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Vattenfall Full Year Results 2007

Vattenfall Full Year Results 2007. Presentations by Lars Josefsson, CEO and Jan Erik Back, CFO 7 February 2008. Highlights 2007 - Group. Net sales increased 5.8% to SEK 143,639 million (135,802) EBIT increased 2.7% to SEK 28,583 million (27,821) Profit after tax increased

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Vattenfall Full Year Results 2007

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  1. VattenfallFull Year Results 2007 Presentations by Lars Josefsson, CEO and Jan Erik Back, CFO 7 February 2008

  2. Highlights 2007 - Group Net sales increased 5.8% to SEK 143,639 million (135,802) EBIT increased 2.7% to SEK 28,583 million (27,821) Profit after tax increased 4.2% to SEK 20,686 million (19,858) Net debt decreased by SEK 5,667 million to SEK 43,740 million compared with 31 December 2006 7 Feb 2008

  3. Highlights 2007 - Group Return on Net Assets was 16.6% (FY 2006: 16.8 %) Return on Equity was 17.6% (FY 2006: 19.1%) The Board proposes a dividend of SEK 8,000 million equivalent to a payout ratio of 40,5% 7 Feb 2008

  4. Highlights Q4 2007 - Group Net sales decreased 2.8% to SEK 38,329 million (39,428) EBIT increased 24.7% to SEK 6,752 million (5,413) Profit after tax decreased 44.4% to SEK 3,676 million (6,609) Net debt decreased by SEK 784 million to SEK 43,740 million vs 30 September 2007 7 Feb 2008

  5. Quarterly figures in SEK million, excluding items affecting comparability Last 12 months figures in SEK million, excluding items affecting comparability EBIT development Quarterly figures, SEK million Bewag consolidated Danish assets consolidated GZE consolidated HEW consolidated 7 Feb 2008

  6. Lower nuclear but higher fossil generation Q4 2006 total: 44.8 TWh Q4 2007 total: 44.7 TWh Other=wind, biofuel, waste 21 % FY 2006 total: 165.4 TWh FY 2007 total: 167.6 TWh 41 % 7 Feb 2008

  7. Higher heat sales Q4 2006 total: 10.9 TWh Q4 2007 total: 12.8 TWh 21 % FY 2006 total: 35.2 TWh FY 2007 total: 36.2 TWh 41 % 7 Feb 2008

  8. Important events • Unplanned outages at German nuclear plants • Loss of retail customers in Germany but increasing market shares in the Nordic countries • Several changes in senior Management • Continued harsh network regulation in Germany • Major climate initiatives including launching of an ambitous CO2 reduction target – to cut emissions by 50% until 2030 • Quantitative targets set for each ”strategic ambition” 7 Feb 2008

  9. Nuclear update – post outages on 28 June • Damage at German nuclear plant Krümmel has been repaired, some work is still under way • Following the events, the work at the nuclear power plants Brunsbüttel and Krümmel, a testing and renovations programme as well as the instituting of the September 2007 recommendations, is continued. • The plants will remain shut-down until these activities are fully completed. • FY 2007 financial impact totals approximately EUR 201 million(SEK 1,900 million) Krümmel (1,346 MW) Brunsbüttel (771 MW) 7 Feb 2008

  10. Important events • Unplanned outages at German nuclear plants • Loss of retail customers in Germany but increasing market shares in the Nordic countries • Several changes in senior Management • Continued harsh network regulation in Germany • Major climate initiatives including launching of an ambitous CO2 reduction target • Quantitative targets set for each ”strategic ambition” 7 Feb 2008

  11. Increased retail customer churn in Germany • Some 250,000 customers lost in Germany primarily due to: • mounting competition and increased churn • Vattenfall’s notice of price increases as of 1 July • Inadequate information to the general public following the nuclear outages Losses should be viewed against the background of previous 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 “Easy” • Nation-wide offerings • Large-scale dialogue with all customers as well as the general public • Customer advisory council established 7 Feb 2008

  12. We are growing our market shares in Sweden • Vattenfall has exceeded one (1) million customers in the Nordic countries • Vattenfall’s Swedish retail customer market share has grown from 13% to 15%. • Customer satisfaction index has improved • Vattenfall’s products are considered best in the market 7 Feb 2008

