Bloomberg News

Vattenfall Writes Down Dutch Production After Misreading Market

February 12, 2013

Vattenfall AB, the Nordic region’s biggest utility, misread European energy markets and prices when it made an unprofitable acquisition of fossil fuel-fired energy production assets at Dutch utility Nuon Energy NV.

The state-owned company wrote down by 17 percent the value of Nuon’s generating assets, for which it paid 89 billion Swedish kronor ($14 billion) in 2009. That’s because energy demand and carbon emission prices fell short of Vattenfall’s expectations since then, Chief Executive Oeystein Loeseth said today in a presentation of the company’s 2012 earnings.

“We paid too much for Nuon Energy in 2009, since the market situation has changed since then,” Loeseth said on a conference call. “The market has developed totally differently than we thought, with low carbon prices and energy demand.”

Falling emission permit prices since 2009 have made power production cheaper for European producers that burn coal, displacing gas plants in the region’s generation mix. European Union carbon allowances for December 2012 fell more than 65 percent since May 2009, when they traded at more than 18 euros ($24) a metric ton, to their December expiration of 6.47 euros.

Amsterdam-based Nuon posted a 2012 loss of 716 million euros after writing down 1.07 billion euros in assets, mainly gas-fired production, according to a statement posted today on the Vattenfall unit’s website.

Generation Profits

Profits at coal-fired plants producing power for next-month delivery on the Dutch market have risen 5.8 percent since Oct. 1, 2009, to 16.82 euros a megawatt-hour today, based on clean- dark spread data compiled by Bloomberg, a measure of power-plant profitability that reflects coal, power and emission-permit prices. Gas-fired generating profits have plunged to minus 6.46 euros a megawatt-hour from 18.23 euros in the same period.

Vattenfall is the second Nordic utility to have devalued gas-fired production assets last year. Dong Energy A/S of Denmark wrote down about 27 percent of its 5.2 billion Danish kroner ($929 million) investment in the 824-megawatt Severn facility in Wales, also purchased in 2009, according to a government auditor’s report published in January. The national auditor criticized the state-owned company’s failure to “assess price and market risks in greater detail” before making the purchase.

Vattenfall CEO Loeseth blamed subdued economic activity and slumping power prices triggered by additions of renewable energy capacity for the unforeseen market developments.

“Previous market forecasts have been overturned, and what used to be considered normal no longer applies,” he said today. “2012 was a tough year for the entire European energy sector, and the industry is facing substantial challenges. We see continued difficult market conditions ahead.”

To contact the reporter on this story: Torsten Fagerholm in Helsinki at

To contact the editor responsible for this story: Lars Paulsson at

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