Fossil-free living within one generation€¦ · Our milestones towards fossil-free living within...

Fossil-free living within one generation

Vattenfall AB – Group presentation 2020

Agenda

2

Section Page

Introduction Vattenfall 3This is Vattenfall

Vattenfall’s Group executives

Vattenfall’s value chain

Market trends

Strategy 8Strategy & strategic targets

Investment plan 2019-2020

Financials 13Financial targets

Financial highlights 2018

Sustainability 16UN’s sustainable development goals

Impact our CO2 emissions throughout the value chain

Attractive partner

Operating segments 21Introduction operating segments

Customers & Solutions

Power Generation

Wind

Heat

Distribution

Introduction Vattenfall

3

Stornorrfors

Harsprånget

Uppsala

Forsmark

BerlinAmsterdam

This is Vattenfall

1 Operating profit excluding items affecting comparability2 The value has been adjusted compared with information previously published in Vattenfall’s financial reports

Basic facts

• One of Europe’s largest

producers of electricity and

heat

• 100% owned by the Swedish

state

• Main products: electricity, heat,

gas and energy services

• Main markets: Sweden,

Germany, Netherlands,

Denmark and the UK

• Almost 20,000 employees

4

Key data

SEK bn FY 2019 FY 2018

Net sales 166.4 152.1

Underlying operating profit1 25.1 19.9

Operating profit (EBIT) 22.1 17.6

Profit for the period 14.9 12.0

Return on capital employed, % 8.5 7.0

Return on capital employed

excl. items affecting comp., %9.6 7.9

Funds from operations/

adjusted net debt, %26.5 20.7

TWh FY 2019 FY 2018

Electricity generation 130.3 130.3

Customer sales, electricity 119.0 119.2

Customer sales, heat 17.1 18.3

Customer sales, gas 59.2 60.72

Wind

Biomass

Hydro

Gas

Largest facilities are marked with a circle

Nuclear

Coal

Solar

District heating

Location of our operations and major plants

Ringhals

Moorburg

DanTysk

Sandbank

Thanet

Pen y Cymoedd

Horns Rev 3

Vattenfall Group executives

1 Tuomo Hatakka will retire at the end of 2020.2 Niek den Hollander has decided to leave Vattenfall and will stay on until 31 March 2020. 5

President and CEO

Magnus Hall

CFO Functions

Anna Borg

Human Resources

Kerstin Ahlfont

Legal & CEO office

Anne Gynnerstedt

Communications

Karin Lepasoon

Strategic Development

Andreas Regnell

Operating Segment

Heat

BA Heat

Tuomo

Hatakka1

Operating Segment

Customers & Solutions

BA Customers

& Solutions

Martijn Hagens

Operating Segment

Wind

BA Wind

Gunnar

Groebler

Operating Segment

Power Generation

BA Generation

Torbjörn

Wahlborg

Operating Segment

Distribution3

BA Distribution

Annika Viklund

BA Markets

Niek den

Hollander2

3 The electricity distribution operations are regulated by the Swedish Electricity Act

(Ellagen) and the German Energy Industry Act (Energiewirtschaftsgesetz), and are

unbundled from Vattenfall’s other operations.

Vattenfall’s value chain

Production Electricity distribution Sales of electricity,

heat and gas

District heating Energy services &

decentralised generation

Production from

• Hydro

• Nuclear

• Coal

• Natural gas

• Wind

• Solar

• Biomass

• Waste

Actively phasing out

fossil-based production

• Guarantees secure

supply via well-

functioning distribution

networks and smart

network solutions

• Enables customers to

feed self-generated

electricity into the grid

(“prosumers”)

• Flexibility services to

both electricity

producers and

consumers to optimise

network functionality

• Sells electricity, heat

and gas to consumers

and business

customers

• Focuses on various

price and service

models, and gives

customers the

opportunity to

understand and reduce

their environmental

impact

• Drives the

transformation towards

fossil-free heating and

cooling solutions

together with partners,

cities and regions

• One of Europe’s

largest producers and

distributors of district

heating

Offers energy services

• Heat pumps

• Solar panels

• Charging solutions for

electric vehicles

• Battery storage

• Network services

• Smart meters

Provides marketplaces

and access to

marketplaces where

customers can buy and

sell electricity

6

Our beliefs about the future

Sustainability is

the business –

and a

prerequisite for

access to

customers,

competence and

investors.

1

To best serve the

needs of

customers, the

ability to deliver

simple solutions

in an increasingly

complex energy

landscape is

required.

