Annual Report 2002

Generating power - transmitting possibilities Sales and Profit, SEK m Net sales Profit

100,000 15,000 nettooms. 80,000 12,000 2002 in Brief 60,000 9,000 40,000 6,000 •Net sales increased by 46 per cent to SEK 101 billion (69) Vatte 20,000 3,000 nettooms. and net profit improved by 81 per cent to SEK 7.6 billion (4.2). nettooms.0 0 98 99 00 01 02 • Operating profit excluding items affecting comparability increased Operating profit by 46 per cent to SEK 12.9 billion (8.8). The high electricity price Profit before tax and minority interests on the Nordic market at the end of the year improved profit by Net sales about 5 per cent. •The return on net assets excluding items affecting comparability increased to 10.1 per cent (8.8). Return on equity improved to 19.1 per cent (11.8). Return on Capital, %

20 Vattenfall’s vision is to be a leading European energy company. Today, 15 Vattenfall generates electricity and heat and delivers energy to about 6 million customers in Northern Europe. The largest electricity customers 10 are industries and energy companies. 5 For further information on the Vattenfall Group, see www.vattenfall.com

0 98 99 00 01 02

Return on net assets, excluding items affecting comparability Return on equity

The Vattenfall Group

Nordic Countries Germany and Poland Total

Net sales, SEK m 37,162 63,863 101,025 Total Electricity Generation Electricity generation, TWh* 87 71 158 TWh 158.5 Heat sales, TWh 8 26 34 150 140.9 Employees** 8,550 25,698*** 34,248

53 *These volumes refer to a normal generation year in the Nordic countries and to Vattenfall’s own generation in Germany. About 70 TWh of the generation in the Nordic countries is available to Vattenfall. 58.1 The remainder is allocated to minority shareholders. 100 ** Average number of employees during the year. *** The figure includes 124 employees in other countries.

70 42.9 50

39.9 35.6

0 2001 2002

Nuclear Financial Information from Vattenfall 2003 Contact Details Fossil-fired General Meeting of Shareholders April 10 Reports are available from: Hydro Three-month interim report May 13 Vattenfall Support AB Six-month interim report July 31 SE-162 87 Stockholm Nine-month interim report November 6 Sweden Tel: +46 8 739 57 14 “Our Responsibilities 2002” E-mail: [email protected] “Our Responsibilities 2002”, which contains Visit Vattenfall’s website at Vattenfall’s sustainability report, will be pub- www.vattenfall.com lished in spring 2003 and can be obtained from www.vattenfall.com. Contents

2002 in Brief

2 Comments by the Chief Executive Officer

6 This is Vattenfall

8 Overview – Nordic Countries – Germany – Poland

10 Vattenfall’s Markets

12 Electricity Market in Northern Europe

14 Market Development

15 Market Competition

16 Vattenfall’s Business Activities

18 Nordic Countries

25 Germany

31 Poland

32 Annual Accounts 2002

33 Administration Report

36 Vattenfall’s Risks and Risk Management

40 Consolidated Income Statement

42 Consolidated Balance Sheet

44 Consolidated Cash Flow Statement

46 Parent Company Income Statement

47 Parent Company Balance Sheet

48 Parent Company Cash Flow Statement

49 Accounting Policies and Valuation Principles

52 Notes to the Accounts

Financial Highlights 69 Proposed Distribution of Profits

2002 2001 70 Audit Report Net sales, SEK m 101,025 69,003 71 Definitions EBIT, SEK m 13,363 9,959 73 Six-year Review Profit before tax and minority interest, SEK m 9,987 7,454 74 Board of Directors and Auditors Return on equity, % 19.1 11.8 Return on net assets, excl. items affecting comparability, % 10.1 8.8 75 Executive Group Management

Equity/assets ratio, % 20.0 22.7 76 Glossary

Funds from operation (FFO), SEK m 17,106 13,148 Investments, SEK m 39,932 43,443 Total electricity sales, TWh 188.3 149.9

Total heat sales, TWh 33.5 25.4 Electricity generation, TWh 158.5 140.9 Average number of employees in the Group 34,248 23,814 2 COMMENTS BY THE CEO trated to Finland, Germany,trated toFinland, Poland andSweden. ments outsideEurope. Today, ourcore businessisconcen- P grown considerablythrough acquisitionsinGermany and Overtially largerbusiness. thepastfew years,Vattenfall has Sweden. Today, ouractivitiesinSweden are partofanessen- withoneor twoall ofitsoperations, exceptions,were in V V in Europe Opens UpOpportunities Va oland. Atthesametime,weoland. have divested ourcommit- attenfall becamealimitedliabilitycompany tenyears ago, attenfall hasnow fullyventured outintoEurope. When T he annualaccountsfor2002clearlyshow thatour tt enfall Diversity” project specifically focuses onfemale employees. international Group. Vattenfall’s “Adding Value through str v In 2002, we concentrated ondeveloping our culture and • • • themes underpinningVattenfall’s work inhumanresources: 34,000 employees Europe. inNorthern There are five T • The Power of People the convergence oftheelectricityandgassectors. from 2007. This meansincreasing marketintegrationand about totakewillleadfullyopenandderegulated markets tive of1996) haspaved theway; thestepthatindustryis in theEuropean Union.The step(thecommunitydirec- first transformation isthecreationenergymarket ofaninternal Animportant factorinthisprocessship diversification. of heat andgasmarkets:deregulation,integrationowner- municipality-owned companies. groupsinto majorinternational orcomprisessmaller, mainly the Swedish power industryhaseitherbeenincorporated ing Swedish power company ofanyThe significance. rest of currently underway inEurope. Vattenfall istheonlyremain- of therestructuring oftheentire electricityindustrywhichis f closure ofnon-coreIT-based Vattenfall’s businessactivities. turnaround intheunitsMarketNordic Countriesandthe largely duetofavourable developments inGermany, toa profit of about five per cent. profit ofaboutfivepercent. we market rose sharplytowards theendofyear. Asawhole, in thesecondhalfof2002,electricitypricesonNordic by within ourorganisation. core businesshave created apositive drivingforce forchange ance. The heightenedmarketcompetitionandourfocuson approach -andwe have moredemandsonperform- specific Today,stage operatingonmarketterms. we are wiserinour value chainhasimproved witheach andcutcosts, efficiency bundling ofourbusinessintotheindividualstages focusing onourcore businessinpower The andheat. un- deliberate measures throughoutgradually ourorganisation, Wement inprofit. have through enhancedourearnings e inancial performanceisalways tosomeextentdetermined alues throughout theVattenfall organisation inorder to xpansion hasbeenaccompaniedby asubstantialimprove- he force drivingVattenfall’s business isthe Group’s some C development Le C engthen theshared values whichare of attheheart our ompetence development ulture andvalues the weather. Asaresult oftheextremely low precipitation T T T estimate thatthishasmadeapositive contributionto adership andmanagement here are three drivers ofchangeontheEuropean power, he transformationthatVattenfall hasundergoneispart he substantialimprovement inprofitfortheyear is • • Rewardoccupational safety Er gonomics and syst ems Comments by the Chief Executive Officer

Electricity sales Net sales international companies. A leading company must also take (TWh) (EUR billion) responsibility.

E.ON AG 318 1 702/18 3 For Vattenfall, with all its business focused within the energy sector, this demand is particularly salient. Customers RWE AG 255 1 572/22 3 and the public at large must be able to trust the power that Electricité de France 407 4 41 comes from Vattenfall. We also aim to be a positive force in Enel S.p.A 206 30 society, to adopt a clear ethical stance and to openly disclose Endesa 134 16 how we fulfil our responsibilities. Electrabel (Suez) 104 13 Energy is fundamentally a positive force in society. Ener- Vattenfall (2002) 188 11 gy – and particularly electrical energy – is the basis of eco- 1 Including electricity trading Figures from 2001, RWE from 2000/2001 nomic growth and creates the necessary conditions for a 2 Excluding electricity taxes quality of life that we often take for granted. At the same 3 E.ON Energi, RWE’s Energy business unit time, all forms of energy supply entail some form of envi- 4 Electricity sales in France ronmental impact. An energy company that aims to sustain its success must view environmental awareness and a sense of responsibility as integral parts of its business operations. Vattenfall’s Main Competitors Are A sense of responsibility lies at the very heart of Vattenfall’s a Number of European Companies core values. The major companies have grown considerably and will We are aiming high – and we aim to be the best. Vatten- continue to expand – growth is necessary in order to achieve fall’s ambition is to be number one for the customer, for the economies of scale. Most of our competitors have doubled environment and for the economy. This is how we take in size over the past five-year period. responsibility – this is our promise to customers, the public However, the underlying growth of volume in the mar- and society. ket is low. The main change that can be observed is market Taking responsibility for our customers, the environment integration which has stimulated structural rationalisation. and the economy means striving for effectiveness and creat- Economies of scale can be achieved through structural ing effective solutions. For effectiveness to be sustainable, change. The radical structural reform that is now underway we need an efficient market. Only an efficient market can is linked to the creation of a single, open energy market and provide the combination of risk, price and timeliness that the pieces of this puzzle are now falling into place. best meets customers’ needs. At the same time, an efficient market is necessary to provide solutions that are environ- Vattenfall has Established Strong Market Positions mentally effective. An efficient market also makes the largest in Northern Europe through Profitable Growth possible contribution to economic growth in society. The market positions that Vattenfall has now established are The past winter was truly a test of stamina for the Nordic a solid platform for further value creation. The ongoing inelectricity market. An extremely dry autumn combined tegration process in Europe is opening up opportunities for with very low precipitation at the beginning of the winter the gradual consolidation of our market positions. Vattenfall led to the worst “dry year” in fifty years. However, the market has a distinct and realistic opportunity to become one of the continued to operate efficiently, in spite of these pressures. leading energy companies in Europe. Vattenfall is actively The occasional high prices and the extreme fluctuations participating in establishing a new arena for the energy made it clear that customers cannot exclusively focus on industry. price but must also take price reliability into account. In both society and industry, we are witnessing an era of These events have highlighted the customer’s need for 3 major change and globalisation. Countries and markets are a strong and sustainable power partner. becoming increasingly closely linked. Europe is now about Vattenfall’s policy is to hedge the risk of price fluctuations to embark on the next major step – enlargement from 15 to in the electricity that we generate through forward contracts. 25 member states. This reduces our exposure to the risk of occasional unfavour- An important aspect of this transformation process is the able weather conditions. However, at the same time, in a demand for greater and clearer accountability on the part of “dry year”, this severely constrains the opportunities for in- COMMENTS BY THE CEO come. In 2002, the average spot price on the Nordic power ditions, it is not possible to establish additional large-scale exchange was 24.6 öre (SEK 0.01) per kilowatt hour. The inpower production facilities on commercial terms. come from Generation Nordic Countries corresponded to Energy production has an impact on the environment. an average price which was substantially lower. On the The major problem today – and in the future – is the green- other hand, if 2002 had been a year of abundant precipita- house effect. This is a global issue – greenhouse gases know tion, our hedging policy would have given us a higher no boundaries. This issue is essentially all about carbon di- income than would have been possible with the consider- oxide. Power production accounts for about one-third of the ably lower spot price. Our policy means that we are evening total global emissions. A raft of different measures will have out our income from electricity generation over a long period to be implemented over a long period of time. In the long of time. Electricity generation is a risky business with major term, new technology is needed to minimise and preferably 4 fluctuations in conditions from year to year. eliminate emissions. In the short term, measures that, as far Last winter’s electricity prices reflect a temporary short- as possible, reduce emissions from existing production are age in water supply to the reservoirs. This situation is of needed. marginal relevance to the future price of electricity. The To effectively guide all of the measures that must be electricity balance in the Nordic system in a year of normal taken, market solutions must be established which direct precipitation is good and, in Vattenfall’s view, this situation financial resources towards the measures that provide the

COMMENTS BY THE CEO will remain the same throughout the rest of this decade. best return. Even if global trading is impossible to establish Therefore, in our opinion, in view of existing market con- initially, the measures that are now being adopted in Europe

• Vattenfall Opens up Future Opportunities Vattenfall conducts research into tomorrow’s technologies. New technology is tested at Vattenfall’s own facilities and at customer sites. Some examples of Vattenfall’s R&D work are: the increased application of IT within our energy systems, which is opening up new possibilities for intelligent control and monitoring, renewable fuels as part of a sustainable

energy system, CO2 separation and storage, which may be a way forward in dealing with the climate issue, and the role of energy companies in supplying hydrogen gas to the transport system. Comments by the Chief Executive Officer

should be designed so that a common trading system can successively be developed. Acting responsibly with respect to greenhouse gases means placing emphasis on sustainability and common solutions. Acting responsibly also means that the phase-out of nuclear power in countries such as Sweden and Germany must more clearly be linked to climate policy. The design of a carbon dioxide emissions trading system is vital for Vattenfall, which has major commitments in lignite-based electricity generation facilities in Eastern Germany. The power plants are among the most modern in the world and their environmental performance is highly satisfactory. The size of the reduction of carbon dioxide emissions that has already been achieved in Eastern Ger- many corresponds to the total carbon dioxide emissions in Sweden. The electricity industry, including Vattenfall, has so far not been sufficiently sensitive and responsive to customers’ demands and needs. This is the case, regardless of whether it is a matter of power outages, accurate and easy-to-under- stand electricity bills or products that are adapted to different customer categories. At Vattenfall, we have decided to change this. An efficient market is ultimately based on customer confidence – that of major industrial customers and small household customers alike. As a major player on the market, we have an obvious responsibility to support an efficient market and to explain how the market operates. In Sweden, Vattenfall has launched a number of initiatives. In 2001, we made the decision to implement measures to improve the quality of our network services and we were the first power company to introduce shareholder’s investments in the best way possible. Custom- a clear guarantee commitment. An efficient customer ser- ers, the public and society can trust the power that they vice was another important step along the way. During the receive from Vattenfall. year, the new organisation has raised Vattenfall’s service level The past year, 2002, marked an important step for from below average for the industry to a situation where we Vattenfall. I would like to thank all of our employees who managed our customers so well during the hectic winter helped Vattenfall to make the transition from vision to that our customers are now more satisfied than those of our action. We will continue to follow the course that we have major competitors. This is the reward for high availability set. Only a strong Vattenfall can contribute to competition, and a professional approach. efficiency and progress. In 2002, we decided to focus on becoming the number one choice for the customer. We aim to get rid of prelimi- 5 nary charging and incomprehensible bills. Our customers will always have a clear understanding of what they are paying for. Vattenfall is one of the players establishing a new arena for the European energy industry. Our vision is to become Lars G Josefsson a leading European energy company. Vattenfall is transform- President and Chief Executive Officer COMMENTS BY THE CEO ing itself in order to create value and thereby manage our Stockholm, February 20, 2003

• Trust the Power from Vattenfall Since spring 2002, Vattenfall has been implementing a Vattenfall is also one of the organisations backing “Akademin corporate responsibility programme for the whole Group. för etik i arbete” (the academy for ethics at work), along with Three areas where we intend to conduct specific, tangible other Swedish organisations, such as Alecta, ICA, Praktiker- work are: tjänst, SEB, WM-data and TRR Trygghetsrådet. •Being a good force in society Vattenfall is working to promote acceptance of and under- • Clarifying our ethical position standing for the conditions and possibilities in the area of • Clearly disclosing how we take responsibility energy supply. Open and transparent reporting allows insight for important issues in our business operations. into these issues. Read more about Vattenfall’s work on corporate responsibility in the separate report, “Our Responsi- bilities 2002”. “Vattenfall’s ambition is to be number one for customers, the environment and the economy”

Executive Group Management Group Functions

Nordic Countries Germany Poland Electricity Networks Generation Mining and Sweden Trading EW GZE Generation Electricity Networks Heat Distribution Mega Finland and Supply & Trading Sales Sweden Transmission Distribution sales

Heat Sales Finland Heat Sales Services This Is Vattenfall

Vision Germany, Poland and Sweden. At the same time, Vattenfall Vattenfall – a leading European energy company. has significantly expanded its operations in Germany and Deregulation has created completely new market conditions. Poland, which has put a burden on the company’s financial National boundaries and protected markets are becoming a position. To ensure that the acquisitions generate value and thing of the past. A strongly competitive market is evolving to secure future financial balance, Vattenfall will focus on in Europe, where about ten major companies are spearhead- the following areas over the next few years: ing developments. Vattenfall is one of these companies, with • Attaining its financial objectives its focus on the Nordic countries, Germany and Poland. • Integrating and consolidating the German units Being a leading company means that Vattenfall must be in Europe number one for the customer and the environment as well • Streamlining operations through non-core asset as actively contribute to the development of sustainable divestiture. energy solutions for the future. After consolidation is achieved, Vattenfall will once again Mission pursue its main strategic direction of creating added value Vattenfall’s mission is to enhance its customers’ com- through growth. petitiveness, environment and quality of life through efficient energy solutions and world-class service. Focus on Value Creation Vattenfall’s ambition is to be number one for customers, the A target for value creation has been environment and the economy. Vattenfall’s market position established for each business unit. is based on a high operational performance and low costs Value creation means that the return on net assets (operating combined with responsibility. Vattenfall has the capacity profit) must be no less than equal to the cost of maintaining and expertise to deliver energy, mainly electricity and heat, the assets, in other words the cost of financing. The cost of which is environmentally acceptable and cost-effective, now financing consists of the cost of borrowing as well as the and in the future, and which fulfils the customer’s individual owner’s requirement on the return on capital invested. need for qualified energy solutions. By providing energy for The cost of financing sets the limit that must be reached an improved quality of life – heat and light, temperature and and exceeded. The difference between the Group’s position comfort, security and safety, reliability and an efficient utili- and this limit, expressed in SEK million, is called the gap. sation of resources – Vattenfall gives its customers value for If the return is below the limit, measures must be taken money. to close the gap. If the Group is above the limit, additional value will be created, primarily through growth. Financial Objectives Individual targets have been formulated for each business Vattenfall’s focus is on unit. When combined, these targets must correspond to, value creation and on profitable growth. or exceed, the Group objective. The owner’s profitability objective is 15 per cent on the book value of equity after tax. The return on equity was Group Structure 19.1 per cent (11.8) in 2002. Translated into the Group’s The organisation is based on the value chain. long-term profitability requirement, expressed as the return The Executive Group Management mainly focuses on on net assets, this corresponds to a return of about 11 per strategic development, with an emphasis on long-term cent before tax. The return for 2002 amounted to 10.1 per development and financing issues, controls, objective-setting cent (8.8). The owner’s objective, expressed as interest and variance analysis. coverage, is 3.5 to 5 times. The result for 2002 was The Executive Group management controls the business 7 2.6 times (2.6). units through a system whereby each management executive Vattenfall is committed to maintaining a rating in the has personal responsibility for the control of specific business Single A category. units, on the mandate of the Chief Executive Officer. Nordic and German operations are mainly organised into business Dividend Policy units based on the electricity value chain. Vattenfall Poland The aim is to maintain a sustainable and stable dividend, is responsible for all of Vattenfall’s business in Poland. THIS IS VATTENFALL which should normally correspond to one-third of the net Under the existing structure, the business units have an profit. extensive and independent mandate to develop their business within the framework of the Group’s long-term objec- Strategies tives. The Group’s business planning directive specifies Vattenfall’s overall strategic direction is to develop its objectives for value creation and growth for the Group position as a leading European energy company through as a whole. growth. However, after its extensive expansion in Germany and Poland, the company’s short-term focus is on operational and financial consolidation. Over the past few years, Vattenfall has focused on the electricity and heat business on four main markets: Finland, 8 THIS IS VATTENFALL • S • Heat Nordic Countries • Electricity Networks Nordic Countries • Market Nordic Countries • Generation Nordic Countries ervices Finland comprises thefollowing businessunits:SalesSweden, and totheNordic power exchange, Nord Pool. r 20 percentoftheelectricityconsumedinNordic has agenerationcapacitythatcorresponds toabout within theenergy, infrastructure andindustrialsectors. contracting andR&Dactivities conducts consulting, countries andtheBalticcountries. andreadydistrict-heating heatfacilitiesintheNordic is responsible forheatsalesandowns andoperatesCHP, distribute electricityto1.3 millioncustomers. Networks T Finlandbusinessunits. comprises theElectricityNetworks Sweden andElectricity T with environmentalSupply& Inaddition, declarations. r electricity andotherenergy-relatedproducts intheNordic Supply &Trading tradingin co-ordinatesthefinancial Megaisresponsiblepanies. forsalestomajorcustomers. industriesandothercom- energycompanies, customers, targetingretailelectricity andenergy-relatedservices, egion. Theegion. electricitygeneratedissoldinVattenfall egion, including eco-labelled electricityand includingeco-labelled egion, rading managesportfoliosforthesalesunits. Nuclear power6 Nordic Countries , Mega and 0 % Supply & Trading 87 T Wh . Salesprimarilycomprise ogether, these units Hydro power4 0 % Sales • Distribution • Tr • Tr • Mining andGeneration • Heat • S (incl. powerpurc (excl. powerpurc ales Hamburg. Most oftheelectricitygoestocustomersinBerlinand d p Germany andHamburg. manages andoperatesthehigh-voltage network inEastern tricity generatedissoldinVattenfall toTrading. cent oftheelectricityconsumedinGermany. The elec- has agenerationcapacitycorresponding toabout17 per heat. unit’s responsibility includesthegenerationandsaleof ( operates twosystems ofthelargestdistrict-heating electricity-related servicestoresellers andend-customers. is responsible forthesaleandmarketingofelectricity unit alsoconductsitsown tradingoperations. risks throughoutThe allstagesofthevaluechain. business with respect toelectricitytradingandassumeshedges ansmission ading Berlin and Hamburg) inWesternBerlin andHamburg) Europe. The business istributes electricityto3.4millioncustomersinGermany. rovides acentralsupportfunctionforthebusinessunits Hydro power1% hased fromN hased fromplantsinwhic Germany Nuclear power10% P Ps inwhic 68 76 TW T Wh h h V h V attenfall hasaminorityinterest) attenfall hasaminorityinterest) Fo ssil-based power8 9 % This Is Vattenfall

Poland

Elektrocieplownie Warszawskie S.A. (EW) – Heat Vattenfall has a 69 per cent stake in the Polish CHP company, EW. The company has an annual production of 13 TWh of heat, corresponding to a market share of 27 per cent. Electricity generation amounts to about 3 TWh. Gornoslaski Zaklad Elektro- energetyczny S.A. (GZE) – Distribution and Sales Distribution and sales are conducted through the associated company, GZE, which is Poland’s largest network company with about 1.1 million customers. Vattenfall owns 32 per cent of the company but is responsible for managing the company and will become a majority owner in 2003, according to an agreement. 43 per cent of the total sales are to industrial customers within the region, 47 per cent are to household customers and companies in the region and 10 per cent to major customers outside the region.

Vattenfall total

Hydro power 22 % 9

Fossil-based power 44 %

Fossil-based power 100 %

Nuclear power 34 % THIS IS VATTENFALL

3 TWh 158 TWh “Vattenfall’s market position is based on a high performance capability combined with responsible action”

Input Output Spot market 5 % Delivery to minority shareholders 8 %

Spot market 15 % External 22 % Vattenfall’s Electricity Other countries 6 % Germany 46 % Balance 2002 Internal 73 %

Nordic 25 % Total 205.9* TWh Total 205.9 TWh * Adjusted for internal consumption * District-heating Distribution Electricity trading Generation ands company,largest generatorandthedistrict-heating Europe. footholdinNorthern withafirm Va Market Position y Europeanposition ontheNorthern energymarketandmany tor convergence inpower, Vattenfall gasandheat. hasastrong spearhead themovement towards bothgeographicalandsec- the energyindustry. Asaresult,thelargestcompanieswill T Va Eur Va develop thisposition asthemarket evolves. electricity generator. Vattenfall’s aimisto maintain and and Poland. IntheNordic region, Vattenfall istheleading Vattenfall’s Only withinsales. ears ofexperience ofoperatinginaderegulated market. he deregulation process isleadingtonew consolidationin markets ttenfall isthethird InaEuropean largestelectricity generatorontheGermanmarket. perspective, Vattenfall isthefifth tt main tt enfall focuses ontheNordic countries, Germany opean energy company enfall’s visionisto bealeading Rest of Europe ales Expected tobederegulatedin2004-2006. Partly deregulated. Expected tobederegulatedin2007. No/some deregulation. Completely deregulated. 2 1 1 Sweden Among the3largest Limited 2 2 Finland Vattenfall’s Markets Among the5largest Germany 1 4 3 N P 1 P 2nd afterthe Among the3largest oland olish st / a ate * 11 VATTENFALL’S MARKETS price and volume risk by actively participating on the power The Electricity Market exchange. However, for practical reasons, small electricity customers cannot themselves participate on the exchange in Northern Europe and manage risk. Instead, the solution is for the electricity suppliers to take over both the price and volume risk from customers. The liberalisation of electricity trading has sparked Large and small customers in the Nordic countries are a new dynamism in the previously stagnant electricity free to buy electricity from any supplier. The total cost to the industry. While the forms of deregulation in each customers in different regions is different due to additional country have differed, the objective has been the same factors such as taxes and network charges. – to achieve an efficient industry. Electricity market development has reached different stages in different Which Factors Affect the Electricity Price? countries. Vattenfall has established itself as a signifi- Prices on the Nordic generation market are determined by cant player on the Northern European market, applying the deregulation of supply and demand. The price is set by its experience from the deregulation process in Sweden the Nordic power exchange – Nord Pool – which maintains and Finland to the German and Polish markets which two marketplaces: one for physical electricity trading and are undergoing rapid transformation. one for trading in standardised financial forward contracts, where the price of expected electricity generation and consumption can be “locked in” in advance. In the Nordic region, the exchange spot prices vary con- The Nordic Market siderably. The range of electricity available is highly dependent on the amount of precipitation, since hydro power is The total generation capacity in the Nordic countries in a nor- the largest energy source. Changes in precipitation are mal year is about 410 TWh, of which Vattenfall’s share is about directly reflected in the market price for electricity. Demand 20 per cent. In addition, electricity can be imported via links with other countries. Energy consumption is currently at Price increases are caused by: Price decreases are caused by: about 380 TWh per year. In the 1990’s, the electricity industry • Generation undercapacity • Generation overcapacity in the Nordic countries was radically reformed in stages. Sub- • Low water levels in the reservoirs • Abundant precipitation • High demand • Low demand scribers were previously charged a certain price based on the • Cold winter days • July summer holiday season supplier’s cost. This price was established in the form of a tariff. • Economic boom • Economic recession • Rising fossil fuel prices • Falling fossil fuel prices Nowadays, customers are free to choose their electricity supplier and their own mix of price and risk on an open market. Öre/kWh The Value Chain 70 • Energy tax and VAT Following deregulation, the generation, distribution and sale Skatt of electricity are now carried out as independent businesses • Price of electricity El and the commercial risks have become considerably greater. • Price of network services Nät Through well-designed market instruments and organised 10 marketplaces, such as Nord Pool, risk in cross-border trading 1990 2002 throughout Europe can be managed. Tax (energy tax + VAT) accounts for a greater share of the total electricity price since the beginning of the nineties and is now 40 per cent. 12 Deregulation has meant that the prices of bilateral contracts between suppliers and customers are also related to a common and transparent marketplace where price is deter- is directly related to the winter temperature, since many mined by supply and demand. dwellings in Norway and Sweden are electrically heated. The distribution of electricity to consumers is carried out Being a leading company means taking a specific respon- by special network companies. Network services are a sepa- sibility to ensure that the market is efficient and to ensure

VATTENFALL’S MARKETS rate business transaction, where the customer pays a charge that the company’s market position is not abused. Vattenfall’s for using the high-voltage grid, the regional network and the ambition is to actively work towards achieving market effi- local network. ciency by promoting openness and transparency with respect Major players on the end-customer market can manage to market mechanisms.

Electricity trading Nord Pool – marketplace establishes Trade Nordic generators spot price Offers to customers Custom- Electricity Wholesalers Sales companies ers Industry Economic • Convert energy into electricity • Package electricity products • Different needs Value Chain • Customer management • Risk management • Varied risk philosophy

Vattenfall’s Markets

2000 •Forty regional energy companies mainly operating as RWE VEW VEAG Bewag HEW LAUBAG Bayern resellers. werk • About 800 Stadtwerke (municipal companies) which, apart from electricity, also provide other utility services EnBW Preussen Elektra such as heat, gas, water and local transportation.

