A New Energy Landscape Annual Report 2012 including Sustainability Report Vinjett Contents Vattenfall at a glance 3 Sustainability Results 2012 4 Performance Report Financial calendar Investor Relations contacts Interview with the CEO 5–6 Vattenfall’s Sustainability Performance 24 April 2013 Annual General Meeting Klaus Aurich, Important events 2012 7–8 Report according to GRI is available at 3 May 2013 Interim report for [email protected] Goals and goal achievement 9–10 www.vattenfall.com/sustainability, along January–March Anna Viefhues, with further information on Vattenfall’s Market and price trends 11–14 23 July 2013 Interim report for [email protected] sustainability work. Strategy for changed market conditions 15–18 January–June Annika Winlund, The path to sustainable 29 October 2013 Interim report for [email protected] energy production 19–22 January–September Telephone +46-8-739 50 00 Generation operating segment 23–27 4 February 2014 Year-end report 2013 Distribution and Sales A New Energy Landscape operating segment 28–31 Sustainability Performance Corporate Governance Report 32–39 Report 2012 according to GRI Board of Directors 40–41 Executive Group Management 42–43 AGM proposal 44 Risks and risk management 45–50 Consolidated accounts, including comments 51–59 Notes to the consolidated accounts 60–97 Parent Company accounts 98–101 Notes to the Parent Company accounts 101–110 Audit Report 111 Combined Assurance Report 112 Quarterly overview 113–114 Several-year overview 115–116 Definitions and calculations of key ratios 117–118 Facts about Vattenfall’s markets 120–122 Forecasts and forward-looking statements GRI Index 123–124 This document contains forward-looking statements ucts. The outcome may vary significantly compared that are based on Vattenfall’s current expectations. with what is presented in the forward-looking state- The Board of Directors and President of Vattenfall Even if Vattenfall’s management believes that these ments, depending on, among other things, changed AB (publ), Swedish corporate identity number expectations are reasonable, no guarantee can be conditions regarding the economy, markets and Cover photo made that these expectations will prove to be cor- competition, legal requirements, and other political 556036–2138, herewith submit the annual report Construction of Vattenfall’s Ormonde offshore wind rect. The forward-looking statements herein pertain actions and variations in exchange rates, as well as and consolidated accounts for 2012, encompass- farm in the UK . to risks and uncertainties that could have a material other factors referred to in the administration report. ing pages 4, 7-8 and 19-110, which have been impact on future earnings. The statements are based translated from the Swedish original. The admin- on certain assumptions, including such that pertain to This English version of Vattenfall’s Annual Report is a Production: Vattenfall AB and Intellecta Corporate AB. istration report is presented on pages 4, 7–8 and financial conditions in general in the company’s mar- translation of the Swedish original, which is the binding Photos: Vattenfall AB; Lars Thornblad. 19–50. kets and the level of demand for the company’s prod- version and shall govern in the event of any discrepancies. Copyright 2012, Vattenfall AB, Solna. 2 Annual Report 2012 including Sustainability Report Vattenfall at a glance Vattenfall is one of Europe’s largest generators of elec- in sales. Vattenfall also conducts energy trading. The tricity and the largest producer of heat. Vattenfall’s main Group has approximately 33,000 employees. The Parent products are electricity, heat and gas. In electricity and Company, Vattenfall AB, is 100%-owned by the Swedish heat, Vattenfall works in all parts of the value chain: pro- state. In 2012 operations were conducted in the Nordic duction, distribution and sales. In gas, Vattenfall is active countries, Germany, the Netherlands, France and the UK. Vattenfall’s markets Electricity generation 2012, % For further information about Vattenfall, such as a Fossil-based power 46 country breakdown of installed capacity, produced electricity and heat, the number of customers and Nuclear power 27 CO emissions, see pages 120–122. 2 Hydro power 24 Wind power 2 Electricity generation, TWh 88.8 Biomass, waste 1 Sales of electricity, TWh 42.1 Sales of electricity, number of customers 947,000 Sweden Sales of heat, TWh 4.1 Number of employees per Electricity network, transited volume, TWh 73.4 country (FTE) Electricity network, number of customers 927,000 Germany 17,729 Sweden 8,930 Netherlands 5,117 Denmark 677 UK 161 Other 180 CO emissions 2 Electricity generation, TWh 68.3 Million tonnes Sales of electricity, TWh 36.6 100 94 Sales of electricity, number of customers 2,788,000 89 Electricity generation, TWh 13.3 Sales of heat, TWh 16.1 85 Germany Sales of electricity, TWh 17.5 Electricity network, transited volume, TWh 26.5 75 Sales of electricity, number of customers 2,147,000 Electricity network, number of customers 3,401,000 Sales of heat, TWh 4.3 Sales of gas, TWh 51.1 50 Netherlands Sales of gas, number of customers 1,854,700 25 0 10 11 12 Corresponding to Vattenfall’s share of ownership in the plants (electricity and heat). 