Tough times ahead for Swedish energy giant
Swedish energy giant Vattenfall could face asset write-downs of around eight billion kronor ($942m) as electricity prices are set to fall across the globe, the company has told specialist magazine Dagens Industri.
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If future energy prices fall by five percent, while the cost of fuel and carbon dioxide emission rights remain static, the value of fossil based assets in the Netherlands and Germany would drop by 12-34 percent, according to Dagens Industri.
Since the Vattenfall Group bought energy giant Nuon in 2009, a deal which has been hotly debated in Sweden, the Dutch firm's assets have been written down by over 52 billion kronor. The final payment instalment is due on July 1st this year, when Vattenfall is obliged to buy the remaining 21 percent for a previously agreed sum of 19.2 billion kronor.
And Vattenfall CEO Magnus Hall paints a bleak picture of the future.
“The prognoses for the coming year indicate that the price of electricity, and by that a large part of the company's profitability, will remain at historically low levels,” he wrote in Vattenfall's annual report, which became public on Wednesday.
Magnus Hall, who Dagens Industri writes has earned 1.1 million kronor a month so far according to the annual report, has previously said that further write-downs cannot be ruled out.
Electricity prices fell last year by an average of 22 percent in the Nordic countries and by 13 percent in Germany.
State-owned Vattenfall, a major provider of electricity in northern Europe and Britain, reported in February that it had been able to curb some of its losses in 2014.
The company reported a net loss of 8.18 billion kronor last year, which was an improvement on the 13.67 billion loss the year before.
"2014 was an eventful and challenging year that was characterized by weak demand, a surplus of production capacity and falling electricity prices," Hall said in a statement at the time.
The main explanation for the year's negative result was asset write-down charges worth 23.8 billion kronor, said Hall.
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If future energy prices fall by five percent, while the cost of fuel and carbon dioxide emission rights remain static, the value of fossil based assets in the Netherlands and Germany would drop by 12-34 percent, according to Dagens Industri.
Since the Vattenfall Group bought energy giant Nuon in 2009, a deal which has been hotly debated in Sweden, the Dutch firm's assets have been written down by over 52 billion kronor. The final payment instalment is due on July 1st this year, when Vattenfall is obliged to buy the remaining 21 percent for a previously agreed sum of 19.2 billion kronor.
And Vattenfall CEO Magnus Hall paints a bleak picture of the future.
“The prognoses for the coming year indicate that the price of electricity, and by that a large part of the company's profitability, will remain at historically low levels,” he wrote in Vattenfall's annual report, which became public on Wednesday.
Magnus Hall, who Dagens Industri writes has earned 1.1 million kronor a month so far according to the annual report, has previously said that further write-downs cannot be ruled out.
Electricity prices fell last year by an average of 22 percent in the Nordic countries and by 13 percent in Germany.
State-owned Vattenfall, a major provider of electricity in northern Europe and Britain, reported in February that it had been able to curb some of its losses in 2014.
The company reported a net loss of 8.18 billion kronor last year, which was an improvement on the 13.67 billion loss the year before.
"2014 was an eventful and challenging year that was characterized by weak demand, a surplus of production capacity and falling electricity prices," Hall said in a statement at the time.
The main explanation for the year's negative result was asset write-down charges worth 23.8 billion kronor, said Hall.
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