Operating profit rose 4.6% to SEK29,895 million (28,583).

Operating profit for the fourth quarter fell 2.8% to SEK6,562 million (6,752).

Favourable earnings and substantially higher investments

Vattenfall reports a good operating profit for 2008. However, the 4.6% increase, to SEK29,895 million, is explained mainly by impairment charges of SEK1,850 million against earnings in 2007, compared with SEK423 million in 2008. Operating profit for 2008 also benefited from currency effects of around SEK800 million from the weaker Swedish krona. Sharply lower electricity prices during the autumn had only a limited impact on earnings thanks to Vattenfall’s ongoing hedging activities. Business Group Nordic posted strong earnings improvement, mainly attributable to the Generation business unit. Business Group Central Europe, on the other hand, noted a drop in operating profit due to the standstills of two nuclear power plants and higher costs for CO2 emission allowances.

Profit for the year is mainly explained by a nonrecurring positive tax effect of SEK3,800 million in Germany in 2007 stemming from the German government’s decision to reduce the company tax rate by around 10 %age points. Return on equity was 13.6% (17.6%), and the return on net assets was 15.1% (16.6%). The FFO cash flow interest coverage ratio after maintenance investments decreased to 4.1 (6.4). Net debt increased by SEK22,260 million to SEK66,000 million, mainly due to a substantially higher level of investments, but also to currency effects of SEK7.1 billion in the accounting as a result of the dramatic weakening of the Swedish krona. However, virtually all of Vattenfall’s borrowings in foreign currency are hedged, and the negative currency effects on loans in foreign currency are largely offset by positive changes in the value of foreign exchange derivatives. Slight decline in total electricity generation but increase in hydro and wind power

Vattenfall’s electricity generation decreased by 2.7% in 2008, to 163.1 TWh (167.6). Hydro power generation increased by 7.9% to 39.5 TWh (36.6). Nuclear power generation decreased by 9.9%, to 46.2 TWh (51.3), due to a number of outages both in Germany and Sweden. Fossil-based power decreased by 3.3% to 75.1 TWh (77.7), and wind power generation increased to 1.6 TWh (1.3). Electricity generation based on biomass and waste was virtually unchanged at 0.6 TWh. Heat production decreased by 1.7% to 35.6 TWh (36.2).

Important events during 2008

The Report includes comments on the following major events during 2008:

Acquisition of wind power in the UK

Acquisition of stake in Polish energy company

EUR1.5 billion bond issues

New Group structure

New chief financial officer

Substantially expanded investment programme

Squeeze out of minority shareholdings in Germany

Strengthening of safety routines in nuclear power

Possible sale of Vattenfall’s German high-voltage grid

World’s first pilot CCS plant, Schwarze Pumpe, inaugurated

Planning of CCS demonstration plant

Go-ahead for construction of Moorburg combined heat and power plant in Germany

Long-term electricity contracts with energy-intensive industrial companies

Vattenfall’s climate vision — to be climate-neutral by 2050

Vattenfall’s Climate Manifesto

Greater number of customers – and more satisfied

Greater market risk


Consolidated profit attributable to shareholders in the Parent Company amounted to SEK17,095 million (19,769) or SEK129.80 (150.11) per share. The Board of Directors proposes a dividend of SEK6,900 million, corresponding to SEK52.39 per share.