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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
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
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
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
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
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 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
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%
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