Vattenfall three-month Interim Report 2002 January - March

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2002-05-15

Vattenfall three-month Interim Report 2002

January - March

Presentations by Lars G Josefsson, CEO and Matts Ekman, CFO

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2 Highlights

• Net sales more than doubled to SEK 28.4

billion

•

Return on net assets increased to 10.7 per

cent from 9.9 per cent

•

Operating profit increased by 53 per cent to

SEK 5.1 billion

•

Acquisition of Bewag completed

•

Integration of the German companies

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2002-05-15

Structural changes in 2002

•

Germany – 44.8 per cent of Bewag purchased from Mirant

•

Poland – ownership in EW increased by 13.9 per cent to 68.9 (April)

•

Poland – two district-heating companies sold to Sydkraft

•

Norway – 5.8 per cent stake in Hafslund sold to Sydkraft (April)

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4 Vattenfall Group 2002 (including Bewag)

Sales, EUR m 3 900 7 100 11 000

Electricity generation (TWh) 90 86 176

Heat generation (TWh) 6 28 34

Employees 8 500 23 600 32 100

The Nordic Region Germany

and Poland * Total

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2002-05-15

Vattenfall’s vision

•

Vattenfall – a leading European energy company

•

Vattenfall Group •The Formation of Vattenfall Europe is a major step to fulfill Vattenfall's vision:

•VATTENFALL

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6 Vattenfall market positions

Sweden Finland Germany Poland

Electricity generation and sales 1 2 3 Top 3

Trading Top 3 on the

Nordic Market

Top 5 _n/a

Distribution 1 2 3 1

District Heating 2 small

volume

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2002-05-15

Market share in Germany

Vattenfall is the third-largest player in the German electricity market which is the largest in Europe, about 40% larger than the total Nordic energy market.

e.on RWE Vatten-fall approx 15% EnBW Other Generation Capacity (MW) e.on RWE Vatten-fall approx 15% EnBW Other Output (GWh) e.on RWE Vatten-fall approx 8% EnBW Other Customers (m) e.on RWE Vatten-fall approx 15% EnBW Other Electricity Sales (GWh)

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8 Our competitors

–

the 10 largest electricity companies in Europe

Sales Electricity (TWH) Turnover in EUR billion 1. Electricité de France 450 36 2. Enel S.p.A. 3. E.ON AG 223 211 28 902 4. RWE AG 210 633 5. Vattenfall AB1 ₁₈₀ ₁₁ 6. Tractebel 94 86 7. Endesa S.A. 84 16 8. Energie Baden-Würtemberg 9. Iberdrola S.A. 78 70 6 7 10. Fortum Corporation 51 12

1_{Including Vattenfall Europe. Sales 2001 excl. trading}

2_{Including non-energy business (Turnover E.ON Energie 22 billion)} 3_{Including non-energy business (Turnover RWE Energie 13 billion)}

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2002-05-15

Nordic Market

•

Generation

•

Sales and margins on

continued satisfactory level

•

Continued high plant availability

•

Electricity Networks

•

Further improvement of

network capacity

•

Market

•

Positive operating result

•

Heat

•

Stable operations and

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10 Electricity Spot and Futures Price Development

Nord Pool’s spot and futures price 1996 – 2007

2002 2003 2004 2001 1997 1998 1999 1996 2000 SEK/MWh 0 50 100 150 200 250 300 350 400 450 _{Spotpris - Sverige} Årsmedelvärde Terminspris - Systempris

Spot price – Sweden

Futures price – System price Average annual value

2005 2006 2007

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2002-05-15

Germany

We have seized the unique opportunity to build the third-largest energy group in

Germany by combining HEW, Bewag, VEAG and Laubag

– thereby creating a leading powerful integrated player with sufficient size and power to successfully operate and compete.

– the integration of the German

companies is progressing as planned – annual cost reductions and synergies

of 400 – 500 million Euro as from 2004.

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12 Current ownership in German and Polish operations

Vattenfall HEW Bewag Veag Laubag City of Hamburg Free float Free float GZE EW Poland 69 % 31.8% 73.8% 81.25% 1.1% 25.1% 92.5% 2.5% 10.4% 6.25% 89.6% (92.1% of votes)

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2002-05-15

Vattenfalls activities in Germany

• Generation • Trading •

Trans-mission •Distribution • Retail • Heat • Laubag • Veag • HEW • Bewag • Vattenfall Europe •Trading •Volume: 123 TWh • Trans-mission •30 Tkm • Distri-bution •60 Tkm • Retail • 112 TWh* • Heat • 16 TWh •Generation •Capacity: 17 GW •Output: 77 TWh •One integrated utility with activities in core

markets

*Incl. physical delivery of trading Source: Vattenfall Europe

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14 Vattenfall – well positioned

• Early deregulation has led to valuable experience

• Well developed energy production • High infrastructure demands • High environmental

requirements and technical innovation capability

• Teamwork between companies and union

organisations Excellent competence _{levels within}

energy, technology, environment, organisation and business areas. With continued development, Vattenfall can maintain position as one of the major players on the European electricity and heating market Vattenfall’s starting

position Vattenfall today, 2002 Future prospects

Well on our way in Europe

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2002-05-15

Vattenfall – strengths

•

Focus on core markets and businesses

•

Nordic market experience

•

Strong position in Germany

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16 Strategies

•

Focus on core markets

• Nordic, Germany and Poland

•

Focus on core businesses

• Electricity and Heat

•

Cost efficiency

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2002-05-15

Financials

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18 Consolidated Income Statement

