Vattenfall chair goes over CEO pay scandal

Lars Westerberg, the chair of the board of Swedish state-owned energy firm Vattenfall, is to be replaced after revelations concerning extra remuneration to the outgoing CEO.

Vattenfall chair goes over CEO pay scandal
Lars Westerberg together with former CEO Lars G.Josefsson

“There were a few of us in the wrong. But I am the chairperson, so I bear the responsibility. The mistake is in contravention of government guidelines,” Lars Westerberg said on Friday in response to the announcement of his departure.

Westerberg said that Friday’s developments and his resignation from the board had been on the cards for some time.

“This is nothing sudden. We have been discussing for several weeks how we should do and have now come to the conclusion it is better that I resign today, and that Vattenfall appoints a new chair,” he said.

Lars Gejrot will also leave his positions as head of human resources and a member of the group management. Kerstin Ahlfont will replace him as HR director and join the group management, according to the Vattenfall statement.

The background to the resignations of Gejrot and Westerberg is the agreement reached with the outgoing CEO Lars G. Josefsson, concerning a one-off compensation payment.

The secret agreement to pay Josefsson a year of his two year notice period in the form of a regular salary was brokered by Westerberg and Gejrot and has now been found to be in breach of government guidelines on remuneration.

The agreement was signed after the choice of new CEO Øystein Løseth as replacement for Westerberg in November 2009. This was a year before Josefsson’s contract expired on his sixtieth birthday and thus it was decided not to give him his notice and instead the pay off was worked out, without the approval of the board.

Vattenfall stated on Friday that it has reached an agreement with Josefsson for the repayment of the 12 million kronor ($1.9 million) that he had erroneously received by the end of March.

Øystein Løseth told journalists on Friday that he had no knowledge of the contract and that it was only discovered by the auditors when they performed a review.

Løseth then asked for an independent law firm to conduct a review of the process leading up to the agreement with Josefsson and underlined that the firm has begun work to tighten up its procedures.

Vattenfall’s owner, the Swedish government, decided to act to end Westerberg’s three year tenure as chairperson of the firm.

“It is the government’s view that this is completely unacceptable, and therefore we have chosen not to renew Lars Westerberg’s mandate as chairman of Vattenfall,” financial markets minister Peter Norman told journalists.

The remainder of the Vattenfall board retained the government’s confidence, Norman confirmed.

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Swedish energy firm racks up giant losses

UPDATED: Swedish energy giant Vattenfall recorded losses amounting to nearly 29 billion kronor ($3.4 billion) on Tuesday as the company continued its battle against increasingly tough market conditions.

Swedish energy firm racks up giant losses
Vattenfall chief executive Magnus Hall on Tuesday. Photo: Fredrik Persson/TT

Hit by asset write-down charges worth 36 billion kronor, Sweden's Vattenfall reported a net loss of 28.812 billion kronor in the second quarter of the year, a huge drop from 2.3 billion kronor in the same period in 2014.

The state-owned energy firm, a major provider of electricity in northern Europe, has been struggling to improve profits for several years, suffering from weak demand and plunging electricity prices.

It attributed 17 billion kronor of the total asset write-downs to the same fall in profits which led to a shock announcement earlier this year that it planned to close Ringhals 1 and 2 in south-western Sweden.

It said at the time that the two reactors were too costly to keep in production until 2025 as previously planned.

“This is of course very negative but unfortunately reflects the reality we're living in,” said its chief executive Magnus Hall in a statement on Tuesday morning.

It also wrote down an additional 15 billion kronor on its lignite, or brown coal, assets in Germany.

Earlier this year Vattenfall announced that 1,000 workers were being let go as part of a series of bids to curb losses, including speeding up the sale of the German plants.

It reported a total turnover of 36.1 billion kronor in the second quarter of 2015 on Tuesday, down from 36.6 billion in the same period last year.

Hall said that the work to tighten the belt was continuing “to identify further reductions in costs”.

Since the Vattenfall Group bought energy giant Nuon in 2009, a deal which has been hotly debated in Sweden, the firm's assets have been written down by over 52 billion kronor. 

Many energy providers in Europe have made huge asset write-downs in the last two years because of weak demand for electricity against a background of sluggish economic activity.

They have also been caught out by the US shale energy boom, which has pushed down the price of coal for power generation, undermining the profitability of new gas-powered plants and some investment programmes.

Vattenfall employs more than 30,000 and has operations in Sweden, Finland, Denmark, Germany, the Netherlands and Britain.