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 as per 31 December 2016

EUR/MWh 2017 2018 2019
  29 27 30

 

Sensitivity analysis – Continental portfolio

Market quoted +/-10% impact on future profit before tax, SEK million1 Observed yearly volatiliy2
  2017 2018 2019  
Electricity +/-399 +/- 401 +/- 820 22% - 23%
Coal -/+11 -/+ 241 -/+ 244 31% - 32%
Gas -/+240 -/+ 412 -/+ 412 25% - 27%
CO2 -/+15 -/+ 79 -/+ 94 54% -55%

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

2) Observed yearly volatility in 2016 for daily price movements for each commodity, based on forward contracts for the period 2017-2019. Volatility normally declines the further ahead in time the contract pertains to.

Vattenfall's estimated Nordic hedge ratio (%) as per 31 December 2016

Item title Nordic hedge ratio
2017 83
2018 65
2019 36

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Last updated: 2017-03-24 09:39