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© Vattenfall AB Vattenfall Q3 Results 2007 Presentations by Lars G. Josefsson, CEO and Jan Erik Back, CFO 31 October 2007
© Vattenfall AB 31 Oct Highlights – 9M results 2007 Net sales rose 9.3% to SEK 105,310 million (96,374) EBIT decreased 2.8% to SEK 21,225 million (21,827) Profit after tax increased 28.4% to SEK 17,010 million (13,249) due to reduction of German corporate income tax Net debt decreased by SEK 4,883 million to SEK 44,524 million compared with 31 December 2006
© Vattenfall AB 31 Oct Highlights – Q3 results 2007 Net sales rose 12.9% to SEK 31,589 million (27,990) EBIT increased 37.9% to SEK 4,557 million (3,304) Profit after tax increased 88.3% to SEK 3,523 million (1,871) due to reduction of German corporate income tax
© Vattenfall AB 31 Oct Highlights – Q3 results 2007 Net debt decreased by SEK 2,241 million to SEK 44,524 million vs 30 June 2007 Return on Net Assets was 15.7% LTM (FY 2006: 16.6%) Return on Equity was 20.5% LTM (FY 2006: 19.1%) Net Gearing was 37% as of 30 Sept 2007 vs 46% as of 31 December 2006 LTM = Last twelve months
© Vattenfall AB 31 Oct EBIT development Quarterly figures, SEK million Quarterly figures in SEK million, excluding items affecting comparability Last 12 months figures in SEK million, excluding items affecting comparability HEW consolidated Bewag consolidated GZE consolidated Danish assets consolidated
© Vattenfall AB 31 Oct Increased fossil and hydro power generation 41 % Heat: Q total: 3.8 TWh Heat Q total: 3.0 TWh Electricity: Q total: 34.5 TWh Electricity: Q total: 37.3 TWh Other=wind, biofuel, waste
© Vattenfall AB 31 Oct Electricity spot price development As of 26 Oct
© Vattenfall AB 31 Oct Nordic hydrological balance Source: Markedskraft and Nord Pool
© Vattenfall AB 31 Oct Increasing electricity forward prices
© Vattenfall AB 31 Oct Oil, coal, gas and CO 2 allowances
© Vattenfall AB 31 Oct EUR/tonne CO 2 allowances
© Vattenfall AB 31 Oct Nuclear update – post outages on 28 June Damage at German nuclear plant Krümmel has been repaired, some work is still under way (e.g. installation of new transformer). However, following the events, deviant installations of some anchors were detected at Brunsbüttel and Krümmel. The evaluation of the findings is still in progress. Both plants will remain disconnected from the grid until all replacement work is finished, all questions are clarified and all relevant measures are taken. Q3 financial impact totals approximately EUR 60 million (SEK 555 million) Krümmel (1,346 MW) Brunsbüttel (771 MW)
© Vattenfall AB 31 Oct Increased retail customer churn in Germany Some 200,000 customers lost in Germany primarily due to: –mounting competition in the retail market and customers being increasingly inclined to switch electricity suppliers –Vattenfalls notice of price increases as of 1 July, which resulted in very negative customer reactions –Inadequate information to the general public following the nuclear outages Losses should be viewed against the background of very high market shares (>80%, corresponding to nearly 2.9 million customers) in Berlin and Hamburg Measures taken: Improved product offers –launched a very competitively priced internet product –expanded marketing activities throughout Germany, i.e. to areas outside our core German markets in Berlin and Hamburg Launched a large-scale dialogue, inviting all customers as well as the general public to put questions to Vattenfall Establishment of a customer advisory council
© Vattenfall AB 31 Oct We are growing our market shares in Sweden We have now exceeded one (1) million customers in the Nordic countries Our Swedish retail customer market share has grown from 13% to 15%. Customer satisfaction index has improved Vattenfalls products are considered best in the market
© Vattenfall AB 31 Oct Major ongoing investment projects Lillgrund – the worlds 3 rd largest offshore wind power farm soon to be fully operationable (48 windmills, 110 MW) Schwarze Pumpe – the worlds first CCS oxyfuel pilot plant, to be commissioned in August Agreement on CO2 storage is now in place. Boxberg – 675 MW lignite power plant under construction Moorburg – 1,640 MW CHP plant still pending final approval from the City of Hamburg Reopening of the Reichwalde lignite mine in Germany Extensive transmission grid investments in Germany Several renewable energy projects in Germany and Sweden