  13. Important events • Unplanned outages at German nuclear plants • Loss of retail customers in Germany but increasing market shares in the Nordic countries • Several changes in senior Management • Continued harsh network regulation in Germany • Major climate initiatives including launching of an ambitous CO2 reduction target – to cut emissions by 50% until 2030 • Quantitative targets set for each ”strategic ambition” 7 Feb 2008

  14. Management and organisational changes July 2007 Klaus Rauscher resigned as Head of Vattenfall Europe AG and BG Germany. Hans-Jürgen Cramer appointed acting Head of Business Group Germany August 2007 Helmar Rendez appointed new Head of Group Strategies January 2008 BG Germany and BG Poland integrated into BG Central Europe.Tuomo Hatakka appointed Head of BG Central Europe February 2008 Carolina Wallenius appointed new Head of Group Communications February 2008 New composition of Executive Group Management (EGM) 7 Feb 2008

  15. New Group organisation as of 1 January 2008 BG Germany and BG Poland have been integrated into BG Central Europe 7 Feb 2008

  16. Important events • Unplanned outages at German nuclear plants • Loss of retail customers in Germany but increasing market shares in the Nordic countries • Several changes in senior Management • Continued harsh network regulation in Germany • Major climate initiatives including launching of an ambitous CO2 reduction target – to cut emissions by 50% until 2030 • Quantitative targets set for each ”strategic ambition” 7 Feb 2008

  17. Rulings from German network regulator 7 Feb 2008

  18. Important events • Unplanned outages at German nuclear plants • Loss of retail customers in Germany but increasing market shares in the Nordic countries • Several changes in senior Management • Continued harsh network regulation in Germany • Major climate initiatives including launching of an ambitous CO2 reduction target – to cut emissions by 50% until 2030 • Quantitative targets set for each ”strategic ambition” 7 Feb 2008

  19. Vattenfall has published a global Climate Map For more information see www.vattenfall.com 7 Feb 2008

  20. Vattenfall’s CO2 emissions reduction target 7 Feb 2008

  21. Important events • Unplanned outages at German nuclear plants • Loss of retail customers in Germany but increasing market shares in the Nordic countries • Several changes in senior Management • Continued harsh network regulation in Germany • Major climate initiatives including launching of an ambitous CO2 reduction target – to cut emissions by 50% until 2030 • Quantitative targets set for each ”strategic ambition” 7 Feb 2008

  22. Vattenfall’s strategic ambitions - targets Goal 2008-2010 Strategic ambition Long-term goal Number One for the customer Customer satisfaction index score of 70 for retail customers Customer satisfaction index score of 63 for retail customers Number One for the environment Halve CO2 emissions by 2030 compared with 1990 levels 3% reduction in CO2 emissions(approx. 1 million tonnes/year) Profitable growth 10 % market share in the future, integrated European energy market 10% increase in market share in electricity and heatgeneration Benchmark for the industry Vattenfall will belong to the upper quartile of the industry 11% improvement in productivity,corresponding to cost reduction of SEK 5 bn from 2006 level Employer of choice Commitment score of 81 Commitment score of 75 7 Feb 2008

  23. Financials Jan Erik Back, CFO

  24. Consolidated income statement FY 2007 SEK millionFY 2007 FY 2006 Change IFRS IFRS % Net sales 143,639 135,802 5.8 Cost of products sold -103,404 -96,428 7.2 Gross profit 40,235 39,374 2.2 Operating profit (EBIT) 28,583 27,821 2.7 Operating profit, excl. IAC28,49727,448 3.8 Financial income 2,276 3,839 -40.7 Financial expenses -6,926 -6,135 12.9 Financial net -4,650 -2,296 -102.5 Profit before taxes 23,933 25,525 -6.2 Taxes -3,247 -5,667 -42.7 Profit for the period 20,686 19,858 4.2 * IAC = items affecting comparability 7 Feb 2008

