to fall across the globe, the company has told specialist magazine Dagens Industri.

Tough times ahead for Swedish energy giant
Is Sweden's state-owned energy firm Vattenfall facing further write-downs? Photo: Nora Lorek/TT

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If future energy prices fall by five percent, while the cost of fuel and carbon dioxide emission rights remain static, the value of fossil based assets in the Netherlands and Germany would drop by 12-34 percent, according to Dagens Industri.

Since the Vattenfall Group bought energy giant Nuon in 2009, a deal which has been hotly debated in Sweden, the Dutch firm's assets have been written down by over 52 billion kronor. The final payment instalment is due on July 1st this year, when Vattenfall is obliged to buy the remaining 21 percent for a previously agreed sum of 19.2 billion kronor.

And Vattenfall CEO Magnus Hall paints a bleak picture of the future.

“The prognoses for the coming year indicate that the price of electricity, and by that a large part of the company's profitability, will remain at historically low levels,” he wrote in Vattenfall's annual report, which became public on Wednesday.

Magnus Hall, who Dagens Industri writes has earned 1.1 million kronor a month so far according to the annual report, has previously said that further write-downs cannot be ruled out.

Electricity prices fell last year by an average of 22 percent in the Nordic countries and by 13 percent in Germany.

State-owned Vattenfall, a major provider of electricity in northern Europe and Britain, reported in February that it had been able to curb some of its losses in 2014.

The company reported a net loss of 8.18 billion kronor last year, which was an improvement on the 13.67 billion loss the year before.

"2014 was an eventful and challenging year that was characterized by weak demand, a surplus of production capacity and falling electricity prices," Hall said in a statement at the time.

The main explanation for the year's negative result was asset write-down charges worth 23.8 billion kronor, said Hall.

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VATTENFALL

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.