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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