Price hedging

Vattenfall continuously hedges its future electricity generation through sales in the forward and futures markets. Spot prices therefore have only a limited impact on Vattenfall's earnings in the near term.

Following the sale of the lignite operations, Vattenfall's portfolio and risk exposure have changed substantially. The dominant risk exposure is now related to price exposure for Nordic nuclear and hydro power base load generation. In addition, Vattenfall's continuing operations generate a higher share of regulated revenue from distribution, heat and subsidies from wind power, which reduces the total risk exposure. On the Continent Vattenfall continues to have some price exposure between electricity and used fuel. Such an exposure has a lower risk profile than in the Nordic countries. Based on this, Vattenfall has decided to decrease its price hedging activity and to focus on hedging its Nordic generation.

Average indicative Nordic1 hedge prices as per 31 December 2017

EUR/MWh 2018 2019 2020
  27 27 31

 

Sensitivity analysis – Continentalportfolio

Market quoted +/-10% price impact on future profit before tax, MSEK 3
Observed yearly volatiliy
  2018 2019 2020  
Electricity +/-749 +/- 1315 +/- 1194 18% - 19%
Coal -/+320 -/+ 350 -/+ 275 22% - 23%
Gas -/+658 -/+ 651 -/+ 577 14% - 16%
CO2 -/+130 -/+ 158 -/+ 167 47% -48%

1) Nordic: Sweden, Denmark, Norway, Finland

2) Continental: Germany, the Netherlands, the United Kingdom

3) The denotation +/- entails that a higher price affects operating profit favourably, and -/+ vice versa.

Vattenfall's estimated Nordic hedge ratio (%) as per 31 December 2017

Item title Nordic hedge ratio
2018 75
2019 56
2020 21

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Last updated: 2018-03-19 13:03