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Vattenfall Q3 Results 2007

Vattenfall Q3 Results 2007. Presentations by Lars G. Josefsson, CEO and Jan Erik Back, CFO 31 October 2007. 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

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Vattenfall Q3 Results 2007

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  1. VattenfallQ3 Results 2007 Presentations by Lars G. Josefsson, CEO and Jan Erik Back, CFO 31 October 2007

  2. 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 31 Oct 2007

  3. 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 31 Oct 2007

  4. 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 was15.7% 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 31 Oct 2007

  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 31 Oct 2007

  6. Increased fossil and hydro power generation Electricity:Q3 2006 total: 34.5 TWh Electricity:Q3 2007 total: 37.3 TWh Other=wind, biofuel, waste Heat Q3 2006 total: 3.0 TWh Heat: Q3 2007 total: 3.8 TWh 41 % 31 Oct 2007

  7. Electricity spot price development As of 26 Oct 31 Oct 2007

  8. Nordic hydrological balance Source: Markedskraft and Nord Pool 31 Oct 2007

  9. Increasing electricity forward prices 31 Oct 2007

  10. Oil, coal, gas and CO2 allowances 31 Oct 2007

  11. CO2 allowances EUR/tonne 31 Oct 2007

  12. 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) 31 Oct 2007

  13. 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 • Vattenfall’s 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 31 Oct 2007

  14. 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 • Vattenfall’s products are considered best in the market 31 Oct 2007

  15. Major ongoing investment projects • Lillgrund – the world’s 3rd largest offshore wind power farm soon to be fully operationable (48 windmills, 110 MW) • Schwarze Pumpe – the world’s first CCS oxyfuel pilot plant, to be commissioned in August 2008. 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 31 Oct 2007

  16. EU’s 3rd Energy package launched 19 September Vattenfall’s response: • This offers a unique opportunity to further improve the market’s 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 31 Oct 2007

  17. Vision and growth strategy remains firm • Vattenfall’s 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 31 Oct 2007

  18. Financials Jan Erik Back, CFO

  19. Consolidated income statement Amounts in MSEKQ3 2007 Q3 2006 Change FY2006 LTM IFRS IFRS % Net sales 31,589 27,990 12.9 135,802 144,738 Cost of products sold 24,335 21,956 10.8 96,844 105,575 Gross profit 7,254 6,034 20.2 38,958 39,163 Operating profit (EBIT) 4,557 3,304 37.9 27,049 26,447 Operating profit, excl. IAC*4,5423.28638.2 26,676 26,373 Financial income 472 841 -43.9 3,839 3,623 Financial expenses -1,515 -1,18428.0 -5,363 -5,758 Financial net -1.043 -343 -204.1 -1,524 -2,135 Profit before taxes 3,514 2,961 18.7 25,525 24,312 Taxes 9 -1,090 -5,667 -693 Profit for the period 3,523 1,871 88.3 19,858 23,619 * IAC = items affecting comparability 31 Oct 2007

  20. Cash flow development MSEK 31 Oct 2007

  21. Return on equity 30% Rolling 4-quarter IFRS excl IAC 25% 20% Rolling 4-quarter Sw GAAP excl IAC 15% Average 4-years (16 10% quarter) Sw. GAAP. IFRS from Q4 5% 2004. Excl. IAC Requirement 15% 0% 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 31 Oct 2007

  22. Financial targets and outcome Key Ratio Targets Q3 2007 Return on Equity (RoE) 20.5%1 15 % on average equity Return on Net Assets(RoNA, excl. IAC) 11 % before tax (= 15 % RoE recalculated into the Groups RoNA requirement) 15.7%* Cash flow interest coverage after maintenance investments 3.5 – 4.5 times 7.0* Credit Rating A2/A- Stable outlook Single A category rating Dividend pay-out 40-60 % 40 %2 1) Q3 2007 figure = LTM 2) Paid in May 2007 31 Oct 2007

  23. EBIT Q3 2007 vs Q3 2006 Millions of SEK 6 000 648 619 5 000 4 557 60 942 540 356 4 000 3 304 3 000 2 000 1 000 0 Q3 2006 Price Volume O&M Sales and Write-downs Other Q3 2007 admin 31 Oct 2007

  24. EBIT 9M 2007 vs 9M 2006 31 Oct 2007

  25. EBIT Q3 2007 vs Q3 2006 – secondary segments VTS= Vattenfall Trading Services 31 Oct 2007

  26. EBIT 9M 2007 vs 9M 2006 – secondary segments Millions of SEK VTS= Vattenfall Trading Services 26 000 2 651 -1 214 Sales 24 000 VTS 21 827 756 21 225 22 000 1 383 1 279 20 000 457 134 18 000 16 000 14 000 12 000 10 000 8 000 6 000 4 000 2 000 0 Q1-Q3 2006 Generation Heat Networks Markets Other Q1-Q3 2007 31 Oct 2007

  27. Hedging position as of 30 September 2007 % hedged of planned electricity generation (percentage values are rounded) 31 Oct 2007

  28. Highlights Q3 2007 - Nordic • EBIT almost flat compared with Q3 2006 • 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. 31 Oct 2007

  29. Key data – BG Nordic 31 Oct 2007

  30. Highlights Q3 2007 - 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 Q3 2006 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. 28-33 million tonnes. Estimated cost (after tax) totals EUR 400-500 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 31 Oct 2007