Electricity trading was initially organised through two com- EnBW RWE Vattenfall E.ON Europe peting power exchanges: Frankfurt and Leipzig. However, insufficient liquidity and profitability resulted in the merger 2002 The German energy market has been consolidated over the past two years. of the two and the concentration of exchange trading to Leipzig (EEX). The spot trading system is based on the same model as that used by the Nordic power exchange, Nord Pool, although EEX is considerably less liquid. The German Market

With a population of more than 80 million inhabitants, an electricity consumption exceeding 500 TWh and an installed The Polish Market power of more than 110,000 MW, Germany is Europe’s largest electricity market. 51 per cent of the electricity gen- The Polish market is divided into three sectors – generation, eration is based on coal, 33 per cent on nuclear power, 7 per distribution and sales. The total generation capacity in cent on gas, 5 per cent on hydro power and 2 per cent on Poland is 146 TWh in a normal year, of which Vattenfall’s other sources. Through deregulation in 1998, the sale of share is 3 per cent. Consumption is considerably lower, electricity was liberalised at a single stroke, for all customer 125 TWh, which means that at present, there is overcapacity segments. Unlike other countries, no independent govern- in the market. Electricity consumption per capita in Poland ment regulator was established for network operations. is about 40 per cent lower than the average for the rest of Instead, it was left to the industry players, via their trade Europe. associations, to formulate rules for the use of the electricity The energy sector is still mainly state-owned and the networks and the pricing of electricity transport services. privatisation process is slow as a result of a halting economy. The original agreement, “Verbändevereinbarung 1” (Associ- However, a change is predicted now that Polish membership ation Agreement I) from 1998, has been further developed of the EU seems likely from 2004. so that, nowadays, non-distance-related network tariffs based The Polish power exchange, Gielda, only covers 2 per on the point of connection are applied, in much the same cent of the total electricity demand in spite of the fact that way as in Scandinavia. the physical electricity trading price is 7–10 per cent below Electricity market players must be able to distinguish the long-term contract price. generation, transmission, distribution and sales in their The extent of privatisation varies in the different segments financial accounting. However, network operations do not of the value chain. On the generation side, the majority of have to be separated from other activities through the estab- the CHP plants have been privatised and about 30 per cent lishment of special legal units, unlike Sweden where this is of the generation facilities. In the distribution segment, only a requirement. 18 per cent of the organisations are privately owned. Deregulation in 1998 immediately led to a sharp decline in the price of electricity, primarily for industrial customers The Electricity Price in Poland 13 (30–40 per cent), but even for household customers (10–20 The energy sector is being deregulated. Customers who per cent). New energy taxes meant that the price fall in the consume more than 10 GWh per year are free to choose consumer segment did not have a full impact. A large num- their electricity supplier, while the electricity price for small ber of new electricity trading companies launched aggressive customers with an annual consumption below 10 GWh is sales tactics, but lack of profitability led to a subsequent shake- regulated by the Polish Energy Regulatory Authority (ERA).

out. Few households have switched supplier because the From 2005, all customers will be entitled by law to choose VATTENFALL’S MARKETS established companies have responded with price reductions their electricity supplier. and new types of contracts. The ERA is attempting to gradually adapt to the EC elec- Following several major mergers, competition on the tricity market directive. From 2003, the setting of the tariffs German market changed radically. Even if the number of for electricity distribution and CHP companies will be based market players has been reduced, there is still a large number on the return on equity. However, much remains to be done of players in network operations and sales. These can be by the ERA before the transition is made to a fully deregulat- grouped into three levels: ed market. For example, a different model for regulating net- •Four major integrated companies, RWE, E.ON, Vattenfall work operations should be applied. The current “Cost Plus” and EnBW, all operating at all stages of the electricity value model, whereby companies can cover their costs plus receive chain and each owning a stake in the German high-voltage a margin, does not encourage cost-efficient network opera- network (380–220 kV). tions. 14 VATTENFALL’S MARKETS tion. It isimportantthatsuchsystemsshouldnotdistortcompeti- lating electricitygenerationfrom renewable energysources. Several countriesare discussingvarioussystemsforstimu- Energy, Environment andFactors Affecting Price Anticipated Market Development mally determinesthemarginalprice. electricitygenerationnor- entire sincefossil-based market, based onfossilfuelsandwillaffectthepricelevel forthe Such policieswillincrease thecostofelectricitygeneration will beintroduced toreduce totalcarbondioxideemissions. agreementsto signinternational onemissionrestrictions. environmental problem,even ifallcountriesare notprepared T is todivert usagefrom fossilfuelstomore sustainablesources. r generation from renewable energysources. systemisbeingintroducedcertificate tostimulateelectricity force inSweden onMay 1, Swedish 2003.Aquota-based Anewwillenterinto mands. actonelectricitycertificates canmeetthesede- inasuitableform, support systemthat, cost-effective. other words, thoseareas where theinvestments are most towards theareas thatarein optimalineconomicterms, harmonisationisnecessarytodirectInternational investment important thatsupportsystemsshouldalsobeharmonised. onmental legislationsandveryThe highenergytaxes. aim he greenhouseasthemostimportant effectisidentified It is reasonable to expect that, within the EU, policies It isreasonable toexpectwithintheEU, that, Sweden already hasoneofEurope’s moststringentenvi- R As Europeanitis energymarketsbecomeintegrated, enewable tradingisamarket-based electricitycertificate tomer anincentive toconserve andrationaliseenergyuse. tricity marketandtheelectricitypricewillalsogive thecus- and onhow thelicensingprocesses areThe designed. elec- will beaddeddependonhow thepoliciesare formulated The electricitymarket. international typesofenergythat processes are adaptedtotheneedsofcompetitive and necessary. However, thisrequires thatpoliciesandlicensing for theelectricitygeneratorstoconstruct new facilitieswhen ingly betraded. will converge products andmixed-component willincreas- kets forelectricity, petroleum naturalgas, products andcoal Thecountries andmarkets. commoditymar- international become more transparent andcorrelated amongthedifferent electricity marketwillemergeinEurope. Marketpriceswill anincreasinglyIn thelongterm, integratedandliberalised L of newwillbeusedincombinedgasturbines. facilities, will beprimarilyreplaced byinthecase naturalgaswhich, facilities thathave reached theendoftheiroperatinglifetimes C governments theconstruction andpolicies, ofbiofuel-fired necessary levels, andthatitisnotundulymanipulatedby facility construction hasstarted. marginalcostandnewa parwiththelong-term production Thedemand. electricitypricewillprobably riseuntilitison emerge asaresult oftheclosure ofoldfacilitiesandgrowing tricity supplier. The needfornew capacitywillgradually than waspossiblewitharegulated market. adapted tocustomerneedsinanentirely different way r market willcontributetothepositive development of enewable energysources.Electricitygenerationwillbe ong-term Development HP plantsandbackpressure plantswillincrease. Coal-fired Providing thatthemarketpriceisallowed torisethe T All electricitycustomerswillbefree tochoosetheirelec- Altogether, aderegulated andcompetitive electricity he electricitymarketwillprovide incentives sufficient Market Competition

Vattenfall’s competitors are not primarily other Swedish power companies and municipal utilities but major international groups such as German E.ON and RWE, French EDF, Italian Enel and Spanish Endesa. Profitability, operational efficiency and risk management expertise are essential if a company aims to be ranked among the leading energy companies in Europe. By focusing on profitable growth, Vattenfall has created a strong position in Northern Europe and Vattenfall’s current market positions are a solid platform for further value creation.

Nordic Countries On the Nordic electricity generation market, Vattenfall primarily competes with Norwegian Statkraft, Finnish Fortum and Sydkraft, in which German E.ON has a majority stake. There are other, major local players on the electricity network market, such as Graninge in Sweden, Helsingfors Energi and Espoon Sähkö in Finland.

Generation Distribution Total market volume, about 380 TWh Sweden Total number of customers, about 5.2 million Finland Total number of customers, about 2.2 million

Companies Share in % Companies Share in % Companies Share in %

Vattenfall 20 Vattenfall 17 Fortum 18 Fortum 14 Fortum 17 Vattenfall 16 Statkraft 9 Sydkraft 15 Helsingfors Energi 14 Sydkraft 8 Göteborg Energi 5 Espoon Sähkö 7 Elsam 4 Graninge 4 Tammerfors 5 Other 45 Other 42 Other 40

Germany Deregulation in 1998 initiated the restructuring of the German market, where Vattenfall and its German subsidiaries have played a decisive role. The integration of the acquired companies, HEW, VEAG, Bewag and LAUBAG, into the Vattenfall Group is a process spanning several years which is progressing as planned. Through the acquisitions in Germany, Vattenfall is the number three electricity generator after RWE and E.ON. The fourth largest player in Germany is EnBW (Energie Baden-Württemberg), in which EDF (Electricité de France) has a 34.5 per cent stake.

Generation Distribution Total market volume, about 480 TWh Total number of customers, about 42 million

Companies Share in % Companies Share in %

RWE 38 E.ON 16 E.ON 27 RWE 16 15 Vattenfall 17 EnBW 12 EnBW 12 Vattenfall 8 Other 6 Other 48

Poland VATTENFALL’S MARKETS In Poland, Vattenfall holds a strong market position through its acquisition of the CHP producer, EW, in Warsaw and the electricity distribution company, GZE, in Upper Silesia. Vattenfall is a market leader in the CHP sector with a 27 per cent market share, followed by EDF with 24 per cent, and RWE with 4 per cent of the market. In terms of electricity distribution and sales, Vattenfall (via GZE) is the largest non-state-owned electricity distributor with 10 per cent of the market.

Heat Total market volume, about 47.3 TWh

Companies Share in %

Vattenfall 27 EDF 24 RWE 4 Polish state 45

Source: Interim reports “Focus on long-term value creation and profitable growth” Vattenfall’s Business Activities

Streamlining Business Operations Significant Events During the year, business was streamlined through the divestiture of non-core assets. At the same time, Vattenfall increased its stake in the German power companies, Bewag for Vattenfall in 2002 and HEW.

Strong Growth in Net Sales and Profit Vattenfall Launched in Germany Net sales increased by 46 per cent to SEK 101 billion (69) Vattenfall launched its brand in Germany in connection and operating profit improved by 34 per cent to SEK 13.4 with the announcement of the name of the German holding billion (10.0). Operating profit, excluding items affecting company, Vattenfall Europe AG. The acquired German comparability, increased by 46 per cent to SEK 12.9 billion companies, HEW, VEAG and LAUBAG, were formally (8.8). transferred during the autumn to Vattenfall Europe. The The increase in net sales is primarily due to the consoli- merger with Bewag was approved at the general meetings of dation of Bewag into the Vattenfall Group from February 1, shareholders of Vattenfall Europe and Bewag early in 2003. 2002. The substantial improvement in operating profit (SEK 4,094 million), excluding items affecting compar- Financial Control, Focusing on Profitability ability, can be explained by: Vattenfall’s financial control model, which is based on sus- • Increased profitability of the German operations through tainable value creation and which was implemented in 2001, cost-cutting and improved prices (SEK 1,260 million). was fully applied during the year. This has contributed to an •A strong increase in profit (SEK 757 million) in the increased concentration on profitability and has resulted in Market Nordic Countries profit area, marking a significant rationalisation of large parts of the organisation. a turnaround in this business. •The closure of non-core business activities within Vattenfall’s Credit Ratings Confirmed IT (SEK 1,111 million). Both of the credit rating agencies, Moody’s and Standard & • Improved profit in Generation Nordic Countries Poor’s, confirmed Vattenfall’s “Single A” credit rating. (SEK 482 million).

Net sales Operating profit

Amounts in SEK m 2002 2001 2002 2001 Generation Nordic Countries 25,667 22,266 6,459 6,099 Market Nordic Countries 21,275 19,492 286 –511 Heat Nordic Countries 2,761 2,590 343 162 Electricity Networks Nordic Countries 7, 674 7,924 1,834 1,816 Services 2,974 2,938 118 187

Germany 60,696 29,510 4,733 3,886 17 Poland 3,167 3,242 5 97 Other business 1,830 2,903 –386 –1,730 Other and eliminations * –25,019 –21,862 –29 –47 Total 101,025 69,003 13,363 9,959

* Mainly concerns trade between Market Nordic Countries, Electricity Networks Nordic Countries and Generation Nordic Countries. VATTENFALL’S BUSINESS ACTIVITIES

Myllykoski Paper in Myllykoski, Finland. Employee at Vattenfall training center in Jokkmokk. Travelling by train between Warsaw and Ostrow in Poland. The Nordic Countries – Leaders on the Energy Market

Vattenfall is the largest electricity generator in the Nordic countries, with a market share of about 20 per cent. Business is mainly concentrated to Sweden and Finland.

Vattenfall operates in all segments of the electricity value chain: generation, trading on the financial and physical markets and distribution and sales to corporate and household customers. Vattenfall also generates and sells district-heating and energy solutions as well as maintenance services and consulting. In the Nordic region, Vattenfall operates primarily in Sweden and Finland. The majority of the assets in Sweden focus on the generation and distribution segments, while the assets in Finland are predominantly electricity networks. In 2002, Vattenfall’s net sales in the Nordic countries Hydro power amounted to about SEK 37 billion, electricity generation Nuclear power to 87 TWh and heat production to 8 TWh. Vattenfall distributes and sells electricity to about 1.3 million customers Thermal power in the Nordic countries. Vattenfall has 8,550 employees. Wholly-owned networks Partly-owned networks

400 kW overhead power lines at Närkes-Kil. Forsmark nuclear power plant. Olidan hydro power plant in Trollhättan. Vattenfall’s Business Activities

Generation Nordic Countries rently conducting investigations. Vattenfall is actively participating in resolving this important issue. Generation Nordic Countries is responsible for the genera- The average price on the Nordic power exchange was tion business on the Nordic electricity market. Vattenfall 24.6 öre per kWh in 2002. In January, the Nordic water generated a total of 87 TWh in 2002, which corresponds reservoirs were relatively well-filled and the price was 22.6 to almost 20 per cent of the total electricity consumption öre per kWh. The abundant supply of water to the reser- in the Nordic countries. This business unit also includes the voirs during the spring contributed to particularly well-filled following subsidiaries: SKB (Svensk Kärnbränslehantering reservoirs in May and the price for that month was 14.1 öre AB), Vattenfall Bränsle AB and KSU (Kärnkraftsäkerhet per kWh. From the beginning of July and throughout the och utbildning AB). rest of the year, the water supply was the lowest for more By far the dominant forms of power are nuclear power than 50 years. Due to the use of the increasingly costly fossil- and hydro power. based power in the Nordic power market, the monthly price of electricity successively rose from August to December, Generation volume during a normal year: when the price for the month was 67.9 öre per kWh. Due to the extremely low availability of water in the 54 TWh, nuclear power Nordic reservoirs in the latter part of the year, the energy 33 TWh, hydro power supply situation in Sweden became the focus of discussion. 0.05 TWh, wind power Market mechanisms are working as intended. High production cost facilities have been brought online when there Standby power: was an opportunity to find a profitable market for the 300MW, gas turbine power. 1,000 MW, oil-fired condensing (shut down on a long-term basis) Outlook Efficient electricity generation requires efficient facilities. Important Events in 2002 Extensive re-investment in nuclear power plants and hydro The improvement in profit was achieved primarily through power plants is being planned in order to upgrade the tech- plant overhauls, reduced operating costs and increased sales. nology and enhance safety. For example, just over SEK 1 bil- Efficiency improvement measures have reduced variable lion will be invested in improving hydro power plant dam electricity generation costs and thereby strengthened com- safety. petitiveness. As far as nuclear power plant modernisation is concerned, In order to meet its profitability target, expressed as a re- a tax of 2.8 öre per kWh is levied on nuclear power produc- turn on net assets, Vattenfall is optimising plant availability tion in accordance with a parliamentary resolution. The tax, to better meet the market demand for power. Earnings from which amounts to a total of SEK 1.4 billion for 2002, could generation operations are highly dependent on the weather, well be used for efficiency-enhancing renewal investments although variations in financial performance can be evened in nuclear plants. Property tax is also a significant problem out to some extent through hedging on the power exchange. for the power industry. The question of access to power on the Swedish electrici- In accordance with the latest energy bill, the Govern- ty market has been highlighted during the past year. There ment has invited the power industry to participate in discus- is a risk of power shortages on isolated and particularly cold sions on the future of nuclear power. Clarifying these issues winter days. This issue will be resolved on market-adapted is a key to obtaining a sound basis for decision-making on terms. Svenska Kraftnät, which owns and operates the na- the renewal investments that the Swedish nuclear power 19 tional grid, is responsible for finding a solution and is cur- plants are facing. VATTENFALL’S BUSINESS ACTIVITIES

Ringhals nuclear power plant. 20 VATTENFALL’S BUSINESS ACTIVITIES ex whichwasinauguratedduringtheyear,Munksund, isan customer tofocusoncoreSCA’s business. heatingplantin energy andprocessimprovement. efficiency This allows the customer’s energyneedsinacustomerfacility, aswell asfor Vattenfallenergy solutions, assumesresponsibility forthe and develops anddeliversWhen energysolutions. providing Megaprovidesindustries. customisedelectricitycontracts mostofwhomoperate inelectricity-intensive tomers, T Mega –SpecialisinginMajorIndustrial Customers Germany) andSwePol Link(between Sweden andPoland). (between cables:KONTEK Denmarkand international r the expected consumptionlevel. Supply&Trading isalso tion capacityisdeterminedby theavailability ofwaterand levels andreflect future production capacity. produc- In turn, T leading player, ischaracterisedby substantialpricevariations. f era mission istobeaservicefunctionwhere otherunitsingen- V customersthrough and external agement servicestointernal Supply&Tradingtives. Inaddition, provides portfolioman- with environmental declarationsaswell asweather deriva- electricityand tradingineco-labelled countries, in electricityandotherenergy-relatedproducts intheNordic Supply &Trading co-ordinatestheGroup’strading financial – RiskManagementandPortfolio Management S for theenergy-intensiveindustryinNorway. Denmark are handledby SalesSweden.Megaisresponsible Salesin industriesandothercompanies. energy companies, lion customersintheNordic countries–retail customers, as wellVattenfall astelecommunications. hasabout1.2 mil- Sales mainlycompriseelectricityandenergy-relatedservices S T MegaandSupply& units: SalesSweden,Finland, Market Nordic Countriescomprisesthefollowing business Market Nordic Countries inancial marketforelectricity, where Supply&Trading isa esponsible fortheGroup’s commitmentsinthefollowing attenfall Power Supply&Trading’s ManagementAB. rading. upply &Trading ales he Megabusinessunitisresponsible forthelargestcus- he pricesfollow theexpected consumptionandgeneration ample ofanenergysolution. tion andsalescanhedgetheriskintheirvolumes.The networks andheat. through theco-ordinationofcustomerserviceforsales, administrationhasbeenrationalised Inaddition, solutions. V andimprovedsimplified procedures. internal InFinland, duction ofanewaswell andmoreorganisation, as efficient of priceandvolumetheintro- risksinthesalesactivities, telecommunications. allowed Vattenfall toextendits servicestoincludemobile Themillion. positive experience gainedfrom thisarea has permonthincreasedof traffic from 30.8millionto49.9 In2002, thenumberofminutes communications services. r T operations ismeasured asthereturnontradingmandate. r Electricity salesmustmeetareturnonoperatingmargin profitability inelectricitytradingandsalestoend-customers. During theyear, there wasasubstantialimprovement in Important Events in2002 T tive waycableinthelongterm. ofusingtheKONTEK T Discussions are inprogress between Vattenfall ABSupply& Outlook will continueuntiltheendofApril2003. SwePol Deliveriesand Link. startedinmid-December bility ofimportingelectricityfrom Poland toSweden via “dry year” electricitydeliveries,inotherwords, thepossi- (PolskieSieciElektroenergetyczne) concerning with PSE dent marketresearch institute,Profitel. the energyindustryinasurvey conductedby theindepen- and Vattenfall’s customerservicewasrankedasthebestin customer service.The result ofthiswork canalready beseen and enhanceitscompetitive strength. within theabove areas toensure sustainablevaluecreation plements deliberateandcontinuousimprovement measures Vattenfallfactors forsuccessontheelectricitymarket. im- of risksassociatedwithbusinessoperationsare thecritical service, low administrationcostsandtheskilledmanagement eturn onnetassets. eturn equirement andtheprofitabilityofelectricitytrading attenfall hasdeveloped new andimproved customised rading and other major stakeholders to find themosteffec- rading andothermajorstakeholderstofind he profitability of international cablesisexpressedhe profitabilityofinternational asthe hese discussionswillcontinueduring2003. In late autumn, Supply&TradingIn lateautumn, reached anagreement During theyear, intensive effortswere madetoimprove T F andeffectiveAttractive anefficient customer offerings, or someyears,Vattenfall hasalso beenproviding tele- he improvement inprofitislargelyduetoareduction Vattenfall’s Business Activities

Vattenfall Focuses on Being Number One for the Customer

Energy Co-operation between Holmen and Vattenfall Holmen is one of the major manufacturers of newspaper and magazine paper in Europe. The company also manu- factures cardboard for consumer packaging, and production is conducted primarily in Sweden. In Sweden, Holmen consumes about 4 TWh of electricity per year. Vattenfall has supplied electricity to Holmen’s facilities in Sweden for manyyears.

“It’s natural for us to have such an important contract with Vattenfall since we have had many years of fruitful Paper manufacturing at Holmen in Hallstabruk. co-operation behind us. We know that we can trust Vattenfall,” says Åke Eklöf, Managing Director of Major Investment in Customer Service Holmen Kraft. Vattenfall’s vision to be a leading European energy company means making matters simple and easy for the customer and Energy Co-operation between creating a more efficient electricity market. For this reason, Ovako Steel and Vattenfall starting in Sweden, Vattenfall has launched an extensive cus- Vattenfall and Ovako Steel have worked together on energy tomer service programme designed to ensure that Vattenfall issues for a long time. One of the outcomes of this co-oper- becomes number one for the customer. Over a three-year ation is that Vattenfall owns and operates the internal elec- period, at least SEK 600 million will be invested in the tricity network in Hofors and Vattenfall has invested in programme. electricity equipment to improve the performance of the All of Vattenfall’s customers in Sweden will be offered electro-steel furnace plant. the opportunity of simplified billing and payment proce- During the past year, co-operation has continued through dures. The current system of preliminary charging will be the development of a model for pricing deviations from abolished and the customer will only be charged for actual estimates of variations in the plant’s electricity consumption. consumption in the future. Customers consuming more Vattenfall and Ovako have also initiated a joint project with than 8,000 kWh a year, about 300,000 in all, will have re- the aim of increasing energy efficiency. The entire opera- mote-read meters that will be read once a month. Customers tion at Hofors has now been reviewed and an initial estimate living in flats will be able to opt for a fixed cost per month of the potential for energy saving projects has been made. with payment via autogiro. The fixed cost will be based on the size of the flat. Other customers will be given the oppor- “We are really happy with the ‘power’, in the broad tunity to read the meters themselves and to report the read- 21 sense of the word, that the co-operation with Vattenfall ings through a simple procedure. This will make it possible has brought our company,” says Sten Lykström, for customers to be billed for an exact amount, and will give Ingot Manufacturing Manager, Ovako Steel AB. them full control over their own consumption and electricity costs. The programme also includes measures for the quality and efficiency assurance of Vattenfall’s customer service routines. VATTENFALL’S BUSINESS ACTIVITIES

Customer service operations in Umeå. Information centre for visitors at Ringhals nuclear power plant. produced results, while operations were not subjected to the same type of pressure as that caused by the previous year’s severe weather conditions. Work on improving network operations will continue in 2003 and over the next few years. Vattenfall was the first to give its network customers a service interruption guarantee. In 2002, customers were also offered the option of receiving service interruption information by SMS. To support network monitoring and customer communications, work on developing a completely new operations monitoring system has been underway during the year. The system will be launched in 2003. Extensive work has also been conducted to improve customer service and this has resulted in shorter response times and a higher service level. Electricity Networks Nordic Countries In Finland, the major disruptions that occurred during autumn 2001 led to extensive criticism of the entire elec- Electricity Networks Nordic Countries comprises the tricity industry. To enhance the ability to deal with major following business units: Electricity Networks Sweden and service disruptions in the future, response plans have been Electricity Networks Finland. Electricity Networks Sweden established and major investments have been made in new conducts regional and local network operations in Sweden technology. A completely new operations monitoring sys- through a wholly-owned regional network company, as well tem and information system is therefore also being imple- as four wholly-owned and two majority-owned local net- mented in Finland in 2003 and this will provide improved work companies. In total, there are 905,000 local network customer service during both normal operation and major customers, which corresponds to a market share of about disruptions. 17 per cent. Of these customers, about two-thirds are located During the year, the six network companies that Vatten- in rural areas. At the regional network level, Vattenfall has fall acquired in Finland were integrated. Operational activi- a market share of about 50 per cent, measured in terms of ties are conducted through a single unit – Vattenfall Verkko. transmitted volume. In Finland, Vattenfall is the second largest market player with 356,000 customers, which corre- Outlook sponds to a market share of 16 per cent. The new Swedish Electricity Act from July 2002 stipulates The network operations in Sweden are supervised by the that tariffs must be reasonable in relation to the actual per- Swedish Energy Agency. The Agency’s task is to ensure that formance of the network companies. The extent to which the network companies in Sweden conduct network opera- the tariff is reasonable is to be assessed by the Swedish Energy tions efficiently. This includes the possibility of evaluating Agency, which is responsible for evaluating the network the extent to which the customer tariffs are reasonable. companies’ performance. Vattenfall is actively working on developing both the The supervisory model, known as the “network utility technical and economic aspects of network operations. model”, will be applied for the first time in 2004 to evaluate network tariffs in 2003. This is a suitable model, providing Important Events in 2002 that it is adapted to market conditions. The profitability of network operations in Sweden and In Finland, a new electricity network regulation system 22 Finland is measured as return on replacement value will also be introduced early in 2003. translated into operating profit. Successful network operations that yield a good return In its Swedish network operations, Vattenfall has been require continuous organisational improvement through able to completely avoid major service disruptions during efficient routines, high delivery reliability and good customer the year. The extensive improvements implemented over service. Further structural changes to develop business are the past two years, with improved clearing of power-line also being given priority in order to enhance competitive tracks and investment in network refurbishment, has strength. VATTENFALL’S BUSINESS ACTIVITIES

Joining an underground cable in Svenljunga. Vattenfall’s Business Activities

Heat Nordic Countries

Heat Nordic Countries generates and distributes heat in Sweden and Finland, Estonia and Lithuania. Within the ready heat product area, 1.5 TWh per year is delivered in Sweden and Finland, making Vattenfall the third largest heat supplier in the Nordic region. Vattenfall’s annual district-heating production in Sweden is 3.9 TWh, in Finland 0.9 TWh and in the Baltic countries 0.2 TWh.

Important Events in 2002 The purpose of this business unit is to create value by becoming the most attractive choice for the customer in terms of heat delivery. The profitability of heat operations in the Nordic countries is measured as the return on net assets. To improve profitability, the return on investment requirement has been raised, unprofitable facilities have been sold and rationalisation measures have been implemented while heat prices have gradually been adapted to the market. Sales dropped to record-low levels during the first three quarters of the year. However, delivery levels were high during the cold fourth quarter. To mitigate risk exposure to weather conditions, district-heating charges with a larger fixed component have been introduced. In 2002, Vattenfall decided to expand its CHP plant in Uppsala by a fifth unit which will be fired by environmentally acceptable refuse-derived fuel. The investment represents just over SEK 1 billion and the plant will start operations in spring 2005. During the year, Vattenfall became the sole owner of Härjedalens Mineral AB which supplies peat fuel to the plants in Uppsala and Drefviken. The aim is to develop the business to include other types of biofuels.

