Annual Report 2002
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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 Vattenfall Opens Up Opportunities in Europe expansion has been accompanied by a substantial improve- ment in profit. We have enhanced our earnings through deliberate measures throughout our organisation, gradually focusing on our core business in power and heat. The un- bundling of our business into the individual stages of the value chain has improved efficiency and cut costs, with each stage operating on market terms. Today, we are wiser in our approach - and we have more specific demands on perform- ance. The heightened market competition and our focus on core business have created a positive driving force for change within our organisation. The substantial improvement in profit for the year is largely due to favourable developments in Germany, to a turnaround in the units in Market Nordic Countries and the closure of non-core IT-based business activities. Vattenfall’s financial performance is always to some extent determined by the weather. As a result of the extremely low precipitation in the second half of 2002, electricity prices on the Nordic market rose sharply towards the end of the year. As a whole, we estimate that this has made a positive contribution to profit of about five per cent. The transformation that Vattenfall has undergone is part of the restructuring of the entire electricity industry which is currently underway in Europe. Vattenfall is the only remain- ing Swedish power company of any significance. The rest of the Swedish power industry has either been incorporated into major international groups or comprises smaller, mainly Vattenfall has now fully ventured out into Europe. When municipality-owned companies. Vattenfall became a limited liability company ten years ago, There are three drivers of change on the European power, all of its operations, with one or two exceptions, were in heat and gas markets: deregulation, integration and owner- 2 Sweden. Today, our activities in Sweden are part of an essen- ship diversification. An important factor in this process of tially larger business. Over the past few years, Vattenfall has transformation is the creation of an internal energy market grown considerably through acquisitions in Germany and in the European Union. The first step (the community direc- Poland. At the same time, we have divested our commit- tive of 1996) has paved the way; the step that the industry is ments outside Europe. Today, our core business is concen- about to take will lead to fully open and deregulated markets trated to Finland, Germany, Poland and Sweden. from 2007. This means increasing market integration and COMMENTS BY THE CEO The annual accounts for 2002 clearly show that our the convergence of the electricity and gas sectors. • The Power of People The force driving Vattenfall’s business is the Group’s some 34,000 employees in Northern Europe. There are five themes underpinning Vattenfall’s work in human resources: •Culture and values •Ergonomics and •Leadership and management occupational safety development •Reward systems •Competence development In 2002, we concentrated on developing our culture and values throughout the Vattenfall organisation in order to strengthen the shared values which are at the heart of our international Group. Vattenfall’s “Adding Value through Diversity” project specifically focuses on female employees. 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.