presentation - analyst conference call, vattenfall q3 report 2012

Vattenfall Q3 and 9M 2012 results Øystein Løseth, CEO and Ingrid Bonde, CFO

Conference Call, 30 October 2012

2 | Conference Call | 30 October 2012

Q3 Highlights (1)

• Underlying operating profit SEK 1.3 bn below last year - 12% higher production volumes and lower OPEX only partially

compensated lower prices, lower trading and sourcing results and lost EBIT due to divestments in 2011

• Reported operating profit heavily impacted by SEK 8.6 bn write-down of Thermal assets- Mainly due to lower clean spark spreads

• New organization as of 1 November 2012- New Business Division Nuclear Power. Business Division Renewables

merges into BD Sustainable Energy Projects (renamed from BD Asset Development) and BD Production

- Two operating segments: Generation and Distribution and Sales


Q3 Highlights (2)

• New capacity added - Diemen 34 in NL connected to grid (gas, 435 MWel, 260 MWth)- Boxberg R unit in Germany inaugurated (lignite, 675 MWel)

• New cost reduction target for 2013- Target to cut costs by a further SEK 3 billion compared with 2012- Great progress on current SEK 6 billion cost reduction programme:

• SEK 5.5 billion achieved as per 30 September 2012

• Vattenfall’s owner, the Swedish state, will decide on new financial targets at an Extraordinary General Meeting on 28 November


• Decrease in electricity market prices and in particular the sharp decrease in clean spark spreads lead to lower profitability of gas-fired power plants (both existing and new build)- Higher gas/oil prices, lower CO2 prices, increase of subsidized

renewable electricity production- Shrinking margins and less production (plants are increasingly out of

the money)

• Impairment charges Q3 2012:- SEK 8.6 billion Thermal assets(mainly in the Netherlands) of which SEK 3.6 billion goodwill

Impairment of Thermal assets and related Goodwill

EUR/MWh

German Clean Spark Spreads (50% efficiency)

-20

-15

-10

-5

0

5

10

15

20

Jun-11

Aug-11

Oct-11

Dec-11

Feb-12

Apr-12

Jun-12

Aug-12

Oct-12

CSS Peak 2013 CSS Base 2013


Decline in Nordic spot prices / Improved hydro balance

• Sharp decline in Nordic spot prices Q3-12 vs. Q3-11

• Continued strong Nordic hydrological balance (+12.6 TWh at the end of Q3)

• German and Dutch spot prices declined but to a lesser extent

Monthly Spot Average Hydrological balance

102030405060708090

Nord Pool Spot EPEX APX

0

200

400

600

800

1000

-60

-40

-20

0

20

40

System Price Hydro Balance 200720032002 2004 2005 2006 2008 2009 2010 2011 2012

EUR/MWh TWh SYSSEK/MWh

-11.5

43.5 (49.2)

EPEX

-41.9

20.9 (35.9)

Nord PoolEUR/MWh APX

Q3-12 (Q3-11) 46.3 (50.4)

% -8.2


Stable electricity futures and commodity prices

• Electricity futures prices almost unchanged Q3-12 vs. Q2-12 on all Vattenfall markets but lowercompared with 2011.

• Fairly stable coal and gas prices Q3-12 vs. Q2-12

• CO2 prices on average 7.6€/ton

Electricity futures prices Commodity prices

0

20

40

60

80

100

120

140

Jan-1

0Mar-

10May

-10Ju

l-10

Sep-10

Nov-10

Jan-1

1Mar-

11May

-11Ju

l-11

Sep-11

Nov-11

Jan-1

2Mar-

12May

-12Ju

l-12

Sep-12

0

10

20

30

40

50

60

70

Oil (USD/bbl), Brent Front M onth Coal (USD/t), API 2, Front YearEmission allowances CO2 (EUR/t), Dec 07-11 Gas (EUR/M Wh), NBP, Front Year