Outlook Transparent and sustainable rules for energy tax-related issues are important for sound decision-making on investment in plants. To ensure market efficiency, the tax system must be designed so that all players are treated equally. 23

Top picture: Vattenfall Värme Uppsala AB. Bottom picture: Drefviken Värmeverk. VATTENFALL’S BUSINESS ACTIVITIES

Wood chips for biofuelled plants. Engineer at Vattenfall Värme Uppsala AB. Refuse-derived fuel incineration at Vattenfall Värme Uppsala AB. Services Outlook The total size of the market for consulting and contracting This business unit provides consulting through two compa- services in the Nordic countries is expected to remain un- nies, SwedPower and SwedPower International, as well as changed in the next few years. In order to develop the com- contracting through Vattenfall Service Nord and Vattenfall petitive strength of the business unit, work is continuing in Service Syd. Research and development work is conducted order to rationalise the organisation and to enhance the unit’s through Vattenfall Utveckling. ability to create even more attractive services for customers. Both consulting and contracting target internal and The Nordic market for consulting is currently undergoing a external customers, while Vattenfall Utveckling is primarily series of structural changes. Consequently, Services must a resource for strategic research and development in Vatten- ensure that it is positioned to advantage in a changing market. fall. The business unit has a total of 2,350 employees, most of whom work with contracting. Contracting in Finland is conducted by Empower, in which Vattenfall holds a 35 per Other Business cent stake. About 50 per cent of consulting sales are realised outside The decision to focus on core business in the Nordic coun- Vattenfall. Within the contracting business, external sales tries, Germany and Poland led to further streamlining of the increased to about 25 per cent. business in 2002. In September, ownership of Arrowhead AB was transferred to Song Networks Holding AB and Vatten- Important Events in 2002 fall also participated with SEK 200 million in a directed new The financial performance of Services was satisfactory in issue of shares. The transactions were completed in January 2002. The business unit has shown a positive profit trend 2003. Following these transactions, Vattenfall owns less than over the past few years and this trend was exceptionally a 20 per cent stake in a completely restructured Song. strong in 2001 due to gains from the restructuring of the Other Business also includes the wholly-owned sub- Finnish contracting business. The profitability is expressed sidiaries, Vattenfall Data, Vattenfall Support and Vattenfall 24 and measured as operating margin. Fastigheter, as well as companies in the Netherlands and the During the year, SwedPower established itself on the Baltic countries. Eastern European market through major contracts for the Ignalina nuclear power plant and in Kosovo. Co-operation between the consulting units in Vattenfall Europe also started during the year in order to take advantage of synergies. In 2002, Vattenfall Service Syd established operations in the Malmö region. VATTENFALL’S BUSINESS ACTIVITIES Vattenfall’s Business Activities

absorbed and has changed its name to Vattenfall Europe, is Germany – Focus still listed on the exchange, although the level of trading is low, since unrestricted shares only correspond to 1 per cent. on Consolidation Vattenfall AB directly and indirectly controls about 97 per cent of the total shares and EnBW about 2 per cent. After Through extensive acquisitions over the past three the merger, the former shareholders in Bewag will obtain years, Vattenfall has developed a strong position in shares in Vattenfall Europe as follows: 1 Bewag share in Germany. Vattenfall is now the third largest electricity exchange for 0.5976 shares in Vattenfall Europe. generator and the largest district-heating producer with SEK 60,696 million (29,510) in combined net New Organisation in Germany sales for 2002. for Enhanced Competitiveness Operations in Vattenfall are formally conducted through a Electricity generation amounted to 68 TWh, which corre- number of subsidiaries. However, operational and financial sponds to about 17 per cent of the total generation in Ger- control is carried out through the six business units: Gene- many, and district-heating amounted to 14 TWh. Vattenfall ration, Trading, Transmission, Distribution, Sales and Heat. also owns the transmission network (high-voltage grid) in From 2003, the organisation has been divided up according the former East Germany and the electricity networks in to the value chain and follows the same principles that apply Germany’s two largest cities – Berlin and Hamburg. At the to Vattenfall’s operations in the Nordic countries with re- end of 2002, net assets amounted to SEK 60.5 billion and spect to performance measurement and profitability require- the number of employees was 22,305. Operating profit ments. amounted to SEK 4.7 billion (3.9). Extensive restructuring and rationalisation programmes are underway which will result in EUR 400–500 million in Vattenfall Europe Formed annual savings by 2005. During the year, the integration of the German acquisitions progressed as planned. Dissolving the former complex owner-relationships and integrating four major energy companies from Eastern and Western Europe with different corporate cultures is a significant challenge. In connection with the acquisitions in Germany, Vattenfall undertook commitments for a period of several years in respect of the employees. Extensive action programmes include additional activities to support employees affected by downsizing. The Vattenfall brand was launched in Germany with the announcement of the name of the German holding company, Vattenfall Europe AG. The company was formally founded in August through a merger between HEW and VEAG. Before this, the lignite producer, LAUBAG, had been taken over by HEW. The decision to merge Bewag with Vattenfall Europe was only made at the beginning of 2003. These mergers have established the legal structure. The headquarters of Vattenfall Europe are located in Berlin, although SEK m 2002 2001 25 several important functions, including Trading, have been Net sales 60,696 * 29,510 * based in Hamburg. HEW and Bewag are well-established brands on the local market in Hamburg and Berlin and will Operating profit 4,733 3,886 therefore be retained. The number of customers in these Net assets 60,468 43,223 cities is just under 3 million. Number of employees 22,305 11,055** Both HEW and Bewag have been listed on the German * Including intragroup sales stock exchanges for a long time. HEW, which has now been ** Average number of employees 2001 VATTENFALL’S BUSINESS ACTIVITIES

Steam from the cooling towers at the thermal power plant in Jänschwalde. Vattenfall Europe Important Events in 2002 In 2002, extensive legal and operational restructuring was – Mining and Generation carried out to integrate the acquired companies’ generation operations. A significant potential for cost-cutting has been The Mining and Generation business unit comprises the identified and an action programme was initiated in 2002 generation facilities in the former VEAG, HEW and Bewag, which is expected to continue over the next two years. as well as lignite mining conducted by LAUBAG in Eastern Operating costs must be reduced for the business unit Germany. In 2002, the total of Vattenfall Europe’s own elec- to be competitive and to attain the financial targets. tricity generation amounted to 68 TWh and electricity obtained from partly-owned nuclear power plants amounted Outlook to just over 8 TWh. The demand for electricity on the German market is expect- The generation capacity is 11,909 MW; 58 per cent ed to increase by less than one per cent per year while the comprises large-scale thermal power plants fuelled by lignite, electricity generation mix will largely remain unchanged. and 14 per cent comprises nuclear power. The variable costs Network operators will probably experience a greater need of the production facilities are low, resulting in an operating for balancing power. The planned increase in wind power in economy that is stable in the long term. At the same time, the German electricity system will also increase the need for the fuel supply from Vattenfall-owned plants secures the balancing power which could create business opportunities access to fuel. Several of the lignite-fired power plants also for pumped storage plants. produce heat – a total of 3 TWh – which is distributed and sold to nearby communities and industries. The remaining 28 per cent of the generation capacity 16 per cent of pumped storage plants used during peak times and 12 per cent other fuel. The pumped storage plants are important for balancing power in the German system. The Goldisthal pumped storage Hamburg plant will come online in 2003 and will increase the Group’s Berlin generation capacity in pumped storage by about 60 per cent. The large power plants, Schwarze Pumpe, Lippendorf and Boxberg 4, were brought online between 1997–2000, replacing the entire old plant capacity of the former East Germany. These facilities are the most modern fossil-fuelled power plants in the world and have a technical efficiency and environmental performance that is absolutely top class. Nuclear power

The plants have helped to significantly reduce carbon dioxide Thermal power/other emissions in Germany. Vattenfall’s nuclear power production is conducted in four partly-owned nuclear power plants: Thermal power/lignite Brunsbüttel, Krümmel, Stade and Brokdorf, which are Pumped storage all located near Hamburg. Brunsbüttel was shut down in Network operations February 2002 due to damage to a pipe system. The cost Transmission operations of the prolonged outage, including the delayed restart, is estimated at SEK 600 million. 26 VATTENFALL’S BUSINESS ACTIVITIES Vattenfall’s Business Activities

Vattenfall Europe – Trading Vattenfall Europe – Sales

Trading operations in the German subsidiaries, Bewag, Vattenfall Europe Sales is the third largest player on the VEAG and Nordic Powerhouse, were combined during German market with a sales volume in 2002 of 81 TWh, the year into a single new business unit – Vattenfall Europe which corresponds to a 15 per cent market share. Of the total Trading – with headquarters in Hamburg. The purpose of volume, 47 TWh was sold to resellers, 14 TWh to regional the unit is to co-ordinate all electricity trading, both physical customers, 11 TWh to industrial customers and 9 TWh to and financial, within Vattenfall Europe. household customers. This corresponds to a market share of Vattenfall Europe Trading participates in the power 20 per cent of the reseller segment and 6 per cent of the mass exchanges in Leipzig (EEX), Amsterdam (APX) and Paris market segment. (Powernext) and can optimise and hedge the risk in future volumes for the Generation and Sales business units. Vatten- Important Events in 2002 fall Europe Trading primarily targets internal customers, in The sales strategy is focusing on maintaining a high customer other words, the business units within Vattenfall Europe. loyalty by offering attractive products and by concentrating However, it also serves external customers through the on profitability improvement. This means that work will subsidiary, Nordic Powermanagement GmbH. continue to focus on enhancing cost-efficiency, effective processes and systems, as well as professional risk manage- Important Events in 2002 ment in the sales process. For the fourth year in a row, During the summer, the power exchanges in Leipzig and HEW was ranked by Kundenmonitor Deutschland as Frankfurt merged into a single exchange – the power the company that had the most satisfied customers on the exchange in Leipzig (EEX). Vattenfall Europe is one of German market. the largest players on the German market and by actively During the year, the business unit signed new contracts participating in the development of new instruments and with several important customers in the industrial customer contract types in risk management and trading, the unit is segment. The volumes in existing contracts have increased, consolidating its position. The unit is also very involved in the unit has consolidated its position as a partner to resellers the development of environmental trading products such in Eastern Germany and has also expanded its co-operation as green certificates. with local energy companies.

Outlook Outlook In 2002, the volume of electricity trading on the financial In 2003, a new sales organisation will be introduced com- market decreased substantially for products with long prising three brands: Bewag, HEW and Vattenfall Europe maturities. The main cause was the bankruptcy of Enron Sales. Vattenfall Europe Sales will be responsible for sales which resulted in the withdrawal of several US players from activities directed at resellers, municipalities and industrial the market. However, total sales increased on the physical customers while the Bewag and HEW brands will be used electricity market and the volume on the financial market for regional sales activities targeting the business unit’s 2.7 is expected to grow again within the near future. million end-customers in Berlin and Hamburg. Vattenfall Europe Sales has also established itself as a player on the French market and, after EDF, is the largest player on the French end-customer market. Internal rationalisation and the harnessing of synergies and economies of scale through the launch of a new sales 27 organisation are expected to have a positive impact on profitability in 2003. Additional cost-efficiency programmes have been planned to improve competitiveness and to strengthen Vattenfall’s position as the third largest market player. VATTENFALL’S BUSINESS ACTIVITIES

Thermal plant Schwarze Pumpe. Inside an office at HEW. Thermal plant Boxberg. Vattenfall’s high-voltage network is centrally located in Europe and is integrated with the rest of Germany which, in turn, has connections with Southern Europe, France and the Benelux countries. The network is also connected to the Nordic electricity market in the North, the Czech Republic in the South and Poland in the East. Together with the Polish high-voltage network, the network is a unique link between the major electricity power system in the Western part of Central Europe and the growing system in Eastern Europe.

Important Events in 2002 During the year, a programme was initiated to reduce the costs of the business units. From December 2002, the network is being monitored and controlled from a single control centre in Berlin. The planning of the remote control of all of the stations is underway and, in 2003, the assets from Hamburg’s and Berlin’s high-voltage operations will be transferred to Vattenfall Europe Transmission. A joint balancing area has been formed, which is a decisive step in the merger of the previous three separate network operators’ activities. In order to increase capital utilisation and improve operating efficiency, the business has been divided into two separate organisations. Asset Management, which focuses Substation. on technical operations, and Service Management, which focuses on the work conducted in the facilities. During the year, Eastern Germany suffered from severe Vattenfall Europe – Transmission flooding, which also affected Vattenfall’s facilities. Major damage was avoided through extensive rescue operations Vattenfall operates the third largest transmission business carried out by employees and volunteers. in Germany. Operations include the high-voltage grid in Eastern Germany and in the Hamburg area, with 10,500 Outlook kilometres of power lines, a number of transformers and The increasing wind power production in the German substations and an ownership stake in the KONTEK cable system increases the system operators’ needs for balancing link between Germany and Denmark. power. The installed power from wind power in the network After re-unification, the electricity supply system in area has increased to 4,200 MW, which is above the average Eastern Germany was radically transformed. Electricity for German network system operators. The increased power consumption in Eastern Germany has decreased significantly will lead to an increased transmission of wind power through over the past ten years, due to the fact that the population the system to other regions in the country and the trend is has moved to Western Germany and other factors. This has expected to continue. In 2010, it is expected that wind power 28 created a need to develop the transmission capacity of the will be expanded to 10,000 MW installed power, resulting in high-voltage network in the direction of Western Germany. a need to eliminate bottle-necks in the Southwestern direc- As large and old power plants have been closed down, the tion of the network. high-voltage network has been refurbished and adapted. VATTENFALL’S BUSINESS ACTIVITIES

Thermal plant Lippendorf. Vattenfall’s Business Activities

Vattenfall Europe – Distribution

Vattenfall Europe has 3.4 million network customers and is the fourth largest player on the local network market, with a market share of about 8 per cent. Operations comprise the distribution of electricity in Northeastern Germany, Berlin and Hamburg as well as in the states of Mecklenburg-Vor- pommern, Brandenburg and Niedersachsen. The voltage levels of the networks range from 110 kV to 0.4 kV and the total power line length is 75,000 kilometres. However, the network in Hamburg maintains a high technical standard, whereas parts of the network in Berlin are in need of refurbishment. The network in the Eastern parts of Berlin is currently being modernised. In Germany, network operations are regulated by an agreement between the network companies and the customers. The agreement establishes how the network tariffs are to be calculated. A key success factor on a regulated market is an efficient structure and high-quality network operations.

Important Events in 2002 During the year, a new organisation and controls were implemented. Many areas of Vattenfall Europe are undergoing a transformation process in order to achieve a Best Practice level in Europe. From 2003, the operational units in Vatten- fall Europe Distribution will be controlled in the same way as profit areas. The split into Asset Management and Service Management will result in a greater focus on profitability and on the customer.

Outlook The current regulation of distribution in Germany with the application of the “Cost Plus” model, where the companies can cover their costs plus receive a margin, does not provide any incentive to improve cost efficiency. A system of regulation that is better adapted to market conditions, where companies can keep the greater share of the increase in profits generated by structural changes and efficiency improvement, is necessary if the business units are to meet and sustain a level profitability that is in line with the Group’s requirement. How these issues will develop in Germany 29 is largely determined by developments in the EU. Conse- quently, Vattenfall is actively participating in resolving issues concerning the EU’s and Germany’s development of systems for regulating network operations. VATTENFALL’S BUSINESS ACTIVITIES

Krümmel nuclear power plant. Thermal plant Tiefstack. Thermal plant Mitte.

Vattenfall Europe – Heat The programme comprises a raft of measures, including optimising production, upgrading the combustion technology, Vattenfall Europe Heat comprises district-heating operations improving fuel logistics and co-ordinating fuel purchasing. in Berlin and Hamburg with generation, distribution and The district-heating operations in Berlin/Charlotten- sales of heat and, to a lesser extent, cooling. The business is burg, which were acquired at the end of 2001, have been the largest district-heating operation in Western Europe, integrated into operations. During the year, a decision was with a market share of 27 per cent in Berlin and 23 per cent also made to rebuild the old part of the distribution system in Hamburg. in Hamburg which conducts energy in steam to a modern Heat is mainly generated by CHP plants although hot- hot-water-based system. The investments are being imple- water boiler stations are also used. The production system mented over a period of eight years and will result in a more has a capacity of 8,500 MW of heat and 3,100 MW of elec- efficient system with lower operating and maintenance costs. tricity, and uses natural gas, oil, coal and lignite as fuel. The CHP plants generate both electricity and heat at the same Outlook time, resulting in efficient fuel utilisation. Combustion technology and reduced emissions from energy 30 production will be important issues for the future, as will the Important Events in 2002 technology for using natural gas in energy production. The During the year, several long-term contracts for the delivery future development of the heat business will be mainly af- of heat have been signed with new customers. fected by the EU’s and Germany’s rules in the environmental A programme has been conducted during the year which area, natural gas price trends and the extent of competition aims at reducing costs and rationalising the organisation. from district-heating substitutes. VATTENFALL’S BUSINESS ACTIVITIES Vattenfall’s Business Activities

The somewhat less than satisfactory performance of the Poland – Vattenfall, business is primarily due to the economic recession in the country. The recession has resulted in lower sales volumes and difficulties for certain customers in paying their bills. the Largest Foreign Other problems include the fact that the planned deregulation is not progressing at the scheduled pace and the fact Energy Player that regulations controlling distribution do not allow a market-adapted return on investment. Vattenfall is the largest foreign player on the Polish Business conducted by GZE at its former district offices energy market. Business comprises heat production, has now been closed down. Maintenance operations are distribution and electricity sales. now conducted through two subsidiaries and electricity sales have been transferred to a separate sales company. Vattenfall produces energy through the subsidiary, Elektro- During the year, IT activities at GZE and EW have been cieplownie Warszawskie (EW) in Warsaw, in which it holds combined into a single service company – Infonet. a 69 per cent stake. Electricity distribution and sales are con- The business has been rationalised through the reorga- ducted through the associated company, Gornoslaski Zaklad nisation of several areas. Employees have been trained and Elektroenergetyczny (GZE) in Upper Silesia in Southwestern non-core activities have been outsourced. Considerable Poland. Vattenfall owns 32 per cent of the company, is re- work has also been put into reducing unpaid customer bills, sponsible for managing the company and will become the and these have now been significantly limited. majority owner in 2003, in accordance with an agreement. EW is a market leader in district-heating in Poland with Outlook an annual output of about 13 TWh of heat, which means As the first foreign player on the Polish market, Vattenfall a market share of 27 per cent. In connection with heat has had a headstart. To enhance its competitive advantage, production, just over 3 TWh of electricity is also produced Vattenfall will focus on management training and on upper year. GZE is Poland’s largest network company with grading its customer management and billing systems. 1.1 million customers. GZE’s market share is 7 per cent in The Polish energy market is on the brink of radical terms of the number of customers, and 10 per cent in terms change. A vital factor for Vattenfall’s Polish business will of transmitted volume. When large-scale privatisation is be how the role of the Polish Energy Regulatory Authority completed, Vattenfall will face competition from several changes if Poland joins the EU from 2004. The political and major European players on the Polish market. The Polish economic situation in Poland has slowed down the privatisa- companies are currently undergoing extensive rationalisation process. However, an imminent EU membership will tion to ensure that they will be well-equipped to deal with probably increase the pace. In accordance with current plans, tougher competition. In connection with the acquisitions in the energy market is expected to be fully deregulated by the Poland, Vattenfall undertook commitments in respect of the end of 2005. employees for a period of several years. In Poland, a system of five-year employment or salary guarantees applies and various programmes are underway to manage the need for downsizing. In addition to the ongoing rationalisation and environ- SEK m 2002 2001 mental investment, the possibility of using other fuels Net sales 3,167 3,242 besides coal in the plants is also being examined. Operating profit 5** 97 31 Net assets 6,108 6,357 Important Events in 2002 Number of employees 2,932 3,562 * Altogether, the underlying business reports a profit im- *Average number of employees 2001. provement of almost SEK 150 million. The profitability of ** The decrease is due to the dissolution of SEK 130 million in reserves in the Polish business is measured as the return on net assets. 2001 and to the production tax on electricity that was introduced in 2002. VATTENFALL’S BUSINESS ACTIVITIES An employee in Warsaw. The power plant in Sikierki. Annual Accounts 2002 we for itemsaffectingcomparability, thecorresponding values and thereturnonequityto19.1 percent(11.8). Adjusted SE items affectingcomparabilityincreased 98percentto 7.6to SEK billion(4.2).The netprofitfortheyear excluding 12.9to SEK billion(8.8). items affectingcomparabilityincreased by 46percent SE to theGermanacquisitions. cent to33.5TWh (25.4).The improvement ismainlydue to 188.3 TWh (149.9) andheatsalesincreased by 32per August July June April F Month mainly duetotheacquisitionsinGermany. 101Net salesincreased by 46percenttoSEK billion(69), Group and consolidatedaccountsfor2002(pages32–73). (556036–2138)(publ) hereby submittheannualaccounts T Acquisitions ebruary he BoardofDirectors andPresident ofVattenfall AB K 7.2 billion(3.7). K 13.4 billion(10.0). The operatingprofitexcluding re re T T T V attenfall’s electricitysalesincreased by 26percent he returnonnetassetscameto10.5 percent(9.9) he netprofitfortheyear increased by 81 percent he operatingprofitincreased by 34percentto 10.1 10.1 per cent(8.8)and18.3 percent(10.3) respectively. E Bewag H Härjedalens MineralAB EW Company B E W H , P olen 25 + 25.1 19 4 14.2 Change, % 4.8 P its coreGermany, electricityandheatbusinessinFinland, In 2002,Vattenfall continuedtorestructure andstreamline Ke the shares inafullyreconstructed Song. Vattenfalltransactions, now owns lessthan20percentof actions were completedinJanuary2003.Following these SE Networks HoldingABandVattenfall alsoparticipatedwith andHafslundrespectively.shares inNESA increased. InDenmarkandNorway, Vattenfall soldits while thestakeinEWheatcompany inWarsaw was date thenew Vattenfall Europe AG. to implementthenecessarystructural changestoconsoli- of VEAGandLAUBAG.This paved theway forVattenfall in connectionwithagreementstheprivatisation concerning settlement ofallclaimsforpayment from theGermanstate Tr AG. shares inHEW in Bewag andacquired theCityofHamburg’sremaining in thetablesbelow: oland andSweden. euhandsanstalt) was concluded concerning anearlyfinal wasconcludedconcerning euhandsanstalt) K 200millioninadirected new share issue.The trans- y Structural Changes Ownership ofArrowhead ABwastransferred toSong In Poland,two ofthesmallerheatcompanieswere sold, An agreement withBvS(thesuccessortotheGerman In Germany, Vattenfall becameamajorityshareholder Details ofkey structural transactionsin2002are setout Administration Report 100 92.1 ofthevotes 8 100 6 Curr 9 9.5 ofthecapit 9.2 6.8 ent holding,% al EB of 25%inVEA Acquisition viaH From EnBWandRW From HärjedalenMunicipality From theCityofHamburg Purc Comments H ownedaminorityst hase frompersonnel G EW A E resp. G ake 33 ANNUAL ACCOUNTS 2002 34 ANNUAL ACCOUNTS 2002 Pe June June April Marc Marc Month Div electricity andheatgenerationthatr and combustionfacilitiesforelectricityheatgeneration. operations mainlycomprisehydro power, windpower permit undertheSwedish Environmental Code.These Th and Parent Company Environmental Impact withintheGroup all R&DfortheGr r also beingimplemented mor of theiroperations V R ment isprovided inNote32. employees, paidtoseniormanage- salarycostsandbenefits 1 22,305inGermany,535 inFinland, 2,932inPoland and employees, cameto33,927, ofwhom8,029inSweden, number ofemployees, expressed intermsoffull-year SE 34,248 (23,814). Salariesandremuneration amountedto During theyear, theaverage numberofemployees was r R&Dcosts within SvenskAB. Kärnbränslehantering 283million(357) wasconducted of whichwork forSEK esponsible forthispr epresented 0.5percent(0.9)ofnetsales. 26 in other countries. Additional26 inothercountries. informationconcerning attenfall’s businessunitsconductR&Dasanintegralpart ese rs K 12,455 million(8,842).Attheendofyear, the e parent company conductsoperationsthatrequire a e Th 481In 2002,R&Dwork totalledSEK million(564), h h e long- s onnel arch andDevelopment (R&D) tment e par term R&Dw ent compan s . Asasupplementtotheseactivities oup ogramme, asw . y has52combustionfacilitiesfor . T ork pr Nässjö K N Ustk Ostrow Hafslund A W Company he Gr E ielkopolski, P SA a, P ogramme fortheGr

oup F oland raftvärmeverk SA equir ell asforco- oland unction Strategiesis e apermit or dinating oup is , asw , a 100 23.2 5.8 3 11.5 Change, % 4 ell ed withintheparent company. Other activitiesthatare an Power generationinhydro power plantsismainlyconduct- unlikeotheroperationsthatrequireoperations, apermit. in nuclearandhydro power plantsisanessentialpartofthe sidiaries thatextractpeatinSweden. Theof electricityunderconcession. Group alsohassub- network operationsforthedistributionandtransmission Thr use combustionfacilitiestogenerateelectricityandheat. includingVattenfallsubsidiaries, VärmeUppsalaAB, Anumberof age facilityforspentfuelinOskarshamn. nuclear wasteinForsmark,aswell asanintermediatestor- disposaloflow-facility forthefinal andintermediate-level use nuclearpower plantstogenerateelectricity.runs a SKB as wellsubsidiaryBarsebäck asRinghalsAB’s KraftAB, mental Code.Forsmarks Kraftgrupp ABandRinghalsAB, tions thatrequire apermitundertheSwedish Environ- Environmental Code. procedures thatfalloutsidethestipulationsof r also hashydro power plantswithaccompanying water permits andtherest mustbereported.The parent company rately andingroups.Ofthesewindpower 10 plants, require has atotalof42windpower turbineslocatedbothsepa- that are onlyusedforreserve power. The parent company while8aredown basis, gasturbineplants onalong-term electricity thatrequire 2power apermit, plantsare shut the Environmental Code.Ofthecombustionfacilitiesfor as 112 heatgenerationplantsthatmustbereported under egulation operationswhichare subjecttospeciallegal As withnetworkthegenerationofelectricity operations, T ough itsSwedishtheGroup subsidiaries, conducts he Group’s Swedish subsidiariesalsoconductopera- 0 0 0 0 Curr 0 ent holding,% T T T T T Comments o NässjöMunicipality o Sydkraft o Sydkraft o Sydkraft o D O N G Administration Report

essential part of the operations are mainly conducted within subsidiaries. The nuclear power plants at Ringhals and Barsebäck are subject to special legal procedures prior to receiving permis- sion to conduct environmentally hazardous operations in accordance with the interim regulations brought in when the Environmental Code was introduced. The main environmental impact of nuclear power plants is the generation of radioactive waste. The main environmental impact of combustion facilities consists of emissions of carbon dioxide and acidifying substances. The main environmental impact of hydro power and network activities, as well as peat extraction, is land use. The Group conducts operations in non-Swedish subsidiaries which require a permit under non-Swedish national legislation. Heat and power generation in fossil- fuelled combustion facilities in Germany and Poland, and in the case of Germany, electricity generation in nuclear power plants and lignite mining as well, are significant operations of this type.

Parent Company Net sales for the parent company amounted to SEK 23,383 million (21,875). The net profit for the year was SEK 4,514 million (2,002). Investments amounted to SEK 9,262 million (19,275). Liquid assets came to SEK 3,313 million (124), while funds in the Group account managed by Vattenfall Treasury AB (publ) amounted to SEK 12,852 million (6,978). Vattenfall AB is wholly owned by the Swedish state.

