Nine-Month Interim Report 2001 January - September

Nine-Month Interim Report 2001 January - September Comments by the Chief Executive Officer * "Neue Kraft" Project in full swing * NordPool prices return to normal * Sales increased more than twofold * Improved profit and cash flow Vattenfall's experience of Swedish and Nordic electricity generation, distribution and sales has been lengthy and multifacetted. The company focuses on providing and developing attractive and cost-efficient energy solutions to customers. As a result of the early deregulation of the Swedish and Nordic electricity market, we have developed considerable expertise in conducting business in a deregulated energy market. At an early stage, we made investments in Finland, Poland and Germany. This long-term business strategy is now beginning to yield benefits. However, this does not mean that the gains from these major investments can be immediately harvested. Nevertheless, it is satisfactory to now see that business operations in Germany are better than we expected at the time that the acquisition was made. In the first nine months of the year, net sales increased by 112 per cent to SEK 46.8 billion. The increase in sales can be explained by the fact that HEW was consolidated from the beginning of 2001 and that HEW's subsidiaries, Veag and Laubag were consolidated from May and July 2001, respectively. Operating profit for the first nine months of the year, excluding items affecting comparability, increased by 47 per cent to SEK 5.5 billion. Profit before tax and minority interests, excluding items affecting comparability, increased by 53 per cent to SEK 3.9 billion. The cash flow before investing activities amounted to SEK 14.2 billion, compared with 3.7 in the corresponding period of 2000. Strong Position in Germany Vattenfall increased its ownership stake in Hamburgische Electricitäts- Werke AG (HEW) to 73.8 per cent. Together with the City of Hamburg, we control 98.9 per cent. The Board of Directors of HEW has now appointed Dr. Klaus Rauscher as President of the company. Dr. Rauscher is also responsible for developing "Neue Kraft" . The basis of "Neue Kraft" is HEW and its new subsidiaries VEAG and Laubag. VEAG is an electricity generator with modern thermal power plants. The company also owns the high-voltage transmission lines in all of the federal states of East Germany, apart from Berlin. Laubag extracts the lignite used by Veag's thermal power plants. Originally, the intention was to also integrate the Berlin-based company, Bewag, into "Neue Kraft". However, the other shareholder, Mirant, decided to discontinue the co-operation concerning Bewag's involvement. This does not alter the basic concept. Vattenfall owns about 45 per cent and, through a shareholder's agreement with Mirant, it has full control over the company. "Neue Kraft" will have a close co- operation with Bewag, even if the company is not consolidated into the Group. We will keep the option open for the company to join at a later stage. Improved Group Structure Vattenfall has sold its 51 per cent stake in Vattenfall Naturgas AB to the other four shareholders - Ruhrgas, Statoil, Dong and Fortum. As the energy markets in Europe are liberalized, natural gas will be available on the open market to a greater extent. The strategy of the Group is to divest activities that are not part of its core business. In November, Vattenfall Naturgas changed its name to Nova Naturgas. Vattenfall has also sold its building in Råcksta to the German real estate company, IVG. SWECO and Vattenfall have agreed to terminate their co-operation in the jointly owned company, SwedPower International AB. This means that SwedPower International has become a wholly-owned subsidiary in the Vattenfall Group, responsible for Vattenfall's international consulting activities. As a part of Vattenfall's strategy to focus on core business and to concentrate on the northern European market, the Group has sold its production assets in Bolivia, Peru and Brazil to the US company, NRG Energy, Inc. Vattenfall has also reached an agreement to sell its stake in the hydro power company, Theun Hinboun, in Laos to Statkraft. The transaction is expected to be completed in November. Vattenfall has reached an agreement to sell its wholly-owned subsidiary, Oslo Energi, to the Norwegian energy group, Hafslund ASA. The transaction is expected to be completed in December, after the general meeting of shareholders in Hafslund. At the same time, Vattenfall will become a shareholder in the new Norwegian energy group. A provision has been made in the accounts for the quarter for the capital loss that will arise from the sale of the company. Electricity Prices The electricity prices on the Nordic power exchange, NordPool, have returned to normal after a number of years of unusually high precipitation. In the light of this development, Vattenfall has raised its prices for customers in Sweden. On the Swedish electricity market, the electricity price increased in spring to about the same level as before deregulation in 1996. The increase was felt by household customers because the tax since deregulation has doubled (from 9 to 18 öre *). We look forward to the inquiry into pricing on the electricity market that has just started. The increase in price reflects the fact that the pricing mechanisms on the producer market are efficient. This means that the price can increase or decrease depending on supply and demand. However, to allow for new investment in power generation, additional price increases of 20- 25 per cent are necessary. Since the 1996 deregulation, Vattenfall has considerably reduced its production costs. The nuclear power tax that still exists distorts market competition and has a negative long-term impact on electricity supply. Increased Generation, Focus on Networks Vattenfall accounts for about 20 per cent of the now integrated Nordic electricity market. So far this year, we have generated more electricity than last year. As of July 1, Vattenfall's four wholly-owned network companies in Sweden introduced a new form of service interruption guarantee for all customers. The guarantee replaced Vattenfall's previous service guarantee and is a part of the comprehensive package of measures that was decided upon on February 1 and which entails an additional annual investment of SEK 200 million in network improvements. Financing Vattenfall's loan strategy is characterized by flexibility and access to various borrowing options. This means that we determine when to borrow and concentrate borrowing to times when market conditions are advantageous. Vattenfall has a sound financing plan which also includes acquiring additional shares in HEW from the City of Hamburg. Extensive restructuring is in progress on the European energy market which is resulting in an increase in debt in energy companies, leading to a general deterioration in credit ratings. Following Vattenfall's acquisitions in Germany, which were primarily debt-financed, Moody's and Standard & Poor's downgraded Vattenfall during the summer. After Mirant terminated the co-operation with Vattenfall, the rating agencies are once again reviewing Vattenfall's rating. We are now consolidating and integrating the German acquisitions into the Group. We anticipate a positive financial development with an improved cash flow and financial ratios. Lars G Josefsson President and Chief Executive Officer ------------------------------------------------------------ This information was brought to you by Waymaker The following files are available for download: The Full Report The Full Report

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Vattenfall’s vision is to be a leading European energy company. Vattenfall’s main products are electricity and heat. Today, Vattenfall generates electricity, produces heat and supplies energy to several million customers in the Nordic countries and northern Europe. The major customers are industrial plants, energy companies, municipalities, property companies and housing associations. For further information, please see The media service section, including a picture archive and Vattenfall’s press releases, can be found under News & Comments.