EUR/MWh USD EUR

35

40

45

50

55

60

65

Jan-1

0Apr-

10Ju

l-10

Oct-10

Jan-1

1Apr-

11Ju

l-11

Oct-11

Jan-1

2Apr-

12Ju

l-12

Oct-12

NP 13 NP 14 EEX 13EEX 14 APX 13 APX 14


Higher generation output, higher heat and gas sales

• 12% higher electricity generation output (39.7 TWh in Q3-12 vs 35.5 TWh in Q3-11)- Fossil generation increased due to higher availability - Nuclear generation increased due to higher availability of Ringhals and

timing of planned outages- Hydro power generation increased due to high reservoir levels

• Lower heat and gas sales due to warmer weather

TWh TWh

1.0

9.410.8

18.5

0.9

8.28.9

17.5

02468

101214161820

Fossil Nuclear Hydro Wind & other

Q3 2012: 39.7 Q3 2011: 35.5

5.0

2.83.8

5.5

0123456789

10

Heat sales Gas sales

Q3 2012 Q3 2011


7773

44

100 100

63

0

10

20

30

40

50

60

70

80

90

100

2012 2013 2014

Nordic region Continental Europe

Large part of generation already hedged

55

47

2012

55

46

2013

53

44

2014EUR/MWh

Nordic region

Continental Europe

% hedged of planned electricity generation(2012: remaining part of the year)


• EU stress tests- Swedish nuclear power plants generally came out very strongly in the country

peer-review process of ENSREG (European Nuclear Safety Regulator Group)- Swedish Radiation Safety Authority (SSM) will provide a national action plan

by year-end for continued international review. This is based on action plans provided to SSM by the license holders on 15 September

- It is not possible to determine any potential additional investments needed until SSM has concluded its work with the stress tests

• Greenpeace activists broke in at Ringhals and Forsmark- On 9 October activists from Greenpeace scaled the outermost fence of the

Ringhals and Forsmark nuclear plants. They, however, only reached the premises with a lower security level. Security measures at both plants worked as they are intended to.

• Reactor vessel at Ringhals 2 without defects- extended testing showed no damage or shortcomings in the reactor vessel

compared to the defects found in the Belgian reactor Doel 3

Nuclear update

FinancialsIngrid Bonde, CFO


Q3 2012 Financial highlights

-1,345-3,951Profit after tax

-37.49,8556,172Cash flow (FFO)

-19.9141,089**114,143Net debt

-2,800

5,774

4,447

9,593

38,276

Q3 2011

-835

4,517

-2,735

10,564

33,679

Q3 2012MSEK Change (%)

Net Sales -12.0

EBITDA 10.1

EBIT -

Underlying EBIT* -21.8

Financial items, net -

* Underlying profit: EBIT excluding Items affecting comparability

** As of 31 December 2011


Underlying EBIT Q3 per operating segment

5,351

Q3 2011

4,431

Q3 2012MSEK

Generation

• Underlying EBIT decreased by 920 MSEK

- Lower achieved prices – mainly in the Nordic market

- Higher production volumes

- Lower trading result (exceptionally good results in 2011)

1,012

Q3 2011

516

Q3 2012MSEK

Distribution and Sales

-75

Q3 2011

-394

Q3 2012MSEK

Renewables


- Lost earnings contribution from divested operations in Belgium, Poland and Finland

- Improved profitability within B2C


- Poorer wind conditions in the UK and Sweden

- Repair costs pertaining to Thanet cablein the UK


<0.1

21.0

-1.2

23.5

+1.4 -1.7

-1.6

21.0

13.1

10.4

-3.1 +3.8

EBIT 9M2011

IAC UnderlyingEBIT 9M

2011

Electricityprice

Electricityvolume

Costs Structure Tradingand

Sourcing

Other UnderlyingEBIT 9M

2012

IAC EBIT 9M2012

Development of underlying EBIT 9M 2012

bn SEK


9M 2012 Financial highlights

102.95,31310,781Profit after tax

-18.828,13622,836Cash flow (FFO)