Board of Directors Vattenfall AB’s Board of Directors comprises 13 members and three alternates, of whom three members and three alternates are appointed by the trade unions. The Board secretary is employed by Vattenfall AB. In 2002, the Board held nine meetings, including the statutory meeting following the general meeting of shareholders. The work of the Board follows an annual plan designed to ensure that the requisite decisions are made and that the Board’s information requirements are met. The Board’s work is also 35 influenced by its rules of procedure. The Board meets with the company’s auditors every year. ANNUAL ACCOUNTS 2002 36 ANNUAL ACCOUNTS 2002 organisation tothebusinessunits’control functions. mandates thatare subsequently allocatedthroughout the Thethem. riskcommitteealso examines thepoliciesand suitable modelsandmeasurement methodsformanaging operations throughout thevaluechainandondeveloping focuses onidentifyingtherisksinvolved inVattenfall’s f Chief FinancialOfficer. co-ordinated by ariskmanagementcommittee,ledby the T Organisation risks are calculatedby anindependent group withintherisk r control departmentsthatmonitor theportfoliolimitsand Eachbusinessunithaslocalrisk policies andmandates. ensures thatthebusinessunitsfollow theestablished A specialunitwithintheGroup Function RiskControl Risk Control irst-class riskmanagementwithin theGroup.Thisirst-class work eport backtotheGroup Function. Vattenfall’s combined he Group’s riskmanagementandreporting processes are T he purposeoftheriskcommittee’swork istoensure within thescopeofGroup’s riskmandate. control whichalsoensures function, thattheserisksfall bears responsibility fortheresults. the riskinquestionisalsoresponsible formanagingitand w risks may betakenandwhoisresponsible as fortheserisks, Thisto eachindividualbusinessunit. policyregulates which nisation intheformofpoliciesspecifyingrules applying Thisoperations. mandateisallocated throughout theorga- mandate specifyinghow much risk isacceptablewithinits Each year, theBoardofDirectors gives thePresident a Mandates andPolicies and varioustypesofsimulations. T risks indifferent areas andmarketsinteractwitheachother. portfolios isValue atRisk(VaR), whichindicateshow the T Risk Measurement his modelissupplementedby otherriskmeasurements he riskmeasurement modelusedforthemajorityof ell assupervisionandreportingThe methods. unittaking power plantoperators. as themutualundertakingsapplyingtoGermannuclear German MutualAtomicEnergyReinsurance Pool,aswell nuclear power liabilityinsurancecover ishandledby the European Theconsortium ledbyMarkets. ACE German power liabilityinsurancecover isissuedby aninternational handles theinsuranceprogramme inSweden.Nuclear US asubsidiaryofthe mutual insurancecompany. ONEIL, cover aEuropean forproperty damagethrough EMANI, • operation ofpower andheatgenerationplants. V Plant Risk Risks withintheGroup • • • • • T identify,ed todefine, measure, report andfollow uprisks. Va T SE 371.88or EUR whichisequivalentto millionintotal, 185.94joint liabilityinsuranceisEUR million per claim one andthesameyear. The Vattenfall Group’s share ofthis T betw joint liabilityinsuranceagreement (Solidarvereinbarung) 2,500millionare coveredup toamaximumofEUR viaa Energy Reinsurance Pool.Claims over250millionand EUR EUR Claimsupto these players2,500million. combinedisEUR Theplants isunlimited. mandatoryinsuranceamountforall each market. Germany isprovided by localinsurancecompaniesactive in Insurance cover Poland againstsimilarrisksinFinland, and cover againstproperty damageandbusinessinterruptions. nuclear facilitiesoftheSwedish Group’s unitswithinsurance liability insurance. other hydro power producers have therefore takenoutdam r esult of dam accidents is strictly unlimited. Vattenfallesult ofdamaccidentsisstrictlyunlimited. and attenfall’s largestinsurablerisksare associatedwiththe he riskmanagementprocess consistsofthefollowing steps: his agreement entailsoneundertaking fortwo claimsin he RiskManagementProcess with establishedstrategiesandwrittenrules. Managing theseprocesses inaccordance established reporting routines R M Identifying where intheorganisationtheserisksarise thecurrentDefining risks Managing therisks ttenfall‘s riskmanagementisacontinuousprocess design- K 3,419 million. V In Germany, theliabilityofplayers operatingnuclear V In Sweden,theliabilityfordamagetothird partiesasa T mutual nuclearpower insurancecompany, NEIL, eporting inaccordance with easuring therisksinareliable manner attenfall Reinsurance S.A. inLuxembourgreinsuresattenfall Reinsurance S.A. part attenfall Insurance,acaptive company, provides thenon- een theGermannuclearpower plantoperators. he Swedish nuclearpower companieshave insurance 250 millionare covered by theGerman MutualAtomic Vattenfall’s RisksandRiskManagement competitors, includingRWE.competitors, collaboration withsomeofVattenfall’s majorinternational separation andstorage.This project isbeingconductedin carbondioxide forlarge-scale bypartly financed theEU, V Amongotherthings, both technicalandpoliticalaspects. by andVattenfallon theiragenda, isaddressing thisissue Society’s electedrepresentatives have puttheissuefirmly challenges facingbothVattenfall andtheenergysector. from power fossil-fuelled plantsconstituteoneofthekey advance plansforimplementingtheappropriate measures. mental discoveries atanearlystagewithaview tomaking makes systematiceffortstoidentifyany signsofnew environ- plants isduetobecompletedby 2010 Vattenfall atthelatest. for allcontaminatedlandthatsurrounds thehydro power h we identifying contaminatedareas.InSweden,sitesexist that fi the acquisitionofEW. In2003,thelandsurrounding all the investment programme negotiatedinconjunctionwith InPoland,sitedecontaminationisincludedin concerned. have beendrawn upinconsultationwiththeauthorities for decontaminatingcontaminatedlandandremedial plans provisions IntheGermancompanies, up. have beenmade these sitesinSweden,Germany andFinlandhasbeendrawn Aninventoryoperations whichmustbedecontaminated. of mean thatoverall insurancecostscanbekeptlow. and directreinsurance accesstotheinternational market of Vattenfall Economiesofscale Insurance‘scommitments. by by carbon dioxide,andthemanagementoflandcontaminated mental risksinvolve emissionsofgreenhouse gasessuchas Vattenfall’sup onanongoingbasis. environ- mostsignificant as theGroup’sandare otherrisks, analysedandfollowed combined environmental risksare handledinthesameway tions withnew environmental Vattenfall’s profilesandrisks. the inclusioninVattenfall Group ofpartiallynew opera- T Environmental Risk is alsoanothertypeofpoliticalriskinvolving changesin the prevailing interest rateandcountryrisktrends.There managed by adjustingthecostof capitalinaccordance with with acquisitionsandotherinvestments, thistypeofriskis policy.change inmonetaryorfinance Inconnection arising whenever there isanew politicalmajorityora a resultThis ofpoliticaldecisions. may includeuncertainty P Po ydro power inthe1950’s and1960’s. Aremedial programme olitical risk is defined asthebusinessriskthatmayolitical riskisdefined ariseas ve ve attenfall hasbeenthedrivingforce behindaproject, he companiesacquired inGermany andPoland have ledto previous operations. re re adopting anintegratedriskperspective thatincludes litical Risk T V plants inWarsaw istobesurveyed forthepurposeof attenfall owns property contaminatedby previous he emissions of climate-affecting carbondioxide he emissionsofclimate-affecting contaminated inconnectionwiththeexpansion of 37 ANNUAL ACCOUNTS 2002 38 ANNUAL ACCOUNTS 2002 differences between theseareas. quotients inthedifferent areas.This leadstoprice inturn various areas leadtodiscrepancies insupplyanddemand Limitations inelectricitytransmissioncapacitybetween the T Area Risk is neededtoheathomeswhentheweather iswarm. siderable extentby outdoortemperatures,sincelesspower Demand –andthusthepriceisalsodeterminedtoacon- and thushasamajorimpactonthepriceofelectricity. of waterintheNordic region iscrucial topower production as are pricesonany othercompetitiveThe market. supply T Electricity Price Risk Electricity Trading Risk tradeorganisations. international r trends andkeepingintouchwithkeyall decision-makers Vattenfallrisks. istherefore actively engagedinmonitoring to predict anditisthusharder toprotect oneselffrom such r changes totaxesandenvironmental aswell fees, asthe the rules applyingtotheenergysector. include Examples T T bilateral contractsinPoland. in theNordicGermany, region,EEX aswell asvia futures canbetradedonexchanges suchasNord Pool anticipated production andsalesinadvance.Electricity forward contractsorfutures,which‘lockin’thepriceof hedges itsproduction andsaleswiththehelpofelectricity the Nordic region,demandisdeterminedby theweather. because accesstoproduction isanimportantfactor. Asin raw materialintheelectricitygenerationprocess,andpartly partlybecausecoalisusedas dependent onthepriceofcoal, elevant Vattenfall markets. isalsoamemberofnationaland Thisegulation ofnaturalmonopolies. typeofriskisharder he Nordic region isdividedintodifferent priceareas. he priceofelectricityisgoverned by supplyanddemand, he hedgingofproduction andsalesinSweden withthe his isaweighted priceforthevariousareas. A systempriceisusedfortradingfutures onNord Pool. In order tomanagepricetrendVattenfall uncertainties, In Germany andPoland,thepriceofelectricityishighly * Excl.loansfromassociatedcompanies andminorityshareholders. Maturity Profile,SEKmillion* 20,000 15,000 10,000 5,000 0 04 06 08 10 Later Credit institutionsandothers Commercial paper Bond loans Financial Risk thepricehedgingprocedure. whichsimplifies sumption, are contractsforregulating bothpeaksandtroughs incon- consumption asaccuratelypossible.InGermany, there sophisticated measurement methodstoestimatecustomer is knownTo asprofilerisk. Vattenfall managethisrisk, uses tohedgetheexactlevel.make itdifficult This phenomenon characterised by consumptionpeaksandtroughs which however, they donotfollowInstead, are thisassumption. Customerconsumptionpatterns, the periodinquestion. an assumedevenness inthelevel ofpower consumedduring F Profile Risk since there isonlyonepricearea. In Germany andPoland,thisproblem doesnotarise, v that are hedgedthrough suchcontractshave noarea riskfor electricity suppliedinSweden inSwedish kronor. Volumes for graphic areas,andthrough specialcontracts(STOSEK) to handlethepricedifference between thevariousgeo- T help offutures usingasystempriceresults inanarea risk. maturity toexceed 5years. was 4years (3.9).The aimisfortheaverage remaining On December31, theaverage remaining maturity of Vattenfall’s loansisshown inthediagrambelow. Thematurity intheloanportfolio. maturityprofile an even spread ofmaturitiesandalongaverage remaining To Re credit linesthatpartlyservedforthecommercial asback-up V programmes andonePolish bondprogramme. Inaddition, comprisingtwogrammes, MediumTerm Note(MTN) Therelines. are currently three commercial paperpro- theGroupforms, hasaccesstoanumberofdifferent credit siderable flexibilityperiodsand intheselectionoffinancing olumes produced orsoldinSweden inSwedish kronor. utures tradedonNord Pool are pricedinaccordance with attenfall has more than SEK 27attenfall hasmorebillionincommitted thanSEK here are two ways tomanagethisrisk:through area swaps financing Risk minimise the refinancing risk, the aimistoachieveminimise therefinancingrisk, oTo safeguard theavailability offundsandmaintaincon- 1 2 3 4 5 6 7 8 * Excl.loansfromassociatedcompanies andminorityshareholders. Total Borrowings,SEKmillion* 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0 0 0 0 0 0 0 0 0 98 99 00 01 02 Credit institutionsandothers Commercial paper Bond loans in thetablebelow. income andexpenses,broken down by currency, are shown being tohedge100 The percentaftertax. Group’s operating and currencies.Equityinforeign currencytheaim ishedged, the currencyrisklimitforinterest riskwithinafixed rates V e usd transaction exposureGerman subsidiaries, isprimarilyin a ratingintheSingleAcategory. rating fromVattenfall Moody’s. iscommittedtomaintaining an A-/A-2 ratingfrom Standard &Poor’s andanA3/P-2 of liquidassetsorcommittedcredit lines. have nolessthan10 percentoftheGroup’s salesintheform into accounthedgingcostsandtaxaspects. e of non-Swedishsubsidiaries(translationexposure). (transaction exposure), andtothevalueofnetassets effects onfuture cashflows ofexchange ratefluctuations T C norm of2.5years. fluctuate more than12 monthsoneithersideofacertain T ings are measured by theaverage interest fixed rateterm. Interest raterisksrelating totheGroup’sborrow- long-term Interest Rate Risk borrowings pertypeofloanisshown inthediagrambelow. The 4billion. distributionofthetotal paper loanofSEK As of2003,new futures willalsobelistedin for exampleonNordhedging ofelectricityprices, Pool. transaction exposure in term was1.8 years. included. operating income/expenses.Inventorychanges andinvestmentsarenot T T Other NOK PLN SEK EUR Currency Consolidated OperatingIncome/ he figures were calculated on the basis of a statistical compilationofexternal he figureswerecalculatedonthebasis of astatistical xposure intheGroup’s unitsishedgedby orthrough xposure istominimiseforeign exchange losseswhiletaking otal urrency Risk attenfall Treasury. Vattenfall Treasury, manages inturn, he Group’s exposure tocurrency riskisrelated tothe he average interest fixed ratetermisnotallowed to In theNordicgreater operations, partofthe On December31, 2002,theaverage interest fixed rate F T T and isattributabletofuelpurchases.Transaction or long-term and short-term borrowing, andshort-term Vattenfallor long-term has he Group‘sliquidityisalways targetforshort-term to he Group’s goalwhenitcomestomanagingtransaction

nok Vattenfall’s RisksandRiskManagement arises inconnectionwiththe Expenses perCurr Income 100 32 63 1 3 1 eur ency . Inthe Expenses , (%) 100 23 67 6 3 1 • categories: r to errors orshortcomingsinthecompany’s administrative f astheriskofincurringboth Operational riskisdefined Operational Risk internal controlsinternal are inplace. documented routines,reliable ITsystemsandsatisfactory operational riskwithinVattenfall by ensuringthatwell- Each businessunitisresponsible forlimitingandmanaging • • changes. changes. plusastandardforfuturemarket valuations, mark-up value daily basisandarethrough constantlyquantified mark-to- creditTheybasis ofexternal ratings. are monitored ona Counterparty risksare managedwithinthelimitsseton investmentswith electricitytrading, andderivative contracts. V C V terparties onthedifferent marketsbuthashadnoimpacton r from theEuropean andNordic marketsforavarietyof inancial damage and losses and loss of confidence due inancial damageandlosseslossofconfidence outines. Operationalriskscanbedividedintothefollowingoutines. easons. Thiseasons. hasledtoareduction inthenumberofcoun- ounterparty Risk attenfall isexposed tocounterpartyrisksinconnection attenfall’s operations, A in theITsystems. IT risksthatentailariskoflossesduetoshortcomings tracts oruncertaintiesregarding thecontract’svalidity. counterpartieslackingthe righttoconcludecon- tation, ofcontractsduetoshortcomings indocumen- fulfilment Legal risksthatentailariskoflossesarisingfrom thenon- and follow-uproutines. risk measurementaswell andvaluationmodels, ascontrol procedures, andlackofcompetence,reporting routines, overlapping areas ofresponsibility andwork allocation shortcomings inthecompany‘sunclearor organisation, During theyear, several companieshave US withdrawn dministrative risksthatentailariskoflossesdueto 39 ANNUAL ACCOUNTS 2002 40 ANNUAL ACCOUNTS 2002 Electricity Networks Heat NordicCountries Market NordicCountries Generation NordicCountries SE Profit Areas Earnings pershareexcludingitemsaffectingcomparability Earnings pershare,S No. ofshares(inthous Earnings pershare Net pr Minority interestintheprofitforyear Ta Pr Interest expensesandsimilarprofit/lossitems, Other interestincomeandsimilarprofit/lossitems Result fromotherlong-termsecuritiesheld Operating pr Participations intheresultsofassociatedcompanies Other operatingexpenses Other operatingincome Researc Administrative expenses Selling expenses Gr Cost ofproductssold Net s SE C * Total Other andeliminations* Other business P Germany Services Nordic Countries oland x ofit befor onsolidated Income Statement oss pr K million K million Mainly concerns trade between Market Nordic Countries, Electricity Networks Nordic Countries andGenerationNordicCountries. NordicCountries ElectricityNetworks MarketNordicCountries, Mainly concernstradebetween ales ofit fortheyear h anddevelopmentcosts ofit e t ofit ax andminorityinter E ands)

K 10 –25,019 6 25,667 21,275 0,696 1,830 1,025 3,167 2,761 2,974 ,674 7, 2002 est e ae Operatingprofit/loss Net sales –21,862 6 22,266 19,492 29,510 2,590 2,903 2,938 9,003 3,242 7 ,924 2001 13,363 , S 6,459 1,834 4,733 –386 2002 343 286 118 –29 E K 5 –1,730 6,099 3,886 9,959 1 –511 ,816 2001 162 –47 187 97 F ull-year 2002 Operating profit/loss (EBIT), excluding itemsaffectingcomparability Operating profit/loss(EBIT), 12,916 6,465 1,828 4,747 –828 285 326 –29 Note 117 4, 5 1, 2 14 10 11 13 5 9 6 7 Full-year 2001 –2,290 5,983 8,822 3,487 1,783 – —46 151 129 472 97 Oct –Dec2002 101,025 131,700 –77,339 –6,386 –1,869 –4,386 23,686 13,363 –1,763 –7,179 5 57.45 4,254 9,987 2,781 ,566 6 5 7, –658 –486 –657 2002 4.91 229 2,652 4,248 –271 960 658 –64 215 46 47 5 Oct –Dec2001 –52,408 131,700 –3,564 –2,938 6 16,595 –5,133 –1,097 –2,167 –4,737 1,681 3,342 1,721 —940 5,104 9,959 4,190 9,003 31.81 1,973 27.72 7 –616 —22 586 103 ,454 2001 259 511 45 85 83 Consolidated Income Statement

Comments The substantial improvement in the operating profit is primarily due to increased efficiency and improved profits Net Sales and Performance in Swedish electricity trading. The volume sold in accord- Net sales increased by 46 per cent to SEK 101,025 million ance with bilateral contracts amounted to 54.5 TWh of (69,003). The net sales figure does not include financial electricity (65.5). trading. The increase in net sales is mainly attributable to the acquisitions in Germany. Bewag was consolidated as of Heat Nordic Countries February 1, 2002, VEAG as of May 16, 2001 and LAUBAG Net sales amounted to SEK 2,761 million (2,590) and as of July 1, 2001. the operating profit totalled SEK 343 million (162). Items Operating expenses amounted to SEK 89,390 million, an affecting comparability amounted to SEK 17 million (33). increase of SEK 27,669 million that is mainly attributable to The volume sold amounted to 4.8 TWh of district-heating acquired companies. The cost of products sold increased by (4.9) and 1.5 TWh of ready heat (1.4). The improved profit SEK 24,931 million, while selling expenses, research and is attributable to high availability in the electricity genera- development costs and administrative expenses increased by tion facilities, improved prices and cost reductions. SEK 2,738 million to SEK 12,051 million. Depreciation totalled SEK 15,118 million (10,830). The dissolution of nega- Electricity Networks Nordic Countries tive goodwill corresponding to losses and restructuring costs Net sales amounted to SEK 7,674 million (7,924) and was reported in the gross profit for 2002 in the amount of the operating profit totalled SEK 1,834 million (1,816). SEK 3,626 million (2,539), which relates to acquired com- Items affecting comparability amounted to SEK 6 million panies in Germany. (33). The transmission volume amounted to 106.9 TWh The operating profit increased to SEK 13,363 million in Sweden (111.5) and 5.6 TWh in Finland (5.6). The elec- (9,959). Excluding items affecting comparability, the ope- tricity network operations are stable and network avail- rating profit came to SEK 12,916 million (8,822). The ability was good during the year. operating margin fell to 13.2 per cent (14.4). Excluding items affecting comparability, it remained unchanged at 12.8 per Services cent. The operating result was positively affected by SEK Services comprise contracting and consulting services, 447 million (1,137) in items affecting comparability, which as well as R&D services. Net sales amounted to SEK 2,974 constitutes the net of capital gains of SEK 838 million and million (2,938) and the operating profit totalled SEK 118 capital losses of SEK 391 million resulting from assets sold. million (187). Items affecting comparability amounted to Financial income amounted to SEK 3,010 million (2,232) SEK 1 million (36). and financial expenses to SEK 6,386 million (4,737). Net financial income/expenses amounted to SEK –3,376 Germany million (–2,505). The deterioration in net financial income/- Net sales for Germany amounted to SEK 60,696 million expenses is due to higher interest expenses as a result of in- (29,510) and the operating profit totalled SEK 4,733 million creased borrowing. Net financial income/expenses was also (3,886). Items affecting comparability amounted to negatively affected by the fall in value of German investment SEK –14 million (399). The increase is due to the fact that assets. The interest coverage ratio was 2.6 times (2.6). Bewag was consolidated as of February 1, 2002, while the Profit before tax and minority interest increased by 34 per VEAG and LAUBAG companies were only included in cent to SEK 9,987 million (7,454) and to SEK 9,521 million the Group as of May 16 and July 1, 2001 respectively. (6,327) after items affecting comparability. In Germany, the volume of electricity sold amounted to Taxes amounted to SEK 1,763 million (2,167). 93.9 TWh (51.7) and the volume of heat sold to 14 TWh Net profit for the year increased by 81 per cent to SEK 7,566 (5.1). In Germany own electricity generation amounted 41 million (4,190). Excluding items affecting comparability, to 68.2 TWh (45.0), of which 1 per cent was hydro power, these figures were 98 per cent and SEK 7,231 million 1 per cent nuclear power and 98 per cent fossil-based power. (3,651) respectively. The return on net assets was 10.5 per cent (9.9) and the Poland return on equity was 19.1 per cent (11.8). Excluding items Net sales for Poland amounted to SEK 3,167 million (3,242) affecting comparability, these figures were 10.1 per cent and the operating profit totalled SEK 5 million (97). In Poland, ANNUAL ACCOUNTS 2002 (8.8) and 18.3 per cent (10.3) respectively. the volume of electricity sold amounted to 3.3 TWh (3.5) and the volume of heat sold to 11.8 TWh (12.8). Profit Areas Generation Nordic Countries Other Business Net sales amounted to SEK 25,667 million (22,226) and Other Business comprises Vattenfall’s non-core business operating profit to SEK 6,459 million (6,099). Items affecting activities, service companies, Group functions and com- comparability amounted to SEK –6 million (116). panies in the Netherlands and the Baltic countries. The increase is mainly due to higher market prices. A total of An agreement regarding the sale of the broadband business, 34.5 TWh of hydro power (39.2) and 52.1 TWh of nuclear Arrowhead AB, was reached during the year. Net sales power (52.3) was generated in the Nordic countries. Sales amounted to SEK 1,830 million (2,903) and the operating to the Nord Pool power exchange totalled 27.4 TWh (26.0). profit totalled SEK –386 million (–1,730). Items affecting comparability amounted to SEK 442 million (560). Market Nordic Countries The substantial negative result in 2001 is mainly due to Net sales amounted to SEK 21,275 million (19,492) and the wind-up of “intelligent services”, as well as to provisions the operating profit totalled SEK 286 million (–511). Items made in respect of the broadband business. affecting comparability amounted to SEK 1 million (–39). 42 ANNUAL ACCOUNTS 2002 Non-restricted equity Equity Equity To To To Cash andbankbalances Curr Curr Inventories, etc. C To To Other long-termreceivables Other securitiesheldasfixedassets Receivables fromassociatedcompanies Participations inassociatedcompanies Financial assets To Advance paymentsfort Construction inprogress Equipment, tools,fixturesandfittings Plants andmac Land andbuildings T To Goodwill Renting andsimilarrights Concessions, patents,licences,trademarksandsimilarrights Int F Assets SE C Commitments underconsortiumagreements Contingent liabilities Pledged assets To To Curr Curr To L L Pr Minority inter To Restricted equity angible assets IXE ong-term non-inter ong-term inter URREN ovisions t t t t t t t t t t ta ons angible assets K million Net profitfortheyear Non-restricted reserves Other restrictedreserves Equity methodreserve Share capit al currentliabilities al long-termliabilities al equity al currentassets al liquidassets al fixedassets al financialassets al t al int al equity D AS l assets ent r ent non-inter ent investments ent inter angible assets , pr angible assets T S olidat eceivables A ETS ovisions andliabilities S , pr SE est-bearing liabilities ests inequity a T hinery ovisions andliabilities l est-bearing liabilities S est-bearing liabilities ed B est-bearing liabilities angible assets alanc e Shee t See note31 18,19 18,19 Note 3 15 29 16 16 16 15 15 28 26 25 24 23 21 20 16 27 1 1 1 7 7 7 0 Dec. 3 1 18 276 276 21 1 1 1 5 3 1 4 5 3 26,428 41,826 68 1 27 67 27 97 1 9,9 6,5 6,5 8,9 5,0 1,3 5,8 1,8 3,5 1,3 1,5 4,6 5,21 8,0 6,25 3,4 4,8 6,0 1,925 5,129 8,626 5,1 1,9 1,0 4,9 5,4 7 7, 7, , 2002 , , ,28 , , , , , 6 1 5 5 24 826 1 2 2 5 7 6 8 1 5 5 5 5 6 5 6 5 5 8 6 46 83 1 42 53 63 41 82 76 76 7 7 7 7 0 7 2 7 8 2 1 0 5 5 8 0 5 4 4 9 7 6 8 4 8 8 3 8 6 8 0 Dec. 31,2001 15 25 25 214,9 118, 4 19,0 19,4 9 10,3 5 19,15 3 4 6 53,335 23,021 19,29 3 29,9 10, 27 8,9 1,5 4,0 2,18 9,0 9,0 4,19 9,4 6,5 4,13 8,6 1,15 0,95 8,420 6,202 0,113 9,410 0,019 6,5 1,63 8,4 2,6 9,5 ,13 546 285 15 7 7 172 973 8 4 4 4 9 8 43 43 92 85 3 81 2 7 6 7 9 7 7 7 0 4 9 0 8 3 0 9 6 7 7 9 4 7 8 6 9 9 4 0 7 6 8 ment pursuanttotheGermanNuclearLiabilityA nuclear po of theliabilityinsuranceagr w to inter assets includein r Eur SE which corr bearing loans. in million associ Bewa holdi T SE the acquisitionofBe SE T As Financial P Co eclassif angible assets hi ell asS v s K K 4, K 1 estment assetsw Liquid assets Financial assets P ope mustbeadded s decr e mment 1 articipations inassociatedcompanie t ngs inDenmarkandNorwa g ated compan s 8,042 million 84,9 1 , inconsequenceoftheacquisition est arbitragetransactionswithr . T ied asliquidassets(seeA 58 million(22,64 E ease ismainlyattributabletothesaleofminority his decr K 3,4 w 7 esponds to1 2 million er plantoperatorswithr incr o s 1 amounted toS sition v 9 estments ofS million eased b ease ismainlyduetothefactthatGerman decr y toafullyconsolidatedGr e , adecr wag r . T e eased b . In2002,in soldtor 5.3 percent( he incr . y 7) in , whichisV S ease ofS eement betw E K 25,998millionto y E E ease islargelydueto S epa K 980million(966)r K 1 v ccounting P E y estment assetsatV K 26,90 , andtothefactthat v y e E 5,4 estment assetsw 1 egar K 4,9 attenfall Eur s 5.0) ofnetsales x amounted to 7 e ter f 3 inancing risk d totheircommit- een theGerman million( , hasgonefr nal inter 7 toS 7 9 olicies million oup compan E ope’s shar K 26,428 1 c est- ). Liquid t 0,340), . attenfall e

. . om an

, as r elating e y Consolidated BalanceSheet e . of 2002,thisisanimpr to 20.0percent(22.7).Compar V which ismainlyduetor intere E to inter SE was ar During they million (seealsoNote24). is adecr inter SE Risk capitalfortheGroup SE 75 panies to liabilitiesminorityshar SE to incr SE quarter b quit attenfall Eur ,20 K 968million( K 5,55 K 7 K 20,693millionoftotalinter K 94, Intere Provisions Current non- est sts inequity y 7 ,984 milliontoS ound S . Netborr eased borr , Pr million(55, est arbitragetransactions , amountedtoS ease ofS 7 st- y 40 million 1 milliontoS o S bearing liabilitie visions andLiabilitie E ear E incr K 4,0 ope AG K 23,89 , thea intere o decr E o eased b wing fortheGr 1 wing tof K 3,569million 1 7 ,200) comprisedin . T 8 36). Netborr eased b st- millionfr v . T he incr E erage v 7 million(8,600).Ofthisamount o E E bearing liabilitie v educed minorityholdingsin K 2 , namelyequityincludingminority K 45, he equity/assetsratioamounted y K 55,089million(58,658),which ement of1 S s inance theGermanacquisitions incr E 7 y eholders andassociatedcom- ,28 K 6,622milliontoS S ease ismainlyattributable 1 o 29 million E eased b lume ofliquidassets om S 1 million ed withthethir . K 9, est- s oup amountedtoS o . wing fellinthefourth Equity .6 percent bearing liabilitiesr 1 E 20 toS v K 7 s y estments r incr S . , while

