Year-End Report 2020 Business highlights, January–December 2020 Financial highlights, January–December 2020 • Mild weather and high level of precipitation contributed to • Net sales decreased by 5% (-4% excluding currency effects) unusually high hydrological balance, putting pressure on to SEK 158,847 million (166,360) Nordic electricity prices • Underlying operating profit1 of SEK 25,790 million (25,095) • Permanent closure of Ringhals 1 on 31 December • Operating profit1 of SEK 15,276 million (22,141) • Important progress in offshore wind investment projects, • Profit for the period of SEK 7,716 million (14,861) including investment decision for Hollandse Kust Zuid 1–4 in • The Board of Directors proposes a dividend of SEK 4,000 the Netherlands million, corresponding to 62% of profit for the year attributable • Commissioning of Princess Ariane wind farm in the to the owner of the Parent Company Netherlands Financial highlights, October–December 2020 • Continued high demand for new connections to both regional • Net sales decreased by 5% (-2% excluding currency effects) and local electricity grids to SEK 44,032 million (46,179) • Vattenfall offers State of Berlin to buy all of the shares in • Underlying operating profit1 of SEK 7,987 million (8,207) electricity network company Stromnetz Berlin • Operating profit1 of SEK 5,246 million (2,427) • Support for closure of Moorburg power plant in Hamburg and • Profit for the period of SEK 5,727 million (488) recognition of large impairment losses for the plant • Inauguration of pilot plant for HYBRIT, a partnership project for fossil-free steel production • Anna Borg took over as new President and CEO on 1 November KEY DATA Full year Full year Oct-Dec Oct-Dec Amounts in SEK million unless indicated otherwise 2020 2019 2020 2019 Net sales 158 847 166 360 44 032 46 179 1 Operating profit before depreciation, amortisation and impairment losses (EBITDA) 46 507 42 445 12 121 8 844 1 Operating profit (EBIT) 15 276 22 141 5 246 2 427 1 Underlying operating profit 25 790 25 095 7 987 8 207 Profit for the period 7 716 14 861 5 727 488 Electricity generation, TWh 112.8 130.2 30.5 34.7 2 Sales of electricity, TWh 164.1 169.4 44.0 42.9 - of which, customer sales 118.2 119.0 31.7 29.8 Sales of heat, TWh 13.8 17.1 4.5 5.1 Sales of gas, TWh 56.8 59.2 18.9 19.7 1 3 3 Return on capital employed, % 5.8 8.5 5.8 8.5 3 3 FFO/adjusted net debt, %1 28.8 26.5 28.8 26.5 1) See Definitions and calculations of key ratios for definitions of Alternative Performance Measures. 2) Sales of electricity also include sales to Nord Pool Spot and deliveries to minority shareholders. 3) Last 12-month values. 1 VATTENFALL YEAR-END REPORT 2020 CEO’s comment Resilience and progress during a challenging year Vattenfall’s performance in 2020 shows that we are a resilient nuclear power, where we are phasing out older reactors, performed more company. Despite a year with record-low electricity prices, lower maintenance and periodically cut back on production when prices were power generation and lower sales of electricity, gas and heat, we at their lowest. At year-end we closed Ringhals 1 according to plan and are reporting a stable underlying operating profit. However, large are now focusing on long-term and safe operation of our five remaining impairment losses associated with the decreased value of coal-fired reactors. power impacted net profit. The fact that coal is being forced out by fossil-free energy is in line with Vattenfall’s strategy. In addition to lower power generation, sales of electricity, gas and heat were also lower. Despite this and the record low electricity prices, we An extreme and unusual year – for several reasons other than the report a stable underlying operating profit of SEK 25.8 billion. Several pandemic factors have contributed to Vattenfall’s resilience. We are a diversified Owing to good preparedness and outstanding efforts by our employees, company, both geographically and with respect to our different business the impact of the pandemic on Vattenfall’s business has been limited. areas. Our hedging has served us well in a declining market. And we Operation of our facilities has been stable and safe whilst deliveries to have drawn benefit from our market knowledge in the trading operations, customers have continued with a sustained high level of service. We are where we reported a strong result for the year. To deliver an underlying making progress in our investment projects and partnerships, where we result in line with last year despite low prices and the ongoing pandemic are also benefiting from increased