Vattenfall Q2 results 2010

© Vattenfall AB

29 July 2010

Vattenfall Q2 results 2010

Presentations by

Øystein Løseth, CEO andDag Andresen, CFO

Conference call 29 July 2010

© Vattenfall AB 229 July 2010

19 .817 .1

12 .9

3 .75 .1

0

4

8

12

16

2 0

2 0 0 7 2 0 0 8 2 0 0 9 Q110 Q2 10

%

0

5

10

15

2 0

2 5SEK bn

Profit for the pe riod (RHS) RoE (LHS)

45.8 46.051.8

10.114.0

28.6 30.0 27.9

5.9 9.0

0

10

20

30

40

50

60

2007 2008 2009 Q209 Q210

SEK bn

0

50

100

150

200

250

SEK bn

EB IT D A (LH S) EB IT (LH S) N et sales (R H S)

• Increased earnings due to higher generation volumes.

• Higher spot prices had limited impact due to hedging.

• Higher heat sales due to colder weather.

• RoE below owner’s requirement.

• Review of Vattenfall’s strategy and structure initiated.

Highlights second quarter 2010

RoE and Profit for the period*

Key financial figures

Gross- and net debt development and credit metrics

1) Last 12-month values.

Business and financial highlights

*Profit for the period attributable to owners of the parent company

FY09 Q110 Q210

FFO interest cover (x) 4.8 4.7 8.1

FFO/net debt (%) 23.7 16.81) 24.41)

FFO/adj.net debt (%) 17.9 13.81) 20.51)

Adj. Net debt/Adj.EBITDA (x) 4.0 3.61) 3.01)

0

50

100

150

200

250

Gro ss D ebt N et D ebt

SEK bn

31/ 12-09 31/ 3-10 30/ 6-10


Higher electricity prices

20

30

40

50

60

70

80

90

100

jan-07 apr-07 jul-07 okt-07 jan-08 apr-08 jul-08 okt-08 jan-09 apr-09 jul-09 okt-09 jan-10 apr-10 jul-10

EUR/MWh

NP 11 EEX 11 APX 11 NP 12 EEX 12 APX 12

• 32% higher spot prices in the Nordic region (Q2-10 vs. Q2-09).

– But 25% lower spot prices thanprevious quarter.

– The hydrological balance recoveredsomewhat in the second quarter –from -36TWh to -24TWh.

• 28% higher spot prices in Germanyand the Netherlands (Q2-10 vs. Q2-09).

– Supported by a cold spring and increasing industrial demand.

EUR/ M Wh

0

1020

3040

50

6070

8090

100NordPool EPEX APX PolPX

Mon

thly

Spot

Ave

rage

Dai

ly F

utur

eC

losi

ngPr

ices• Prices on the future markets in

Europe increased slightly in Q2, 2010.


Significant higher electricity generation, +20.3%

Wind & Other incl. biomass and waste

• Increased hydro generation.– Good prices in Nordic.– Strong generation.

• Increased nuclear generation.– Less maintenance in Q2, 2010.

Will be carried out in Q3.– Forsmark 2 runs with reduced capacity

(appr. 30%). • Good contribution by fossile generation

plants.– Nuon contributed 2.3 TWh.– Less maintenance in German plants than

last year.– Better utilisation than expected.

• Wind– Increase pertains mainly to UK.– Less wind than normal.

0.8

20.4

12.3

7.97.0

10.8

16.1

0.50

5

10

15

20

25

Hydro Nuclear Fossil Wind & Other

Q2 2010: 41.4 TWh Q2 2009: 34.4 TWh

TWh


Higher heat sales

0.4

4.8

2.5

3.7

1.9

0

1

2

3

4

5

6

Nordic Central Europe BeneluxQ2 2010: 7.7 TWh Q2 2009: 5.6TWh

TWh• Heat sales increased by 37.5%

– Increase mainly due to cold weather in April.