© Vattenfall AB 31 Oct EUs 3 rd Energy package launched 19 September This offers a unique opportunity to further improve the markets function and to speed up market development through integration of national markets into regional markets and finally the Internal Market for Energy We believe that an integrated energy market is a prerequisite for the competitiveness of Europe We believe having Regional System Operators (RIO) is the best way to achieve integration We are positive to creating an Agency for Cooperation of National Energy Regulators We support the proposed new Network for Transmission System Operators (ENTSO) We believe, however, that additional measures are needed to reach the target Vattenfalls response:
© Vattenfall AB 31 Oct Vision and growth strategy remains firm Vattenfalls vision is to be a leading European energy company Within our growth ambition we will –Continue to be an integrated company and focus on generation of electricity and heat –Expand in core and geographically close markets where value can be created –Use both M&A and greenfield investments as tools for growth More focus on renewables, CCS, nuclear and CHP Increased focus on our benchmark ambition and operational performance
© Vattenfall AB Financials Jan Erik Back, CFO
© Vattenfall AB 31 Oct Amounts in MSEK Q Q Change FY2006LTM IFRSIFRS% Consolidated income statement * IAC = items affecting comparability Net sales31,58927, ,802144,738 Cost of products sold24,33521, ,844105,575 Gross profit7,2546, ,95839,163 Operating profit (EBIT)4,5573, ,04926,447 Operating profit, excl. IAC*4, ,67626,373 Financial income ,8393,623 Financial expenses -1,515-1, ,363-5,758 Financial net ,524-2,135 Profit before taxes 3,5142, ,52524,312 Taxes9-1,090-5, Profit for the period 3,523 1, ,85823,619
© Vattenfall AB 31 Oct Cash flow development MSEK
© Vattenfall AB 31 Oct Return on equity 0% 5% 10% 15% 20% 25% 30% Rolling 4-quarter IFRS excl IAC Rolling 4-quarter Sw GAAP excl IAC Average 4-years (16 quarter) Sw. GAAP. IFRS from Q Excl. IAC Requirement 15%
© Vattenfall AB 31 Oct Financial targets and outcome Q Single A category rating Credit Rating 3.5 – 4.5 times Cash flow interest coverage after maintenance investments 11 % before tax (= 15 % RoE recalculated into the Groups RoNA requirement) Return on Net Assets (RoNA, excl. IAC) Return on Equity (RoE) Targets Key Ratio 15 % on average equity 20.5% %* 7.0* A2/A- Stable outlook 1) Q figure = LTM % Dividend pay-out 40 % 2 2) Paid in May 2007
© Vattenfall AB 31 Oct EBIT Q vs Q Q3 2006PriceVolumeO&MSales and admin Write-downsOtherQ Millions of SEK
© Vattenfall AB 31 Oct EBIT 9M 2007 vs 9M 2006
© Vattenfall AB 31 Oct EBIT Q vs Q – secondary segments VTS= Vattenfall Trading Services
© Vattenfall AB 31 Oct EBIT 9M 2007 vs 9M 2006 – secondary segments Q1-Q3 2006GenerationHeatNetworksMarketsOtherQ1-Q Millions of SEK Sales VTS VTS= Vattenfall Trading Services
© Vattenfall AB 31 Oct Hedging position as of 30 September 2007 % hedged of planned electricity generation (percentage values are rounded)
© Vattenfall AB 31 Oct Highlights Q Nordic EBIT almost flat compared with Q Sharp decline in Nordic spot prices mitigated by hedging. Higher electricity generation due to increased hydro and nuclear power. Lower results in Distribution due to a provision of approx. SEK 100 million for restructuring measures. Lower results in Heat due to an impairment loss of SEK 195 million of a CHP plant in Finland. The Lillgrund windpower farm has started to generate electricity. When fully operational it will be the largest windpower farm in Sweden and the third largest offshore farm in the world.
© Vattenfall AB 31 Oct Key data – BG Nordic
© Vattenfall AB 31 Oct Highlights Q Germany Significantly higher EBIT, + SEK1,279 million to SEK 3,173 million (+67,5%). (+ 71.2% excl. IAC). Main part of EBIT improvement pertains to an impairment loss of SEK 931 million in Q in business unit Distribution. Mining & Generation increased its result despite unplanned nuclear outages thanks to higher fossil power and successful hedging. NAP2 - Total national emissions cut to 453 million tonnes per year (NAP1 was 499 million tonnes). Vattenfall estimates a yearly deficit of approx million tonnes. Estimated cost (after tax) totals EUR million Continued pressure from the Regulator (BNetzA) on transmission tariffs Lowered German corporate income tax by approx. 10 percentage points. The impact on profit after tax is 950 MSEK for Q3 and 2,850 for 9M 2007
© Vattenfall AB 31 Oct Key data – BG Germany
© Vattenfall AB 31 Oct Highlights Q Poland EBIT decreased by 37% from SEK 125 million to SEK 79 million (-50.4% excl IAC). EBIT reduction pertains mainly to Distribution due lower volumes and squeezed margins. Business unit Heat reports a marginally lower operating profit. Business unit Sales reports a slightly better result.