  31. Key data – BG Germany 31 Oct 2007

  32. Highlights Q3 2007 - 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. 31 Oct 2007

  33. Key data – BG Poland 31 Oct 2007

  34. Consolidated balance sheet Amounts in MSEK30/9/07 30/9/06 Change 31/12/06 IFRS IFRS % Non-current assets 257,489 266,242 -3.3 251,893 Current assets 67,127 61,543 9.1 71,273 Total assets 324,616 327,785 -1.0 323,166 Equity 119,679 94,118 27.2 107,674 Interest-bearing liabilitites66,34172,222-8.1 71,575 Interest-bearing provisions 52,280 48,412 8.0 49,217 Pension provisions 17,424 17,3450.5 16,877 Deferred tax liabilities 25,403 40,104 -36.7 29,875 Other non-interest-bearing liabilitites 43,489 55,584 -21.8 47,948 Total equity and liabilities 324,616 327,785 -1.0 323,166 31 Oct 2007

  35. Net debt development Acquisition of Bewag and GZE shares Acquisition of Elsam shares SEK million Dividend paid Capital Securities SEK 9.1 billion 31 Oct 2007

  36. Questions & Answers 31 Oct 2007

  37. Backup slides

  38. Consolidated income statement Amounts in MSEK9M 2007 9M 2006 Change IFRS IFRS % Net sales 105,310 96,374 9.3 Cost of products sold 75,911 67,180 13.0 Gross profit 29,399 29,194 0.7 Operating profit (EBIT) 21,225 21,827 -2.8 Operating profit, excl. IAC*21,11521,418 -1.4 Financial income 2,103 2,319 -9.3 Financial expenses -4,095 -3,70010.7 Financial net -1,992 -1,381 -44.2 Profit before taxes 19,233 20,446 -5.9 Taxes -2,223 -7,197 -69.1 Profit for the period 17,010 13,249 28.4 * IAC = items affecting comparability 31 Oct 2007

  39. Consolidated cash flow statement Amounts in MSEKQ3 2007 Q3 2006 Change FY 2006 LTM IFRS IFRS % Funds from operations (FFO)6,002 5,625 6.7 35,673 32,667 Change in working capital 261 1,769 -85.2 -466 1,290 Cash Flow from operating activities 6,263 7,394 -15.3 35,207 33,957 Investments -4,310 -4,749 -9.2 -16,534 -18,327 Divestments239289 -17.3 1,720 935 Cash and cash equivalents in aquired/divested companies2 39 -94.9 -686 10 Cash Flow from investing activities -4,069 -5,107 -20.3 -15,647 -17,382 Cash Flow before financing activities 2,194 2,287 -4.1 19,560 16,575 Cash Flow from financing activities -8,259 -634 -10,742 -18,870 Cash Flow for the period -6,065 1,653 8,818 -2,295 Net debt at the end of the period -44,524 -55,380 -19.6 -49,407 -44,524 31 Oct 2007

  40. Key ratios Key Ratios(% unless otherwise stated) Q3 2007 Q3 2006 LTM RoNA (1) 15.7 15.7 RoE (1) 20.5 20.5 Operating margin 14.4 11.8 18.3 Pre-tax profit margin 11.1 10.6 16.8 Cash Flow interest coverage aftermaintenance investments, times 4.7 6.9 7.0 FFO/net debt (1) 69.0 69.0 Equity/assets ratio 36.9 28.7 36.9 Net Gearing - Net debt/equity, times 0.37 0.59 0.37 Capitalisation - Net debt/net debt + equity 27.1 37.0 27.1 1) Q3 2007 value = LTM 31 Oct 2007

  41. Net asset development Consolidation of Danish assets Acquisition of Elsam shares MSEK Acquisition of Bewag and GZE shares 31 Oct 2007

  42. Break down of group liquidity Amounts in SEK million As of Sep 30, 2007 Treasury Germany Poland NordicTotal % Cash and bank 968 1,034 467 594 3,063 14 Interest-bearing investments 4,683 5,419 63 316 10,481 48 Special Funds 2,578 2,578 12 Brunsbüttel 5,335 5,673 26 Shares 22 22 Total 5,651 14,389 531 909 21,480 100 Undrawn committed credit facilities amount to 9,577 SEK million and other undrawn credit- and overdraft facilities amount to 10,859 SEK million. 31 Oct 2007

  43. Break down of group debt Amounts in SEK million As of Sep 30, 2007 Treasury Germany Poland Nordic Total % Subordinated perpetual Capital Securities 9,082 9,082 14 MTN 839 839 1 EMTN 30,526 30,526 46 Liabilities to assoc. companies 6,909 4,261 11,170 17 Liabilities to minority shareholders 49 5,132 5,181 8 Bank loans and others 559 6,433 142 2,410 9,544 14 Total 47,915 10,743 142 7,542 66,341 100 31 Oct 2007

  44. Sep 30, 2007 Sep 30, 2006 Duration (years) 3,71) 3,7 Average time to maturity (years) 6,51) 6,1 Net debt (SEK bn) 44,5 55,4 Vattenfall debt maturity profile SEKmillion 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. 31 Oct 2007

  45. Adjusted Gross & Net debt 31 Oct 2007

  46. Development of adjusted net debt 31 Oct 2007

  47. Group provisions down by 10.2% 30 Sept 2007 SEK 95,107 million 30 Sept 2006 SEK 105,861 million 31 Oct 2007

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