– Nuon contributed with 0.4 TWh.

• Gas sales amounted to 8.9 TWh – Virtually all gas sales pertains to

BG Benelux. Comparison figures forQ2 2009 are lacking.

Gas sales, TWh

Heat sales, TWh

8.9

0

2

4

6

8

10

Benelux

TWh

Q2 2010: 8.9 TWh Q2 2009: 0 TWh


Nuclear update

• The Swedish parliament decided on 17 June to lift the ban on new build of nuclear power plants.

• The two German nuclear power plants, Brunsbüttel and Krümmel are still off-line.Not expected to be restarted during 2010

– Some remaining projects, followed by an extensive recommissioning programme.

• Estimated earnings impact (loss of revenues) for the standstills Q2 2010:– Nordic: SEK 400 million– Germany: SEK 950 million

• The German government has announced a new nuclear tax from 2011– Aim to raise EUR 2.3 billion net, annually, details are yet unclear. – Vattenfall’s share of total nuclear power capacity in Germany is approx. 7%.

• Vattenfall’s production quotas in German nuclear plant Stade sold for SEK 590 mn– Vattenfall’s ownership in Stade amounts to 1/3.


Several investments in renewable energy

• Two new biomass-fired CHP plants inaugurated in Denmark.– Unit 1 at the Amagerverket and unit 8 at the Fynsverket. Replaces 100,000 tonnes of coal by

straw.

• First German offshore wind farm alpha ventus inaugurated. – Joint project between Vattenfall, E.ON and EWE (12 turbines of each 5 MW).

• Acquisition of 20% of Buchanan renewables fuel, Liberia.– The company produces biomass from old non productive rubber trees. A first step towards

building an international sourcing portfolio to secure long-term access of biomass.

• Edinbane 41.4 MW onshore wind farm in UK, inaugurated.

• The 100th and final turbine was installed at Thanet in the UK. – The worlds largest offshore wind-farm to date. Total capacity: 300 MW.

• Construction work started at 150 MW Ormonde Wind farm in the Irish sea. – Estimated to be commissioned in 2011.

• A new sustainable cooling station commissioned in Amsterdam. – Leads to a CO2 reduction of up to 75%.

• Solar island Almere in the Netherlands, inaugurated. – Comprises 520 solar collectors that capture the heat of the sun to generate hot tap water and for

2,700 homes.


Clarification of Vattenfall’s assignment

• On 3 June, 2010 Sweden’s parliament (Riksdag) passed the Government’s Bill regarding clarification of Vattenfall AB’s corporate assignment

“ The object for the Company’s activities is to generate a market rate of return by operating a commercial energy business that enables the company to be among the leaders in developing environmentally sustainable energy production”.

The Swedish original text: ” Föremål för bolagets verksamhet är att generera en marknadsmässig avkastning genom att affärsmässigt bedriva energiverksamhet så att bolaget tillhör ett av de bolag som leder utvecklingen mot en miljömässigt hållbar energiproduktion”.

• The Riksdag’s decision is being formally implemented through an amendment to Vattenfall AB’s articles of association. The amendment will be dealt with at an extraordinary shareholder’s meeting in Vattenfall AB on 23 August 2010.


Review of Vattenfall’s strategy and structure initiated

• Starting point:Vattenfall’s current geographical presence and fuel mix provide a good platform to handle upcoming financial, environmental and regulatory challenges.

• We have initiated a review of existing strategy, including organizational structure, cost levels and performance. The outcome will be discussed with our shareholder and Vattenfall’s Board in the coming months. This may lead to restructuring costs and possibly impairment charges – among other things as a result of a review of future investments.

• Going forward Vattenfall must find the right balance between financial performance, security of supply and the environmental/regulatory agenda.

• We will return with more details later this year.

