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 Nordic hedge prices (SE, DK, NO, FI)1 as per 30 September 2018

EUR/MWh 2018 2019 2020
  27 28 30

 

Sensitivity analysis – Continental portfolio (DE, NL, UK)

  +/- 10% price impact on future profit before tax, MSEK2
 
Market quoted 2019 2020 2021 Observed yearly volatiliy3 
Electricity +/- 2,147 +/- 1,909 +/- 1,863 19%-22%
Coal -/+ 464 -/+ 386 -/+ 325 21%-26%
Gas -/+ 1,009 -/+ 906 -/+ 815 14%-18%
CO2 -/+ 454 -/+ 514 -/+ 553 41%-47%

 

Vattenfall's estimated Nordic hedge ratio (%) as per 30 September 2018 

Item title Nordic hedge ratio
2018 75
2019 65
2020 33

1) Vattenfall has stopped its price hedging activity on the Continent as a result of changed risk exposure following the divestment of the German lignite operations.

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

3) Observed yearly volatility for daily price movements for each commodity, based on forward contracts. Volatility normally declines the further ahead in time the contracts pertain to.

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Last updated: 2018-11-08 10:46