January – March Full year

Amounts in SEK million 2002 2001 2001

Net sales 28,445 11,559 69,003

Gross profit 7,705 3,855 16,595

Operating profit (EBIT) 5,103 3,340 9,959

Operating profit, excl. IAC 5,049 2,955 8,822

Financial income 476 253 2,232

Financial expenses –1,135 –779 –4,737

Profit before taxes

and minority interests 4,444 2,814 7,454

Taxes –1,466 –844 –2,167

Minority interests in the profit for the period –661 -14 –1,097

Net profit for the period 2,317 1,984 4,190

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2002-05-15

Net sales

Quarterly values, SEK m 30 000

Quarterly values SEK m 0 5 000 10 000 15 000 20 000 25 000 Quarter 1/2000 Quarter 2/2000 Quarter 3/2000 Quarter 4/2000 Quarter 1/2001* Quarter 2/2001* Quarter 3/2001 Quarter 4/2001 Quarter 1/2002 * The Quarterly values are pro forma,

reflecting the situation if HEW had been consolidated from January 1.

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20 Operating profit (EBIT)

excl. items affecting comparability

Quarterly values, SEK m

5 000 4 000 3 500 3 000 2 500 2 000 1 500 1 000 500 0 Quarter 1/2000 Quarter 2/2000 Quarter 3/2000 Quarter 4/2000 Quarter 1/2001* Quarter 2/2001* Quarter 3/2001 Quarter 4/2001 Quarter 1/2002 Quarterly values SEK m * The Quarterly values are pro forma,

reflecting the situation if HEW had been consolidated from January 1.

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2002-05-15

Net sales – break down per profit area

0 2 000 4 000 6 000 8 000 10 000 12 000 14 000 16 000 18 000 20 000 SEK m Profit Areas Q 1, 2002 Q 2, 2001 Generation Nordic Countries Market Nordic Countries Heat Nordic Countries Electricity Networks Nordic Countries Services Germany *) Poland Other *)Q 1, 2001 = HEW proforma

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22 EBIT – break down per profit area

excl. items affecting comparability

-500 0 500 1 000 1 500 2 000 2 500 SEK m Profit Areas Q 1, 2002 Q 2, 2001 Generation Nordic Countries Market Nordic Countries Heat Nordic Countries Electricity Networks Nordic Countries Services Germany *) Poland Other *)Q 1, 2001 = HEW proforma

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Consolidated

Balance Sheet – Summary

March 31 March 31 Dec 31

Fixed assets 238,784 94,135 214,997 Current assets 53,664 22,129 44,046 Total assets 292,448 116,264 259,043 Equity 40,807 38,091 39,578 Minority interests 21,584 4,761 19,080 Provisions 98,403 13,911 90,956

Interest bearing debt 103,561 50,113 88,533

Other liabilities 28,093 9,388 20,896

Total equity, provisions and liabilities 292,448 116,264 259,043

Net debt 74,370 45,172 55,736

Net assets 133,280 87,752 110,062

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24 Consolidated Cash Flow Statement

January – March Full year

Funds from operations (FFO) 5,734 3,541 13,148

Change in working capital -3,218 –519 –2,706

Cash Flow from operating activities 2,516 3,022 10,442

Investments -21,920 -5,093 -43,443

Divestments 324 936 20,459

Cash flow from investing activities –21,596 –4,157 –22,984

Cash flow before financing activities -19,080 –1,135 –12,542

Cash flow from financing activities 18,279 -1,271 15,099

Change in net debt

Net debt at the beginning of the period -55,736 -43,311 -43,311 Net debt at the end of the period -74,370 -45,172 -55,736

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2002-05-15

Key Ratios

April 2001- March 2002 Full Year 2001

Return on net assets 10.7 9.9

Return on equity 11.9 11.8

Jan – March 2002 Jan – March 2001

EBIT-margin (excl. IAC) * 17.8 19.3

Net margin (excl IAC)* 15.4 17.6

Pre-tax interest coverage, times 4.9 4.6

FFO interest coverage (times) 6.1 5.5

FFO net interest coverage (times) 9.7 7.7

Equity-assets ratio 21.4 37.3

Net debt/equity (times) 1.2 1.1

EBITDA/ net financial items (times) 12.4 8.9

IAC = Items Affecting Comparability

* Q 1, 2001 = HEW proforma

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26 Financial targets

•

Focus on value creation and profitable growth

•

To consolidate and secure a fast integration and profit

improvement in the acquired German businesses

•

Profitability target:

•

After completion of the German integration:

- Return on Net Assets of 11% before tax

•

Interest coverage

•

Pre-tax interest coverage of 3.5 – 5 (times)

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2002-05-15

Vattenfall’s credit rating

Short-term Moody’s S&P P-2 A-2 Long-term Moody’s S&P A-3 A-(Outlook (Outlook negative) negative)

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28 Funding

•

650 million Eurobond, 7-year, launched March 20.

Coupon 6 %

•

Strong demand

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2002-05-15

Vattenfall

– A Leading European

Energy Company