2

Further

electrification is a

key enabler of

fossil-free living

and, given the

pace required,

demand for fossil-

free electricity

and infrastructure

will increase

significantly.

3

Digitalization of

the entire energy

value chain is

required to

leverage flexibility

and serve

customers in a

fossil free, robust

and cost efficient

energy system.

4 6

Cost efficiency

and

competitiveness

is a prerequisite

for value creation

and growth.

5

New

competencies,

speed in learning

and diverse and

inclusive teams

are critical in the

energy transition.

Strategy

8

Four strategic focus areas become five

9

A strategy for leading the energy transition

Strategy and strategic targetsOutcome of our strategic targets in 2019

1 Including the heat operations in Hamburg, which have been sold and where emissions

amounted to 1.1 Mtonnes during the period January-September.

Strategic targets to 2020 FY 2019 Comments

Customer engagement, Net Promoter

Score relative (relative customer

satisfaction): +2

+1Improved performance by Vattenfall

and peers

Commissioned new renewables capacity

2016-2020: ≥2,300 MW1 226 MW

Commissioning of Horns Rev 3

(407 MW) and Slufterdam (29 MW)

Absolute CO2 emissions, pro rata: ≤21

Mtonnes19.31 Mtonnes Lower coal-fired generation

Return On Capital Employed (ROCE):

≥8%8.5%

Higher gross margin in Power

Generation and capital gain

(Hamburg)

Lost Time Injury Frequency (LTIF): ≤1.25 2.1Unsatisfactory level, major ongoing

efforts

Employee Engagement Index: ≥70% 69% Strong improvement

10

Our milestones towards fossil-free living within one generation

Fossil-free energy

solutions available

for all our customers

Our operations in

the Netherlands are

coal-free

2020 2023 2025 2035

We provide electric

charging for half a

million cars

10 GW of third party

renewables capacity

under management

600 MW additional,

flexible hydro

capacity enables

more renewable

generation

We generate fossil-free

electricity to power 30

million homes

We pilot 100 MW of

green hydrogen gas

production from fossil-

free electricity

The Nordic production

fleet is free from fossil

fuels

We are not done,

more to come…

2030

Coal is phased out

from all our heat

operations

Our emissions are

reduced by 40%, in

line with required level

to limit global warming

to below 2˚C

11

61%

23%

16%

Growth, 35bn SEKMaintenance, 13bn SEKReplacement, 9bn SEK

37%

31%

12%

11%

9%

Netherlands, 13bn SEK

Denmark, 11bn SEK

Sweden, 4bn SEK

UK, 4bn SEK

Germany, 3bn SEK

Investment plan 2020-2021

12

Total capex

2020-2021

58bn

SEK

70%

11%

8%

8%

3%

Wind power, 25bn SEK

Heat grids, 4bn SEK

Distribution grids, 3bn SEK

New businesses, 3bn SEK

Solar energy & batteries, 1bn SEK

Growth capex per

technology 2020-2021

35bn

SEK

Growth capex per country

2020-2021

35bn

SEK

1 Mainly decentralised solutions, energy storage, e-mobility and initiatives like HYBRIT

1

Financials

13

Financial targets

1 5–7 years2 The key ratio is based on average capital employed

14

Financial

targets

Targets over a

business cycle1

Outcome

2019

Comment

Profitability Return on capital

employed: ≥8%

8.5%2 The return on capital employed

was 8.5% (7.0%). Higher gross margin

in operating segment Power Generation

and capital gain from divestment of

district heating operations in Hamburg

contributed positively.

Capital

structure

FFO/adjusted

net debt:

22%–27%

26.5% FFO/adjusted net debt increased to

26.5% (20.7), mainly due to higher

EBITDA as a result of higher achieved

prices in operating segment Power

Generation and lower paid tax.

