Important events 2008
Substantially expanded investment programme
In February 2008 Vattenfall announced an investment programme worth SEK 173 billion for the period 2008-2012, an increase of SEK 29 billion compared with the five-year period 2007-2011. On 12 February 2009 Vattenfall announced an investment programme for the period 2009-2013 worth SEK 202 billion. In connection with Vattenfall’s announcement on 23 February 2009 of its offer to acquire the Dutch company Nuon (read more on "Events after the balance sheet date"), it was disclosed that a reprioritisation would be made in the investment programme for 2009-2013, to SEK 191 billion (read more on "Investment programme 2009-2013"). The reprioritisation in the investment programme is a consequence of the planned acquisition of Nuon.
Redemption of minority shareholdings in Germany
In April the redemption of the outstanding minority shares in Vattenfall’s German subsidiary Vattenfall Europe AG was completed, and the company was delisted from the German stock exchanges.
Status of nuclear power in Nordic countries
Vattenfall has conducted a thorough review of safety work in its nuclear power operations in consultation with the pertinent authorities, and internationally renowned experts have performed independent, in-depth analyses of the company’s work on nuclear safety. In February Vattenfall appointed a Chief Nuclear Officer (CNO), who reports directly to the CEO on nuclear safety issues and serves as the Executive Group Management’s nuclear power expert. Vattenfall also established a Nuclear Safety Council which is chaired by the Group CEO. In addition, Vattenfall is participating actively in international nuclear power organisations in order to ensure that the entire body of global experience is taken advantage of in the Group’s safety work.
In early 2008 the UN’s International Atomic Energy Agency (IAEA) performed a three-week review of the Forsmark nuclear power plant. The IAEA concluded that Forsmark maintains a good international level in its safety standards. A number of suggested improvements that were identified are now being implemented.
Continued outages at German nuclear power plants
The two German nuclear power plants, Brunsbüttel and Krümmel, which were both shut down in June 2007 independently of each other, are still not operating. The reasons for the shutdowns were remedied back in 2007, however, as a result of time-consuming controls and verification work as well as new demands that have been raised, the plants have not yet been able to be restarted. The earnings impact in 2008 for these standstills is estimated to have amounted to EUR 573 million (SEK 5,540 million). The earnings impact in 2007 was EUR 201 million (SEK 1,900 million).
Possible sale of Vattenfall’s German high-voltage grid
In late July Vattenfall contacted a number of potential investors regarding the possible sale of Vattenfall’s high-voltage transmission grid in Germany. Interest has been great, and a number of indicative offers were received in October. No decision on the sale has been made.
World’s first pilot CCS plant, Schwarze Pumpe, inaugurated
After two years of construction, on 9 September Vattenfall inaugurated the world’s first coal-fired CCS power plant based on oxyfuel technology. CCS, which stands for Carbon Capture and Storage, entails the capture and underground storage of the carbon dioxide that is created in the combustion of fossil fuels. The investment sum for the pilot plant amounts to EUR 70 million (read more on "A milestone for clean electricity in Europe").
Planning of CCS demonstration plant
In May Vattenfall announced its plans to build a large demonstration plant at the Jänschwalde power plant in Germany. Vattenfall is also conducting planning work for a CCS plant in Aalborg, Denmark. The final investment decision will require support from national authorities in Germany and Denmark and at the EU level. The EU underlined its commitment to CCS in the climate package in December 2008 when it reserved 300 million allowances in the coming ETS trading period for financial support for CCS demonstration plants. In January 2009, the European Commission also proposed to provide EUR 250 million each in support to five mature demonstration projects in the European Economic Recovery Programme. The European Council has not yet handled the proposal. Jänschwalde was one of 11 projects found eligible.
Go-ahead for construction of Moorburg CHP plant in Germany
On 30 September, the Hamburg State Ministry of Urban Development and the Environment (BSU) granted Vattenfall approval to build the Moorburg coal-fired combined heat and power plant in Hamburg, Germany. The permission to build the plant is coupled with a number of new restrictions that will affect operation of the plant. Vattenfall has therefore requested a judicial review of the authorities’ decision.
