Vattenfall’s new investment

Swedish state-owned Vattenfall is shifting up a gear in the UK. From the start of May the company is to start selling renewable energy direct to customers instead of to the grid.

Since 2008, Vattenfall has invested over SKr 34 billion in the UK. “We now have a critical mass and can start selling directly to customers. The UK is interesting because there is dense capacity there and still good opportunities for investing in more renewable energy. Furthermore, there are fairly high demands to become more environmentally friendly and reduce carbon dioxide emissions in the UK,” says Anna Borg, from Vattenfall.

Vattenfall demands compensation

Dutch energy company Vandebron, the Triodos bank and the City of Amsterdam are behind an initiative to buy Hemweg 8, an old and inefficient coal-fired plant in the city (ed.). They have offered Vattenfall subsidiary Nuon the equivalent of some SKr 50 million for the plant, which they want to close as soon as possible.

Vattenfall has rejected the bid, and has instead demanded 55 million euros of the Netherlands to close the plant ahead of time.

Vattenfall committed despite losses

State-owned energy firm Vattenfall continued to post major losses in its Q2 report, with losses after tax for the first half of 2016 on a par with last year’s major losses. The company has also had to write down a further SKr 30 billion of the value of the company’s assets, of which the German lignite assets account for SKr 21 billion.

The losses would have been SKr 20 billion higher if Vattenfall had not sold the controversial assets in Germany, says chief executive Magnus Hall.

Vattenfall has also announced it will invest SKr 3 billion in a wind farm off the coast of Aberdeen, which US presidential candidate Donald Trump battled unsuccessfully in court to stop.

Despite not being Vattenfall’s largest facility, it will be very important in testing and demonstrating new technology for offshore wind power, said Hall.

Vattenfall earns billions but sees risks ahead

State-owned Vattenfall’s cash flow will improve by 4 billion kronor annually, as a result of the political agreement to abolish the output tax on nuclear power and lower the tax on hydropower. Additionally, with the risk of massive write-downs reduced, since the utility does not need to close reactors ahead of time, Vattenfall may be able to turn loss into profit.

Just days after the agreement, Vattenfall decided to invest in independent core cooling in Forsmark’s three reactors and the intention is to make a similar investment in two of the reactors at Ringhals, thereby extending the life of the reactors to the 2040s.

Vattenfall is critical of the decision by politicians to subsidise the expansion of renewable energy. Torbjörn Wahlborg, head of Vattenfall Generation, says there is a clear risk that electricity prices will be low for years to come, which will have an impact on all electricity producers.

Sjöstedt: Not surprised

Dagens Industri (DI) revealed on Sunday that the Green Party leadership struck an agreement with the Social Democrats over Vattenfall’s lignite operations last autumn, thereby waiving any right to stop the sale of the business for climate change reasons.

The news has sparked outrage from several quarters; Johan Rockström, a professor of environmental science, suggests the government is guilty of hypocrisy, saying: “You cannot with one hand sign the Paris Agreement, and with the other hand allow lignite operations to continue in Germany”.

Left Party leader Jonas Sjöstedt is also critical, although not particularly surprised, and does not rule out the possibility of halting cooperation with the government.

Vattenfall’s threat: we will close all reactors

Yesterday’s quarterly report from energy giant Vattenfall presented a rise in operating profits and profits after tax of SKr 6 billion, thereby granting CEO Magnus Hall some breathing space.

However write-downs for German brown coal, if the government approves Vattenfall’s sale, are expected in the next report and the company must make a decision to make new investments into nuclear power or decommission.

“Without investment… we will not be allowed to run the reactors after 2020. We are not going to make investments if the government does not remove the tax on nuclear power completely. That is a definite decision from us,” says Magnus Hall.

Meanwhile DN reports Vattenfall has no plans to scrap emission rights, as MEP Jytte Guteland has demanded. Magnus Hall says the rights are part of the deal with the buyer of the lignite operations in Germany.

Govt to approve lignite sale

Czech energy company EPH’s bid to acquire state-owned Vattenfall’s German lignite coal assets will mean a loss of at least SKr 22 billion for the Swedish utility company, and the risk of the government being labelled a deserter on climate change. Magnus Hall, chief executive of Vattenfall, is nevertheless optimistic that the government will approve the sale.

Enterprise Minister Mikael Damberg said the government was receiving help from external advisors, in what is a complex financial transaction, adding, “I am very anxious that this should not become some kind of Nuon process.”

According to Vattenfall’s own calculations, its carbon emissions should fall to a level of 23 million tons per year from the current level of 83.8 million per year as a result of the lignite sale.

Multi-million kronor hit threatens Vattenfall

In the past three years state company Vattenfall has declared total losses of SKr 52 billion, mainly due to write-downs in the value of power plants, which have dramatically lost value owing to falling electricity prices.

A sensitivity analysis carried out by Vattenfall shows the threat of new write-downs is not over. Even slight falls in the price of electricity could trigger significant hits to the results. A future fall of 5% in the price of electricity with no change to the cost of fuel and emission rights would lead to a reduction in the value of fossil-based assets in Germany and the Netherlands of between 15 and 27%, the analysis shows.

Pressure on Damberg over brown coal

Pressure on Enterprise Minister Mikael Damberg is building over Vattenfall’s plans to sell off its German lignite operations. On Friday he received a petition with 65,000 signatures from environmental organisation, Greenpeace, demanding the state energy giant Vattenfall does not sell off its German lignite operations, but leaves the coal in the ground.

Damberg said, “The government only gets involved when there is a proposal. Germany decides German energy policy and the country wants to keep coal in its energy mix for a transitional period.”

The government is also under pressure from the Liberal Party, which wants to see a sale go through, but wants to have climate and environmental conditions attached.

Damberg did not wish to answer what action he will take if Vattenfall presents a sale proposition with no environmental conditions attached.