Dividend

policy

Dividend:

40%–70% of the

year’s profit

after tax

7.2 billion

SEK

The Board of Directors proposes

payment of a dividend of SEK 7.2 billion

for 2019 corresponding to 55% of profit

for the year

Financial highlights 2019

• Underlying EBIT increased by SEK 5.2 bn to SEK 25.1 bn. Higher contribution from Power Generation and Wind was partly offset by

lower contribution from Distribution due to the storm ”Alfrida”, higher transmission costs and depreciation

• EBIT increased by SEK 4.5 bn to SEK 22.1 bn and Profit for the year increased by SEK 2.9 bn to SEK 14.9 bn

• Adjusted net debt increased by SEK 19.7 bn, mainly due to negative cash flow after investments, implementation of IFRS 16 Leases,

dividends as well as higher provisions for pensions and nuclear power

• FFO/Adjusted net debt at 26.5% was at the upper level of the target range of 22-27%

• Return on capital employed (ROCE) at 8.5% was above the target of 8%

15

22.125.1

FY 2018

12.0

FY 2019

17.619.9

14.9

Underlying EBIT (SEK bn) Profit for the year (SEK bn)

EBIT (SEK bn)

20.7%

FY 2018

112.3

26.5%

FY 2019

132.0

FFO/Adjusted net debt (%)

Adjusted net debt (SEK bn)

Earnings Adjusted net debt

Sustainability

16

UN’s Global Sustainable Development Goals

17

• Invest in the expansion of renewable energy sources such as offshore

wind, onshore wind, and solar, all while striving to reduce costs

• Reduce emissions of fossil-fuel plants in line with what is required by

climate science to limit warming to 2° or less

• Partner to keep welfare recipients from having their electricity or heat

service disconnected

• Enable customers to participate in the energy transition via

decentralised solutions like solar power, heat pumps, and microgrids

• Enable cities to decarbonise by expanding our district heating

networks and developing fossil-free decentralised energy solutions

• Invest to improve grid stability and reliability while keeping costs down

and enabling integration of renewable energy sources

• Facilitate further integration of renewable energy in local electricity and

heating networks through our investments in grids, infrastructure, and

technologies like power-to-heat, which uses excess renewable

electricity in district heating networks

• Expand e-mobility offerings and partnerships with car- and ridesharing

services to reduce emissions from transport

• Strengthen guidelines for responsible purchasing and human rights

policies in our supply chain via our Code of Conduct for Suppliers

• Strive to achieve best-in-class efficiency in all our operations,

maximising production while minimising fuel consumption and waste

• Our Environmental Product Declarations and Life Cycle Assessments

enable customers to make smart choices.

• Commit to enable fossil-free living within one generation

• Conduct studies to understand climate impacts on our operations and

invest in mitigating activities, for example strengthening hydro power

dams against potential heavier rainfall, or installing underground

electricity distribution lines to prevent damage from an increase in

severe storms

• Form partnerships with energy-intensive industries like cement,

refineries, and steel manufacturing to reduce their CO2 emissions

• Collaborate with cities to use our industry knowledge and co-develop

ambitious yet feasible city-specific climate neutrality roadmaps, such as

the coal-exit feasibility study done with the City of Berlin

Vattenfall understands businesses and industries will play a decisive role in the achievement of the UN’s Global Sustainable Development

Goals (SDGs). Our activities contribute to the achievement of all SDGs, either directly through our operations, or indirectly through our supply

chain. However, we have identified the six most relevant SDGs for Vattenfall where we can have the greatest global impact.

Impact our CO2 emissions throughout the value chainEnabling fossil-free living within one generation

1 Primarily related to natural gas sales2 EPD – Environmental Product Declaration – a third-party environmental declaration in accordance with

ISO 140253 LCA – Life cycle Assessment

18

Customers1

~ 5 Mt

~ 19 Mt

~ 14 Mt

CO2 – emissions 2018

• Transparency on climate footprint

• Collaboration for phasing out fossil fuels

• Incentivising CO2 reductions in project design and material

choices

• Fossil-free in the Nordic region by 2025

• Coal phased out 2030 in the heat portfolio

• 2030 emissions-reduction trajectory aligned with climate science

• Fossil-free within one generation

• Products and services with clear climate footprint (EPD2 / LCA3)

• Renewable decentralised solutions

• Low carbon district heating

• Fossil-free alternatives to natural gas, such as biogas

• Climate targets together with cities

• E-mobility

• Electrification of industries

Suppliers

Own business

Our goal is to ensure social responsibility and sustainability throughout the supply chain