E 9,225 million incr K 6,20 eased b E eased b K 9,960, . d quarter minority elating E 7 to y K 9

E y K

7 elates . ,5 , 7 8 . 43 ANNUAL ACCOUNTS 2002 44 ANNUAL ACCOUNTS 2002 Non-cash items: follo Net profitfortheyear ** Change inliquidassets Reclassification ofinvestmentassetsasliquid T Change ininterest-bearingreceivablesandliabilities,net****** Cash flowafterdividend * Net b Exc Cash flowafterdividend Net borrowingatthebeginningofyear Cash flowafterdividend* Dividend paid Minority shareofGroupcontributionpaid Acquired/sold liquidassetsandinterest-bearingliabilities,net Financing activities Cash flowbefor Cash flowfr Divestments**** Investments*** Investing activities Cash flowfr Changes inoperatingassetsandliabilities Funds fromoperation(F Operating activities SE C Minority interestinprofitfortheyear Change inincomet Change inprovisions Change ininterestpayable Change ininterestreceivable Revers Capit Capit Unrealised foreignexc Unrealised foreignexc of associatedcompanies Dissolution ofnegativegoodwill Depreciation million (2,9 amounted toS Interest paidamountedtoS Unpaid participationintheresults ranslation differences ons K million Supplementary information Funds fromoperation hange ratedifferencesfornetborrowing wing itemsnotincludedinthecashflo al losses al gains orr al ofwrite-downs/write-downsshares owing attheendofyear***** olidat 05). om investingactivities om operatingactivities E K 2,23 e financingactivities ax liability ed C hange losses hange gains 9 million(1,826).T FO)** , namelythenetprofitforyearadjusted E K 5,822million(4,4 ash Flo axes paidamountedtoS w w S . 6 t 8) andinterestreceived – – 1 17 at 5,1 3,626 3,224 7, – – 2002 , – 5 1 860 658 394 – 124 128 73 37 1 6 15 0 39 13 ement 8 6 4 9 6 E K 1,635 10,83 13,14 –2,53 –2,232 4,19 1,318 1,0 –9 –211 –7 2001 113 –53 120 17 179 3 03 9 0 1 8 0 9 7 8 *** Investments int Divestment ofsharesandparticipations int Divestment oft fixed assets Investments inint fixed assets and otherlong-termsecuritiesheld Investments inassociatedcompanies Acquisition ofGroupcompanies **** Divestments See alsonotes15,16and18. Assets inacquiredGroupcompaniesprimarilycomprisefixedassets. angible fixedassets Investments angible and angible angible –1 –1 –1 –3 –3 –5 –7 – –1,3 20,1 –1,3 1 17 17 8,9 6,1 8,9 3,6 6,24 9,932 2,9 5,20 5, 6,9 8,9 5,133 –5 – , 2002 , 1 –22 7 8 72 3 6 0 4 6 0 0 03 83 9 7 1 0 52 24,0 3 7 9 6 7 4 3 5 6 6 6 5 8 4 5 2,5 3,6 1,1 3,33 9,932 4,5 7, 2002 2002 9 4 4 83 43 7 7 4 5 0 8 5 –22,9 –12,5 –43,4 –43,311 –11,9 –11,9 –55, –11,9 20,45 13,14 10,4 19,0 20,45 43,4 18,521 –1, –2, 16,6 14,532 2,351 1,93 7 –45 2, ,45 2001 2001 2001 229 7 7 7 24 797 85 75 43 8 3 0 8 75 75 42 43 42 75 9 8 4 — 4 — 6 9 8 0 6 4 0 district- electricity netw generation facilitiesandS assets ****** A R In Liquid assets Current investmentassets(seeNote21) Interest-bearing liabilitiesandprovisions ***** SE 4, 24,045 million( A acquisitions amountedtoS amounted toS acquisitions ande (43,443), ofwhichgr T In amounted toS to S ating assetsandliabilitiesincr Cash flo Oper Co cquired interest-bearingliabilities epayment ofdebt crease inborrowing 1 he Gr cquisitions ofGr v 7 K 398million(899). SE SE E e 6 million( Net borrowing mments Change ininterest-bearingreceivablesandliabilities,net K 1 s . ating A K 2,0 K 7 ting A oup’s in heating w fr 7 , , 9 1 06 million 7 7 om operatingactivitiesbefor 5 million(7 1 million( 1 ctivitie E E v , r 8, ork facilities ctivitie 1 K 30,650million(38,4 K 20, estments amountedtoS 1 6,6 eady heatandcombinedpo xpansion in 86) andotherlong- oup companiesaccountedforS 7 o 5), associatedcompaniesforS 1 . Cashflo w 03 million( 1 s ,454) wasin ,935) wasin th in s E E K 2,306million( . W K 28,6 v v eased b estments estments inf w fr ithin theheatar 1 1 om operatingactivities Dec. 3 0,442). v v 9 y ested intangiblef ested inelectricity million(35, S term securitiesfor –21,8 –9 –7 , namelycompan 7 26,6 1 E 1 8). Compan 6,9 2,0 4,1 4,83 5,20 5,4 E , 2002 K 3,958million e changesinoper- 2002 Consolidated CashFlowStatement K 39,932million 0 1 6 5 5 7 i xed assets 7 8 6 4 4 3 8 6 1 ,885) in ea – E 7 Dec. 31,2001 60). E K y K –18,014 –22,6 –8 –55, , w 10,3 55,193 14,532 ixed 4,951 8, er – y 2001 7 7 3 4 2 4 7 6 3 0 in assets accounted forthediv Nor Countries accountedforthegr SE Expansion in ments inequipment T in AB underguaranteefr ing shar million Mirant’s stakeinBe due toborr 1 minus f T Financing A 9,4 he r he netde v v K 2,03 estments inne estments amountedtoS SE T All publicborr 7 dic CountriesandOtherBusinesspr he MarketNor 1 , andthegr emaining in K 3,338million(229)wasin milliontoS ) andthepur inancial assetsandliquid es inH 1 million(2, bt o wing tof v , namelyinter estments inf E ctivitie W (25. eater partofthisamountin v w miningrightsinGerman o estments primarilyconcer E wing ishandledviaV wag (44.7 chase oftheCityHamburg’sr K 7 , toolsandf dic Countries estment oftangiblef inance thepur 7 om V 1 1 percentforE 9). German 5,20 s est- ixed assetsamountedto E attenfall AB 7 million K 1 6 percentforU bearing de eater partofthese. i , x 1 tur 52 million(2,05 , ElectricityNetw v y andHeatNor chase ofU ested inintangible es andf . T , incr U . he incr attenfall T of bt andpr R 869million i xed assets it ar eased b v ittings ned in y olv S . S eas mainly ease ismainly D 1 compan es 1 o y . , ). r dic 1 v visions S orks easury 6 . est- e E 3 main- K ). y 45 ANNUAL ACCOUNTS 2002 46 ANNUAL ACCOUNTS 2002 Net pr Ta Pr Appropriations Pr Group contributions Interest expensesandsimilarprofit/lossitems Other interestincomeandsimilarprofit/lossitems Result fromotherlong-termsecuritiesheld Result fromparticipationsinassociatedcompanies Result fromparticipationsinGroupcompanies Operating pr Other operatingexpenses Other operatingincome Researc Administrative expenses Selling expenses Gr Cost ofproductssold Net s SE Pa x ofit befor ofit befor oss pr K million re ales ofit fortheyear h anddevelopmentcosts nt C ofit e t e appr ofit a omp x opriations andt an y Inc a x ome S t at ement Note 1, 3 10 11 12 9 6 8 4 7 –1 23,3 – – – 6,0 2,0 2,1 4,5 1,6 6,6 6,1 1,25 1,293 4, —7 6, – – – 2002 409 101 43 24 7 11 11 7 4 9 8 1 4 9 0 5 83 63 3 21 3 9 8 8 5 4 9 0 9 4 5 9 8 0 –15,5 –2,03 –1,124 –2,626 21,8 –1,25 2,6 2,002 3,126 4,000 1,152 4,62 6,3 –15 –352 –8 – 2001 –32 79 27 772 4 75 01 7 7 9 6 4 7 4 2 0 6 7 Commitments underconsortiumagreements Contingent liabilities Pledged assets To To Curr Curr To L L Pr Unt To Non-restricted equity Equity Equity To To Cash andbankbalances Curr Inventories, etc. C To To Other long-termreceivables Other securitiesheldasfixedassets Receivables fromassociatedcompanies Participations inassociatedcompanies Receivables fromGroupcompanies Participations inGroupcompanies Financial assets To Construction inprogress Equipment, tools,fixturesandfittings Plants andmac Land andbuildings T To Goodwill Renting andsimilarrights Concessions, patents,licences,trademarksandsimilarrights Int FIXE Assets SE Pa Restricted equity angible assets ong-term non-inter ong-term inter URREN St Share capit ovisions t t t t t t t t ta t angible assets K million Net profitfortheyear Profit broughtforward al currentliabilities al long-termliabilities al equity al fixedassets al financialassets al t al int al equity al curr axed r D l assets atutory reserve ent non-inter ent r ent inter re

angible assets AS , pr angible assets T nt C S eceivables A ent assets eserves ETS ovisions andliabilities S , pr SE est-bearing liabilities al (131, T hinery ovisions andliabilities omp est-bearing liabilities S est-bearing liabilities est-bearing liabilities 7 00,000 sharesataparvalueofS an y B alanc e Shee Parent CompanyIncomeStatement E t K 5 0 eac h) 18,19 18,19 18,19 Note 3 15 29 16 16 15 16 15 28 26 25 24 12 23 22 21 20 16 31 27 1 1 1 7 7 7 0 and BalanceSheet Dec. 3 3 1 3 6 1 82,93 3 8 8 18 1 1 47 17 17 1 9,1 3,6 4,5 1,6 9,6 6,5 9,4 3,3 8,0 6,4 2,6 4,1 1,320 1,932 5,926 1,3 5,9 5,1 5,9 6, 3,2 8,0 6,0 , 2002 , , ,226 , 1 569 6 60 14 7 7 221 173 5 9 1 9 4 1 8 5 65 05 49 34 5 13 82 93 62 13 7 8 8 7 1 7 1 9 1 — 3 2 1 7 7 3 7 5 0 7 5 4 7 4 7 7 5 0 6 5 4 Dec. 31,2001 5 4 19,6 14,95 11,0 31,65 7 7 18,351 29,451 25,93 16,2 11,6 17 77 17 6,6 6,6 9,4 2,6 6,5 0,3 1,316 2,525 3,514 2,002 6,3 1,83 5, 4, ,918 ,202 ,029 690 85 80 59 13 124 825 7 7 0 0 9 0 49 96 92 2 85 65 83 65 52 7 6 7 — 8 9 6 5 2 3 0 8 7 8 8 7 1 9 6 0 7 47 ANNUAL ACCOUNTS 2002 48 ANNUAL ACCOUNTS 2002 T Interest paidamountedtoS Liquid assetsattheendofyear Cash flowfortheyear Liquid assetsatthebeginningofyear Liquid assets Cash flowfortheyear Cash flowfr Dividend paid Loans raised Financing activities Cash flowbefor Cash flowfr Divestment ofsharesandparticipations Divestment oft Investments int Investments inGroupcompanies,associatedcompaniesandotherlong-termsecurities Investing activities Cash flowfr Cash flowfromc in operatingassetsandliabilities(F Adjustments fortheeffectsofitemsnotincludedincashflow Net profitfortheyear Operating activities SE Pa Cash flowfromoperatingactivitiesbeforec ax paidamountedtoS K million re nt C om financingactivities om investingactivities om operatingactivities angible fixedassets angible andint omp e financingactivities hanges inoperatingassetsandliabilities E an K 1,215million(1,3 E y C K 2,0 angible fixedassets ash Flo 8 FO) 6 million(2,015)andinterestreceivedamountedtoS hanges 85). w S t at ement E K 1.011million(1,116). – – – – – 3,8 6,6 4,5 3,1 3,1 1,03 8,0 1,29 3,3 1,422 4,032 —5 2, 7, 7, – 2002 0 48 6 124 7 6 0 1 8 8 96 83 12 13 4 5 1 1 3 2 4 5 9 1 4 9 0 1 –14,3 –18,411 11,8 –2,412 3,4 4,5 8,18 2,413 2,002 6,18 3, –9 –8 2001 124 123 353 7 9 0 9 02 0 03 65 1 1 0 1 7 9 9 0 f costs andothere Negativ tion pricear amortised the surplusvaluese assets andliabilities tions ear equity onlyincludesthatportionofthesubsidiary’s pur influence attheendofy of thev companies inwhichV T C in million million on December3 V ar tion andClassif Balance SheetDate,RR2 of BusinessandGeographicAr In mulation ofFinancialR coming intoeffect Sw pr on V ne RR23 Detailsconcer RR1 Liabilities andContingentAssets RR1 being applied:RR1:00ConsolidatedFinancialStatements by r Sw ance withtheSw T General A iable liabilitiesatthetimeofacquisition ecommendations ha attenfall Gr he consolidatedaccountsincludethepar he consolidatedaccountsha ons e not v v e cc w r

the Sw edish FinancialA edish FinancialA estments ned aftertheacquisitiondate.Inconnectionwithacquisi- vious y estment P T In During 2003,sixne Fr chase accountingmethod 9 W 5 IntangibleAssets attenfall’s accountingpoliciescompar , amarketvaluationismadeoftheacquir he consolidatedaccountsha ounting Policies andValuation Principles v om 2002,thefollo ecommendations ha olidat estment assetsinGermanGr Accounting PoliciesandValuationPrinciples ), w ) andOtherlong- oting po e goodwillr xpected toha inding upOperations edish FinancialA . R ear er e r . emaining differ oup’s balancesheetorincomestatement e r . urposes ed A eported asgoodwillornegativ ication eclassif 1 w xpenses thatcannotber , 200 edish AnnualA er orinan . T . Deferr xcept forwaterrights c elates toanticipatedlosses ccounting Standar ccounting Standar , RR25R c ning CloseAssociates hese r v 1 underCurr v attenfall heldmor e beenapplied , andRR28Go ount ied asofJune30,2002Curr e an w r , RR1 eports wing ne term securitiesheld( 7 FinancialInstr v ecommendations issuedb ecommendations ( ccounting Standar ed taxistakenintoaccountin e ledtoan y signif y otherwa ear ences inr s . T 6 Pr v , RR24BuildingsHeldfor eporting forSegments–Lines e beenpr , RR2 . eas his meansthattheGr w r ccounts A v , RR1 o , RR26Ev e beenpr icant impactonthe visions ent r ecommendations oup companiesr 1 LoanCostsand . y signif elation totheacquisi- v ds Councilwillbe ds Council’s y hadacontr 7 Write- er eceivables ( epar e than50percent . Negativ eported asidenti- , whichar nment Support , Contingent uments: Informa- ed withthe ent compan ct andthe . Noneofthe epar ed inaccor ents afterthe icant impact e goodwill ds Council RR22 F ed compan , r S E do ed usingthe estr K 1 e goodwill wns e alsonot S olling ucturing eported E y the 7 , issued oup’s ent . ,4 or- K 3 y and , d- 7 . , ar 5 ) y’s 7 , 7 e slight dela ar used inthevaluationofunderlyingreceivable orliability. e Whenin theconsolidatedaccounts. spot hedging, accounts oftheindividualGroupaswell companies, as in foreign currencies are valuedattheclosingratein r ing isadjustedb consolidated balancesheet accor panies ar income statementuptothetimeofdiv sition the consolidatedincomestatementfr pr negativ turing costscanbeaccommodatedwithinther costs arise.V Negativ wa German is attributabletotheacquir to theGr in thesamewa Exchange ratediffer the Gr and performscurr re of thea Sw the consolidatedbalancesheetfr ar T the e the netpr business activities ye lated intoS the incomestatementsofnon- Wh Fo esult aftertaxminustheamortisationofsurplusvalues xchange rateonthedatethatcurrency washedgedis he differ e incertaincasesincludedV e r stricted r o ar (a y inGerman r edish subsidiary’snetpr vision intheconsolidatedbalancesheet F Holdings inassociatedcompaniesar Inter- During they R en pr eign C eported dir or practicalr xchange ratespr eceivables andliabilities(includingprovisions) dance withtheequitymethod . Div oup’s netin v e goodwill v erage rates e goodwillisdissolv y erage e e eliminated oup’s equity eparing theconsolidatedaccounts compan . Ex of y ences arisingfr ested companiesar eserv . E it/loss forthey urr attenfall’s assessmentisthatr K atthea tensiv y astranslationdiffer y andisduetobecompletedin2005. ectly againstequity xchange rateaffectstheGr y V es encie ear easons y pr . Allbalance- . Negativ . Fr v ency swapsinfor ). Allsubsidiariesconductindependent e r attenfall’s participationinthecompan estments innon- , acquir ences r . e , takingintoaccountdeferr om timetotime,V of estr vailing aty v s its onsalesbetw erage e , ther om thetranslationofbalancesheets ucturing w ed companiesw , thebookvalueofshar of ed businessoperationsin e goodwillisr ear elating totheseloansar ed asandwhenr it/loss intoS e includedintheconsolidated esults ofassociatedcompanies , ar xchange rateforthef Sw sheet items attenfall’s accountsaftera om thetranslationofanon- e ther ear- edish subsidiariesar . T eign curr , whichmeansthatinthe ences andtransferr ork iscurr Sw end (closingrates om thetimeofacqui- he differ efor estment edish companies een Gr e accountedforin attenfall raisesloans eported asa emaining r E , apartfr oup’s non- er e translatedat . K onthebasis , allitemsin encies topr e includedin estr ence arisingin ently under oup com- eported . ed tax ucturing om e handled inancial estr e trans- ehold- . ). ed . uc- otect . y’s 49 ANNUAL ACCOUNTS 2002 50 ANNUAL ACCOUNTS 2002 valuations agr net f cial instr when r with thepr the underlyingph as agr hedging pricerisksingenerationorsalesv bilateral contracts and Amster in Norther market inScandina V Ener compan for suchlossesar to f price basis tracting servicesar as r he orsheisconnectedtotheelectricitynetw Connection fees ing value- Operating incomeisr Ne US P Norway Denmark Euro Country Ke and underuntaxedr tion isr in theincomestatement of anasset culated onastraight- Depr Depr oland attenfall isanactiv A y Ex eements ismonitor e ixed pricew Other tradingtransactionsar t S v igur eciation isbasedontheacquisitionvalueandcal- enue atthetimeofconnection gy Deriv oss f eciation andAmor change R ale ealised andlossesar eported b y’s costprice. uments heldfortradingpurposesar e intheincomestatement added taxandindir . . Depr . T igur s –A n Eur udence principle,wher dam andontheEur he per Curr D N P E USD LN U e inaccor K O ork K R K ency ope thr , namelythefeepaidb eciation isdistributedaccor at e madeintheaccounts ativ c y thepar . T ysical contract e performedonacostplusandf c e . W via thr centage ofcompletionmethodisappl e participantontheenergyderivativ ounting f s AppliedintheC rading conductedforthepurposeof eserv line basiso 1.21 9.1 2.3 e 1.2320 9.7 eported atthetimeofdeliv ed viadaily“mark–tomarket” her s ough themarketplacesinLeipzig 2002 dance withthedeliv 5 923 232 . F A 8 52 es ough itstradingonNor verage rates ent compan e lossesar 0 e r urthermor . ect taxes eported whenincurr tisation 10.3 opean O or Inc 2.5 1.14 v 1.2432 9.2629 . e r er theestimatedusefullife 2001 e 0 4 . T eported inaccor b 6 8 6 e anticipated . Consultingandcon 7 9 9 y gainsar he valueofconcluded e, accelerateddepr y underappr , primarilyenergy ons ome y acustomerwhen , valuedatthe Dec. 3 T olidat C marketthr olumes isr ding tofunction 9.1 8.825 2.3 1.259 e r 1.23 Closing rates ery periodsof 1, 2002 ork e r 93 000 eported asa 7 ed A , ar eported 5 0 0 5 , pr ery d P ed opriations ixed Dec. 31,2001 dance e carr o , e c ool . Finan- eported vi 10.6 c xcl 2.6 1.26 9.419 1.1835 ount ough sions , ecia- e tax ied - ied 6 9 ud- 8 65 00 . 0 0 s r e criteria forwritingoffintangibleassets Depr valued atcost(acquisitionvalue)lessaccumulateddepr trademarks Intangible f Int amortised overnomorethan5years. no morethan10yearswhilegoodwillacquiredin19 underlying contract.Goodwillacquiredbefore19 eac Int ** *1 Equipment, etc. Mac and transformerst P Gas pipelines T Hydro powerplants Properties Re T adjusted forr T T basis ciation Other currentliabilities. liabilitiesandOtherlong-term fi assets are writtenoffandreported asacquisitionsoftangible leases/rental agreements thatarevalue,the ofsignificant esear hermal powerplants* xpenses ar ower lines angible Fix angible f xed assets. Thexed assets. corresponding liabilitiesare reported under he needforwrite- angible fixedassetsareamortisedovertheestimatedusefullifeof 2 valuations ar h asset,andt T W angible Fix hinery 5–3 5 yearsformaintenanceinvestmentsinnuclearpo . he Gr eciation R ch e ith regard totheleasingofassetsviafinance . T 5 yearsforlocaldistributionnet , etc.formining he needforwrite- xpenses ixed assetsar oup’s e e writtenoffasthe , r ixed assetsincludeconcessions e enting rightsandgoodwill aking account,whererelevant,ofthelength valuation lessaccumulateddepr ations** e r ed As at ed As . xpenses forde e eported takingintoaccountdeferr s ( do y wns isassessedonanongoingbasis s e e valuedatcost(acquisitionvalue) Mac ar e s equipment t s e s hinery and ) do t 5–20 3–10 s y ariseinamannersimilarto 3 4 3 25 20 wns isassessedonanongoing 0 0 0 w v elopment donotmeetthe orks. . T Buildings . T 25–5 hese de 9 , patents 7 isamortisedover hese assetsar wer plants. 9 5 3 25 7 andafteris — — — 0 0 0 eciation v improvements elopment , licences ed tax Land . 3 25 25 25 e- e — — — 0 . . , Projected Unit CreditIAS19. Method, we Superannuation Fund (Pensionkasse). f sheet forGermanGroup companiesisreported asanet TheGerman companies. provision reported inthebalance Therebased. are alsopremium-basedcommitmentsinthe panies acquired inGermany in2001 and2002are benefit- a netfigureagainstavailable capitalinaspecialpensionfund. balance sheetcorresponds tothesecommitmentsreported as Swedish The actuarialmethods. provision reported inthe Group companiesare calculatedinaccordance withstandard P Provisions for Pensions thesurplusisnotincluded inincome. losses, is reportedWhere intheincomestatement. gainsexceed r balance sheetdate.Unrealised lossesare setoffagainstun- ments are valuedatthelower ofcostandmarketonthe instruments.Theseother interest-bearingfinancial invest- Current investments commercial includebonds, paperand C R Re of thedegr ar re W W not r of theenergystor cost ofeachbatchfuelloadedintothecor of theenergycontentfuelr T value inaccor In In igure againstavailable capitalinaseparateso-called ealised gains. Whereealised gains. lossesexceedthenetamount gains, ension commitmentswithregard topensionsinSwedish he consumptionofnuclearfueliscalculatedasadepletion eceivables ar urrent Investments e immediatelywrittenoffintheirentir d, v ork inPr v ork inpr re re entories ar c T T

