Vattenfall's Q2 generation rebounds; German nuclear boosts earnings

Vattenfall's Q2 2021 power production climbed 8% year on year, boosted by strong nuclear generation and despite a dip in hydro output, the Swedish utility said July 20.

Nuclear output rose 37% on the year while hydro fell 7%, the two accounting for 75% of total Q2 generation of 25.9 TWh.

Availability of Vattenfall's Swedish reactors rose to 91% for the first six months 2021 from 79% a year ago.

Ringhals 3 is to be offline until September to reposition a fuel element, while Ringhals 1 was closed end-2020.

"The market is experiencing wide fluctuations, and electricity prices in the Nordic countries have had a strong recovery since last year's historically low levels," Vattenfall CEO Anna Borg said.

Nordic spot prices averaged Eur41.90/MWh ($49.40/MWh) in Q2, up six-fold from Q2 2020.

Higher spot prices however, were offset by lower achieved prices as output is hedged in advance, Vattenfall added.

Hedging for its 2021 outright Nordic nuclear and hydro production was unchanged from Q1 at 69% at an average Eur28/MWh.

For 2022, hedging increased from 56% to 73% with the average price unchanged at Eur28/MWh.

For 2023, hedging rose from 25% to 33% with the average price up Eur1/MWh to Eur27/MWh.

Capital recycling

Vattenfall's wind generation was down 8% on the year for the first six months despite new capacity coming online.

Installed capacity rose above 4 GW after it completed Denmark's biggest offshore wind farm (605 MW Kriegers Flak).

Vattenfall also received an irrevocable permit for its 344 MW Vesterhav project, preparing an investment decision in Q4 2021.

The near-shore project in Western Denmark is planned to start from 2023.

In the Netherlands, Vattenfall entered a partnership with BASF for its 1.5 GW Hollandse Kust Zuid project that commits the chemicals company to $1.9 billion mainly consisting of planned investment costs to bring the world's biggest offshore project online 2023 without subsidies.

"The deal means we can recycle our capital for other investments earlier than otherwise planned," the Vattenfall CEO said at a press conference.

Strategic partnerships with industry were essential for Vattenfall to drive forward the energy transition, she added.

That included its HYBRIT project with Swedish steel maker SSAB and iron ore miner LKAB where the first 100 mt of iron sponge were produced fossil-free at a pilot plant in Northern Sweden.

Planning is underway for a first industrial scale plant by 2026 with an electrolyzer plant of up to 500 MW.

In Southern Sweden, Vattenfall and fuel maker Preem were studying a 50 MW electrolyzer at the Lysekill refinery, while its 100 MW Hamburg-Moorburg electrolyzer project with Shell was shortlisted as Important Project of Common European Interest (IPCEI).

In the Netherlands, Vattenfall is mulling the sale of its 1.4 GW Magnum gas-fired power plant and plans to make an investment decision by mid-2022 on a 150 MW e-boiler in Amsterdam.

One-off items raise profit

Operating profit for power generation rose 49% to SEK10.3 billion ($1.2 billion; Eur1 billion) for the first six months, it said.

Overall, net profit for H1 2021 was at SEK23.6 billion compared to a net loss a year ago when impairments for its Hamburg-Moorburg coal plant impacted the results negatively.

Borg said one-off items such as the German nuclear settlement impacted 2021 results positively.

In total, three major events (German nuclear settlement, sale of Berlin power grid and strategic partnership with BASF on Dutch offshore wind) have a combined benefit of around $6 billion.

The Moorburg plant only commissioned in 2015 is now closed after being awarded compensation in the first German coal closure auction.

Germany's Bundestag in June approved the agreement on compensation for reactor closures, which boosts Vattenfall's Q2 result by SEK11.1 billion, it said.

Vattenfall on July 1 also completed the sale of the Berlin power distribution grid to Stromnetz Berlin for Eur2.1 billion.

It also received July 5 the final court ruling that the Berlin authorities cannot take over its district heating network.