A sustainable supply chain is a

competitive advantage

Increased credibility leads to more

business opportunities

Internal and external actions and

continued focus needed

• Commitment to fossil-free living

• CO2 target aligned with 2° climate

science

• Partnering to decarbonize industry

• Partnering for sustainable supply

e.g. WindEurope & Bettercoal

• Increased dialogue with

stakeholders e.g. NGO

• Increase internal awareness

and buy-in

• Conduct enhanced due diligence on

targeted, high-risk suppliers

• Establish process for progress and

assessment reporting, measurement

and follow up

19

Reducing risk

Reducing cost

Improving reputation

An attractive partner in the energy transitionExamples of partnerships

20

Research project for

a carbon dioxide-

free steel industry

Market place for

energy sharing

Cooperation in large

scale bio-diesel

production

Support of a major

enterprise for

battery production

in Sweden

Study on electrified

cement production

Northern Europe’s

largest charging

network for

e-vehicles

Electrification of

mines and smelters

Storage projects at a

number of wind parksCo-operation for

e-mobility

Powering

sustainable data

centres

Operating segments

21

Introduction to operating segmentsOverview of operations and major assets

Our operating segments

• Customers & Solutions – Responsible for sales of electricity, gas

and energy services in all of Vattenfall’s markets

• Power Generation – Comprises the Generation and Markets

Business Areas. Responsible for Vattenfall’s hydro and nuclear

power operations, maintenance services business, and

optimisation and trading operations including certain large

business customers

• Wind – Responsible for development and operation of

Vattenfall’s wind farms as well as large-scale and decentralised

solar power and batteries

• Heat – Responsible for Vattenfall’s heat business (district heating

and decentralised solutions) and gas and coal-fired condensing

plants

• Distribution – Responsible for Vattenfall’s electricity distribution

operations in Sweden, Germany (Berlin) and the UK

22

Customers & SolutionsLeading market position in the retail segment in Sweden, the Netherlands, Hamburg and Berlin

1 Operating profit excluding items affecting comparability2 NPS was reported for the first time in 2016

Overview Key data

• One of the market leaders in Sweden

with close to 900,000 electricity

contracts

• One of the market leaders in the

Netherlands with 3.6 million electricity

and gas contracts

• Leading position in Berlin and Hamburg

as an electricity supplier

23

Highlights 2019

• The customer base grew by 5.1% to

10.2 million contracts mainly due to

growth in Germany and acquisition of

Delta Energie in the Netherlands

• Expansion of InCharge charging

network, which has a total of 14,900

charging points

• Launch of Flexpower, a public smart

charging network for e-vehicles, in

cooperation with the city of Amsterdam.

FY 2019 FY 2018

Net sales (SEK bn) 89.9 81.3

External net sales (SEK bn) 87.3 78.9

Underlying EBIT1 (SEK bn) 1.3 1.3

Sales of electricity (TWh) 89.5 88.3

- of which, private customers 28.0 27.4

- of which, resellers 6.5 4.9

- of which, business customers 55.0 56.0

Sales of gas (TWh) 54.2 55.5

Net Promoter Score (NPS)

relative2 +1 +1

Electricity customers 6,930,000 6,600,000

Gas customers 2,470,000 2,350,000

5%

Share of underlying EBIT

Power GenerationOne of Europe’s largest providers of fossil-free electricity

1 Operating profit excluding items affecting comparability

Overview Key data• Operates a portfolio with 7.2 GW nuclear

capacity and 11.7 GW hydro power

capacity, mainly in Sweden but also in

Finland and Germany

• One of Europe’s largest providers of

fossil-free electricity, with a total

generation of 89.2 TWh, out of which 35.8

TWh from hydro power and 53.4 TWh

from nuclear power

• Provides asset optimisation services and

market access, and a leading player in

PPA markets in northwest Europe

24

Highlights 2019

• Closure of Ringhals reactor 2 and

preparing for the decommissioning of

Ringhals reactor 1 in 2020.