e plus ar eported asanasset eiv he pensionprovisions fortheGermancompanies he majorityofthepensioncommitmentsforcom- nt calculated onanactuarialbasisinaccordance withthe Accounting PoliciesandValuationPrinciples orie able ee ofcompletionthecontractinquestion ogr easonable pr s ogr dance withthef e valuedatthelo s e r ess isvaluedasthedir , e eported intheamountlikelytober ed intheformofwaterr e t c. s s . oportion ofindir irst- w er ofcostornetr ods andisbasedonthe in/f ect costsactuallyincur- irst- ect costs ety irr out principle. e. T eserv espectiv he value . Badde ealisable oirs is eceiv . e bts ed . after appropriations. V heading Appropriations.The reported taxexpense tothe and dissolutionofuntaxedreserves are reported underthe company’s provisions incomestatement, tountaxedreserves balance sheetthatincludesdeferredIntheparent tax. untaxed reserves are reported asaseparateiteminthe to untaxedreserves. IntheVattenfall ABparent company, allows companiestodefertaxpayment by makingprovisions forwards canbeusedwithintheforeseeable future. cases in into account differences attributabl in therelevant Temporary countrywithoutdiscounting. valued atthetaxrateapplyingonbalancesheetdate tion infutureDeferred taxes. taxassetsandliabilitiesare in caseswhere recovery orsettlementwillleadtoareduc- lead tofuture taxpayments.Adeferred taxassetisreported in caseswhere recovery orsettlementoftheamountwill and theirreported value.Adeferred taxliabilityisreported value ofassetsandliabilitiesfortaxassessmentpurposes profitandreported aswelltaxable profit, asbetween the Temporaryinto account. differences may thusarisebetween and generallyacceptedaccountingprinciplesmustbetaken the measurement ofcertainevents between taxlegislation that sometimesexist withrespectand tothetimeoftaxation Deferredliabilities. taxmeansthatthetemporarydifferences current taxandtheyear's changeindeferred taxassetsand T Taxes for future nuclearwastemanagementexpenses. they Instead, payvisions. afeetotheNuclearWaste Fund T themselves forfuture nuclearwastemanagementexpenses. sions are, forexample,madeinGermany by thecompanies In additiontoprovisions provi- forpensioncommitments, present valueofthecommitmentsonbalancesheetdate. each case.Provisions are madeaccording totheestimated commitments orprobable risksbasedonanassessmentin Provisionsof theamountisuncertain. are madeforknown Other provisions are liabilitieswhere thematurityorsize Other Provisions attenfall ABparent company consistsoftaxontheprofit he Group’s taxexpense isestimatedasthesumofyear’s he Swedish power plantsdonotmakecorresponding pro- T ax legislationinSweden andincertainothercountries where itislikelythatsuchlosscarry- e tolosscarry-forwardsare onlytaken 51 ANNUAL ACCOUNTS 2002 52 ANNUAL ACCOUNTS 2002 balance sheet. gains (lessdeductionsforreportedlosses)isasanassetinthe 16million(17). ments amountedtoSEK Relatedadvancepay- 416million(66). sheet dateamountedtoSEK deductions forreportedlosses)workinprogressonthebalance Totallion (503). expenditureforcontractworkandreported gains(less mil- 586 During theyear, incomefromcontractworkamountedtoSEK Not To Other andeliminations Other Business P Germany Services Nordic Countries Electricity Networks Heat NordicCountries Market NordicCountries Generation NordicCountries Net sales Indirect t indirect t S Note 1 specified. millionunlessotherwise Amounts arestatedinSEK Not (14) of sales and 48 percent(47) and48 ofpurchase(14) ofsales costs. withGroupcompaniesaccountedfor13percent costs, transactions purchase andtotal incomefromsales Of theparentcompany’stotal Note 3 in therestofworldfor4percent(10). (42), inGermanyfor6 Of theGroup’snets Net sales byprofitarea Net sales oland ales including t a SE l e e K 243million(20)inexpenditureforcontractworkandreported axes s axes 2 – Net sales – Intra-Group transactions – Inc ome fr ales, s 0 percent(43),inP ales inSwedenaccountedfor33percent om c 101 10 10 – 6 25,0 25,6 – 21,2 ontr 0,6 1,83 6,24 1,025 5,223 3,1 2, 2,9 7, 0 2002 2002 7 6 9 1 6 2 7 6 6 7 7 4 7 6 5 7 0 8 9 1 5 4 acting Group Group –21,8 oland for3percent(5)and 6 6 19,4 22,26 29,510 –2,5 71,5 2,5 2,9 2,93 9,003 9,003 3,242 7 ,924 2001 2001 9 03 92 62 7 6 0 8 0 6 7 – 25,0 24,41 23,3 23,3 22, 25,1 – 1,26 1,6 Parent Parent 2002 2002 7 5 86 65 0 83 83 29 7 7 — — 5 4 0 6 3 4 –25,183 company company 22,8 25,5 19,6 –1,005 21,8 21,8 2001 2001 89 855 8 9 24 65 75 75 27 — — 0 6 1 Provisions forfutureexpensesof Capit waste. T fee tofinancethemanagementofspentnuclearfuelandotherradioactive reactor inSwedenmust,aslongtheisoperation,payanannual of SpentNuclearFueletc.,theholderalicencetoo *A To managing low-andintermediate-levelwaste –S – Fe Not companies. costs, nuclearpowerprovisionsandotherintheGerman ininterestrelatingtoannualpension 1,529million(1,400) ofSEK a total SE fortheGroupand 327 million(555)inpropertytaxes as wellSEK 155million(229)fortheparentcompany, duties fortheGroupandSEK 4,672 and Direct costsincludeSEK million(3,312)inproductiontaxes Note 4 To on divestments Dividends Share ofprofits Not administered bytheNuclearW based ontheenergydeliveredfromreactorandispaidinto development oftheSwedishnuclearpo as acontributiontotheactivitiesconductedatStudsvikABrelating of alicencetoo Financing oftheManagementC ** SE the marketvalueofV respect ofcostsforwhic in ordertofulfiltheobligations(a)and(b). and dismantlingoftheunit,(c)researc and wastehavebeenremo disposal ofspentfuelandradioactivewastefromitsreactors,afterthe when thenuclearpo energy deliveredbythereactor c omp t t es toNuclearW own high-levelwaste* K 23,011million(2 A During 2 K 275 million(275) fortheparentcompany. The costsalsoinclude a a V l l ccording totheA ccording totheA al gains/losses AFO** e e anie he feeispaidintotheNuclearW 5 6 002, S s – C – P – Cost of products sold wn andoperateanuclearreactorinSwedenmustpayfee ar o E s aste Fund wer companyincurscostsfor(a)thetreatmentandfinal ticip K 7 t o ct (1 ct (1 0,6 4 f nucle h theV attenfall Group’sshareoftheFundwas 0 million(5 7 ations inther 9 9 ved fromthereactors,(b)decommissioning 6). 8 9 8:1 5:1 . T aste Fund. attenfall Groupisliable.OnD 5 5 he Fundreimbursesthesefeesasand ar w 9 4 er 7 4) ontheFinancingofFutureExpenses – – 8 tain R , latestamendment,1 2002 65 65 8) wasdisbursedfromtheFundin as wer programme.T — — 7 7 aste Fundandisbasedonthe t Group adioactive W e management e sult h anddevelopmentnecessary 2001 26 511 24 s o — 4 7 wn oroperateanuclear f as aste etc.,theholder 2002 628 47 his feeisalso 9 70 79 9 Parent s 2002 9 ecember 31, 5:1 ociat 13 21 — Group 8 5 4 company 5) onthe ed 2001 2001 525 25 27 673 69 15 79 — 2 7 Capit in Gr To on divestments Revers W investment funds Y Dividends Not (3,61 *T To Capit W Dividends* Not To development costs Administrative expenses Selling expenses Cost ofproductssold Not Researc ield fromGerman rite-downs rite-downs* t t t a a a he amountincludesarepaidshareholder’scontributionofS l l l 2), whic al gains/losses al gains/lossesondivestments oup c e e e al ofwrite-downs h and 9 8 7 omp h waspreviouslyrepor – R – R – Depr e e sult fr anie sult fr eciation s om otherlong-t om p ar 1 1 4,6 5,1 ted asanasset. ticip 366 2002 2002 104 11 229 –1 86 1 62 24 — 4 8 8 7 Group Group ations 10,83 10,3 erm s 2001 2001 P 25 –8 –10 129 27 22 179 7 4 9 0 1 2 9 6 7 — ecuritie – 2002 409 93 523 Parent company Parent company 2002 2002 5 3 43 43 70 72 arent 17 — — — — 9 4 5 5 2 6 E K 0mil s held company –2,232 –5,113 –2,626 4, 2001 2001 2001 –32 –16 –26 629 719 61 lion 10 10 — — — 2 7 pr it To F Interest expenses Not SE Operations-related foreignexc * To F Interest income Not SE SE SE T To 2003 t 2002 t 2001 t 2000 t 19 19 19 Accelerated depreciation Par Not 111 million(3 Operations-related foreignexc * See alsoNote4concerninginterestrelatingtoprovisionsintheGerman companies. oreign exc oreign exc he followingc ems ta t t o 9 9 9 K 4 Interest incomefromsubsidiariesamountstoS Interest expensestosubsidiariesamountS K 1,3 K –3 K –128millioninaccelerateddepreciationwasdissolved, a a ent company 7 t f 9 t 8 t l l l it 7 e e e ax allocationreserve ax allocationreserve ax allocationreserve ax allocationreserve ax allocationreserve ax allocationreserve ax allocationreserve / 8 million(53 63 forthe19 lo 65 millionwastransferredtothe2002t 12 10 11 s Notes totheAccounts hange losses hange gains s it 4 – Int – Appr – Otherint 8). hanges occurredinunt ems 2002 er 7). 9 e 6 t opriations andunt s t e ax allocationreservewasdissolvedand xpens er hange gainsfortheGroupamountto hange lossesfortheGroupamounttoS Opening balance e 1 6,3 1,3 s 1,0 t inc 6,1 6,3 2,3 3 4 8 2, 715 931 e 6 82 65 63 41 2002 2002 6 190 41 7 — 8 s andsimilarpr 5 9 8 8 63 axed reservesin2002: 8 6 6 1 ome andsimilar Gr Grou T ransfer to oup /from (–) 4,5 1,8 1,9 4, p –931 ax –14 2001 2001 14 E – 737 9 1 8 8 K 1,9 E 93 7 ax allocationreserve. 63 1 ed r 9 8 0 3 K 6 — — — — — 7 5 8 5 e Merged 0 million(4 8 million(1,8 panies 2,0 2,1 s 1,0 1,293 o Parent Parent com- erv 2002 2002 3 282 f 3 8 99 8 it 61 1 7 6 5 — — — 1 1 6 1 1 0 / e * * lo s company company s balance Closing 81). 1 s 2,03 2,015* 1,116* 1,152 6,5 1,3 1,320 E 4 2001 2001 4 9 3 8 715 K 8). 36 24 6 82 63 71 83 42 9 0 4 53 ANNUAL ACCOUNTS 2002 54 ANNUAL ACCOUNTS 2002 T Dissolutions ofnegativegoodwill t T amounts toS T and non-t V Adjustment oft Difference int Swedish incomet P To Other countries Sweden Deferr Other countries Sweden Curr To Other countries,associatedcompanies Other countries,Groupcompanies Sweden, associatedcompanies Sweden, Groupcompanies Profit beforet Not interest. deferredtaxinrelationtoprofitbeforeandminority excluding reported Tax expenseinaccordancewiththe consolidatedincomestatement ** in relationtoprofitbeforetaxandminorityinterest. *T T Effective t Other and depreciationofgoodwill,net Non-deductible expenses ax rateisexplainedasfollows: ax rate,currenttax** he differencebetweenthenominalSwedisht he year’scurrentt he reportedt alue adjustmentoflosscarry-forwards er cent t t a a ax expenseinaccordancewiththeconsolidatedincomestatement l l ent t ed t e 1 a ax x ax rate* a 3 able income,net x E a ax rateinnon-Swedishoperations ax expenseisallocatedasfollows: – T K –1,5 xes andminorityinterestinprofitfortheyearamountedto: ax forpreviousperiods a ax rate ax expenseattribut x e 0 s 8 million(–13 8). able toprofitforpreviousyears ax rateandtheeffective –1,8 2,3 1,0 9,9 –12.9 4,1 6,53 1, –6 –8.0 –0.6 –9.4 28.0 17 2002 2002 2002 25 7 2.5 6.0 4.1 1 8 9 9 6 33 8 0 . 3 7 0 5 9 7 7 1 7 0 Group Group Group 3,8 1,8 3,05 1,221 –14.8 2,16 7 –5 –28 –3 ,45 41.6 –1.4 –0.1 13.5 29.1 –1.9 28.0 2001 2001 2001 80 5.8 8 62 81 7 4 0 4 3 7 9 9 balance sheetitems: T possible touset T To Loss carry-forwards,etc. Current liabilities Provisions andlong-termliabilities Current receivables Fixed assets Deferr To Other countries Sweden Accumulated t To Minority interestint Minority interestinprofitbeforet Not To Loss carry-forwards,etc. Current liabilities Provisions andlong-termliabilities Current receivables Fixed assets Deferr he deferredt he reductioninthereportedamountsisduetofactthatithasbeen t t t t a a a a l l l l ed t ed t e

14 ax liability ax assets ax liabilityanddeferredt ax losscarry-forwardsareallocatedasfollows: – Minorit ax losscarry-forwardsin2002. ax y int er ax e s t inpr ax assetsrefertothefollowing o f it bef 32,8 3 1,1 1,93 4,41 3,282 or 2002 2002 2002 2002 395 658 855 34 122 73 – 279 72 27 8 9 51 94 62 e t — 0 9 1 9 1 2 0 6 ax Group Group Group Group 28,8 27 2 915 1,115 6,135 8,016 1,000 1,0 1,3 2,0 7 –2 ,819 ,016 2001 2001 2001 2001 864 124 153 –33 –20 11 75 92 9 7 7 7 8 9 ** Including write-downs of SEK 0million(2). Includingwrite-downs ofSEK ** * Book value Accumulated accelerateddepreciation forward to plancarried Residual valueaccor c Accumulated depreciation S Depreciation fortheyear assets purchased fromGroup companies Merged plants Depreciation broughtforward Accumulated depreciation according toplan forward values carried Accumulated acquisition S Investments Merged plants Acquisition valuesbroughtforward Acquisition values PARE forward to plancarried Residual valueaccording c Accumulated depreciation T Companies sold S Depreciation fortheyear Companies acquired Depreciation broughtforward Accumulated depr forward values carried Accumulated acquisition T Companies sold Reclassifications S Investments Companies acquired Acquisition valuesbroughtforward Acquisition values G Note 15 Accumulated depreciationoffixed ranslation difference ranslation difference arried forward arried forward ales/Disposals ales/Disposals ales/Disposals ales/Disposals ROUP Including write-downs of SEK 117million(587). Including write-downs ofSEK NT COMPANY – Intangible fixed assets eciation accor ding ding toplan – – 3,568 2,489 2,653 1,943 3,330 6,221 – – – – – – 340 501 346 351 –34 24 341 103 307 112 – 2002 and similarrights —8 99 34 12 63 — — — — — — — Concessions 4 0 1 * 108* –1,038 –1,943 2,489 1,050 1,447 –538 –244 –19 –373 2001 546 340 –44 198 142 –92 96 96 13 26 –4 62 –3 –7

— — — — — — – 7 – – 1,856 2,508 1,548 2,182 4,038 —150 1,878 – – – – – – —34 569 196 569 244 813 719 789 124** 203 – 197 2002 and similarrights —2 —3 16 26 12 — — — — 0 2 8 Renting Notes totheAccounts 1,688 1,159 1,878 –590 –196 –165 –597 – 2001 –44 –86** –69 593 183 719 –31 789 789 –2 11 –9 76 — — — — — — — 3 3 5 – – 2,264 1,291 2,038 1,212 –315 –338 – 2002 248 338 826 –12 124 – – 56 13 12 13 13 – — — — — — — — — — — — 0 1 0 Goodwill –1,291 –1,497 2,389 2,264 1,215 –999 –492 –188 140 2001 105 115 –32 –12 –11 –35 162 973 90 –1 13 13 — — — — — — — 1 1 – – 12,297 – 1,899 6,631 6,250 3,953 1,142 3,338 3,257 6,047 1,167 – – – – – – – 150 644 564 2002 603 135 603 452 634 785 – – – —2 44 98 16 26 — — — 0 2 1 Total –1,566 –2,134 –1,616 –3,953 2,8 6,631 1,142 5,127 2 –449 –590 –362 –452 –282 ,678 2001 690 108 100 152 –55 –35 155 228 127 987 –37 175 45 — — — — 55 ANNUAL ACCOUNTS 2002 56 ANNUAL ACCOUNTS 2002 W c Accumulated r T Companies sold Other changes of previousrevaluations W Revaluations broughtforward Revaluations c Accumulated depr T Companies sold Reclassifications S Depreciation fortheyear Companies acquired Depreciation broughtforward accor Accumulated depr values c Accumulated acquisition T Companies sold Reclassifications S in progress Investments*** Companies acquired Acquisition valuesbroughtforward** Acquisition values G Not **** During the year, interest during the construction period has been reported as an asset in the amount of SEK 271 million(13 Duringtheyear, asanassetintheamountofSEK interestduringtheconstructionperiodhasbeenreported **** million(1,009). 256 Government grantsreceivedduringtheyear:SEK *** million(3,416). 4,426 Government grantsreceived,openingbalance:SEK ** * to planc Residual valueaccor Wr T Other changes S W Companies acquired W T ranslation differences ranslation differences ranslation differences ranslation differences ransfer fromconstruction arried forwar arried forwar ales/Disposals ales/ ales/ rite-downs ROU rite-downs fortheyear rite-downs broughtforward rite-downs fortheyear ite-downs c Includes an acquisition value for land and water rights amounting to SEK 15,446 million (13,032), which cannotbedepreciated. million(13,032), 15,446 Includes anacquisitionvalueforlandandwaterrightsamountingtoSEK ding toplan Dispos Dispos e P 1 arried forwar arried forwar 6 als als – T d, net d arried forwar evaluations angible fix eciation eciation ding d d d ed as – s – 4 1 6 – – – 3 – e 28,3 1 1,1 1,6 8,4 1,13 9,9 8,9 4,428 5,1 5,6 t Land andbuildings – – – s 2002 150 154 451 689 35 43 29 570 – 973 1 9 0 35 18 25 41 8 27 – 7 0 6 — — — — — — 9 9 3 7 0 0 7 4 7 1 4 7 8 * –18,9 –11, 3 4 –1,13 –1,024 –1,113 –1,105 –6,124 19,41 29,9 0,9 ,4 * 9,941 –4 –162 –295 2001 384 75 15 15 –4 –22 41 20 370 6 05 –4 –1 14 13 7 8 70 — — — 7 0 8 0 7 4 0 0 7 7 4 9 – – 3 24 1 126,83 – 16 – 1 6 12,4 – – – 41,826 – – 37 4,9 5,4 1,3 2,3 4,6 6,0 0,63 6,8 2, 1,297 2,6 7, 7 – , , 2002 3 980 7 132 282 787 – and mac 8 1 4 8 4 4 0 16 14 6 25 1 82 8 – 7 72 — — — — — 9 – 9 3 0 3 0 9 8 6 5 1 9 7 6 Plants –126,83 24 – –4 14 118, –2,6 –1,3 –1,8 71,161 –3,219 92,6 –7 hinery 1,3 4,6 1,023 6,8 4, 1, 8, 8, –369 –964 –12 –756

, 2001 –26 –20 753 7 7 79 7 7 3 4 9 6 4 50 81 45 02 0 14 2 7 7 8 — — — 9 4 7 6 1 5 6 0 6 8 1 7 7 0 – – – 6,5 9,6 fixtures andfittings 8,25 1,333 1,925 — —1 —41 1, 7, Equipment, – 2002 481 516 39 63 – 7 711 74 – 98 8 3 50 8 00 37 75 – – — — — — — — — — 5 2 5 1 4 1 1 9 6 0 5 – 6 –3,14 –6,5 –3,551 4,5 4,0 8,255 1,63 –5 –212 –612

tools, 2001 –36 –4 38 53 152 –3 8 9 81 –1 –1 85 28 70 — — — — — — — — — — 8 6 3 7 8 7 6 0 4

– 5,8 8,00 8,4 5,8 4, – Construction**** 2002 20 922 – – 7 98 14 6 13 93 7 7 – – in progress — — — — — — — — — — — — — — — — — — — 1 9 1 8 1 9 0 –5,14 8,4 2,95 5,331 5,122 8,4 0). 2001 –3 19 –3 –14 –12 11 –1 –1 93 7 —, — — — — — — — — — — — — — — — — 8 7 7 9 0 9 9 – – 1 20 3 3 – 184 – 8 52,3 92,4 13,003 – – – 13,5 – – 47 4,0 5,3 1,330 2,53 4,41 8,0 3,6 3,828 6,5 6, – , —3 2002 , 6 168 1 – 278 7 7 1 9 4 51 5 36 9 5 21 6 63 1 2 7 – – 7 — — — — 0 1 9 3 7 9 0 4 1 4 8 7 5 8 0 6 – 9 –152,3 T –8 –63,5 13 15 17 o 313,5 –4,9 –2,53 –2,025 t –2,8 –1,92 –9,0 a 2,6 1,4 0,83 0,6 8,0 5,115 8,812 6, l –544 –110 –129 –756 2001 16 94 –42 –2 7 9 41 81 83 83 –1 –3 82 3 9 7 78 7 9 — 7 8 6 9 5 5 7 8 4 0 6 7 9 8 of fixedassetspurchased Accumulated depreciation Accumulated accelerated Total Land Buildings T 0million(0). Government grantsreceived,openingbalance:SEK ** * Book value depreciation forward to plancarried Residual valueaccording brought forward Accumulated depreciation from Groupcompanies S Depreciation fortheyear Merged plants Depreciation broughtforward according toplan Accumulated depreciation forward values carried Accumulated acquisition Reclassifications S in progress T Investments Merged plants Acquisition valuesbroughtforward** Acquisition values PARE Cont’d are not subject to tax assessmentvalues. are notsubjecttotax T ransfer fromconstruction ransmission lines and transformer stations ransmission linesandtransformerstations ax assessmentvalues(Swedishreal-estate) ales/Disposals ales/Disposals Includes an acquisition cost for land and water rights amounting to SEK 6,785 million(6,773), 6,785 Includes anacquisitioncostforlandandwaterrightsamountingtoSEK which cannotbedepreciated. NT COMPANY 11 3 7 0,499 0,181 9,682 2002 1 1 1 1 – – Group 1,640 1,640 6,661 6,434 5,021 4,758 Land andbuildings – 101,262 2002 243 –25 – – 178 28,147 7 20 33 41 11 11 — — 3,115 2001

* 644* 16,434 16,447 –4,758 11,676 11,676 –4,576 –239 –103 2001 5 21,065 3 88 57 5,540 4,475 — — — — — 2 Parent 2002 13,005 company – – – 1 33,839 5 5,464 20,676 5,930 6,210 1,262 6,795 – – – 4,515 2002 865 845 166 148 244 370 994 482 – 2001 and machinery 60 — Plants –5,464 –5,259 11,262 11,117 –5,726 5,798 –339 –196 2001

134 325 16 72 — — — — fixtures andfittings Notes totheAccounts – – Equipment, 2002 146 198 143 192 – – – – 16 14 49 49 43 29 41 – — — 0 8 8 –169 –146 tools, 2001 198 230 –16 –45 –52 39 52 13 — — — — — 0 – 1,023 2002 221 420 221 221 825 – Construction 26 27 in progress — — — — — — — — –413 2001 560 825 825 825 678 — — — — — — — — — –10,368 – 18,705 3 28,719 12,726 – 1 1,069 5,979 0,079 1,374 – – – 2002 501 218 312 630 – 627 – 96 27 0 Total –10,368 –10,004 28,354 18,351 12,573 28,719 –5,778 –344 –594 2001 230 709 — — — — 0 57 ANNUAL ACCOUNTS 2002 58 ANNUAL ACCOUNTS 2002 W Change invalue,associatedcompanies Reclassifications Divestments New issuesandshareholders’contributions Investments Companies acquired B G Note forward Balance carried Reclassifications Payments received New advances/receivables B PARE forward Balance carried Reclassifications Exchange ratedifferences Companies sold W Payments received asset Deferred tax New advances/receivables Companies acquired B G Note 17 ** The amount includes a repaid shareholder’s contribution of SEK 0 million (3,612) which was previously reported asanasset. which waspreviously reported 0million(3,612) The amountincludesarepaidshareholder’scontributionofSEK ** * forward Balance carried W Mergers ofshareholdings Divestments* Shareholder’s contributionsmade* New issues Investments/purchases B PARE forward Balance carried T Companies sold ranslation differences alance broughtforward alance broughtforward alance broughtforward alance broughtforward ROUP ROUP rite-downs rite-downs/Write-offs rite-downs Shareholder’s contributionsmadeanddivestmentsmainlyrefertorestructuring withintheGroup. NT COMPANY NT COMPANY 18 – Advances andlong-term receivables – Participations inGroup companies, associated companies andother securities heldasfixed assets t – Advance payments angible fixedassets 2002 195 245 121 147 172 — — — — — — — — — — to suppliers, –111 2001 111 110 172 60 — — — — — — — — — 2 3 3 1,662 4,187 2,525 1,659 8,093 Group companies 7 2002 Group companies – – Receivables from Participations in ,001 2002 942 629 232 – — — — — — — — — — — — — 22 — — — — — — — — — — — — ** 26,481 31,659 –5,113** 11,824 –5,197 1,307 2,357 2,525 2,447 2 001 2001 –23 — — — — — — — — — — — — 28 73 — — — — — — — — — — – 12,346 1 23,021 associated companies 8,042 2,692 4,126 2,687 —110 4,478 – – 2,184 1,932 1,837 1,978 2002 – 708 423 Participations in 2002 254 –40 10 – – from associated —2 — — — — — — 94 5 6 – 97 Receivables — — — — companies 7 1 –11,906 19,029 23,021 13,267 2,184 1,654 1,397 1,837 2,149 3,269 2,692 1,513 –181 –995 –297 –970 2001 440 461 252 2001 713 –74 –1 15 — — — — — —

— — — — – – 1 17,8 –3,452 1,354 9,449 5,054 8,681 – – –642 – – asset securities Other long-term – 2002 398 802 – 736 107 724 2002 850 654 487 356 – 173 772 174 45 13 82 – Other fixed receivables 97 74 — — — — — — — 6 4 — — 19,449 –3,109 –7 27,972 8,681 1 6,135 3,173 1,524 1,019 –758 – –672 –389 –266 ,510 2001 ,839 850 111 714 –24 757 2001 443 168 802 –26 –22 774 12 –5 — 6 — — — — 2 ** *T To Other companies Österede K V V V VG VG V V V V V V V V V V V V V V V V V V V V V S SwedP SwedP Svensk KärnbränslehanteringAB* Ringhals AB Produktionsbalans P Nordic P K K Gotlands EnergiAB Gestrikekraft AB Förs F F Energibolaget B Elektrocieplownie W Arrowhead ServicesAB Arrowhead AB Abonnera iSverigeAB GR T Note he followingisalistofthemainsharesandparticipationshelddirectlyorindirectlybyparentcompany. orsmarks K ors attenfall P attenfall Oy attenfall NorrnätAB attenfall FastigheterAB attenfall EstoniaO attenfall EngineeringAB attenfall Deutsc attenfall Dat attenfall DanmarkA/S attenfall BränsleAB attenfall BråvikenAB attenfall ÖstnätAB attenfall V attenfall V attenfall Utvec attenfall T attenfall SveanätAB attenfall SupportAB attenfall ServiceSydAB attenfall ReinsuranceS.A. attenfall RegionnätAB ästerbergslagens V ästerbergslagens K ästerbergslagens EnergiAB raftbyggarna InvestAB raftbyggarna EntreprenadAB äffle ÅrjängEnergiAB t T al par O S HydroInternationalAB S AB he companyo he Groupo aströms K äkrings AB U P ower InternationalAB ower AB C ower InvestAB ent company 19 O reasury AB(publ) ästnät AB ärme Upps ower ManagementAB raft AB** MP raftgrupp AB a AB raft AB – Shares andparticipations wns afur kling AB A V otkyrk hland GmbH** NIES attenfall Insurance wns sharesinV Ü arszawskie S.A. ärme AB BA AB raft AB ala AB a-S ther 2 alem Förs 0 percentviaForsmarksKraftgruppAB. attenfall EuropeA äljn. AB G. 516 55 55 (B) 4 55 55 55 55 (H 55 55 55 3 55 55 55 55 55 55 25 55 55 55 55 55 55 55 55 55 10 55 55 10142 55 55 55 55 55 5 55 55 55 55 55 55 55 Corporate I 5 8 R 713 6 6333-24 6 6192-6212 6 4 6 619 6 6 6 63 65 6 0526 65 61 6 63 611 6 65 6215- 63 6 65 6 6 63 6 6 6528-4 6 65 63 6 655 6 6 644 649 4 1 014- 4 4 4 4 4 022-03 4 4 425-813 4 010-0 4 0 4 4 4 B) 6265 013-15 4 9528 7 7 75-2014 7 7 7 01-83 3 3 3 1 1 3 83-5 62-8 65-6 3 0 65-6 9 0 1 3 83-5 63- 9 0 4-8525 2-9 7 3-5 6-9 6 7 7 7 7 7 7 7 7 4-9 8- 8-5 8-026 8-6 0-5 9-0 8-215 9-0 0-26 9-8 -28 - 6 -85 -0 -0 -85 -0 - 6-1 9 7 7 6 7 7 4 4 4 75 0 6 929 8 9 85 85 8 7 9 816 6 8 4 819 85 619 952 026 614 8 6 D 6 9 0 7 61 3 8 02 83 6 4 1 7 0 7 6 91 6 4 6 9 0 0 8 no. 9 2 4 4 6 0 7 6 4 2 9 9 8 0 0 7 8 4 8 3 9 6 1 9 6 9 9 Luxembourg B Luleå Hamburg Stoc Sollentuna W Stoc Sundsvall Luleå Stoc T T Helsinki Ludvik Gentofte Stoc Stoc Stoc Nyköping Östersund Stoc Ludvik Linköping Stoc Östhammar Stoc Upps Älvk T Fagerst Åtvidaberg Gotland Stoc Stoc Stoc Sundsvall Stoc Stoc Stoc Reg. office V Stoc Stoc S Stoc Stoc allinn rollhätt rollhätt arberg äffle otkyrk ars arleby kholm kholm kholm kholm kholm kholm kholm kholm kholm kholm kholm kholm kholm kholm kholm kholm kholm kholm kholm aw ala a a a a an an Notes totheAccounts % holding 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 6 6 5 3 5 5 75 7 6 9 1 1 8 6 4 161,433, 14,28 19 16 112,5 4 3 15 200,000 100,000 218,000 110,000 12,9 3 8 5 12,5 10,000 16,000 24,000 10,000 00,000 14,000 00,000 Number 8 5,5 4,8 2,5 4,000 8,000 8,000 0,000 8,000 1,000 1,000 0,000 0,000 1,000 8,000 8,000 0,000 6,5 0, 7 9, ,5 3 5 100 100 100 100 100 200 752 100 100 7 7 9 3 6 9 6 00 2 00 00 00 0 7 9 2 6 9 6 0 0 0 0 B ook value 18,412 3 2,6 1,9 1,4 9,142 8,0 19 19 13 200 626 120 283 45 5 9 4 8 9 13 43 12 83 18 10 35 24 25 1 10 55 91 22 13 15 25 16 11 7 3 1 7 93 6 1 9 8 5 6 5 8 9 9 4 0 6 7 7 7 0 4 2 6 6 7 7 59 ANNUAL ACCOUNTS 2002 60 ANNUAL ACCOUNTS 2002 St Päijät-Hämeen V KO K K K GE ES Empower Oy E Compania ElectriciadeSoc A- Indir Other SweP Preem GasAB Plusenergi AB PiteEnergi AB Luleå EnergiAB Gulsele AB Gornoslaski ZakladElektroenergetycznyS.A. B i/s A AS V Pamilo Oy LA Hämeenlinnan EnergiaOy H Hamburgisc Bewag A B To Other Åtvidabergs FjärrvärmeAB TVF GmbH T St St Dir Major shareholdings heldbyGroup companies erki Oy attenfall EuropeA ernkraftwerk BrokdorfGmbH ernkraftwerk St ernkraftwerk K HA EnergieHandelsGmbH&CoK arsebäc odens EnergiAB EW P T adtwerke W adtwerke ädtisc t U ect holdings AG SO rain AB a RO SAB BerlinerGaswerkeA vedøreværket 2 BA l ect holdings ol LinkAB CIA S GmbH&CoK Energieverzorgung S G LausitzerBraunkohleA ower V he W G k K TE he Electricit Eilenburg GmbH raft AB D erke KasselA ittenberg GmbH enture HanfengGmbH CO rümmel GmbH oima Oy ade GmbH MPANIES G G äts-W G hagot ac G erke A hsen OstA G a G G G R H H H 1000 H Cottbus 55 55 4 (LEV) 221005 55 55 Malmö 55 55 Hamburg 55 H Corporate I H 55 Hamburg 55 H Berlin Eno Berlin H H 0 H 0 T H Number Reg. office avastehus 6 953-0 65 H R R R R RA 1 R RA 92 R R B 24 R 7 65 65 65 633 613 6200-911 653 6 6 B 9 B 4 B 15 B 12163 B 1 B 215 B 35 B 9 B 126 82 001-18 03 9323-0 7 8 43-16 00-3 2-4 7 0 7 7 6 0-922 9-8255 0-9 8 43 65 41-1 85 7 -29 7 623 4- 033 0 61 29 7 0 43 6 6 7 7 829 D 8 3 45 7 9 0 00 0 7 6 7 7 % holding 100 100 9 9 9 8 9 7 7 7 4 7 7 7 Gliwice Berlin Hamburg Hamburg Hamburg Heinola Gothenburg Gentofte Åtvidaberg Cologne Colombia Stoc Lübbenau Piteå Luleå B Hamburg Kassel Stoc Sollefteå Stoc Dresden W Leipzig Reg. office Helsinki Helsinki WE VEA V V V V V attenfall V attenfall Indals attenfall EuropeT attenfall EuropeS attenfall EuropeGenerationGmbH oden ittenberg MA G K kholm kholm kholm G raftwerke Sc A erkko Oy G % holding älven AB ransmission GmbH ales GmbH hwarze PumpeGmbH 4 5 5 5 4 5 3 4 5 3 5 4 5 3 32 20 32 33 29 20 95 25 35 25 23 29 0 0 0 0 8 0 0 0 0 0 0 9 0 4 1,000,000 35 28 18,6 Number 5 5 8 10,000 7 22, 7 2,5 0,000 0,000 0,000 8,000 4,000 4,000 3, 75 5 7 7 9 00 20 00 31 00 8 0 V Berlin T Berlin Bispgården Berlin Sc Reg. office 1 ammerfors etsc 2,0 1,4 Group 4,914 1,019 1,22 1,52 3,8 8,0 hwerin 16 53 15 10 103 332 1 1 4 14 02 75 28 10 45 13 51 13 28 51 12 7 7 42 hau 7 0 9 7 6 8 6 6 8 4 2 9 B Parent ook value % holding company 2,14 2,6 100 332 1 9 9 9 7 9 7 14 7 8 7 7 7 7 7 4 — — — — — — — — — — — — — — — — — — 0 9 7 3 0 3 7 2 7 Prepaid expensesand Receivables from To accrued income Other receivables in Germancompanies Investment assets associated companies companies Receivables fromGroup Accounts receivable–trade Note To Materials andspareparts Coal, etc. Oil Nuclear fuel Raw materialsandconsumables Note 20 *T To Other VEA St St KO HH HanseNet T GN AO Indir Other Leks Jämtkraft AB Eutilia Dir Other securitiesheldasfixedassets adtwerke Rostoc adtwerke Parc t t t ect holdings a a a M-Strom A