Long-term electricity contracts with energy-intensive industrial companies
Several major, long-term contracts were signed during the year with industrial companies in the Nordic region, including Stora Enso, Smurfit Kappa, Vargön Alloy, Outokumpu, Hydro and Borealis. Vattenfall has a good working relationship with electricity-intensive industries, and the newly signed contracts are a testimony of the confidence that companies have in Vattenfall as an electricity provider.
New CFO
On 1 October, Dag Andresen took office as new First Senior Executive Vice President and CFO after Jan Erik Back, who left Vattenfall.
Vattenfall’s climate vision - to be climate-neutral by 2050
During the autumn Vattenfall clearly laid out its strategic direction, which is summarised in three words: Making electricity clean. An integral part of this strategy is Vattenfall’s climate vision: to be a climate-neutral company by 2050. Growth in generation with low CO2 emissions is the platform for Making electricity clean.
Vattenfall launches Climate Manifesto
In late September Vattenfall went public with its Climate Manifesto in Brussels and invited the general public to sign a manifesto via Vattenfall’s website and thereby urge politicians around the world to take necessary measures to improve the climate issue. The manifesto identifies the following three points:
- We need a global price for CO2 emissions.
- We need more support for climate-friendly technologies.
- We need to implement climate requirements for products.
More than 238,000 people have signed the manifesto.
Greater number of customers
During the year Vattenfall continued to win market shares in the Nordic countries, while customer satisfaction index scores improved. In September Vattenfall and Göteborg Energi AB signed an agreement on the takeover of part of the customer base in the jointly owned electricity supply company Plusenergi AB. Under the agreement, Vattenfall will gain approximately 150,000 new customers, further boosting its market share. Vattenfall has also achieved sales successes in Germany. By marketing electricity sales online nationwide in Germany, Vattenfall has increased its customer numbers. By year-end 2008 Vattenfall had more customers than at the start of the year.
Wind power acquisitions in the UK
During the autumn, Vattenfall acquired several British wind power companies:
- AMEC Wind Energy Ltd, one of the UK’s foremost developers of commercial wind farms, with current projects corresponding to 500-750 MW.
- Eclipse Energy UK Plc, which is developing six wind power projects in the UK with combined capacity of more than 200 MW.
- Thanet Offshore Wind Ltd, which with 300 MW under construction is the UK’s largest wind power project.
At the end of the year, Vattenfall also entered into a partnership with ScottishPower Renewables, a subsidiary of the Spanish company Iberdrola, to participate in the third round of tender bids to develop offshore wind power in the UK. The joint goal is to establish 6,000 MW of wind power (3,000 MW each). (Read more on "British winds strengthen Vattenfall".)
Acquisition of stake in Polish energy company
In November Vattenfall acquired 18.7% of the Polish energy company ENEA S.A. The company, which is one of four state-owned energy companies in Poland, has 2.3 million customers and accounts for approximately 8% of Poland’s total energy generation. ENEA S.A. has a mixed portfolio of small-scale hydro power plants as well as planned investments in wind power development projects, but relies predominantly on coal-based generation. Vattenfall today is the largest foreign energy company in Poland, and the acquisition strengthens Vattenfall’s position in the Polish energy market.
EUR 1.5 billion bond issues
In November Vattenfall issued two benchmark bonds in the Euro market totalling EUR 1.5 billion through the Group’s internal bank, Vattenfall Treasury AB. The bonds have maturities of five and ten years, and the size is EUR 850 million and EUR 650 million, respectively. The purpose of the issues was to take advantage of the prevailing window in the credit markets in order to prefund a significant portion of estimated borrowing needs in 2009. The issue met strong demand from investors, and the bonds were oversubscribed nearly four times.
New Group structure
A new Group organisational structure has been implemented with effect on 1 January 2009. A third Business Group, Pan-European, has been established, comprising three new Group-wide business units: Wind Power, Nuclear Power and Engineering. Business Group Pan-European will also be responsible for European business development, focusing on efficient use of energy and biomass. The new organisational model will make Vattenfall better equipped to further improve its ability to reach its ambitious climate and growth targets and take advantage of cross-border co-operation opportunities (read more on "Corporate Governance Report").
Provided that Vattenfall’s offer for the Dutch company Nuon is approved and completed, a new Business Group, Benelux, will be established in Vattenfall’s organisation.