© Vattenfall AB

29 July 2010

Financials

Dag Andresen, CFO


Q2 Financial highligths

* IAC = items affecting comparability

SEK million Q2 2010 Q2 2009 Change (%)

Net sales 49,713 42,128 +18.0

EBITDA 13,966 10,145 +37.7

EBIT 8,963 5,881 +52.4

EBIT excl. IAC 8,936 5,805 +53.9

Profit after tax 5,185 2,625 +97.5

Profit after tax excl. IAC 5,159 2,563 +101.3

FFO 11,679 2,568 +354.8

Cash flow from operating activities 17,307 10,437 +65.8

Cash flow before financing activities 13,828 1,200 +1 052.3


H1 Financial highligths


SEK million H1 2010 H1 2009 Change (%)

Net sales 120,370 94,656 +27.2

EBITDA 29,443 27,294 +7.9

EBIT 19,078 18,741 +1.8

EBIT excl. IAC 24,312 18,662 +30.3

Profit after tax 8,972 10,716 -16.3

Profit after tax excl. IAC 14,204 10,655 +33.3

FFO 21,499 21,328 +0.8

Cash flow from operating activities 19,566 21,965 -10.9

Cash flow before financing activities 7,331 5,782 +26.8


Total interest-bearing liabilities (gross debt) decreased by

SEK 15 bn to SEK 199 bn compared with 31 Dec. 2009

Net debt decreased bySEK 3.9 bn to SEK 151 bn compared with 31 Dec. 2009

Return on Net Assets - incl. IAC: 8.6%* (FY 2009: 10.0%)- excl. IAC: 11.6%* (FY 2009: 11.4%)- target 11%

Return on Equity - incl. IAC: 8.7%* (FY 2009: 9.5%)- excl. IAC: 14.6%* (FY 2009: 11.4%)- long-term target 15%

* Last Twelve Months

H1 – Debt development & Key ratios


EBIT development, Q2 2010

5133 5133

74558435 8435 8547 8886

+77*+339+112-416+1 396

+2 321

-747

8 963

5 881

0

3 000

6 000

9 000

Q2 2009 Electricityprice

Electricityvolume

O&M Fuel Depr. Other EBITitems

N.V. NuonEnergy

Q2 2010

SEK million

* Excluding amortization of surplus value Nuon contributed with 500 million SEK.


EBIT development, Q2 2010 – by Product & Services

5881

7702 7702 8201 83718886

+77*+515

+170+498-228

+2 050

5 881

8 963

0

3 000

6 000

9 000

Q2 2009 Generation Heat Electricitynetworks

Supply &Trading

Other EBITitems

N.V. NuonEnergy

Q2 2010

SEK million

* Excluding amortization of surplus value Nuon contributed with 500 million SEK.


EBIT by Operating Segment

SEK million

2 229

2 966

824

470

1 940

20

3 639

-507-188

3 776

-325

-1 000

0

1 000

2 000

3 000

4 000

5 000

BG Pan Europe BG Nordic BG CentralEurope

BG Benelux Supply &Trading

Other

Q2 2010Q2 2009


Debt development H1 2010

135,4 135,4 137,4 137,4 139,8 151,1 151,1

198.5

151.1

+0.3+11.3+2.5-10.3+12.3-19.6

+47.5*

155.0

0

50

100

150

200

250

Net debt 31Dec, 2009

Cash flowfrom

operatingactivities

Cash flowfrom

investingactivities

Exchangerate

difference

Valuation atfair value

Changedcalculation of

net debt

Other Net debt 30June, 2010

Cash 30June, 2010

Gross debt30 June, 2010

SEK billion

*Includes loans to minority owners in foreign subsidiaries of SEK 1.8bn (excluded from liquidity calculation on slide 29)


Divestment of 50Hertz Transmission GmbH completed

Accounting• 2010/Q1 write-down of SEK 5,322 million ( EUR 531 mn) (based on book value as of 2010/Q1).• 2010/Q2 capital loss of SEK 93 million (based on net profit in Q2, April to 19 May).