© Vattenfall AB 31 Oct Key data – BG Poland
© Vattenfall AB 31 Oct Amounts in MSEK 30/9/07 30/9/06 Change 31/12/06 IFRSIFRS% Consolidated balance sheet Non-current assets257,489266, ,893 Current assets67,12761, ,273 Total assets324,616327, ,166 Equity119,67994, ,674 Interest-bearing liabilitites66,34172, ,575 Interest-bearing provisions52,28048, ,217 Pension provisions 17,42417, ,877 Deferred tax liabilities25,40340, ,875 Other non-interest- bearing liabilitites 43,48955, ,948 Total equity and liabilities 324, , ,166
© Vattenfall AB 31 Oct Net debt development SEK million Capital Securities SEK 9.1 billion Acquisition of Elsam shares Acquisition of Bewag and GZE shares Dividend paid
© Vattenfall AB 31 Oct Questions & Answers
© Vattenfall AB Backup slides
© Vattenfall AB 31 Oct Amounts in MSEK 9M M 2006 Change IFRSIFRS% Consolidated income statement * IAC = items affecting comparability Net sales105,31096, Cost of products sold75,91167, Gross profit29,39929, Operating profit (EBIT)21,22521, Operating profit, excl. IAC*21,11521, Financial income 2,103 2, Financial expenses -4,095-3, Financial net-1,992-1, Profit before taxes 19,23320, Taxes-2,223-7, Profit for the period 17,010 13,
© Vattenfall AB 31 Oct Amounts in MSEK Q Q Change FY 2006LTM IFRSIFRS% Funds from operations (FFO) 6,0025, ,67332,667 Change in working capital2611, ,290 Cash Flow from operating activities6,2637, ,20733,957 Investments-4,310-4, ,534-18,327 Divestments , Cash and cash equivalents in aquired/divested companies Cash Flow from investing activities -4,069-5, ,647-17,382 Cash Flow before financing activities 2,1942, ,56016,575 Cash Flow from financing activities-8, ,742-18,870 Cash Flow for the period-6,0651,6538,818-2,295 Net debt at the end of the period-44,524-55, ,407-44,524 Consolidated cash flow statement
© Vattenfall AB 31 Oct Key ratios Key Ratios (% unless otherwise stated) Q3 2007Q3 2006LTM RoNA (1) RoE (1) Operating margin Pre-tax profit margin Cash Flow interest coverage after maintenance investments, times FFO/net debt (1) Equity/assets ratio Net Gearing - Net debt/equity, times Capitalisation - Net debt/net debt + equity ) Q value = LTM
© Vattenfall AB 31 Oct Net asset development MSEK Acquisition of Elsam shares Acquisition of Bewag and GZE shares Consolidation of Danish assets
© Vattenfall AB 31 Oct Amounts in SEK million As of Sep 30, 2007 TreasuryGermanyPolandNordicTotal% Cash and bank9681, ,06314 Interest-bearing investments4,6835, ,48148 Special Funds2,5782,57812 Brunsbüttel5,3355,67326 Shares2222 Total5,65114, , Undrawn committed credit facilities amount to 9,577 SEK million and other undrawn credit- and overdraft facilities amount to 10,859 SEK million. Break down of group liquidity
© Vattenfall AB 31 Oct Amounts in SEK million As of Sep 30, 2007 TreasuryGermanyPolandNordicTotal% Subordinated perpetual Capital Securities 9,0829,08214 MTN EMTN30,52630,52646 Liabilities to assoc. companies6,9094,26111,17017 Liabilities to minority shareholders495,1325,1818 Bank loans and others5596, ,4109,54414 Total47,91510, ,54266, Break down of group debt
© Vattenfall AB 31 Oct Vattenfall debt maturity profile Sep 30, 2007 Sep 30, 2006 Duration (years) 3,7 1) 3,7 Average time to maturity (years) 6,5 1) 6,1 Net debt (SEK bn) 44,5 55,4 SEK million Excluding loans from associated companies and minority owners 1) Based on external debt. Excluding Capital Securities the duration is 3,1 years and average time to maturity 6,3 years.
© Vattenfall AB 31 Oct Adjusted Gross & Net debt
© Vattenfall AB 31 Oct Development of adjusted net debt
© Vattenfall AB 31 Oct Group provisions down by 10.2% 30 Sept 2007 SEK 95,107 million 30 Sept 2006 SEK 105,861 million
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