Vattenfall AB

Over the past year, there has been a large differences between the prices in Northern Sweden and the system price. This has become a structural issue in the Nordic region. Because of the price differences--combined with Vattenfall's hedges and the fact it produces the most in Northern Sweden--the company did not benefit from the high system prices. During the period, the system price was €136/MWh compared with Vattenfall's price realization of €17/MWh. We understand Vattenfall will opt to lower its hedge ratio going forward, which gradually should improve profitability from the generation division, although it could potentially become more volatile. For the rest of 2022 and 2023 Vattenfall already has hedges in place that cover 66% and 57% of its

...Thanks to Vattenfall's integrated business model, operating performance proved resilient despite exceptionally low prices for the generations segment in the first nine months of 2022. We view Vattenfall' results for the first nine months of 2022 as strong, showcasing the robustness of its integrated business model. The results were in line with our base case, despite very low achieved prices in its power generation segment, thanks to its wind segment's strong performance. We now expect full-year EBITDA of SEK50 billion-SEK55 billion. Over the nine months to September, the wind segment generated underlying EBITDA of SEK16 billion, up from SEK7 billion in the previous year. This was substantially higher than expected, largely as a result of merchant upside when prices rose above the subsidized level. This fully mitigated lower results in the power generation segment, which was depressed by low achieved prices, a mere 17MWh. Underlying EBITDA therefore declined to SEK13.5 billion from SEK17.6...

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