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 31 December 2018
| EUR/MWh |
2019 |
2020 |
2021 |
| |
29 |
31 |
33 |
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 |
+/- 2,184 |
+/- 2,006 |
+/- 1,962 |
19%-23% |
| Coal |
-/+ 403 |
-/+ 355 |
-/+ 293 |
21%-25% |
| Gas |
-/+ 964 |
-/+ 841 |
-/+ 790 |
16%-21% |
| CO2 |
-/+ 513 |
-/+ 575 |
-/+ 623 |
44%-48% |
Vattenfall's estimated Nordic hedge ratio (%) as per 31 December 2018
| Item title |
Nordic hedge ratio |
| 2019 |
69 |
| 2020 |
37 |
| 2021 |
18 |
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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