Vattenfall Annual Report 2001
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VATTENFALL ANNUAL REPORT 2001 2001 in Brief 1 Comments by ABOUT VATTENFALL the Chief Executive Officer 2 Vision, Mission, Financial Vattenfall’s vision is to be a leading energy company in Europe. Objectives and Dividend Policy 4 The business is concentrated to northern Europe with a focus on Vattenfall Takes Responsibility 5 Sweden, Finland, Germany and Poland. During 2001, the Vattenfall Group expanded considerably when majority shareholdings in the German Electricity Market Development companies, Hamburgische Electricitäts-Werke AG (HEW), VEAG Vereinigte in Northern Europe 7 Energiewerke AG (VEAG) and Lausitzer Braunkohle AG (LAUBAG) were acquired. In 2002, Vattenfall also acquired a majority shareholding in Business Activities 2001 11 Bewag AG. In Poland, the production company, Elektrocieplownie Warszaw- Organisation 12 skie S.A. is a part of the Vattenfall Group. Vattenfall also has a minority interest with management responsibility in the electricity distribution Generation Nordic Countries 13 company, Gornoslaski Zaklad Elektroenergetyczny S.A. (GZE). Market Nordic Countries 14 The dominant business is electricity, where Vattenfall is active through- Heat Nordic Countries 15 out the value chain with generation, trading on financial and physical Electricity Networks markets, sales to corporate customers and households as well as electricity Nordic Countries 16 transmission on high-voltage networks and distribution. To this must be Services 17 added the production and sales of district-heating as well as energy solu- Other Business 17 tions, IT, communication, contracting and consulting. Vattenfall Europe 18 In the Nordic countries, Vattenfall is the largest company within the Vattenfall Poland 21 power and heat sector, with net sales of about SEK 35 billion (EUR 3.9 billion) in 2001, electricity generation of just over 90 TWh in 2001 and heat Annual Accounts 2001 22 generation of 6 TWh. In the Nordic countries, Vattenfall has about 1.3 Administration Report 23 million network customers and sells electricity to just under 1.5 million Risk Management 26 customers. Vattenfall has about 8,500 employees in the Nordic countries. Consolidated Income Statement 30 In Germany, work is underway to integrate the acquired companies into Consolidated Balance Sheet 32 Vattenfall Europe. The operations comprise HEW with electricity and heat in Hamburg, VEAG with electricity generation and transmission in eastern Consolidated Cash Flow Statement 34 Germany, LAUBAG with lignite mining for VEAG’s power plants and, from Parent Company 2002, Bewag, with electricity and heat in Berlin. Vattenfall’s German Income Statement 36 business will have just over SEK 60 billion in net sales (EUR 7 billion) and Parent Company an aggregate annual electricity generation of 82 TWh and 16 TWh of heat. Cash Flow Statement 36 Vattenfall Europe will be Germany’s third largest power group – at year-end Parent Company the four companies had just over 20,000 employees. Balance Sheet 37 In Poland, Vattenfall is among the largest companies in the industry, Accounting Policies with an electricity generation of 4 TWh and heat generation of 12 TWh in and Valuation Principles 38 2001. Furthermore, Vattenfall has a minority interest of 32 per cent and Notes to the Accounts 41 management responsibility in the electricity distribution company, GZE. Proposed Distribution of Profits 58 In total, the Vattenfall Group had 28,650 employees at year-end 2001. Audit Report 59 The Group comprises 10 business units and a German sub-group. Definitions 60 Vattenfall’s organisation is presented on page 12. Six-year Review 61 The Vattenfall Group after the acquisition of Bewag Board of Directors and Auditors 62 Nordic Germany countries and Poland* Total Executive Group Management 63 Glossary 64 Net sales, EUR million 3,906 7,078 10,984 Electricity generation, TWh** 90 86 176 Heat generation, TWh 6 28 34 Employees 8,500 23,600 32,100 Cover: Generator overhaul at VEAG’s * Stake in GZE not included. Hohenwarte 2 hydro power station in ** Volumes for a normal production year. About 75 TWh of the generation in the Nordic Thüringen in October 2001. countries is available to Vattenfall. The rest is allocated to minority shareholders. 