  25. Consolidated income statement Q4 2007 SEK million Q4 2007 Q4 2006 Change IFRS IFRS % Net sales 38,329 39,428 -2.8 Cost of products sold -27,791 -29,561 -6.0 Gross profit 10,538 9,867 6.8 Operating profit (EBIT) 6,752 5,413 24.7 Operating profit, excl. IAC6,7765,449 24.4 Financial income 173 1,520 --- Financial expenses -2,225 -1,854 20.0 Financial net -2,052 -334 --- Profit before taxes 4,700 5,079 -7.5 Taxes -1,024 1,530 --- Profit for the period 3,676 6,609 -44.4 * IAC = items affecting comparability 7 Feb 2008

  26. Electricity price development Volatile spot prices. Picking up again after sharp declines in 2006 and 2007 Increasing forward prices 7 Feb 2008

  27. Above normal hydrological balance Nordic countries 7 Feb 2008

  28. Hedging position as of 31 December 2007 % hedged of planned electricity generation (percentage values are rounded) 7 Feb 2008

  29. CO2 allowances EUR/tonne 7 Feb 2008

  30. Oil, coal, gas and CO2 allowances 7 Feb 2008

  31. Vattenfall’s cost of NAP2 • Lower allocation of CO2 allowances than expected. • German electricity generating sector must carry the German burden. • Material financial impact on Vattenfall’s German operations, less in Nordic and Poland Germany Deficit of CO2 allowances: Estimated net cost (after tax) & cash flow effect 28-33 mn ton 400-500 MEUR p.a. from 2008 1.8 mn ton 26-28 MEUR Denmark Deficit of CO2-certificates: Estimated net cost (after tax)& cash flow effect (approximately) p.a. from 2008 p.a. from 2008 0.7-1.0 mn ton 14-20 MEUR Poland Deficit of CO2-certificates: Estimated EBIT effect 7 Feb 2008

  32. EBIT Full Year 2007 vs 2006 7 Feb 2008

  33. EBIT Q4 2007 vs Q4 2006 7 Feb 2008

  34. EBIT Full Year 2007 vs 2006 – secondary segments 7 Feb 2008

  35. EBIT Q4 2007 vs Q4 2006 – secondary segments 7 Feb 2008

  36. Financial targets and outcome Key Ratio Targets 2007 Return on Equity (RoE) 17.6% 15 % on average equity Return on Net Assets(RoNA, excl. IAC) 11 % before tax (= 15 % RoE recalculated into the Groups RoNA requirement) 16.6% Cash flow interest coverage after maintenance investments 3.5 – 4.5 times 6.4 Credit Rating A2/A- Stable outlook Single A category rating Dividend pay-out 40-60 % 40.5 % * *) Proposed dividend 7 Feb 2008

  37. Increased capex programme SEK 173 bn 2008-2012 (2007-2011 was SEK 134 bn) • Boxberg power plant (675 MW) • Moorburg power plant (1,640 MW) • Reichwalde mine • Nuclear capacity upgrade • Network improvements • German and Nordic wind power • Life-time extensions generation assets in Sweden and Germany 7 Feb 2008

  38. Consolidated balance sheet SEK million 31/12/07 31/12/06 Change IFRS IFRS % I Non-current assets 264,864 251,893 5.1 Current assets 73,37271,273 2.9 Total assets 338,236323,166 4.7 Equity124,132 107,674 15.3 Capital Securities 9,341 8,9114.8 Interest-bearing liabilitites57,84862,664 -7.7 Interest-bearing provisions 56,250 49,217 14.3 Pension provisions 17,735 16,877 5.1 Tax liabilities 26,632 33,460 -20.4 Other non-interest-bearing liabilitites46,298 44,363 4.4 Total equity and liabilities 338,236 323,166 4.7 7 Feb 2008

  39. Cash flow development 7 Feb 2008

  40. Net debt development Acquisition of Bewag and GZE shares Acquisition of Elsam shares SEK million Dividend paid Capital Securities SEK 9.3 billion 7 Feb 2008

