Vattenfall Q1 2015 results Magnus Hall, CEO and Ingrid Bonde, CFO - - PowerPoint PPT Presentation

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Vattenfall Q1 2015 results Magnus Hall, CEO and Ingrid Bonde, CFO - - PowerPoint PPT Presentation

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Vattenfall Q1 2015 results Magnus Hall, CEO and Ingrid Bonde, CFO Presentation 28 April 2015 Financial highlights SEK bn Q1 2015 Q1 2014 Change % FY 2014 Net Sales 45.4 45.9 -1.1 165.9 Underlying EBIT 7.7 9.1 -15.4 24.1 Profit

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SLIDE 1

Vattenfall Q1 2015 results

Magnus Hall, CEO and Ingrid Bonde, CFO Presentation 28 April 2015

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SLIDE 2

Financial highlights

Vattenfall Q1 2015 Results | Presentation | 28 April 2015 2

SEK bn Q1 2015 Q1 2014 Change % FY 2014 Net Sales 45.4 45.9

  • 1.1

165.9 Underlying EBIT 7.7 9.1

  • 15.4

24.1 Profit after tax 5.0 8.2

  • 39.0
  • 8.3

Return on capital employed (ROCE), %

  • 1.9*
  • 1.7*

˗̶

  • 0.7%

Return on capital employed (ROCE) excl. items affecting comparability, % 7.6 8.4 ˗̶ 8.2%

* Last twelve months

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SLIDE 3

Current market backdrop

Vattenfall Q1 2015 Results | Presentation | 28 April 2015

Continued challenging market environment

  • Continued weak demand
  • Structural oversupply
  • Depressed electricity prices and margins

Energy commission appointed in Sweden

  • A parliamentary Swedish Energy Commission has been appointed
  • Purpose to achieve a broad political agreement on long-term energy

policies

  • Vattenfall is looking forward to contributing to the process

Emissions Trading System

  • Reformation of ETS may provide support for CO2 prices

Carbon levy

  • The German Ministry of Economic Affairs and Energy has proposed

significant levies on older fossil based power plants

3

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SLIDE 4

20 25 30 35 40 45 50 55 60 2013 2014 2015

EEX 2016 EEX 2017 ICE 2016 ICE 2017 NPX 2016 NPX 2017

EUR/MWh

Pricing environment

Electricity futures

4

20 25 30 35 40 45 50 55 60 65 2013 2014 2015

EPEX APX NordPool

EUR/MWh

Monthly spot power price average

5 10 15 20 25 30 35 40 40 50 60 70 80 90 100 110 120 2013 2014 2015

Coal (USD/t), API2, Front Year Oil (USD/bbl), Brent Front Month Emission allowances CO2 (EUR/t), Dec 09-12 Gas (EUR/MWh), NBP, Front Year

USD EUR

Commodity prices

EUR/MWh Nord Pool EPEX APX Q1-15 (Q1-14) 28.2 (30.2) 32.3 (33.5) 43.1 (43.0) %

  • 6.7
  • 3.6

0.2 Q1-15 (Q4-14) 28.2 (30.7) 32.3 (34.8) 43.1 (44.4) %

  • 8.4
  • 7.4
  • 3.1

Vattenfall Q1 2015 Results | Presentation | 28 April 2015 4

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SLIDE 5

Electricity generation decreased 7.4% to 46.4 TWh

Vattenfall Q1 2015 Results | Presentation | 28 April 2015 5

5 10 15 20 25 Nuclear 10.6 Hydro 12.0 9.8 14.8 1.4 1.4 Fossil Biomass, waste 0.4 0.5 Wind 22.9 22.7 Q1 2014: 50.1 TWh Q1 2015: 46.4 TWh

  • Lower nuclear power due to several unplanned outages at Vattenfall’s nuclear plants.
  • Lower hydro power production due to lower reservoir levels

TWh

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SLIDE 6

Continued investments in wind power

  • Vattenfall won the concession for the

400 MW Horns Rev 3 offshore wind farm, in

  • Denmark. To be commissioned in 2019
  • The 288 MW DanTysk offshore wind farm in

Germany in operation since late 2014. Official inauguration on 30 April

  • The 37 MW Clashindarroch wind farm in UK has

started to deliver power

  • German offshore wind farm Sandbank

(288 MW) under construction. To be commissioned in 2017

Vattenfall Q1 2015 Results | Presentation | 28 April 2015 6

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SLIDE 7

Other important events Q1 2015

  • Coal-fired plant Moorburg (827 MW) in Hamburg in commercial operation (unit B)
  • New electricity contract signed with mining and metals company Boliden