-19.9141,089**114,143Net debt

-6,283

23,450

13,050

39,091

130,587

9M 2011

-6,493

21,010

20,996

44,120

119,376

9M 2012MSEK Change (%)

Net Sales -8.6

EBITDA 12.9

EBIT 60.9

Underlying EBIT* -10.4

Financial items, net -3.3

* Underlying profit: EBIT excluding Items affecting comparability

** As of 31 December 2011


Cash flow development Q3 2012

bn SEK

+1.2

-4.9

-2.7

10.6

-1.9

-6.2

7.9

Cash flow fromoperations

MaintenanceCapex

Free cash flow Grow thinvestments

Divestments Cash f low fromfinancing activities

Cash f low for theperiod


Key credit metrics

• Gross debtdecreased by SEK 9 bn to SEK 161.3 bn

• Net debtdecreased by SEK 27 bn to SEK 114.1 bn

• Adjusted net debtdecreased by SEK 31.6 bn to SEK 144.4 bn

Comparison with 31 December 2011

3.22.4Adj.net debt/ EBITDA (x)

21.7

27.1

4.8

FY 2011

22.8

28.9

4.7

Q3 2012Key credit metrics

FFO Interest cover (x)

FFO/net debt (%)

FFO/adj. net debt (%)

0

20

40

60

80

100

120

140

160

180

200

30.09

.2010

31.12

.2010

31.03

.2011

30.06

.2011

30.09

.2011

31.12

.2011

31.03

.2012

30.06

.2012

30.09

.2012

Gross DebtNet DebtAdj. Net Debt

For calculation of adjusted net debt, see Appendix page 26

Rolling 12 months values

bn SEK


Concluding remarks

Vattenfall’s key strengths:

• Strong owner, clear operating mandate• Commitment to financial stability• Diversified production portfolio, competitive low cost production assets

(hydro, nuclear, lignite). Low CO2 exposure in the Nordic market.• Good geographical base and strong market positions (Northwestern

Europe)• Strong liquidity position• Prudent hedging policy• Large end-customer base• Significant share of regulated business• Proven execution ability (divestments, cost reduction, re-organization)

Appendix


Operating profit and underlying EBIT Q3

bn SEK

4.8

0.3

7.3

-2.7

4.5

Reported operatingprofit

Items affectingcomparability

Underlying operatingprofit

Structure Underlying operatingprofit for continuing

operations


7.34.5

-0.7

5.7

+0.4 -0.3

-1.1

-2.7

4.4

1.3-2.1 +2.5

EBIT Q32011

IAC UnderlyingEBIT Q3

2011

Electricityprice

Electricityvolume

Costs Structure Tradingand

Sourcing

Other UnderlyingEBIT Q3

2012

IAC EBIT Q32012

Development of underlying EBIT Q3

bn SEK


• Higher hydro power tax through increased tax assessment values for hydro power plants as of 1 January 2013

• Impact on Vattenfall: decreased FFO by 780 MSEK/p.a.• Swedish government bill (subject to Parliament approval in December)

- Proposal to lower the Swedish corporate income tax rate to 22%from 26.3%• Impact on Vattenfall: increased FFO by approx. 360 MSEK/p.a.• In addition, estimated SEK 3.4 billion one-off increase in net profit

Q4 2012 due to revaluation of net deferred tax liability position• Coal tax Netherlands

- Abolishment of tax exemption for the use of coal in electricityproduction (EUR 13.76/ton) as of 1 January 2013• Impact on Vattenfall: decreased FFO by approx. 25 MEUR/p.a.