  41. Thank you for your attention 7 Feb 2008

  42. Back-up slides

  43. Highlights 2007 - Nordic • EBIT decreased by 696 SEK million to SEK 12 591 million (-5,2%) • Higher Fuel and O&M costs – mainly due to Danish operations. • Lower results in Distribution due to the storm ”Per” (290 MSEK) and provsions for restructuring measures (160 MSEK). • Higher electricity generation due to increased hydro-, fossil- and wind power. • All windmills at the Lillgrund windpower farm are now generating electricity. 7 Feb 2008

  44. Key data – BG Nordic * Excl. intra group transactions ** Excl. items affecting comparability (IAC) *** At the end of the period **** Full time equivalents (FTE) 7 Feb 2008

  45. Highlights 2007 - Germany • EBIT increased by SEK 1,454 million to SEK 15 338 million (+10,5%). • BU Mining & Generation increased its result, despite nuclear outages and impairment losses for pumped storage plants of 1 110 MSEK, thanks to higher prices as well as hedging. • BU Heat improved its result from the electricity business, mainly due to higher electricity prices. • Warm weather and storms in the beginning of the year had a negative effect on the BU Heat and BU Distribution businesses. • Higher feed-in from windpower caused higher EEG costs. • NAP2 - Total national emissions cut to 453 million tonnes per year. (NAP1 was 499 million tonnes). Vattenfall estimates an annual deficit of 28-33 million tonnes. Estimated cost (after tax) totals EUR 400-500 million. 7 Feb 2008

  46. Key data – BG Germany Q4 Q4 % FY FY 2007 2006 Change 2007 2006 Amounts in SEK billion Net sales 29.8 28.5 4.6 112.5 101.5 External net sales * 20.6 20.0 3.0 77.5 70.0 EBIT ** 2.8 1.9 47.4 15.4 13.7 Net assets *** 67.8 61.8 9.7 67.8 61.8 Electr. generation, TWh 19.2 19.6 -2.0 72.8 76.2 Heat generation, TWh 5.6 4.4 27.3 14.8 15.5 Employees **** 19 656 19 821 * Excl. intra group transactions ** Excl. items affecting comparability (IAC) *** At the end of the period **** Full time equivalents (FTE) 7 Feb 2008

  47. Highlights 2007 - Poland • EBIT almost flat compared with FY 2006. • BU Distribution’s results decreased due to tariff reductions which could only partly be compensated by higher volumes. • Lower heat volumes and prices were compensated by higher prices on electricity. • Significant positive effect in BU Heat, due to sold excess CO2 allowances. 7 Feb 2008

  48. Key data – BG Poland Q4 Q4 % FY FY 2007 2006 Change 2007 2006 Amounts in SEK billion Net sales 2.8 2.7 3.7 9.8 9.4 External net sales * 2.6 2.5 4.0 9.3 9.0 EBIT ** 0.3 0.03 --- 1.1 0.9 Net assets *** 10.9 8.8 23.9 10.9 8.8 Electr. generation, TWh 1.3 1.0 30.0 3.8 3.3 Heat generation, TWh 4.1 3.3 24.2 10.7 11.2 Employees **** 2 740 2 836 * Excl. intra group transactions ** Excl. items affecting comparability (IAC) *** At the end of the period **** Full time equivalents (FTE) 7 Feb 2008

  49. Net asset development Consolidation of Danish assets Acquisition of Elsam shares Acquisition of Bewag and GZE shares MSEK 7 Feb 2008

  50. Consolidated cash flow statement SEK millionQ4 2007Q4 2006 FY 2007 FY 2006 IFRS IFRSIFRSIFRS Funds from operations (FFO)10,9099,527 34,049 35,673 Change in working capital -2,527481 -1,718 -466 Cash Flow from operating activities 8,38210,00832,331 35,207 Investments-6,753-6,116 -18,964 -16,534 Divestments 291301 925 1,720 Net investment following the trans. between Vattenfall and Dong -686 Cash and cash equivalents in aquired/divested companies -1 7 2 -147 Cash Flow from investing activities -6,463 -5,808-18,037 -15,647 Cash Flow before financing activities 1,919 4,20014,29419,560 Cash Flow from financing activities 2,024 1,816-18,662-10,742 Cash Flow for the period 3,943 6,016 -4,368 8,818 Net debt at the end of the period -43,740-49,407 -43,740 -49,407 7 Feb 2008

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