As agreed 2010/Q1

Price agreed (Equity Value as of 1 January 2010)

Shareholder’s loans to be redeemed

Calculated divestment proceeds

EUR mn

464.6

320.0

784.6

As executed at closing 19 May 2010

Cash paid, shares

Debt redeemed

Divestment proceeds

- Buyers take over responsibility for grid investments of approx. EUR 3 bn.- Net provisions and working capital transferred to buyer (delta EUR 784.6 million and EUR 810 million enterprise value).

EUR mn

464.6

320.0

784.6

Cash received by Vattenfall

Cash retained by Vattenfall

EUR mn

194

126

320

(50Hertz cash generated Jan – May 2010)

Profit earned April – 19 May 2010 accounted in 2010/Q2 as capital loss (9.4 M€).


84

59

41

94

67

27

0

10

20

30

40

50

60

70

80

90

100

2010

*

2011

2012

Nordic regionContinental Europe

Hedging position as of 30 June 2010% hedged of forecasted electricity generation.

EUR/MWh 2010* 2011

Nordic region 46 42 41

Continental Europe 57 56 56

2012

* remaining part of 2010


Key Ratio Targets

Return on Equity (ROE) 15% on average equity

3.5-4.5 times

Credit Rating Single A category ratingMoody’s: A2 Stable outlookS&P: A Negative outlook

40-60%

Cash flow interest coverage after maintenance investments

Dividend pay-out

Q2 2010

8.7%*14.6%* excl. IAC

4.1*

40.6%

Financial targets and outcome

* Last Twelve Months

© Vattenfall AB

29 July 2010

Q & A

© Vattenfall AB

29 July 2010

Back-up slides


84

52

36

90

51

16

0

10

20

30

40

50

60

70

80

90

100

2010

*

2011

2012

Nordic regionContinental Europe

Hedging position as of 30 June 2010% hedged of forecasted electricity generation.

EUR/MWh 2010* 2011

Nordic region 45 41 40

Continental Europe 58 57 55

2012

* remaining part of 2010


Consolidated income statement


SEK million Q2 2010 Q2 2009 H1 2010 H1 2009 FY 2009 LTM

Net sales 49,713 42,128 120,370 94,656 205,407 231,121

Cost of products sold -36,343 -32,788 -87,215 -69,470 -162,564 -180,309

Gross profit 13,370 9,340 33,155 25,186 42,843 50,812

Operating profit 8,963 5,881 19,078 18,741 27,938 28,275

Operating profit, excl. IAC* 8,936 5,805 24,312 18,662 31,294 36,944

Financial income 295 415 861 1,102 2,814 2,573

Financal expenses -2,427 -2,823 -5,892 -5,613 -13,018 -13,297

Financial net -2,132 -2,408 -5,076 -4,511 -10,204 -10,724

Profit before taxes 6,831 3,473 14,047 14,230 17,734 17,551

Taxes -1,646 -848 -5,075 -3,514 -4,286 -5,847

Profit after tax 5,185 2,625 8,972 10,716 13,448 11,704


02 0004 0006 0008 000

10 00012 00014 00016 00018 00020 00022 00024 00026 00028 00030 00032 000

Q1 200

6Q2 2

006

Q3 200

6Q4 2

006

Q1 200

7Q2 2

007

Q3 200

7Q4 2

007

Q1 200

8Q2 2

008

Q3 200

8Q4 2

008

Q1 200

9Q2 2

009

Q3 200

9Q4 2

009

Q1 201

0Q2 2

010

Quarterly figures, SEK million

Quarterly figures in SEK million, excluding items affecting comparability

EBIT development last 5 years

Last 12 month figures in SEK million, excluding items affecting comparability


EBIT development, H1 2010

17870 17870 1894320556

16010 16010 1671818 741 19 078

-870 +1 072+1 614

+170

-4 717

+708

+2 360*

0

5 000

10 000

15 000

20 000

25 000

H1 2009 Electricityprice

Electricityvolume

O&M Fuel Depr. Other EBITitems

N.V. NuonEnergy

H1 2010

SEK million

* Excluding amortization of surplus value Nuon contributed 3 283 million SEK.