Taxation changes


Strong liquidity position

41,425Available liquidity

-5,541Unavailable liquidity*

46,966Reported cash, cash equivalents & short term investments

32,103Short term investments

14,863Cash and cash equivalents

SEK millionGroup Liquidity

As of 30 September 2012

8,463Within 180 days

464Within 90 days

SEK millionDebt maturities**

*German nuclear ”Solidarvereinbarung” 2,877, Margin calls paid (CSA) 860 and others 1,804**Excluding loans from minority owners and associated companies


Committed credit facilities

31,597Total undrawn

10,050EUR 1 300 millionMulti option Facility (12-month rolling)

EUR 2 550 million

Line size

21,547RCF (maturity Jan 2016)

Amount available SEK millionCommitted credit facilities

As of 30 September 2012


Bonds issued under EMTN-programme

58%

Margin calls (CSA)5%

Loans from associated companies

6%

Loans from minority shareholders

7%

NPV of liabilities to Nuon shareholders

16%

Bank loans and other 3%

Hybrid capital5%

Breakdown of gross debt

• All public debt issued by Vattenfall AB• The debt portfolio has no currency exposure that

has an impact on the income statement. The debt in foreign currency is either swapped to SEK or booked as a hedge against net foreign investments.

• No structural subordination

Total debt 30 Sep 2012: SEK 161 billion (EUR 19 billion). External market debt SEK 114 billion.

9,92118,775Total

01,775SEK 15 bn Domestic CP

2,000

15,000

Size(MEUR)

0

9,921

Utilization(MEUR)

Debt issuing programmes

EUR 15 bn Euro MTN

EUR 2 bn Euro CP


Development of reported and adjusted net debt

*Of which: German nuclear ”Solidarvereinbarung” 2.9, margin calls paid (CSA) 0.8, others 1.8

-141.1-114.1Net debt

0.60.2Loans to minority owners of foreign subsidiaries

17.432.1Short-term investments

11.314.9Cash and cash equivalents

-170.4-161.3Total interest-bearing liabilities

-8.0-10.1Other liabilities

-10.2-11.4Liabilities to minority shareholders

-10.5-9.3Liabilities to associated companies

-30.5-26.6Present value of liability pertaining to acquisition of subsidiaries

-95.5

-8.4

Sep 302012

-102.3Bond issues and commercial papers and liabilities to credit institutions

-8.9Capital Securities

Dec 312011

Net debt(bn SEK)

-176.0-144.4= Adjusted net debt

22.941.5= Adjusted cash, cash equivalents & short-term investments

-5.8*-5.5*Unavailable liquidity

28.747.0Reported cash, cash equivalents & short-term investments

-198.9-185.8= Adjusted gross debt

9.810.5Liabilities to minority owners due to consortium agreements

7.58.6Margin calls received

3.33.7Cross currency swaps

-18.5-17.5Provisions for nuclear power (net)

-12.5-11.8Mining & environmental provisions

-22.5-22.2Present value of pension obligations

4.2

-161.3

Sep 302012

4.450% of Hybrid capital

-170.4Total interest-bearing liabilities

Dec 312011

Adjusted net debt(bn SEK)


Vattenfall debt maturity profile

These figures differ from the reported interest bearing liabilities as loans from associated companies, minority owners, margin calls received (CSA) and valuation at fair value are excluded and currency derivatives for hedging debt in foreign currency are included.

Including Hybrid capital

141.1114.1Net debt (SEK bn)

3.93.4Average interest rate (%)

5.55.6Average time to maturity (years)

3.6

30 Sep 2012

4.3

31 Dec 2011

Duration (years)

MSEK

Hybrid capital

0

10 000

20 000

30 000

40 000

2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038

Undrawn back-up facilities

Includes deferred payments for Nuon shares (MEUR):July 2013: 1,179.5July 2015: 2,071.3


Financial targets and outcome Q3 2012

2.5 times3.5-4.5 timesCash flow interest coverage after maintenance investments

11.7%*15% on average equityReturn on Equity (RoE)

40-60%

Single A category rating

Target

40% (SEK 4.4 bn)

Moody’s: A2, negative outlookS&P: A-, stable outlook

Q3 2012Key Ratio

Credit rating

Dividend pay-out

* Rolling 12 months values

presentation - analyst conference call, vattenfall q3 report 2012

Economy & Finance

gas prices q3

nordic spot prices q3

lower co2 prices

q3 highlights

vattenfall q3

unchanged q3

end of q3

electricity market prices