– supply of 5.5. TWh over a five-year period from 2016

  • Successful issue of hybrid bonds, SEK 6 billion and EUR 1 billion

(approx. SEK 15 billion combined)

  • E-mobility: Demonstration project with plug-in hybrid buses in regular bus traffic in Stockholm and

nation-wide cooperation with airport operator Swedavia on fast-charge stations for taxis

Vattenfall Q1 2015 Results | Presentation | 28 April 2015 7

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SLIDE 8

Business areas and reporting segments as from 1 April 2015

Vattenfall Q1 2015 Results | Presentation | 28 April 2015 8

* Figures exclude "Other" activities such as Treasury, Shared Service Centre operations and eliminations Business Areas Reporting Segment Share of 2014 Group Revenue* Share of 2014 Group EBITDA* Heat

Heat operations incl. thermal (excl. Lignite)

Heat ~10% ~10% Customers & Solutions

Sales to end customers

Customers & Solutions ~50% ~5% Wind

All wind power operations

Power Generation ** ~40% ~65% Generation

All hydro and nuclear operations

Markets

Asset optimisation and trading (energy related commodities)

Distribution

Electricity distribution in Sweden and Germany

Distribution ~10% ~20%

* Preliminary pro forma figures ** Power Generation also includes Lignite Mining & Generation

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SLIDE 9

Further cost reductions needed

Vattenfall Q1 2015 Results | Presentation | 28 April 2015 9

  • To mitigate the negative impact of weak demand, oversupply and low electricity prices Vattenfall has

during 2011-2014 reduced operating expenses by SEK 13.7bn

  • Further cost reductions needed
  • savings target for 2015-2016 of SEK 2.5bn
  • partially to be achieved through employee reductions of 1,000 full-time equivalents, of whom about

half will be in staff functions

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SLIDE 10

Vattenfall changes direction for operational lifetimes of Ringhals 1 and 2

  • Vattenfall has decided that Ringhals reactors 1 and 2 will be closed down between

2018 and 2020 instead of, as previously announced, around 2025

  • The final decision will be made by the Board of Directors of Ringhals AB and requires unanimity

between the owners, i.e. Vattenfall and E.ON

  • The book value of Ringhals 1 and 2 in the Vattenfall Group consolidated balance sheet amounts to

SEK 15.1 billion as of 31 March, 2015, of which Vattenfall’s share is 70.4%

  • The existing plans of at least 60 years of operation remain unchanged for Vattenfall’s five other nuclear

reactors Ringhals 3 and 4 and Forsmark 1, 2 and 3

Vattenfall Q1 2015 Results | Presentation | 28 April 2015 10

Ringhals 1 Ringhals 2 Commercial start up (year) 1976 1975 Installed capacity (MW) 881 865 Average annual generation (TWh) 6.3 5.9

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SLIDE 11

Financials Ingrid Bonde, CFO

Vattenfall Q1 2015 Results | Presentation | 28 April 2015 11

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SLIDE 12

Q1 2015 Financial highlights

Vattenfall Q1 2015 Results | Presentation | 28 April 2015 12

SEK bn Q1 2015 Q1 2014 Net Sales 45.4 45.9 EBITDA 13.5 16.6 Underlying EBITDA excl. items affecting comparabilities 12.8 13.8 EBIT 8.4 11.8 Underlying EBIT excl. items affecting comparabilities 7.7 9.1 Financial items, net

  • 1.5
  • 1.7

Profit after tax 5.0 8.2 Cash flow (FFO) 9.8 10.8 Operating cash flow (after change in working capital) 6.8 7.5 Net debt 78.8 79.5* Adjusted net debt 150.7 158.3* FFO/Adjusted net debt (%) 20.7* 20.4** Adjusted net debt/EBITDA (times) 4.0 3.3

* As of 31 December 2014 ** Last twelve months

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SLIDE 13

Development of underlying EBIT Q1 2015

Vattenfall Q1 2015 Results | Presentation | 28 April 2015 13

Rounding difference Sales business

  • 0.3

Operating expenses Generation volume 9.1 7.7 Production margins Underlying EBIT Q1 2015 Underlying EBIT Q1 2014

  • 0.3

0.5

  • 1.2
  • 0.1

SEK bn

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SLIDE 14

Cash flow development Q1 2015

Vattenfall Q1 2015 Results | Presentation | 28 April 2015 14

Cash flow before financing activities Divestments, net Maintenance investments

  • 2.8

Growth investments Free cash flow 1.6

4.0

Cash flow from

  • perating activities
  • 2.8

6.8 0.4 SEK bn

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SLIDE 15

Hedge ratios and prices as per 31 March 2015

Vattenfall Q1 2015 Results | Presentation | 28 April 2015 15

65 74 73 63 91 98 20 40 60 80 100 2017 2016 2015 Continental Europe Nordic % hedged of planned electricity generation Hedge prices EUR/MWh 2015 2016 2017 Nordic region 37 34 32 Continental Europe 45 39 36