EBIT development, H1 2010 – by Product & Services

1874120564

16598 16598 16718 16718

+2 360*+85+205

-4 443

+447+1 823

18 741 19 078

0

5 000

10 000

15 000

20 000

25 000

H1 2009 Generation Heat Electricitynetworks

Supply &Trading

Other EBITitems

N.V. NuonEnergy

H1 2010

SEK million

* Excluding amortization of surplus value Nuon contributed 3 283 million SEK.


Consolidated cash flow statement

SEK million Q2 2010 Q2 2009 H1 2010 H1 2009 FY 2009 LTM

Funds from operations (FFO) 11,679 2,568 21,499 21,328 36,700 36,871

Change in working capital 5,628 7,869 -1,933 637 9,546 6,976

Cash flow from operating activities 17,307 10,437 19,566 21,965 46,246 43,847

Investment -8,973 -9,937 -17,908 -16,947 -102,989 -103,950

Divestment 5,785 675 5,964 737 5,542 10,769

Cash and cash equivalents in acquired/divested companies -291 27 -291 27 14,407 14,089

Cash flow from investing activites -3,479 -9,237 -12,235 -16,183 -83,040 -79,092

Free cash flow 14,288 5,594 13,231 14,049 27,566 26,748

Cash flow before financing activities 13,828 1,200 7,331 5,782 -36,794 -35,245

Cash flow from financing activities -347 20,363 3,286 55,559 27,822 -24,451

Cash flow for the period 13,481 21,563 10,617 61,341 -8,972 -59,696

Net debt at the end of the period -151,071 -63,478 -151,071 -63,478 -154,987 -151,071


Liquidity position

Debt maturities 2) (SEK million)

- within 90 days

- within 180 days

560

1 641

Group liquidity (SEK million)Cash and equivalents 21 279

Short term investments 24 365

Reported cash, cash equivalents & short term investments

45 644

Restricted cash 1) -9 326

Available cash 36 318

1) German nuclear ”Solidarvereinbarung” 3 234, Minority owner´s share of German nuclear subsidiaries cash position 3 610, Margin calls paid and others 2 482

Committed credit facilities Line size Amount available

RCF (maturity Feb 2013) EUR 1000 million SEK 9 501 million

Overdraft facility SEK 100 million SEK 100 million

Total undrawn SEK 9 601 million

Other credit lines unutilised SEK 7 925 million

As of 30 June 2010

2) Exluding loans from minority owners and associated companies


Subordinated Perpetual Capital Securities

5%

EMTN53%

Loans from associated companies

8%

Loans from minority shareholders

4%

NPV of liabilities to Nuon shareholders

23%

Bank loans and others7%

Funding programmes Size (EURm)

Utilization (EURm)

EUR 15 bn Euro MTN

EUR 2 bn Euro CP

SEK 15 bn Domestic CP

Total

10 60415 000

2 000

1 579

0

0

18 579 10 604

Breakdown of gross debt

Total debt 30 June 2010 1) :(SEK 198.5 bn / EUR 20.9 bn)

1) Of which external market debt: SEK 128.6 bn (65%)

• All public debt issued by Vattenfall AB• No currency exposure in the debt portfolio• No structural subordination