3 Annual Report 2012 including Sustainability Report Results 2012 • Net sales for 2012 decreased by 7.6% to SEK 167,313 Key data million (181,040). For comparable units, i.e., excluding 2012 2011 Change, % 2012, MEUR2 2011, MEUR2 divested operations in Belgium, Finland and Poland, sales Net sales, SEK million 167,313 181,040 -7.6 19,496 21,095 increased by 2%. Operating profit before depreciation and amortisation (EBITDA), SEK million 54,488 54,538 -0.1 6,349 6,355 1 • The underlying operating profit decreased by 9.9% to Operating profit (EBIT), SEK million 26,175 23,209 12.8 3,050 2,704 SEK 27,747 million (30,793). The underlying operating Underlying operating profit1, SEK million 27,747 30,793 -9.9 3,233 3,588 profit for comparable units decreased by 1.6%, to Profit before tax, SEK million 18,301 14,298 28.0 2,132 1,666 SEK 27,693 million (28,148). Profit for the year 17,224 10,416 65.4 2,007 1,214 Funds from operations (FFO), SEK million 34,419 38,256 -10.0 4,011 4,458 • Reported operating profit rose 12.8% to SEK 26,175 mil- Balance sheet total, SEK million 528,364 524,558 0.7 61,567 61,123 lion (23,209). Net debt, SEK million 111,907 141,089 -20.7 13,040 16,440 • Profit for the year (after tax) rose 65.4% to SEK 17,224 Adjusted net debt, SEK million 153,943 176,031 -12.5 17,938 20,512 million (10,416), of which the reduced corporate income Return on capital employed, % 8.4 7.3 — tax rate in Sweden contributed SEK 3.5 billion. Return on equity, % 12.1 8.6 — Debt/equity ratio, net, % 72.1 101.6 — • Electricity generation increased by 7.3% in 2012, to Funds from operations (FFO)/adjusted net debt, % 22.4 21.7 — 178.9 TWh (166.7). 2012 was record year for Vattenfall’s Electricity generation, TWh 178.9 166.7 7.3 Swedish electricity generation. Sales of electricity, TWh 202.3 203.0 -0.3 Sales of heat, TWh 30.3 41.0 -26.1 1) Operating profit excluding items affecting comparability. Sales of gas, TWh 52.4 53.8 -2.6 2) Exchange rate 8.582 SEK/EUR. Values in EUR are shown only to facilitate comparisons Number of employees, full-year equivalents 32,794 34,685 -5.5 between SEK and EUR. CO emissions, million tonnes 85.0 88.6 -4.5 2 Sales and underlying operating profit Profit for the year and return Net debt FFO/adjusted net debt Adjusted net debt/EBITDA SEK million SEK million SEK million % SEK million % % Times 240,000 60,000 20,000 20 240,000 200 24 4 180,000 45,000 15,000 15 180,000 150 18 3 120,000 30,000 10,000 10 120,000 100 12 2 60,000 15,000 5,000 5 60,000 50 6 1 0 0 0 0 0 0 0 0 08 09 10 11 12 08 09 10 11 12 10 11 12 10 11 12 10 11 12 Sales (scale on left) Profit for the year attributable to Net debt See page 55 for calculation of Underlying operating profit (scale owners of the Parent Company Total interest-bearing liabilities adjusted net debt. on right) Return on equity, % Debt/equity ratio, % Return on capital employed, % Debt/equity ratio, net, % 4 Annual Report 2012 including Sustainability Report ” This is the new normal” Interview with Øystein Løseth, President and CEO How would you summarise the past year? eration posted a record year in 2012. Owing to well-filled employees, suppliers, customers and society at large. It is 2012 was a tough year for the entire European energy sector, reservoirs and high availability at our power plants, we gen- therefore gratifying to note that our LTIF (Lost Time Injury and the industry is facing considerable challenges. Demand erated more electricity from hydro power during the year Frequency) ratio decreased significantly in 2012, from 3.3 stayed low as a result of the economic recession. At the same than ever before. to 2.3. High safety at our plants also contributes to higher time, new capacity is being added, especially in renewable availability, especially in the nuclear power operations. energy generation, which has led to low electricity prices. Low What have you done to address the increasingly margins on electricity generation based on natural gas have tougher conditions in the market? How are you proceeding with put heavy pressure on the profitability of our gas-fired power Above all, we have continued to successfully execute our strat- implementation of the strategy? plants, which a couple of years ago were considered to be a egy and have taken a number of measures to boost profitability.