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SLIDE 16

Financial targets and outcome

Vattenfall Q1 2015 Results | Presentation | 28 April 2015 16

Metric Target Outcome Q1 2015 Outcome FY 2014 Return on Capital Employed (ROCE) (Return on capital employed excl. items affecting comparability) 9.0%

  • 1.9%*

(7.6%)

  • 0.7%

(8.2%) Net debt/Equity 50-90% 58.5% 61.9% FFO/Adjusted net debt 22-30% 20.7%* 20.3%

* Last twelve months

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SLIDE 17

Successful issue of hybrid bonds

  • On 12 March Vattenfall successfully launched a ~EUR1.65bn (equivalent) three-tranche hybrid offering
  • The transaction represented the first SEK denominated corporate hybrid capital issue ever
  • Alongside of the new issue Vattenfall made a tender offer on the outstanding EUR 1bn hybrid bonds

callable in June 2015. The offer was accepted to 49.6%. The remainder of the outstanding hybrid bonds will be redeemed on 29 June 2015.

Vattenfall Q1 2015 Results | Presentation | 28 April 2015 17

Currency Amount Coupon rate Interest Tenor First call date SEK 3 billion 3.125 % 7 years, fixed 62 years After 7 years SEK 3 billion 3 months Stibor + 2.35 % points 3 months, floating 62 years After 7 years EUR 1 billion 3.0 % 12 years, fixed 62 years After 12 years

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SLIDE 18

Summary and conclusions

Vattenfall Q1 2015 Results | Presentation | 28 April 2015 18

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SLIDE 19

Summary and conclusions

  • We are mitigating current challenging market environment through continued focus on financial

discipline and increased capital efficiency

  • We are continuing the transformation toward a more sustainable and flexible generation model
  • Wind power is our prioritised growth investment area
  • We are strengthening our customer focus and are developing new customer-centric models
  • New business-centric organisation in place as of 1 April

Vattenfall Q1 2015 Results | Presentation | 28 April 2015 19

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SLIDE 20

Appendix

Vattenfall Q1 2015 Results | Presentation | 28 April 2015 20

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SLIDE 21

Breakdown per operating segment

Vattenfall Q1 2015 Results | Presentation | 28 April 2015 21

SEK bn Q1 2015 Q1 2014 Change % FY 2014 External net sales 12.2 13.5

  • 9.6

49.2 Underlying EBIT 3.6 4.4

  • 18.2

12.0 Electricity generation, TWh 21.8 25.3

  • 13.8

83.1 Number of FTE 8,499 8,400 1.2 8,508 SEK bn Q1 2015 Q1 2014 Change % FY 2014 External net sales 33.1 32.3 2.5 116.6 Underlying EBIT 4.5 4.9

  • 8.2

12.7 Electricity generation, TWh 24.6 24.8

  • 0.8

89.9 Number of FTE 19,136 21,045

  • 9.1

19,952

Continental/UK Nordic

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SLIDE 22

Capital expenditures

Vattenfall Q1 2015 Results | Presentation | 28 April 2015 22

SEK bn Q1 2015 Q1 2014 Change % FY 2014 Electricity generation 3.5 3.0 20.7 17.9 CHP/Heat 0.5 0.6

  • 16.7

3.7 Electricity networks 0.8 0.8 ˗̶ 5.0 Other 0.7 0.9

  • 22.2

2.4 TOTAL 5.6 5.3 5.7 29.0

  • of which maintenance and replacement

2.8 2.8 ˗̶ 16.9

  • of which growth

2.8 2.5 12.0 12.1

  • Investments in wind power of SEK 2.0bn in Q1 2015 compared to SEK 1.2bn in Q1 2014
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SLIDE 23

Debt development

Vattenfall Q1 2015 Results | Presentation | 28 April 2015 23

20 40 60 80 100 120 140 160 180 200

31.12.2012 30.09.2012 31.03.2013 30.06.2013 31.12.2011 30.06.2012 31.03.2012 31.03.2015 31.12.2014 30.09.2014 30.06.2014 31.03.2014 31.12.2013 30.09.2013 30.9.2011 30.6.2011 31.3.2011

Gross debt Net debt Adjusted net debt

Compared with 31 December 2014, net debt was essentially unchanged. Adjusted net debt decreased by SEK 7.6bn, compared with 31 December 2014. For the calculation of adjusted net debt, see Appendix slide 27.