PG S Gesellsc Mosenergo he share of the voting power is 16 percent. he shareofthevotingpower is16 G Beteiligungsgesellsc l l l and-Rättvik EnergiAB ect holdings C 21 China elekommunik G haft fürNuklearserviceGmbH – Current receivables – Inventories, etc. him GmbH k A G ation GmbH haft mbH 3 17 4,3 3,9 5,5 4,1 1,83 6,0 4,225 1,02 7, ,833 2002 2002 26 1 0 5 1 8 1 41 — 2 9 6 8 9 6 0 7 Group Group 10,65 27 1,5 3,9 3,03 4,422 4,951 6,5 4,0 ,13 2001 2001 16 913 41 45 6 7 — 8 4 9 7 4 8 Sweden Germany Germany China Germany Netherlands Germany Germany Sweden Germany Country Germany 1 2,4 5,28 2,26 3,59 2,4 6,0 Parent company Parent company 2002 2002 55 5 65 7 7 — — 6 7 5 2 4 9 8 3 10,0 17 1,4 1,35 2,4 1,6 ,029 2001 2001 40 49 9 61 71 42 — — 6 6 3 9 % as CurrentreceivablesfromGroupcompanies. 12,852million (6,978),to SEK which arereportedinthebalancesheet subsidiary Vattenfall Treasury AB.FundsintheGroupaccountamounted T Note 22 To Accrued income,other income, electricity Prepaid expensesandaccrued Prepaid expenses,other Prepaid insurancepremiums Specification ofprepaidexpensesandaccruedincome: holding he parentcompany’scashandbankbalancesareadministeredbythe t a l 20 16 10 12 15 20 55 8 6 1 8 * Notes totheAccounts – Cash andbank balances Number 13,000 11, 7 ,83 7 6 0 3 1,0 4,225 2,633 2002 42 9 74 7 1 Group 1,5 3,03 2001 63 812 6 21 Group 1,3 9 8 6 3 252 4 6 6 23 3 2 2 2 2 5 0 1 79 2 3 7 8 7 9 7 5 3 9 4 B 1, 2,4 ook value Parent company Parent company 2002 464 24 7 6 7 — 3 6 3 1,4 1,131 2001 36 23 3 2 9 82 — — — — — — — — — 2 3 4 — 2 6 9 61 ANNUAL ACCOUNTS 2002 62 ANNUAL ACCOUNTS 2002 Provisions forfutureexpenses Provisions fordeferred G V P basis ofindividualassessments. Provisions aremadeforknowncommitmentsoranticipatedrisksonthe Note 24 Closing balance,2002 Net profitfortheyear Result ofmerger T Group contribution Dividend T Opening balance,2002 Closing balance,2002 Net profitfortheyear Hedging T T Dividend Opening balance,2002 Not To Other provisions Negative goodwill t of nuclearwastemanagement t PA B SE Accumulated translationdifferencesinequityamountedtoS environment of miningoperationsandother Provisions forfutureexpenses akings ax liability ax effectofGroupcontribution ransfer fromnon-restrictedequitytost ranslation differences ransfers betweenrestrictedandnon-restrictedequity attenfall AB’s share capital comprises131,700,000attenfall AB’ssharecapital 50. shareswithaparvalueof SEK ension provisions oards oftheGroupcompanies. ROU t R K 10millionofthenon-restrictedequityatyear-endisduetobetransferredrestrictedreservesasproposedby a E l NT C e P 2 O al measures/under- 3 M P – E – Provisions ANY quit y 1 3 1 13,63 1 97 0,8 4,41 6,6 6,5 5,4 , 2002 5 9 43 7 7 1 7 9 1 8 8 0 atutory reserve Group 9 28,8 14,855 18,132 12, 6,9 0,95 9,3 2001 7 8 92 71 2 2 6 4 Parent company 2002 14 11 12 13 — — — 2 7 E K 3 4 4 million,ofwhic 2001 13 101 12 26 — — — 9 IAS 19, amount to SEK 4,637 million (4,137).IAS 19,amounttoSEK actuarial basisinaccordancewiththe ProjectedUnitCreditMethod, benefit-based commitmentsforemployeesinSweden,calculatedonan 4,285million(3,919).The corresponding in SwedenandamounttoSEK actuarialmethods Sweden arecalculatedinaccordancewithstandard mentioned SuperannuationFund. premium-based commitmentsareentirelyfinancedviatheabove- derBewag),whilethe Bewag’s SuperannuationFund(Pensionkasse commitments. The benefit-basedcommitmentsarepartlyfinancedvia Bewag AG hasbothbenefit-basedcommitmentsandpremium-based Germany in2001and2002comprisedbenefit-basedcommitments. T During theyear, thereturnonPension Fundwas2.5 percent(1.9). the Pension LiabilitiesActthrough paymentsintothePension Fund. nies asco-owners,andtheyhaddissolvedtheirpensionliabilitiesunder V in which arereportedasnetfigures againsttheavailablecapital ed inthebalancesheetcorrespondstothesepensioncommitments, Swedishactuarialmethods.The provisionreport- are basedonstandard P the currentvalueoffuturebenefitsearned. in thebalancesheetandanannualcostiscalculatedonbasisof Method, IAS 19.Aprovisionforthesecommitmentsisthereforemade on anactuarialbasisinaccordancewiththeProjectedUnitCredit P he majorityofthepensioncommitmentsincompaniesacquired attenfall's Pension Fund. ensions: ension commitmentsrelatingtopensionsinSwedishGroupcompanies T T At theendof2002,Vattenfall’s Pension Fundhad17 Groupcompa- he pensionprovisionsmadeinthebalancesheetforemployees he pensionprovisionsfortheGermancompanieswerecalculated Share capit h S 6,5 6,5 E K –31millionwasforhedging. 85 8 — — — — — 5 al Share capit 6,5 1,028 6,5 — 1,0 method reserve Equity 10 15 85 8 7 — — — — — — — — — 8 7 5 7 al restricted St reserves —2,85 19,15 — 1 reserve Other 1,316 1,0 5,21 atutory 1,3 7 1 — — — — — 1 — — — 7 9 4 7 8 Non-restricted restricted –2,9 –1,03 — 13,6 equity 22,24 equity Non- 8,3 4,514 1,03 1,831 7 9, ,5 83 — 231 7 —1 6 8 6 3 82 1 9 0 9 6 6 1 0 6 1 9 — 3 4 –2,9 –1,03 16,2 1 1,03 T 9,5 7 5,129 — 4,514 T 7 o , o ,6 —31 5 95 t 8 t a 6 a 13 7 8 3 7 l l 4 0 0 8 6 — 0 9 6 0 6 Pr Balance carried forward Balance carried T Reclassified provisions Utilised provisions Provisions fortheperiod(includingeffectsofdiscounting) B Provisions fornuclearpower(changes in2002) of nuclearwaste. they payafeetotheNuclearWaste Fundforthefuturemanagement power companiesdonotmakecorrespondingprovisions.Instead, themselves forthefuturemanagementofnuclearwaste.The Swedish In Germany, provisionsaremadeinthebalancesheetbycompanies Provisions forthefuture costsofnuclearpower: Balance c T Provisions fortheperiod Companies acquired B Provisions liabilities(changes fordeferred in2002) tax toso-calledtemporarydifferences. liabilities attributable with companyacquisitions,aswellotherprovisionsfordeferredtax t T Provisions liabilities: fordeferred tax Balance c T Reversed provisions Utilised provisions Provisions fortheperiod Companies acquired B Information registeredbyP at theendofyear To Other pensioncommitments funds Less: Capit P ax thatismadewhenacquisitionanalysesareapprovedinconnection ranslation differences ranslation differences ranslation differences hese relate to deferred tax in untaxed reserves,theprovisionfordeferred inuntaxed hese relatetodeferredtax ension commitments alance broughtforward alance broughtforward alance broughtforward ovisions forpensions(c t al pr ovisions forpensions arried forwar arried forwar al inpension d d R hanges in2002) I – 1 3 13,824 3,00 6,6 0,332 2002 13 43 5 1 Group 16,63 –4,10 12, 2,4 2001 193 7 2 4 2 8 9 7 – 2,4 1,33 2,4 Parent company 2002 92 13 13 92 5 28,8 –1,643 12,722 Group 3 16,643 –2,4 6,984 4,349 1,633 5, 4,41 6,517 –465 2,4 1,225 –120 – – – –175 339 298 166 43 218 7 2001 3 92 82 26 26 82 9 9 0 B Utilised provisions,2001 V Provisions fornegativegoodwill 3,626million(2,539). was dissolvedbySEK negative goodwillcorrespondingtolossesandrestructuringcosts report asidentifiableliabilitiesatthetimeofacquisition.During2002, in Vattenfall’s acquisitionsinGermany, butwhich itwasnotpossibleto T Negative goodwill: forward Balance carried T Reversed provisions Utilised provisions Provisions fortheperiod(includingeffectsofdiscounting) Companies acquired B Provisions formining,etc.(changes in2002) inotheroperationsconductedbytheGroup. measures/undertakings in Germany. Provisionsarealsomadeforcorrespondingenvironmental ated withtheGroup’spermissiontoconductligniteminingoperations Provisions aremadeforsiterestorationandothercommitmentsassoci- Balance carried forward Balance carried T Reclassified provisions Reversed provisions Utilised provisions Provisions fortheperiod(includingeffectsofdiscounting) Companies acquired B Other provisions (changes in2002) for guaranteecommitments. related measures/commitments.Otherprovisionsalsoinclude disputes,aswellprovisionsforpersonnel- future legalandtax-related T Other provisions: forward Balance carried T Utilised provisions,2002 Companies acquired Provisions provisions: forminingoperationsandotherenvironmental ranslation differences ranslation differences ranslation differences he provisionconcernsanticipatedfuturelossesandexpensesidentified hese mainlyconcernprovisionsmadeinconjunctionwithongoingor alue attimeofacquisition,2001 alance broughtforward,2002 alance broughtforward alance broughtforward Notes totheAccounts –2,393 14,855 18,132 – – 20,671 1 13,631 –2,765 1 2,360 1,561 2,148 2,539 3,626 9,371 1,017 1,417 0,898 5,479 – –155 –816 – – 444 419 224 –11 63 ANNUAL ACCOUNTS 2002 64 ANNUAL ACCOUNTS 2002 ance withanagreementbetweentheshareholders. of F to F million (124). the followingamountfallsdueafterfiveyears:OtherliabilitiesS five years:OtherliabilitiesS Of theaboveliabilitiesforGroup.followingamountfallsdueafter To Other liabilities Liabilities toGroupcompanies Note 26 Total Other liabilities Liabilities toGroupcompanies companies andminorityowners Liabilities tocreditinstitutions B Note 25 To Other liabilities Liabilities toGroupcompanies companies Liabilities toassociated Liabilities tominorityowners Liabilities tocreditinstitutions Commercial paper B Not from Vattenfall Treasury AB. to Groupcompaniesfallsdueaftermorethanfiveyears. SE Otherlong-termborrowings 3,103million(2,345), owners SEK million(5,617), 4.495 Liabilitiestominority to creditinstitutionsSEK 20,579 Liabilities loansSEK million(21,630), more thanfiveyears:Bond Of theaboveliabilitiesforGroup,followingamountsfalldueafter Liabilities toassociated ond loans ond loans t t K 625million(194). a a Liabilities toGroupcompaniesmainlycompriselong-termliabilities V Liabilities toGroupcompaniesmainlycompriselong-termborrowings 619million(619)inliabilities In respectoftheparentcompany, SEK orsmarks K orsmarks K l l irtually allborrowingsinforeigncurrenciesarehedged. e 2 7 raftgrupp, nointerestispayableontheamountinaccord- raftgrupp ABandothersforpowerc – C – Long-term non-interest-bearing liabilities – Long-term interest-bearing liabilities urr ent int E K 713million(855).F er 1 1 3 67,158 27 6,6 2,3 4,0 3,8 1,5 1,5 e 5,533 8,1 9,679 3,775 , s 2002 2002 2002 390 5 23 t 8 4 8 5 8 8 82 7 -be — — — 4 0 4 0 8 8 4 1 Group Group Group aring liabilitie 5 3 3 19, 9,9 1,5 4,040 1,5 9,3 4,443 6,132 3,914 8,420 0,113 0,185 2001 2001 2001 613 185 752 0 9 9 63 — — — 6 9 9 or theparentcompany harges. Inthecase 3 3 3,6 8,0 3,33 5,925 5,926 8,0 Parent company Parent company Parent company 2002 2002 2002 356 9 4 26 7 s — — — — — — — — 0 5 4 1 1 E 25,936 K 35 25,937 3,514 3,131 4, 4, 2001 2001 2001 38 7 7 25 24 6 — — — — — — — — 3 1 1 , Accrued nuclear-related Bloc Deferred incomeandaccrued Specification ofaccruedexpensesanddeferredincome: Other accruedexpenses Accrued interestexpenses fees andt Accrued personnelcosts To deferred income Accrued expensesand Other liabilities T companies Liabilities toassociated Liabilities toGroupcompanies Accounts payable–trade customers Advance paymentsfrom Not To Other for tradingonNordP Real-est Floating c Liabilities tocreditinstitutions: F G Not To Other deferredincome expenses, electricity ax liabilities or ownliabilitiesandpr ROU t t t a a a l l l ked bankfundsassecurity e e P ate mortgages 2 2 harges axes 8 9 – Pledgedas – C urr ool ent non-int ovisions s 1 11 11 e 27 6,8 0,4 4,0 3,4 2,426 3,2 t ,28 , , s 2002 2002 2002 5 35 89 5 95 75 32 17 1 0 98 86 83 53 83 8 8 11 7 er — 2 0 6 7 1 3 7 1 3 3 9 2 Group Group Group e s t 19,29 -be 2,5 6,0 6,0 1,33 1,4 3,414 8,211 2001 2001 2001 18 50 125 165 285 82 678 6 8 8 aring liabilitie 63 83 37 — — — 0 4 4 0 7 6 3 7 9,1 5,43 1,923 1,923 3,2 3,2 1, Parent company Parent company Parent company 2002 2002 2002 154 18 95 7 673 5 14 21 20 7 7 — — — — — — 5 3 2 7 0 3 4 12,5 14,95 s 1,020 1,020 2001 2001 2001 15 40 816 328 573 36 9 41 — — — — — — — 8 3 8 6 5 2 costs. T this kindofloss. 5,000millionfor insurance coverwhich willpay outamaximumofNOK power producersinSwedenandNorway, Vattenfall outliability hastaken party lossesresultingfromdamaccidents.Together withotherhydro AB’s commitments. relates toitssubsidiaries.Vattenfall ABhasguaranteedVattenfall Treasury SE To Other guarantees Contract guarantees Nuclear W of whic Guarantees PA To Nuclear W Other contingentliabilities Guarantees G Not Other contingentliabilities he ownersoftheplantsareeach liablefortheirshareoftheregulation ROU – Energysupplied,TW – Capacity – Numberofcommitments subordinated guarantees external borrowingforothercompanies external borrowingforsubsidiaries to associatedcompanies to subsidiaries for V W Compens t t R K 82,363 million(74,632)K 82,363 oftheparentcompany’scontingent liabilities a a On somerivers,severalhydropowerplantsshareregulationfacilities. Under Swedishlaw, Vattenfall hasastrictly unlimitedliabilityforthird holes E l l NT C attenfall T e P h: 3 ale powersupplied aste Fund aste Fund OM atory andfreepowersupplied: 0 , MW P – C reasury’s lending: ANY ontingent liabilitie h/year s 1 5 82,93 21,533 1,3 6,9 3, 3,83 1,233 2,41 3,6 2002 673 13 68 226 1.0 5 9 14 37 7 74 6 4 3 4 7 4 1 7 4 22,33 10, 77 3,9 3,9 2,922 6,329 6,555 1, ,918 2001 45 215 226 7 7 0.9 4 4 56 14 33 92 93 8 8 7 6 SE which 371.88 isequivalentto millionintotal, per claim,orEUR million 185.94 share ofthisjointliabilityinsuranceagreementisEUR year.for twoclaimsduringoneandthesame The Vattenfall Group’s oneundertaking nuclear powerplantoperators.This agreemententails liability insuranceagreement(Solidarvereinbarung)betweentheGerman millionarecoveredbyajoint 2,500 million anduptoamaximumofEUR 250 German MutualAtomicEnergyReinsurancePool. ClaimsoverEUR millionarecovered bythe 250 million.ClaimsuptoEUR 2,500 is EUR liability. The mandatoryinsuranceamountforalltheseplayerscombined In Germany, playersoperatingnuclearpowerplantshaveanunlimited contractual commitments. specified above,guaranteesareputupforthefulfilmentofvarious SE by Vattenfall. Onthebalancesheetdate,thesecostsamountedto obligations undertheleasingcontracts,thiswillresultincostsincurred reported atthetimethatleasecontractswereconcluded. gainwas made hasbeenreportedasanetfigureandthetransaction payment ofsumsdueinaccordancewiththesubordinatedleases. been depositedinfinancialinstitutionswithhighcreditratingsforthe counterpartieshasbeenreceivedinadvanceand Rent fromtheUS leased back for24yearsaspartofaso-calledsubordinatedlease. of so-calledmainleaseslastingamaximum75years.andthereafter counterpartiesaspart is therightofusepowerplantsleasedtoUS forpowerplants.The basisforthetransactions of leasingtransactions for anequivalentproportionofallthejointventure’scosts. its shareofownership,andeach ownerisliable,regardlessofoutput, tium agreements,each owner is entitledtoelectricityinproportion P Note 31 to July2020. a liabilityforcostsinproportiontoitsshareofownership. ower plantsareoftenbuiltonajointventurebasis.Undertheconsor- K 3,419million. K 933million,which isincludedinthereportedcontingentliabilities. Should the lessees or other parties/stakeholders failtomeettheir Should thelesseesorotherparties/stakeholders T W As anaturalpartoftheGroup’sbusinessandinadditiontothose V Va he net difference between rental paymentsreceivedanddeposits he netdifferencebetweenrental attenfall bearsfullfinancialresponsibilityfortheSwePol Linkup ithin itsGermanoperations,Vattenfall hasconductedanumber ttenfall’s investments in heat and other companies often entail ttenfall’s investmentsinheatandothercompaniesoftenentail Notes totheAccounts

–C ommitments underconsortium agreements 65 ANNUAL ACCOUNTS 2002 66 ANNUAL ACCOUNTS 2002 G Other countries Germany P Finland Sweden other S pension commitmentsinrespectoftheseofficerstotalS .* outstanding pensioncommitmentsinrespectoftheseofficerstotalS *S To (of whic Social securityexpenses S P To Other countries Sweden PA To Other countries Germany P Finland Sweden G A Note 32 *** ** *B To Other countries Sweden PA To *T ersonnel costs verage numberofemployees oland oland alaries and alaries andotherremuneration ROU ROU t t t t t R R Includes bonusesofS Includes bonusesofS None oftheB a a a a a he parentcompany’spensioncostsincludeS E E l l l l l EK oard membersandpresidentsalsoincludealternates,deputyformer B remuneration NT C NT C P P

