23.07.2013

Market will not recover in foreseeable future – Vattenfall

 


(Montel) The European energy market “will not recover in the foreseeable future”, Swedish utility Vattenfall said on Tuesday amid a massive EUR 3.5bn write-down.In the light of “increasingly gloomy market prospects”, the company added it would split operations into Nordic and continental European segments as of 1 January.

The write-downs carried out in the second quarter mainly concern gas and hard coal-fired power plants in the Netherlands: SEK 14.5bn (EUR 1.7bn), hard coal-fired power plants in Germany: SEK 4.1bn, combined heat and power plants in the Nordic region: SEK 2.5bn, goodwill originating mainly from trading operations: SEK 6.8bn, other assets: SEK 1.8bn.

“Vattenfall is changing its organisational structure to achieve greater financial and strategic flexibility. The background to the changes is the increased uncertainty about the development of the single energy market in Europe, especially in continental Europe,” it said in a statement following the release of second-quarter results.

Operating losses
Operating profit amounted to a loss of SEK -25.9bn in the second quarter, while seeing a loss of SEK -15.1bn for the first half of the year, though underlying operating profit for the January-June period rose 3.3% year on year to SEK 16.9bn.

“The new structure will allow the regions to focus on their respective core issues and will open up opportunities for risk-sharing in Vattenfall’s continental operations over time,” said Vattenfall’s chairman Lars Nordström and CEO Øystein Løseth in a joint statement.

“Cost reductions and ongoing streamlining measures are being accelerated. The cost cuts planned for 2014 have been increased from SEK 1.5 to 2.5bn. A new savings target of SEK 2bn has been set for 2015. We have introduced a recruitment stop as well as major restrictions in the use of external consultants,” the company said.

“Investments for the upcoming five years have been reduced to SEK 105bn, compared to SEK 123bn for the period 2013-2017.”

Utility companies have been suffering throughout Europe, with low power prices and increasing renewables growth hitting the profitability of conventional generation. Germany’s Eon, for instance, decided at the start of the year to close 11 plants in Europe, including several in Germany, while RWE is examining the economic viability of several plants and municipal utilities are also reporting losses.

(EUR 1 = SEK 8.5)

Robin Newbold

robin@montel.no
09:59, Tuesday, 23 July 2013




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