SEK bn

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SLIDE 24

Continued strong liquidity position (as of 31 March 2015)

Vattenfall Q1 2015 Results | Presentation | 28 April 2015 24

Group liquidity MSEK Cash and cash equivalents 11,606 Short term investments 45,634 Reported cash, cash equivalents & short term investments 57,240 Unavailable liquidity*

  • 7,356

Available liquidity 49,884 Debt maturities** MSEK Within 90 days 12,339 Within 180 days 31,988 Committed credit facilities Facility size MSEK RCF (maturity Dec 2019) 2,000 MEUR 18,580 Total undrawn 18,580

* German nuclear ”Solidarvereinbarung” 3,163 MSEK, Margin calls paid (CSA) 3,290 MSEK, Insurance” Provisions for claims outstanding” 876 MSEK and Margin accounts 27 MSEK ** Excluding loans from minority owners and associated companies.

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SLIDE 25

Breakdown of gross debt as of 31 March 2015

Total debt : SEK 137bn (EUR 15bn) External market debt: SEK 103bn

Vattenfall Q1 2015 Results | Presentation | 28 April 2015 25

Debt issuing programmes Size (MEUR) Utilization (MEUR) EUR 15bn Euro MTN 15,000 6,095 EUR 2bn Euro CP 2,000 336 SEK 15bn Domestic CP 1,615 Total 18,615 6,431

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

impact on the income statement. Debt in foreign currency is either swapped to SEK or booked as hedge against net foreign investments

  • No structural subordination

Commerical paper EMTN 47% 2% 2% NPV of liabilities to Nuon Shareholders Loans from minority shareholders 15% Bank loans and others 14% 7% Margin calls (CSA) 4% Hybrid capital Loans from associated companies 9%

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SLIDE 26

Debt maturity profile*

Vattenfall Q1 2015 Results | Presentation | 28 April 2015

* 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 ** The maturity of the hybrid capital in 2022 and 2027 is reflecting the first call date of the respective issuances.

26 26

31 March 2015 31 Dec 2014 Duration (years) 3.6 2.8 Average time to maturity (years) 6.4 5.6 Average interest rate (%) 3.4 3.6 Net debt (SEK bn) 78.8 79.5 Available group liquidity (MSEK) 49,884 37,796 Undrawn committed credit facilities (MSEK) 18,580 18,786 10,000 20,000 30,000 40,000 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039

Capital Securities Maturity profile Undrawn back-up facilities

MSEK Includes final payment for shares in N.V. Nuon Energy 1 July 2015: 2,071.3 MEUR

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SLIDE 27

Reported and adjusted net debt

Vattenfall Q1 2015 Results | Presentation | 28 April 2015 27

Reported net debt (SEK bn) Mar 31 2015 Dec 31 2014 Hybrid capital

  • 20.0
  • 9.4

Bond issues and commercial papers and liabilities to credit institutions

  • 70.8
  • 72.5

Present value of liability pertaining to acquisition of subsidiaries

  • 19.2
  • 19.3

Liabilities to associated companies

  • 2.7
  • 2.6

Liabilities to minority shareholders

  • 12.4
  • 12.4

Other liabilities

  • 12.4
  • 9.8

Total interest-bearing liabilities

  • 137.4
  • 125.9

Reported cash, cash equivalents & short-term investments 57.2 45.1 Loans to minority owners of foreign subsidiaries 1.3 1.4 Net debt

  • 78,8
  • 79,5

Adjusted net debt (SEK bn) Mar 31 2015 Dec 31 2014 Total interest-bearing liabilities

  • 137.4
  • 125.9

50% of Hybrid capital 7.6 4.7 Present value of pension obligations

  • 44.8
  • 45.3

Mining & environmental provisions

  • 14.3
  • 14.5

Provisions for nuclear power (net)

  • 33.0
  • 33.7

Margin calls received 9.6 7.0 Liabilities to minority owners due to consortium agreements 11.6 11.6 = Adjusted gross debt

  • 200.6
  • 196.1

Reported cash, cash equivalents & short-term investments 57.2 45.1 Unavailable liquidity

  • 7.4*
  • 7.3*

= Adjusted cash, cash equivalents & short-term investments 49.9 37.8 = Adjusted net debt

  • 150.7
  • 158.3

* Of which: German nuclear ”Solidarvereinbarung” 3.2, Margin calls paid (CSA) 3.3, Insurance “Provisions for claims outstanding” 0.9