Development of reported and adjusted net debt

Net debt (SEK bn) June 30 2010

Dec 31 2009

-9,4

Bond loans and liabilities to credit institutions

-113,2 -122,1

Present value of liability pertaining to acquisition of N.V. Nuon Energy

-44,9 -49,4

Liabilities to associated companies -16,4 -16,7

Liabilities to minority shareholders -8,7 -8,0

Other liabilities -6,0 -7,0

Total interest-bearing liabilities -198,5 -213,5

Cash and cash equivalents 21,3 10,6

Short-term investments 24,4 46,4

1,8

-151,1

Capital Securities -10,3

Loans to minority owners of foreign subsidiaries

1,5

Net Debt -155,0

Adjusted net debt (SEK bn) June 30 2010

Dec 31 2009

-198,5

50% of Capital securities 4,7 5,1

Margin calls received 4,8 5,5

Liabilities to minority owners due to consortium agreements

8,1 7,6

Present value of net pension obligations

-19,6 -21,2

= Adjusted cash, cash equivalents & short term investments

36,3 31,3

= Adjusted net debt -179,8 -205,0

Mining & environmental provisions -13,3 -14,4

Nuclear asset retirement obligations

-5,8 -6,7

Cross currency swaps 3,5 1,3

= Adjusted gross debt -216,1 -236,3

Reported cash, cash equivalents & short term investments

45,6 56,9

-9,31)

Total interest-bearing liabilities -213,5

Restricted cash -25,6

1) Of which: German nuclear ”Solidarvereinbarung” 3 234, Minority owner´s share of German nuclear subsidiaries cash position 3 610, Margin calls paid and others 2 482


Vattenfall debt maturity profile

Capital Securities

0

5000

10000

15000

20000

25000

30000

35000

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038

2010 06 30

Undrawn back-up facilities

Excluding loans from associated companies and minority owners

SEK million

1) The duration in the liability portfolio was in the end of May 2009 prolonged from 2,5 to 4 years

2) Based on external debt, excluding Capital Securities. Including Capital Securities the Duration is 4.3, Average time to maturity 6.8, and Average interest rate 3.5.

2010-06-30 2009-06-30

Duration (years)1) 4.32) 4.0

Average time to maturity (years) 6.92) 9.2

Average interest rate (%) 3.42) 4.7

Net debt (SEK bn) 151.1 63.5


Oil, coal, gas and CO2 allowances

0

50

100

150

200

250

jan-

07

apr-0

7

jul-0

7

okt-0

7

jan-

08

apr-0

8

jul-0

8

okt-0

8

jan-

09

apr-0

9

jul-0

9

okt-0

9

jan-

10

apr-1

0

0

10

20

30

40

50

60

70

80

Oil (USD/bbl), Brent Front Month Coal (USD/t), API 2, Front Year Emission allowances CO2 (EUR/t), 2009/10 Gas (EUR/MWh), NBP, Front Year

USD EUR


Hydrological balance in Nordic region

-50

-40

-30

-20

-10

0

10

20

30

40

0

100

200

300

400

500

600

700

800

900

1000

System Price

Hydro Balance

SYSSEK/MWhTWh

1996 199919981997 2003200220012000 2004 2005 2006 2007 2008 2009


Audits 2010per/weeks MW

F1 978

F2 990

F3 1 170

R1 855

R2 866

R3 1 051

R4 936

A 500

B 500

D 500

E 500

F 500Boxberg P 500

A 800

B 800Lippendorf R 900Rostock A 553

LWE6 247

MK11-12 103

DM33 249

AL01-02 62/52

HW71-72 579

HW-8 650

PU-1 67

Velsen VN24-25 459/375

Oost BUGG 240

Ultrecht

Amsterdam

Gas and coal

Q3 Q4

Nuclear

Jänschwalde

Forsmark

Ringhals

Q2

Schwarz

e pumpe

Lignite/Coal pow

er plants


20 849

40 571

14 318

27 618

1 605

3 499

8 234

18 994

42 055

13 304

34 266

1 862

3 6106 132

PensionsNuclearMiningTaxesOtherPersonnelLegal

30 June 2010

SEK 120,223 million30 June 2009

SEK 116,694 million

Group provisions (IFRS)

Vattenfall Q2 results 2010

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