electrification in society. The Nordic is a testament to the strength, stability and delivery capacity of Vattenfall. electricity market, which is crucial for Vattenfall, had a dramatic year for The Board of Directors proposes a dividend of SEK 4 billion. other reasons than the pandemic. Mild weather and a high level of precipitation resulted in large inflows to reservoirs. This translated to Vattenfall’s strategic direction continues historically low electricity prices and extreme differences between price I took office as CEO of Vattenfall on November 1st. I feel secure in that areas in Sweden. the strategic direction that we at Vattenfall have set – to enable fossil- free living within one generation – is right. This is not our sustainability Vattenfall impacted by costs of the energy transition strategy, it is our business strategy. And it is sustainable. It is in line with The decreased value of coal-fired power is a natural development, but it this direction that we will find and create the business models of also had a strongly negative impact on Vattenfall’s financial results in tomorrow. We now report the outcome of our strategic targets for 2020 2020. Net profit for the year was SEK 7.7 billion and was weighed down and continue to work towards the new targets for 2025. I look forward to by impairment losses mainly related to the Moorburg coal-fired power working together with my colleagues on continuing to build a company plant in Hamburg. In Germany, the Parliament passed a law calling for that is profitable, sustainable and future-oriented. the phase-out of coal-fired power by 2038 at the latest. At the end of the year our bid to handle the phase-out of Moorburg was accepted, and since year-end we are no longer generating coal-fired power from the plant. A diversified business and balanced risk-taking stabilised the Anna Borg underlying operating profit President and CEO Vattenfall’s generation volume in 2020 was considerably lower compared with the preceding year. This is due above all to the situation for Swedish FFO/adjusted net debt Profit for the period Underlying operating profit 28.8% Full year 2020 7.7 25.8 SEK billion SEK billion Full year 2020 Full year 2020 Return on capital employed 5.8% Full year 2020 2 VATTENFALL YEAR-END REPORT 2020 Group overview Customer sales development 2021 and 2022 were 8%–45% lower than during the fourth quarter of 2019. Sales of electricity, excluding sales to Nord Pool Spot and deliveries to minority shareholders, decreased by 0.8 TWh to Compared with the fourth quarter of 2019 the average spot 118.2 TWh (119.0), mainly owing to lower volumes in the price for gas was 16% higher, at EUR 14.6/MWh (12.6). The Nordic countries and Germany. Higher sales in the B2B spot price for coal was 5% higher, at USD 59.1/t (56.3). The segment in France had a countering effect. Sales of gas futures price 2021 for gas was 20% lower, at EUR 14.0/MWh decreased by 2.4 TWh to 56.8 TWh (59.2) as a result of (17.5), and the futures price 2021 for coal was 11% lower, at warmer weather in the Netherlands. Sales of heat decreased USD 60.5/t (67.7). The price of CO emission allowances was by 3.3 TWh to 13.8 TWh (17.1). 2 11% higher, at EUR 27.6/t (24.9). CUSTOMER SALES (TWh) AVERAGE INDICATIVE NORDIC HEDGE PRICES (SE, DK, FI) 140 AS PER 30 DECEMBER 2020, EUR/MWh 120 EUR/MWh 2021 2022 2023 100 28 29 26 80 60 VATTENFALL’S ESTIMATED NORDIC HEDGE RATIO (SE, 40 DK, FI) AS PER 30 DECEMBER 2020 (%) 20 80 69 0 Electricity Gas Heat 60 41 Full year 2019 Full year 2020 40 20 Generation development 20 0 Total electricity generation decreased by 17.4 TWh to 2021 2022 2023 112.8 TWh (130.2) in 2020. Lower nuclear power (-14.0 TWh) and fossil-based (-8.4 TWh) power generation was countered by higher hydro power (+4.0 TWh) and wind power (+1.1 ACHIEVED NORDIC ELECTRICITY PRICES (SE, DK, FI)1 TWh) generation. EUR/MWh Full year Full year Oct-Dec Oct-Dec ELECTRICITY GENERATION (TWh) 2020 2019 2020 2019 60 31 32 31 33 50 40 SENSITIVITY ANALYSIS – CONTINENTAL PORTFOLIO (DE, 30 NL, UK) 20 +/-10% price impact on future 10 2 profit before tax, SEK million 0 Fossil Nuclear Hydro Wind Biomass, waste Observed Market- yearly Full year 2019 Full year 2020 quoted 2021 2022 2023 volatility3 Electricity +/- 352 +/- 454 +/- 1,439 19%-27% Price development Coal -/+ 43 -/+ 22 -/+ 7 17%-21% Average Nordic electricity spot prices were 65% lower, at Gas -/+ 133 -/+ 156 -/+ 720 18%-28% EUR 13.6/MWh (38.7) during the fourth quarter of 2020 CO -/+ 60 -/+ 72 -/+ 318 48%-50% compared with the corresponding period in 2019, mainly 2 owing to a stronger hydrological balance.