2001 IN BRIEF 1 2001 IN BRIEF •Considerable improvement in profit, operating profit increased to SEK 10.0 billion (6.7). •The return on net assets, excluding items affecting comparability, increased to 8.8 per cent (6.6). •Net sales improved to SEK 69 billion (32). Vattenfall is now established as the fifth largest electricity company in Europe (141 TWh). •Vattenfall’s electricity generation in the Nordic countries reached a record high-level (92 TWh). Financial Highlights Sales and Profit, SEK m 2001 2000 Net sales Profit Net sales, SEK m 69,003 31,695 80,000 12,000 EBIT, SEK m 9,959 6,688 60,000 9,000 Profit before tax and minority interest, SEK m 7,454 5,189 40,000 6,000 Return on equity after actual tax, % 11.8 8.9 20,000 Return on net assets, 3,000 excl. items affecting comparability, % 8.8 6.6 0 0 Equity/assets ratio, % 22.7 35.4 97 98 99 00 01 Funds from operation, SEK m 13,148 5,830 Operating profit Profit before tax and minority interests Investments, SEK m 43,443 23,840 Net sales Total electricity sales, TWh 149.9 83.1 Total heat sales, TWh 25.4 17.0 Electricity generation, TWh* 140.9 83.7 Average number of employees in the Group 23,814 13,123 Return on Capital, % 20 15 Total Electricity Generation, Total Electricity Generation, 140.9 TWh, 2001, % * 83.7 TWh, 2000, % 10 Fossil-fired 4 Fossil- Hydro 28 fired 31 Hydro 47 5 0 97 98 99 00 01 Return on net assets, excluding items Nuclear 49 affecting comparability Return on equity after actual tax Nuclear 41 *2001 includes a full year of generation by HEW and for VEAG from May 16. Bewag will be consolidated from 2002. 2 COMMENTS BY THE CHIEF EXECUTIVE OFFICER Vattenfall Has Established a Strong Market Position in Northern Europe The net sales of the Vattenfall Group more than works in combination with our service interrup- doubled, from sek 32 billion to sek 69 billion, tion guarantee. Although work in this area is still during the past year. Vattenfall has now taken a in progress, it is gratifying to see the positive re- major step out into Europe. This achievement is sults already at this stage. We are also pleased that reflected in the accounts. During 2001, Vattenfall our customers have noticed the improvement. was a company with 45 per cent of its net sales in In a European perspective, Vattenfall is now Sweden, 5 per cent in Finland, 40 per cent in the fifth largest power generator and the largest Germany and 5 per cent in Poland. From the district-heating company. In Germany, we are beginning of this year, all German operations, now the third largest electricity company. Vatten- including the Berlin-based company, Bewag, fall has established a strong foothold in northern will be consolidated into the Group and Vatten- Europe and our long-term vision is within reach. fall’s sales will increase to around sek 100 Being a leading energy company in Europe re- billion. quires a competitive strength that can challenge Vattenfall’s vision is to be a leading European corporations with an international focus such as energy company. This means that Vattenfall must the German-based E.ON and RWE, French- be the customer’s choice in the short and long based EDF, Belgian Tractebel and Spanish Ende- term. We must also make a positive contribution sa. The restructuring of the European industry to the economic development of the countries will continue, resulting in fewer but larger com- where we operate. panies. In the long term, Vattenfall must grow Vattenfall is the leading power company in further in order to continue to be an industry Sweden and the Nordic countries, and as the leader and to provide optimum service to market evolves, our ambition is to continue to customers. develop this leading role. During the year, For us to attain a leading position, our busi- Vattenfall’s power generation in the Nordic ness volumes must be high. This will allow us to countries totalled a record-high 92 TWh (81)*. achieve economies of scale while we reduce costs Nuclear power accounted for a substantial share and the need for capital at the same time as we of the increase. Both the hydro power and nuc- can spread our risks. It is satisfying to note that lear power plants have operated highly satisfac- Vattenfall has simultaneously managed to grow torily, with high availability and reduced opera- and enhance profitability. The improvement in ting expenses. In Sweden, we focused on the profitability is mainly due to the fact that pricing maintenance and upgrading of electricity net- on the Nordic generation market has returned to Market Positions Sweden Finland Germany Poland Electricity generation and sales 1 2 3 Among the 3 largest Electricity trading 1 of the 3 largest on the Nordic market 1 of 5 Non-existant Distribution 1 2 3 1 District-heating 2 Smaller 1 1 scope *76 TWh of the electricity generation in the Nordic countries was at Vattenfall’s disposal while 16 TWh was allocated to minority shareholders. COMMENTS BY THE CHIEF EXECUTIVE OFFICER 3 normal at the same time as the German opera- tions have exceeded our expectations with re- spect to the direction and rate of development. Even so, we must improve our profitability in absolute terms. We also have a major and most essential task ahead of us: that of actually realising the full potential of the German integration project. Through internationalisation and profitable growth, we are creating a stronger Vattenfall.