• Sale of 10 TWh nuclear production rights

to PreussenElektra in Germany

• Acquisition of Senfal, a Dutch energy

services company

FY 2019 FY 2018




Electricity generation (TWh) 89.2 90.5

Customer sales of electricity

(TWh)27.0 28.7

- of which, resellers 22.8 24.6

- of which, business customers 4.2 4.1


58%

Stornorrfors power plant, Sweden

WindOne of the biggest renewable energy players in Europe

1 Operating profit excluding items affecting comparability

Overview Key data

• One of the largest producers of offshore

wind power in the world

• One of the largest producers of onshore

wind power in Denmark and the

Netherlands

• Operates a portfolio of more than 1,100

wind power turbines with total installed

capacity of approximately 3.3 GW

across five countries

25

Highlights 2019

• Inauguration of the Horns Rev 3

offshore wind farm (407 MW) in

Denmark

• Winning bid for the subsidy free

Hollandse Kust Zuid 3 & 4 offshore wind

farm (~750 MW) in the Netherlands

FY 2019 FY 2018





Investments (SEK bn) 9.2 5.6


63%

36%

1%

Offshore Onshore

Solar

3.3 GW

33%

23%

13%

12%

20%

UK Denmark

The Netherlands Sweden

Germany

3.3 GW

Split by type of generation Split by geography

16%

Slufterdam onshore wind farm, the Netherlands

Operating wind farms, construction and pipeline

26

Name Capacity (MW) Commissioning Country

Hollandse Kust Zuid 1-4 ~1,500 2022/2023 NL

Vesterhav projects 344 2023 DK

Thanet Extension 272 2024 UK

Norfolk Vanguard 1,800 2027 UK

Norfolk Boreas 1,800 2028 UK

South Kyle 240 2022 UK

Jaap Rodenburg 38 2021 NL

NK II ~150 2021 DK

Nørre Økse Sø ~50 2021 DK

Total >5 GW

Name Capacity (MW) Country

Thanet 300 UK

Ormonde (51%) 150 UK

Aberdeen Bay 97 UK

Kentish Flats 90 UK

Kentish Flats extension 50 UK

Pen y Cymoedd 228 UK

Ray 54 UK

Lillgrund 110 SE

Stor-Rotliden 78 SE

Horns Rev 3 407 DK

Horns Rev 1 (60%) 158 DK

Klim (98%) 67 DK

DanTysk (51%) 288 DE

Sandbank (51%) 288 DE

Alpha ventus (26%) 60 DE

Nordzee Wind (50%) 108 NL

Prinsess Alexia 122 NL

Other onshore 651

Total 3,311 MW

Name Capacity (MW) Commissioning Country

Kriegers Flak 605 2021 DK

Wieringermeer 180 2019/2020 NL

Wieringermeer ext. 118 2020 NL

Moerdijk 27 2021 NL

Haringvliet 22 2020 NL

Nieuwe Hemweg 19 2021 NL

Blakliden + Fäbodberget 353 2022 SE

Total 1,736 MW

In operation In construction

Pipeline

Offshore Onshore

Pen y Cymoedd

ThanetKentish Flats + Kentish Flats Ext.

Ray

Ormonde

Prinsess Alexia

Sandbank DanTyskHorns Rev 1

Klim

Lillgrund

Stor-Rotliden

Nordzee Wind

Alpha Ventus

Wind farms above >50 MW

% Vattenfall ownership

Aberdeen Bay

Horns Rev 3

HeatOne of Europe’s largest producers and distributors of heat

Overview Key data

• One of Europe’s leading producers and

distributors of heat with approximately

2.2 million end customers

• The heat production will phase out

coal and peat by 2030 and replace

fossil gas by 2050, at the latest

• Decentralised operations with 75,000

customers

27

Highlights 2019

• Transfer of district heating operations

in Hamburg completed

• Closure of the coal-fired power plants

Hemweg 8 in Amsterdam and Reuter

C in Berlin

• Switch from peat to wood pellets as

fuel in heat-only-boiler in Uppsala.

FY 2019 FY 2018




Sales of heat (TWh) 17.1 18.3


CO2 emissions2 (Mtonnes) 19.3 22.0

Nitrogen oxide, NOx

(ktonnes)7.43 9.9

Sulphur dioxide, SO2

(ktonnes)2.33 4.2

Particulates (ktonnes) 0.13 0.2


2%

1 Operating profit excluding items affecting comparability2 CO2 emissions are pro rata3 Excluding the divested heat operations in Hamburg

DistributionLeading owner and operator of electricity distribution networks in Sweden and Berlin, Germany

1 Operating profit excluding items affecting comparability2 SAIDI: System Average Interruption Duration Index3 SAIFI: System Average Interruption Frequency Index

Overview Key data

• Leading owner and operator of

electricity distribution networks in

Sweden

• Approximately 3.3 million business and

household customers in Sweden and in

Berlin, Germany

28

Highlights 2019

• Swedish Energy Markets Inspectorate

(Ei) announced significantly lower

revenue frames for the next regulatory

period, reducing the scope for needed

investments

• Major disruptions after the storm

“Alfrida” with related costs of

approximately SEK 800 million.

FY 2019 FY 2018




Investments (SEK bn) 7.2 6.6

SAIDI2 (minutes/customer)

Sweden 439 187

Germany 10 15

SAIFI3 (number/customer)

Sweden 2.4 2.9

Germany 0.2 0.3


19%

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