h pensioncosts) 21 million(2 O OM M P P – Average numberof employees andpersonnel costs ANY ANY oard membersreceiveanypensionbenefitsinconnectionwithB 4) oftheGroup’spensioncostsconcernspresidents,deputyandformerpresidentspres E E K 1.6million(0.5). K 2 6 million(1 6). E K 5million(4)forexistingandformerpresidentsdeputypresidents.T E and pr Boar 2002 K 5 8 million(52). d members esidents* 104 169 12 11 11 47 — 2 4 *** E ** K 3 7 26,5 17 Men 2002 3 million(1 2,5 6,2 ,262 65 35 66 1 1 7 97 12,28 Other employees 9 8 9 3 9 7 0 8 3,0 oard duties. , 486 699 4 425 133 12 8 1 6 3 7 3 9 8) W oard members,alternates,presidentsandd 5,1 omen 1, 7 , 6 395 399 2 7 7 0 14 3 5 42 2 (1,4 1 12,4 12,4 4 4 7 8 1 T 4,4 6,9 8,8 3,0 ot 2002 6 494 49 43 13 al 5 6 1 4) 5 1 03 59 1 5 6 7 5 9 7 3 7 22,4 3 T Group o 1 1 4,24 3,1 7 t , , ,9 a 0 0 124 56 l 0 54 66 83 1 7 4 2 0 8 7 (1,15 12,232 3,3 8,8 2001 and presidents* B oard members 2001 9 42 6) 0 119 * 45 13 47 — 9*** 9 7 7 18,519 2001 Men ** 2,8 8,5 6,3 he c 64 50 235 632 0 85 11 8 3 9 7 3 ompany’s outstanding idents. T (1 eputy presidents. Other employees 2002 49 875 378 7 2,9 4,915 8, 1) W 4 4 4 285 7 7 Parent company 5,295 2,295 2,4 1, 6 65 93 6 6 23 omen 753 226 7 41 4 8 2 2 3 he Group’s 6 1 7 — 0 7 7 0 11,055 23,814 T T (13 3,5 4,9 1 1,0 8,8 3,015 8,14 ot o 2001 826 352 47 , t 0 506 292 321 7 al 4 a 4 7)** 62 2 6 60 4 6 7 1 42 l 7 4 9 7 0 4 1 1 9 3 9 Swedish partoftheGroup. applied withinanumberofbusinessunitsandcompaniesinthe isinformed. afterwhich theBoard Chairman oftheBoard, withthe Officer decidesonremunerationfollowingconsultations B bytheChairmanof Chief ExecutiveOfficerfollowingproposals asawholethatdecidesontheremunerationpaidto It istheBoard the amountcorrespondingtonewincomeduringperiodinquestion. pay of18months’salary, which ispaidmonthlywithadeductionfor s if employmentisterminatedbythecompany, theyareentitledtotheir uponwhich thepensionisbased. of 32.5percentthefixedsalary s conditions, toreinforcetheITPpensioninformofanextension officers, ithasbeendecided,inordertoadaptpensiontermsmarket T and65. not inanywayabasisforthepensionbetweenagesof60 correspondingto70of 60–65 are percentoftheirfixedsalary. Bonuses heads ofGroupFunctionsareentitledtoreceiveapensionfromtheage based pensionsolutionapplieswitharetirementageof60. thousand. 2,042 bonuses for2001cametoSEK 17,240remuneration andbenefitsamountstoSEK ofwhich thousand, are employedbyVattenfall sumof ofeightpeople,thetotal AB,atotal executive GroupmanagementorareheadsofFunctionsand monthly. benefits receivedduringtheperiodinquestion.Severancepayispaid will bereducedbyanamountcorrespondingtothenewincomeorother of newemploymentorincomefromanothersource,theseverancepay forthepastthreeyears.Inevent riable portionofthesalary/bonus termination ofemployment,plusone-thirdtheaggregateva- applyingatthetimeof be calculatedonthebasisoffixedsalary until thecontractualretirementage.The sizeoftheseverancepaywill mum of24months’salary. However, severancepaymayonlybepaid Executive Officerisentitledtoseverancepaycorrespondingamaxi- way abasisforthepension. arenotinany Bonuses year andceasescompletelyattheageof80. Aftertheageof76,of 80. itdecreasesbyone-fifthforeach consecutive T amountusedforSwedishsocialsecuritypurposes). is astandard basicamounts(aamount exceeding30 of theportionhissalary paid correspondingtotheapplicableITPbenefitplanplus32.5percent will bepaiduptotheageof65.Afterthis,aretirementbenefit atthattime Aretirementpensionof65percenthissalary age of60. 1,100thousand. the bonusfor2001wasSEK ofwhich thousand, 6,254 the valueofacompanycar, amountingtoSEK dent ofVattenfall andotheremoluments,including AB,receivedasalary V A bonussystemformanagersisappliedintheSwedishpartof Bonus andincentiveprogrammes 270 thousand. fee ofSEK Chairman,receivedafixed In 2002,DagKlackenberg, whoistheBoard’s ment o Not alary duringthecontractualperiodofnotice(6months),plusseverance alary componentsexceeding20basicamounts.The extensionconsists he ITP plan applies from the age of 65. In the case of certain specified he ITPplanappliesfromtheageof65.Incasecertain he latterretirementbenefithasatimelimit,andispayableuptotheage attenfall Group. oard. For othermembersofseniormanagement,theChiefExecutive Furthermore, incentiveprogrammesorbonusare In thecaseofabove-mentionedmembersseniormanagement, T In thecaseofFirstSeniorExecutiveVice President,apremium- F In theeventofterminationemploymentbyVattenfall, theChief isentitledtoretireatthe Lars GJosefsson,whowasbornin1950, In 2002,LarsGJosefsson,whoisChiefExecutiveOfficerandPresi- e he otherofficersoftheexecutiveGroupmanagementandcertain or othermembersofseniormanagementwhoarepartthe 3 2 f V –C a t o t nt en ’ f d all AB -R e muner ation t o thes enior manage- related reasons. wherevermotivatedformarketorbusiness- programme areacceptable as ontheemployee’sownunitandwork.Deviationsfrom business unitlevelandonresults,aswell,inparticular, goal. Inotherrespects,thefocusshouldbeongoalsbrokendownto fixed annualsalary. One-tenth should relatetotheGroup‘svalue-creation The maximum levelis6percentofthe in2004. for twoyearsstarting included intheprogramme.The programmewillberunonatrialbasis joint incentiveprogrammeforallemployeesinSweden.Finlandisalso orexceedsitsthree-yeartargets. the Groupattains T while fortheannualbonuses,ITP’srulescalculatingpensionsapply. annual bonuses.This long-term incentiveisnotabasisforthepension, t iftheGroupexceedsitsfinancial will inadditionbeeffectiveafter2004 and theheadsofGroupFunctions,aswellbusinessunits, component (“long-termincentive”)fortheexecutiveGroupmanagement value creation*.Within theprogramme’sframework,along-term(3-year) based onleadershiptargets. levels. Within businessunits,bonuseswerealso,toalesserextent, atunitandcompany at businessunitlevel,andothertargets strategic businessprojects,growthincashflowandprojects growth incashflowandreturnonequityatGrouplevel,aswell group oftheservicecompany. companies, whileamaximumof8percentappliestothemanagement membersofthemanagementgroups. cent isappliedtostaff managers oflargeoperationalunits.Abonusamaximum8–10per to themanagementgroups,primarilypresidentsoflargecompaniesand to headsofbusinessunits. Functions, amaximumamountof10–15percentapplies. managers/keyindividualswithintheGroup In thecaseofcertain to theexecutiveGroupmanagementandheadsofFunctions. that helptoenhancevaluecreationareused. derived fromit.Inaddition,theunit’sowngoalsandmanagement creation isusedatGrouplevel,aswellthebusinessunitgoalthat SE of 33.3percenthisfixedannualsalary. In2002,thiscameto ofamaximum to aspecialperformance-relatedvariablesalary/bonus Under hisemploymentcontract,theChiefExecutiveOfficerisentitled Management bonuses return onaveragenetassets,wheretherequiredis11percent. *V T T T bonus programmesexistatthemajorityofbusinessunitsandcompanies. W Bonuses andincentivesforotheremployees argets. The maximumsizeofthe long-termincentiveisequivalenttotwo he valuecreationforVattenfall’s ownerisexpectedtobeveryhighif he Board ofDirectorssupportstheprogrammesdescribedabove. he Board peryear. 15thousand he maximumlevelaveragesaroundSEK andneeds. hey aredesignedtosuittheparticularunit’stargets ithin theSwedishpartofGroup,differenttypesincentivesor K 1,665 thousand. K 1,665 From 2002–2004, thebonusprogrammewillbedirectlylinkedto From 2002–2004, In 2001,managementbonuseswerebasedonfinancialtargets, A bonusofamaximum15percentisappliedtoheadsservice W isapplied A bonusofamaximum20percentthefixedsalary isapplied A bonusofnomorethan25percentthefixedsalary Th T W alue creation=thepositivechange inoperatingprofitminustherequired he above applies to a total ofaround100managers. he aboveappliestoatotal ithin businessunits,abonusofmaximum15percentapplies ithin thebusinessunits’managementgroups,goalforvalue e company has taken adecisionregardingguidelinesfornew e companyhastaken Notes totheAccounts 67 ANNUAL ACCOUNTS 2002 68 ANNUAL ACCOUNTS 2002 downs to SEK –15. downs toSEK –143millionandaccumulatedwrite- depreciation amountedtoSEK million.Accumulated 339 under OperatingleasesamountedtoSEK based onthefixedincomepart. for lease contracts and rental contractsaredistributedasfollows: for leasecontractsandrental Future paymentcommitmentswithintheGrouponDecember31,2002 delivered. expenses,andavariablepartbasedonthequantity part tocovercapital customers. Incomefromcustomersbreaksdownintotwoparts:afixed Groupcompaniesownandoperateenergyfacilitiesonbehalfof Certain L SE SE T To 200 200 200 2005 200 2003 Residual valueaccor W Accumulated depreciationaccordingtoplan Acquisition value Mac fixedassetcomprises: a tangible Equipment leasedbytheGroupthroughfinanceleasesandreportedas L Note 33 To Less: Financialincome 200 200 200 2005 200 2003 Future leasepaymentsforthistypeofleasingaredistributedasfollows: easing income easing expenses he year’sleasingexpensesinrespectofGroupassetsamountedto rite-downs t t K 7million. K 35 a a On December31,2002,theacquisitionvalueofassetsreported leasingprinciples, Facilities areclassifiedinaccordancewithstandard 7 7 6 8 andbeyond 4 6 4 8 andbeyond hinery/ l l 0 million.F Equipment – Leasing or theparentcompany ding toplan Finance leases 28 10 529 3 1 7 8 4 5 9 7 6 Group , thecorrespondingfigurewas Operating Finance leases 2,5 leases 4,4 –24 4 3 329 420 28 10 13 1 5 3 3 3 65 8 9 1 6 5 7 4 6 6 0 Group Parent company 2002 316 101 506 89 Operating Operating leases leases 2001 103 1 5 6 9 6 7 7 7 12 — 3 9 0 8 0 3 — — — — 1 7 4 7 1 8 *** in Sweden,andtheremainingamountisforauditsofGermancompanies. ** these costsrelatetoauditsofPolish,FinnishandGermancompanies. * To Other Arthur Andersen KPMG PricewaterhouseCoopers Ernst & Other fees*** To Other BD KPM PricewaterhouseCoopers** Swedish NationalAuditOffice Ernst & St Not expenses, etc.,forthePolishandGermanoperations. atutory audit t t S In additiontotheparentcompany‘sauditcoststotallingS a a O (Germany) T l l E he amountsspecifiedfortheGrouprelatemainlytoinvestigation G (Germany) K 3million(4)concernstheauditofnet e Y Y 3 oung oung 4 * – R eimbur s ement o 2002 50 16 29 13 11 17 1 3 3 6 1 8 0 Group f audit 2001 w 34 20 11 12 14 o ork operations 1 2 2 3 2 6 0 1 r s , e t c. Parent company 2002 E K 5million(6), — — — — — — — 2 0 3 5 5 1 2001 — — — — — — 1 2 0 5 6 6 2 – – – that theprofitsbedistributedasfollows: 9,710,319,128.disposal ofthegeneralmeetingshareholders isthusSEK The BoardofDirectors andthePresident propose (1 A Proposed Distribution of Profits Th ccording to the consolidated balance sheet, the Group’s non-restricted equity amounts to SEK 22,248,966thousand ccording theGroup’s totheconsolidatedbalancesheet, non-restrictedequityamountsSEK 3,681,553). 9,702 SEK Ofthisamount, thousandisexpected tobetransferred torestricted reserves. The totalprofitatthe is is equivalent to a dividend of SEK 11.28is equivalenttoadividendofSEK pershare. to becarriedforwar transferr dividend totheshar Johnn ed tothestatutoryr R onn y Ber y Ekwall nhar P eter Lindell d eholder dsson eserv e Annette Br Proposed DistributionofProfits P eter Fallenius Pre Elisabet SalanderBjörklund sident andChiefExecutiveOfficer odin Rampe Feb Dag Klackenberg Lars G r Stockholm Chairman uary 20,2003 Josefsson Christer Bådholm Jan Gr S S SE E E önlund K 1 K K

8,225,3 9, ,485,000,000 7 1 0,3 K ent Ögr 1 1 S 9, 9, E 1 1 K 0 28 28 Göran Johansson en Lars Carlberg 69 ANNUAL ACCOUNTS 2002 70 ANNUAL ACCOUNTS 2002 the financial year.the financial andthat themembersofBoardDirectorsin theannualaccounts, andPresident bedischargedfrom liabilityfor company andtheGroupthatprofitofparent beadopted, company bedealtwithinaccordance withtheproposal To To A accordance withgenerallyacceptedaccountingprinciplesinSweden. A We We acted incontravention oftheSwedish CompaniesAct,theSwedish AnnualAccounts Act ortheArticlesofAssociation. any BoardmemberorthePresident.We alsoexaminedwhetherany BoardmemberorthePresident hasinany otherway actions takenandcircumstances ofthecompany inorder tobeabledeterminetheliability, ifany, tothecompany of discharge from Asabasisforouropinionconcerning liability,consolidated accounts. wedecisions, examinedsignificant of Directors andthePresident,aswell asevaluating theoverall presentation ofinformationintheannualaccountsand closures Anauditalsoincludesassessingtheaccountingprinciplesusedandtheirapplicationby intheaccounts. theBoard evidenceare onatestbasis, supportingtheamountsanddis- freeAnauditincludesexamining, ofmaterialmisstatement. that we planandperformtheaudittoobtainreasonable assurancethattheannualaccountsandconsolidated on ouraudit. Our responsibility istoexpress theconsolidatedaccountsandadministrationbased anopinionontheannualaccounts, T r We ecords andtheadministrationofBoardDirectors andthePresident ofVattenfall year ABforthefinancial 2002. hese accountsandtheadministrationofcompany are theresponsibility oftheBoardDirectors andthePresident. ct andthereby give atrue andfairview ofthecompany’s andtheGroup’spositionresults financial ofoperationsin udit Report the general meeting of theshareholders of Vattenfall AB We r We We We T believe thatourauditprovides areasonable basisforouropinionassetoutbelow. have togethercomprisingpages32-73, auditedtheannualaccountsandconsolidatedaccounts, theaccounting he annualaccountsandtheconsolidatedhave beenprepared inaccordance withthe Swedish AnnualAccounts conducted ourauditinaccordance withgenerallyacceptedauditingstandards inSweden.Those standards require ecommend tothegeneralmeetingofshareholders thattheincomestatementsandbalancesheetsofparent Authorised PublicAccountant Er nst &Y Lars T oung AB räff Feb r Stockholm uary 20,2003 Swedish N Authorised PublicAccountant Corporate identitynumber556036-2138 Filip Cassel ational AuditOffice Equity atthebeginningofyear Net profitexcludingitemsaffectingcomparability in relationtoequityatthebeginningofyear Net profitfortheyearexcludingitemsaffectingcomparability Return onequityexcludingitemsaffectingcomparability, percent Equity atthebeginningofyear Net profit of theyear Net profitfortheyearinrelationtoequityatbeginning Return onequity, percent Net s comparability Profit beforet comparability inrelationtonetsales. andminorityinterestexcludingitemsaffecting Profit beforetax profitPre-tax margin excludingitemsaffectingcomparability, percent Net s Profit beforet Profit beforet Pr Net s EB in relationtonets EB Operating margin excludingitemsaffectingcomparability, percent Net s EB EB Operating mar million). Figures fortheGroupin2002(SEK Definitions andCalculations of Key Ratios e-t IT IT inrelationtonets IT excludingitemsaffectingcomparability IT excludingitemsaffectingcomparability ax pr ales ales ales ales . ofit mar ax andminorityinterestexcludingitemsaffecting ax andminorityinterest ax andminorityinterestinrelationtonets gin, percent ales. gin, percent ales. . ales. 101,025 101,025 101,025 101,025 Audit ReportandDefinitions 13,3 12,916 3 3 9,521 9,9 9,5 9,5 7 7 ,5 ,231 12.8 1 1 13.2 9.4 9.9 8.3 9.1 6 63 8 7 7 7 8 8 6 EB EB interestPre-tax coverageratio,times Net assets EB assets. bearing liabilitiesandprovisions,interest-bearingreceivablesliquid average ofthebalancesheettot EB per cent Return onnetassetsexcludingitemsaffectingcomparability, Net assets EB receivables andliquidassets. period lessnon-interest-bearingliabilitiesandprovisions,interest-bearing EB Return onnetassets,percent Net financialitems F F F Financial expenses F F F Financial expensesexcludingitemsaffectingcomparability comparability EB relation tofinancialexpensesexcludingitemsaffectingcomparability EB comparability, times interestPre-tax coverageratioexcludingitemsaffecting Financial expenses FO plusnetfinancialitems FO plusnetfinancialitemsinrelationtoitems. FO plusfinancialexpenses FO plusfinancialexpensesinrelationtoexpenses. FO netinterest coverage,times FO interest coverage,times IT plusfinancialincome IT plusfinancialincomeinrelationtoexpenses. IT excludingitemsaffectingcomparability IT excludingitemsaffectingcomparabilityinrelationtoaweighted IT IT inrelationtoaweightedaverageofthebalancesheettot IT plusfinancialincomeexcludingitemsaffecting IT plusfinancialincomeexcludingitemsaffectingcomparabilityin als fortheperiodlessnon-interest- als forthe 12 12 23,4 13,3 20,4 12,916 15,9 16,3 6,3 6,3 6,3 3,3 7 7 1 1 ,4 ,4 . 6.1 3.7 2.5 2.6 0.1 0.5 8 8 8 92 63 82 7 7 7 7 0 9 9 6 6 6 3 6 7 71 ANNUAL ACCOUNTS 2002 72 ANNUAL ACCOUNTS 2002 Interest-bearing debtandprovisions FF F Net debtplusequityincludingminorityinterest Net debt interest inequity. investment assetsandliquidplusequityincludingminority liquid assetsinrelationtointerest-bearingdebtandprovisionsminus Interest-bearing debtandprovisionsminusinvestmentassets Net debt/netdebtplusequity, percent Equity includingminorityinterest Net debt in relationtoequityincludingminorityinterest Interest-bearing debtminusinvestmentassetsandliquid Net debt/equityratio,times B Equity includingminorityinterest tot Equity includingminorityinterestinequityrelationtothebalancesheet Equity/assets ratio,percent F FO inrelationtointerest-bearingdebtandprovisions. FO/interest-bearing debt,percent alance sheettot O al attheendofyearlessinterestarbitragetrans al lessinterestarbitragetrans actions actions. . 13 2 9 55,0 55,0 75,29 75,20 75,20 1 4,83 0,29 7 ,10 1 20.0 57 1.4 8.0 8 8 . 6 7 7 6 8 6 9 9 7 Interest-bearing debt Net financialitemsexcludingaffectingcomparability EB net financialitemsexcludingaffectingcomparability. EB comparability, times EBITDA/net financialitemsexcludingaffecting Net financialitems EB EB EBITDA/net financialitems,times Net debt FF investment assetsandliquidassets. F F Interest-bearing debtplusequityincludingminorityshare including minorityshare inequity, percent Interest-bearing debt/interest-bearing debtplusequity FO inrelationtointerest-bearingdebtandprovisionsminus FO/net debt,percent O ITDA excludingitemsaffectingcomparabilityinrelationto ITD ITD ITD A A excludingitemsaffectingcomparability A inrelationtonetfinancialitems. 14 24,4 24,855 75,20 9 1 3,3 9,829 3,3 7 4, ,10 22.7 63.2 7 0 4 7. 95 7. 7 6 7 6 8 0 4 2 * Proposeddividend. A Electricity s Investments Dividends * Other information To EB EB F F Net debt/netdebtplusequity Net debt/equityratio,times Equity/assets ratio F F Pre-t Pre-t Return onnetassetsexcludingitemsaffectingcomparability Return onnetassets Return onequityexcludingitemsaffectingcomparability Return onequity Pre-t Pre-t Operating marginexcludingitemsaffectingcomparability Operating margin K B Net assets,weightedaveragevalue Non-interest-bearing liabilitiesandprovisions Net debt Interest-bearing liabilitiesandprovisions Minority interestinequity Equity Liquid assets Balance sheetitems FF Cash flowitems Net profitfortheyear Profit beforet Financial expenses Financial income EBI EB Net s SE Six-year Review P&L items FO/net debt FO/interest-bearing debt FO netinterestcoverage,times FO interestcoverage,times verage numberofemployees ey financialratios alance sheettot t O K million al debt/tot ITD ITD ITD T ax interestcoverageratioexcludingitemsaffectingcomparability ax interestcoverageratio,times ax profitmarginexcludingitemsaffectingcomparability ax profitmargin ales A A/net financialitemsexcludingaffectingcomparability A/net financialitems,times ales, TW al debtplusequity ax andminorityinterest al h (in percentunlessotherwisespecified) , times , times 126,3 10 276 12 9 –6,3 3 24,8 4 13,3 3 7 1 17 9,9 3,0 18 1,4 4,83 4,24 9,9 5,129 9,932 1,025 5,20 5,4 7, 7 , 2002 1 1 1 1 1 63.2 22.7 20.0 12.8 13.2 , ,4 5 1 57 276 8.3 8.0 1.4 6.1 3.7 2.5 2.6 0.1 0.5 8.3 9.1 9.4 9.9 7. 7. 8 6 1 8 6 0 4 5 63 8 7 7 . 0 7 0 5 6 7 8 8 9 6 2 4 7 6 9 3 5 * 25 111,6 100, 19,0 10,3 13,14 43,4 18,25 6 23,814 3 55, 88 –4, 4,19 9,95 14 1,03 9,0 2,232 9,003 9,5 7 2001 ,45 6 4 23.6 14.8 22.7 10.3 11.8 10.8 12.8 14.4 ,7 7 7 7 9.9 0.1 6.9 8.7 1.0 6.3 3.8 2.3 2.6 8.8 9.9 9.2 7. 8 4 3 43 23 43 01 62 3 7 7 0 0 8 0 9 0 6 8 3 4 0 115,25 23,8 24,0 5 –2,53 31,6 43,311 13,123 12,165 7 35,3 4,9 6,6 4,9 5,83 5,18 0,85 1,03 2,9 7 2000 ,5 83.1 11.5 16.4 13.5 35.4 15.7 21.1 55.8 51.8 10.5 9 4.9 4.2 8.9 6.4 1.1 3.3 2.3 3.0 6.6 8.9 8.1 Six-year Review 6 8 4 9 4 85 43 95 7 7 6 0 8 8 0 9 4 4 0 6 0 7 9 6 8 18,5 3 32,2 –1, 2 2 4,8 9,8 0,3 6,6 1,5 2,53 6,224 5,515 3,3 4,29 2,4 7 7 7 7 19 ,9 8 4 ,916 ,415 19.3 15.5 43.4 15.4 22.7 42.3 19.9 19.9 , 5 75 7 6.9 6.4 6.1 0.8 4.5 3.4 3.4 9.1 9.1 8.1 7 7 7 6 6 6 6 95 63 91 42 00 75 4 7 9 .8 .9 .9 0 0 7 2 7 8 9 6 4 9 83,35 20,9 32,325 –1,9 23,43 5 2 2 4,4 2,6 9,8 4,43 1,5 4,528 2,213 6,0 6, 7 7 7 7 19 ,9 4 ,253 83.8 24.2 15.9 41.0 15.9 28.8 42.2 21.7 21.7 10.6 10.6 ,95 ,8 28 75 8.6 8.5 6.1 5.2 0.4 0.7 4.5 3.4 3.3 6.1 4 6 9 6 00 42 0 6 7 9 7 9 6 7 7 8 8 7 6 4 8 6 0 8 –2,4 5 19,0 22 35 31,15 28,45 11,16 26,311 7 2,3 3,3 4,5 3,9 1,5 5,43 8,8 4,8 7 7 7 19 ,8 4 4 11.5 11.9 29.9 19.1 18.5 13.2 13.5 35.2 43.3 25.4 25.9 ,8 7 ,3 5 8.7 5.7 0.4 0.0 5.1 0.7 4.2 3.1 3.2 5.8 9 0 6 9 9 00 61 00 61 7 7 4 7 9 8 6 2 7 7 4 9 8 8 9 0 9 9 9 7 73 ANNUAL ACCOUNTS 2002 Board of Directors

Dag Klackenberg Johnny Bernhardsson Annette Brodin Rampe Christer Bådholm Born 1948 Born 1952 Born 1962 Born 1943 Chairman of the Board since 2001. Board member since 1995. Board member since 2001. Board member since 2002. President of the Swedish Federation Employee representative, Sif. President of Senea AB. Board member of Green Cargo AB. of Trade. Board member of Handels- Board member of Peab AB Chairman of Bombardier Transpor- banken, Central Sweden Region. and Posten AB. tation Sweden AB and Chalmers Tekniska Högskola AB. Board member of Icomera AB.

Lars Carlberg Ronny Ekwall Peter Fallenius Jan Grönlund Born 1943 Born 1953 Born 1951 Born 1960 Board member since 1998. Board member since 1999. Board member since 2001. Board Board member since 2002. Employee representative, CF. Alternate since 1998. member of SJ AB and the European Alternate since 2000. Permanent Employee representative, SEKO. Institute for Japanese Studies and under-secretary at the Swedish member of the Royal Swedish Ministry of Industry, Employment Academy of Engineering (IVA). and Communications since 1999.

Göran Johansson Lars G Josefsson Peter Lindell Elisabet Salander Björklund Born 1945 Born 1950 Born 1972 Born 1958 Board member of the public utility Board member since 2001. Board member since 2002. Board member since 2002. Senior 74 1982-91 and of Vattenfall AB since President and Chief Executive Expert advisor to the Swedish Vice President. Board member of 1995, alternate 1992-94. Chairman Officer of Vattenfall AB. Chairman Ministry of Industry, Employment Clas Ohlson AB, Vägverket, Svenskt of the Municipal Executive Board of Vattenfall Europe AG, Board and Communications. Board member Trä AB and Stora Enso AB, as well as in Gothenburg. Board member of member of Böhler-Uddeholm AG, of SOS Alarm Sverige AB. of a number of subsidiaries in the SKF AB, Liseberg AB and Svenska member of IVA’s Industry Committee. Stora Enso Group. Mässan AB. Board member of ESKOM. BOARD OF DIRECTORS AND AUDITORS

Kent Ögren Lars Carlsson Stig Lindberg Per-Ove Lööv Born 1955 Born 1951 Born 1946 Born 1961 Board member since 2002. Alternate since 1991. Alternate since 1998. Alternate since 1999. Alternate since 1995. Member of Employee representative, SIF. Co-opted 1992-1998. Employee representative, SEKO. the County Administrative Board in Employee representative, Ledarna. Jokkmokk. Chairman of Jokkmokks Värmeverk AB. Member of the local Police Board, Norrbotten County.

Auditors Ernst & Young AB Filip Cassel Alternate Lars Träff Authorised Public Staffan Nyström Authorised Public Accountant Authorised Public Accountant. Swedish National Accountant Audit Office. Swedish National Audit Office C Executive Group Management o-opt Group Function HumanResources. S Ann-Charlot President andChiefExecutive Officer. Lar Group Function Strategies. Executive Vice President, L enior Vice President, ennar s GJo ed t t B o s theEx e illf f t s e Dahls alk s on ecutiv B B tröm B orn 1952 orn 1950 orn 1946 e Gr oup Management: Group Function Legal Affairs andM&A. Executive Vice President, Mat Group Function Communications. S Knut L and ChiefFinancialOfficer. First Senior Executive Vice President Mat enior Vice President, s F t s Ekman agerlund eman and Executive GroupManagement Board ofDirectors,Auditors B B B orn 1950 orn 1946 orn 1950 Other Gr Generation Nordic Countries. Executive Vice President, Alf Lindf of of S Klaus R Va B S Magnus Gr enior Executive Vice President enior Vice President, usiness Development. Va tt enfall Europe AG. tt enfall ABandPresident of oup F aus or s oth cher unction Manager B B B orn 1946 orn 1949 orn 1963 S Lar s: enior Vice President, Internal Audit. s S eger s t olpe B orn 1941 75 EXECUTIVE GROUP MANAGEMENT GLOSSARY

Availability: Actual electricity generation capability EW: Elektrocieplownie Warszawskie S.A. in relation to the maximum possible generation. FFO: Funds From Operation. CHP plant: Combined heat and power plant. Plant which supplies both electricity and district-heating. Often known Fortum: Finland’s largest power company. as a backpressure plant if linked directly to an industrial process. Green Certificates: Tradable certificates issued for renewable electricity generation. Compensatory power: Power supplied from the owners of one power plant to the owners of another plant on the GZE: Gornoslaski Zaklad Elektroenergetyczny S.A. same river pursuant to a Water Rights Court ruling. HEW: Hamburgische Electricitäts-Werke AG. Consortium power: Output from a power plant to which several parties have rights. ISDA agreement: A bilateral framework agreement in accordance with guidelines issued by the International Swap Deep repository: Underground facility for the final Dealers Association. The agreement regulates the parties’ disposal of spent nuclear fuel, see also SKB’s web site legal obligations in derivative transactions. http://www.skb.se ISO 14001: International standard for environmental Derivative: Financial instrument where the value or management systems. change in value is related to an underlying instrument. Examples of derivatives include options, futures and swaps. LAUBAG: Lausitzer Braunkohle AG. They are often used for risk management (hedging). Local network: Electricity distribution network with EBIT: Earnings Before Interest and Tax (operating profit). a voltage of 0.4–20 kV.

EBITDA: Earnings Before Interest, Taxes, Depreciation Major disruption: Major operational disruption in the and Amortisation of goodwill (operating profit before power grid system that results in many customers being depreciation). cut off from their power supply.

EDF: The largest power company in France and Europe. Nord Pool: The Nordic power exchange.

EEX: European Energy Exchange, the Leipzig power Regional network: Electricity distribution network exchange. with a voltage in Sweden of 40–130 kV.

Electrabel: The Benelux countries’ largest power company. RWE: One of Germany’s four largest power companies.

EMAS: Eco Management and Audit Scheme. European SKB: Svensk Kärnbränslehantering AB (Swedish Nuclear 76 Commission regulations for environmental management Fuel and Waste Management Co). Responsible for the and auditing. management of radioactive waste in Sweden.

GLOSSARY EnBW: One of Germany’s four largest power companies. Spot market: Short-term physical trading in electricity on an exchange. Endesa: Spain’s largest power company. Statkraft: Norway’s largest power company. Enel: Italy’s largest power company. Swap: A financial instrument involving an exchange E.ON: One of Germany’s four largest power agreement. companies and the main shareholder of Sydkraft. Thermal power: Electricity generated by a gas turbine EPD: Environmental Product Declaration. A system based or steam process in a coal-fired or nuclear power plant. on Type III declarations in ISO TR 14025 which aims at providing objective, credible and comparable information VEAG: Vereinigte Energieverke AG. on the environmental impact of products and services, see www.environdec.com/eng Volatility: A measure of the extent to which the price of a commodity has varied over a particular period. Energy Terms Energy units in practice

Capacity 1 kWh is enough to run a normal car’s heater for an hour Expressed in watts (W) or an 11-watt low-energy light bulb for almost four days. 1 kW (kilowatt) = 1,000 W 1 MW (megawatt) = 1,000 kW 1 MWh is enough to heat a small house in Sweden for a 1 GW (gigawatt) = 1,000,000 kW couple of weeks and can be generated in 20 minutes by Vattenfall’s largest wind power plant in windy conditions. Electrical energy A measure of power over time 1 GWh is enough to meet the energy needs of an average 1 kWh (kilowatt-hour) = 1 kW for one hour Swedish town with a population of 100,000 for 8 hours 1 MWh (megawatt-hour) = 1,000 kWh and can be generated in one hour by the Harsprånget hydro 1 GWh (gigawatt-hour) = 1,000,000 kWh plant or in 20 minutes by the Forsmark nuclear power plant. 1 TWh (terawatt-hour) = 1,000,000,000 kWh 1 TWh is enough to run two large newsprint machines for a Voltage year or to power all of Sweden’s railways, subways and trams 1 kV (kilovolt) = 1,000 volts (V) for 5 months and can be generated by the Ringhals nuclear power plant in 12 days.

Produced internally by: Vattenfall AB and Vattenfall Support AB Project Manager & Editor: Susanna Hjertonsson Graphic design: Tiina Kinnunen Originals: Barbro Andersson, Harriet Henningsohn, Sture Söderlund Production Manager: Siw Östgren Photos: Carl Henrik Tillberg, Hans Blomberg Photo agencies: Getty Images, Johnér Printing: EO Print, Stockholm, April 2003 vattenfall.se vattenfall.com

VATTENFALL AB (PUBL) SE-162 87 STOCKHOLM, SWEDEN TEL: +46 8 739 50 00 FAX: +46 8 37 01 70