Vattenfall´s six-month interim report 2004 January - July

Vattenfall´s six-month interim report 2004 January - July * Net sales decreased by 2.4 per cent to SEK 57,071 million (58,498) * Operating profit increased by 17.7 per cent to SEK 11,593 million (9,848) * Net profit after tax increased by 21.1 per cent to SEK 6,871 million (5,676) * Operating profit for the second quarter increased by 40.7 per cent to SEK 3,929 million (2,793) CEOs comments Vattenfall continues its positive development The trend from the first quarter continues, with Vattenfall maintaining its positive development. We can be satisfied that both the first and second quarters are stronger this year than in 2003, despite the fact that Nordic electricity prices were higher at the beginning of 2003. Vattenfall's strength is underlined by our business strategy, which concentrates on European growth. Integration of the German companies continues to allow considerable streamlining. To consolidate our process further, we are investing heavily in our existing power plants, networks and improvement of customer service. During the first half-year, we invested almost SEK 3 billion in our installations. Net sales decreased somewhat, due to lower electricity prices in the Nordic countries in the first quarter. However, net sales increased in the second quarter, as a result of higher sales volumes in the Nordic countries and the fact that German electricity prices were on average higher during the second quarter this year compared with the same period in 2003. Operating profit increased despite lower electricity prices in the Nordic countries due to the fact that much of the electricity generation was sold forward at a higher price than during the same period in 2003, but also as a result of increased production, particularly in nuclear power. In the operating profit for the second quarter, items affecting comparability amounted to SEK 360 million, net. The majority of this amount comes from additional proceeds of SEK 448 million from the sale of our stake in Danish NESA in 2002. During the second quarter, a provision of SEK 100 million was also made for winding up the Group's investment in Härjedalens Mineral AB. Excluding items affecting comparability, operating profit increased by almost 20 per cent in the second quarter compared with the same period last year. Our cash flow continues to be strong and net debt is gradually decreasing. The first quarter saw net debt decrease by approx. SEK 4 billion and in the second quarter it was down by approx. SEK 1.4 billion to SEK 61.5 billion (66.8). Return on net assets was 13.2 per cent on a rolling 12-month basis and return on equity was 20.1 per cent; in both cases excluding items affecting comparability. Market development During the first half-year, electricity prices remained stable in the Nordic countries. The average price on the Nordic energy exchange Nord Pool's spot market was SEK 260 per MWh, which was 30 per cent lower than for the first six months of 2003. In the second quarter, average Nordic electricity prices were SEK 260 per MWh, which was only 1 per cent lower than for the second quarter of 2003, when the average price was SEK 263 per MWh. Total electricity consumption in the Nordic countries during the first half of 2004 amounted to 200 TWh (196). Despite the latter part of the period being marked by heavy rainfall, the deficit in the so-called hydrological balance for the Nordic countries at the end of June was 22 TWh, compared with a deficit of 23 TWh in June 2003. This is largely attributable to the fact that the precipitation was in the southern areas and as such did not contribute appreciably in filling the reservoirs of nothern Sweden. However, by July 21, the position had strengthened, with the deficit standing at 15 TWh. In Germany, the average electricity price on EEX, the European Energy Exchange rose marginally, and amounted to EUR 27.50 per MWh (27.28), which was approx. 1 per cent higher than the first six months the previous year. The average price in the second quarter was EUR 26.48 per MWh, compared with EUR 24.62 per MWh for the second quarter in 2003, an increase of 7 per cent. Electricity consumption in Germany up to May was largely unchanged compared with 2003 (Statistics for June not yet available). Brand-building activities In Sweden the "Ask Vattenfall" dialogue has been launched. In an advertising campaign, the public have been encouraged to put questions to Vattenfall by visiting our web site. This direct contact has enabled us to listen to views and attitudes, and engage in open dialogue, with our answers reaching people in every corner of Sweden The high level of commitment and the questions that have come in have given us clear pointers towards future orientation and what the Swedish people need to know about our activities. In a broad system study, Vattenfall plans to examine the formulation of a future electricity system with greater flexibility and customisation. For this study, Vattenfall will take advantage of its broad base of resources, using experts in Sweden, Germany, Finland and Poland. Major changes ahead on the European energy market The markets in Europe continue their development and major changes lie ahead of us. The entry of Poland and nine other countries into the EU on May 1 was significant to the Vattenfall Group. Poland's membership means that the energy market there will be opened up in accordance with the same rules that apply in the EU. Our current position, with all our domestic markets in the EU, is a sound basis for continued growth. In Sweden, a network utility model is being introduced, designed by the Network regulator for the purpose of comparing the pricing of network services. At the same time, politicians and the power industry are still locked in discussions about stable conditions for the energy sector and a long-term plan for phasing out nuclear power, using a model similar to the German one. It is important for Vattenfall to lie at the forefront of development of different technological methods of electricity generation. On June 22, the Olsvenne 2 wind power plant began commercial operation in Näsudden in Gotland. With an output of 3 MW, Olsvenne 2 is Sweden's largest wind power plant and a step forward in terms of performance and increased electricity generation. In Germany, the new Network regulator will soon be introduced and Denmark is undergoing changes in regulations which will see new conditions for a more open market and restructuring of the industry. In the Netherlands too, they are about to see major changes, with network operations due to be separated from integrated companies, and in Norway views on ownership in Norwegian power production are about to change. All these changes are important and will enhance our potential for realising our vision to be "a leading European energy company". Vattenfall will play an active role in the continued restructuring of Europe's energy market. From a long-term perspective, growth and restructuring provide optimum conditions for increased value creation and maintained profitability. In this climate, we can nurture our aspiration to be number one for the customer, the environment and the economy, and to be an attractive, dependable employe Lars G Josefsson President and Chief Executive Officer You will find a summary of Vattenfall's financial performance and cash flow in the enclosed pdf. Download the complete report from Vattenfall's website www.vattenfall.com. The Results will be published on http://www.vattenfall.com at 09:00 (CET). The same day at 10:00 (CET) Lars G Josefsson, CEO and Matts Ekman, CFO will host a conference call presenting the Results, followed by a Question & Answer session. ................................................................................................................................................................ Issued by Vattenfall's Press Office, telephone +46 8 739 50 10. For further information, please contact: Klaus Aurich, Investor Relations, telephone +46 8 739 65 14, mobile +46 70 539 65 14. Martin May, Press Officer, telephone +46 8 739 52 70, mobile +46 70 539 52 70. Vattenfall's vision is to be a leading European energy company. Vattenfall's main products are electricity and heat. Today, Vattenfall generates power and supplies energy to several million customers in the Nordic region and northern Europe. The largest electricity customers are industrial plants and energy companies. For more information, see www.vattenfall.com . Under NEWS & COMMENTS you will find media service, including Press Releases and Key Events. ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2004/07/29/20040728BIT20750/wkr0010.pdf http://www.waymaker.net/bitonline/2004/07/29/20040728BIT20750/wkr0012.pdf Complete six-month interim report