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Fossil-free living within one generation Vattenfall AB Group - - PowerPoint PPT Presentation

Fossil-free living within one generation Vattenfall AB Group presentation 2020 Agenda Section Page Introduction Vattenfall 3 This is Vattenfall Vattenfalls Group executives Vattenfalls value chain Market trends Strategy 8


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Fossil-free living within one generation

Vattenfall AB – Group presentation 2020

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Agenda

2

Section Page Introduction Vattenfall 3

This is Vattenfall Vattenfall’s Group executives Vattenfall’s value chain Market trends

Strategy 8

Strategy & strategic targets Investment plan 2019-2020

Financials 13

Financial targets Financial highlights 2018

Sustainability 16

UN’s sustainable development goals Impact our CO2 emissions throughout the value chain Attractive partner

Operating segments 21

Introduction operating segments Customers & Solutions Power Generation Wind Heat Distribution

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Introduction Vattenfall

3

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Stornorrfors Harsprånget Uppsala Forsmark Berlin Amsterdam

This is Vattenfall

1 Operating profit excluding items affecting comparability 2 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

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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.

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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.

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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

  • pportunity 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

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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.

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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.

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Strategy

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Four strategic focus areas become five

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A strategy for leading the energy transition

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Strategy and strategic targets

Outcome 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 +1 Improved performance by Vattenfall and peers Commissioned new renewables capacity 2016-2020: ≥2,300 MW 1 226 MW Commissioning of Horns Rev 3 (407 MW) and Slufterdam (29 MW) Absolute CO2 emissions, pro rata: ≤21 Mtonnes 19.31 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 2.1 Unsatisfactory level, major ongoing efforts Employee Engagement Index: ≥70% 69% Strong improvement

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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

  • perations

Our emissions are reduced by 40%, in line with required level to limit global warming to below 2˚C

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61% 23% 16% Growth, 35bn SEK Maintenance, 13bn SEK Replacement, 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

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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

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Financials

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Financial targets

1 5–7 years 2 The key ratio is based on average capital employed

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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 3.6 billion SEK Vattenfall’s Board of Directors revised its previous dividend proposal for 2019 from SEK 7,245 million to SEK 3,623

  • million. The proposal was adopted by

the Annual General Meeting

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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%

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19.9 25.1 17.6 22.1 12.0 14.9 FY 2019 FY 2018 Underlying EBIT (SEK bn) EBIT (SEK bn) Profit for the year (SEK bn) 112.3 132.0 26.5% 20.7% FY 2019 FY 2018 FFO/Adjusted net debt (%) Adjusted net debt (SEK bn)

Earnings Adjusted net debt

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Sustainability

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UN’s Global Sustainable Development Goals

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  • 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.
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Impact our CO2 emissions throughout the value chain

Enabling fossil-free living within one generation

1 Primarily related to natural gas sales 2 EPD – Environmental Product Declaration – a third-party environmental declaration in accordance with

ISO 14025

3 LCA – Life cycle Assessment

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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

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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

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Reducing risk Reducing cost Improving reputation

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An attractive partner in the energy transition

Examples of partnerships

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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 parks Co-operation for e-mobility Powering sustainable data centres

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Operating segments

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Introduction to operating segments

Overview 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

  • ptimisation 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
  • perations in Sweden, Germany (Berlin) and the UK

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Customers & Solutions

Leading market position in the retail segment in Sweden, the Netherlands, Hamburg and Berlin

1 Operating profit excluding items affecting comparability 2 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

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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

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Power Generation

One 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

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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 Net sales (SEK bn) 102.4 100.0 External net sales (SEK bn) 38.4 36.1 Underlying EBIT1 (SEK bn) 15.4 9.4 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

Share of underlying EBIT

58%

Stornorrfors power plant, Sweden

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Wind

One 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

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Highlights 2019

  • Inauguration of the Horns Rev 3
  • ffshore 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 Net sales (SEK bn) 13.5 11.9 External net sales (SEK bn) 6.6 5.7 Underlying EBIT1 (SEK bn) 4.2 3.7 Electricity generation (TWh) 9.5 7.8 Investments (SEK bn) 9.2 5.6

Share of underlying EBIT

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

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Operating wind farms, construction and pipeline

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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 Thanet Kentish Flats + Kentish Flats Ext. Ray Ormonde Prinsess Alexia Sandbank DanTysk Horns Rev 1 Klim Lillgrund Stor-Rotliden Nordzee Wind Alpha Ventus

Wind farms above >50 MW

% Vattenfall ownership

Aberdeen Bay Horns Rev 3

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Heat

One 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

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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 Net sales (SEK bn) 31.4 34.0 External net sales (SEK bn) 15.9 15.8 Underlying EBIT1 (SEK bn) 0.6 0.8 Sales of heat (TWh) 17.1 18.3 Electricity generation (TWh) 31.7 32.0 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

Share of underlying EBIT

2%

1 Operating profit excluding items affecting comparability 2 CO2 emissions are pro rata 3 Excluding the divested heat operations in Hamburg

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Distribution

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

1 Operating profit excluding items affecting comparability 2 SAIDI: System Average Interruption Duration Index 3 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

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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 Net sales (SEK bn) 22.5 22.4 External net sales (SEK bn) 17.9 17.8 Underlying EBIT1 (SEK bn) 5.0 6.3 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

Share of underlying EBIT

19%