One-off effects, higher power prices lift profit at Sweden's Vattenfall

OSLO, July 20 (Reuters) - Swedish utility Vattenfall reported a 33% rise in underlying earnings before interest and tax (EBIT) for January-June, driven by one-off effects and higher prices.

Underlying EBIT rose to 17.3 billion Swedish crowns ($1.99 billion) from 13 billion a year earlier.

First-half net profit rose to 23.6 billion crowns from a 1.6 billion crowns loss a year ago.

The company booked a one-off compensation payment for the early closure of its nuclear power plants in Germany of 11.1 billion crowns in the second quarter, Vattenfall said.

“We have also seen more electricity production and slightly more normal prices,” CEO Anna Borg told Reuters, adding heating sales were also higher.

The benchmark Nordic system power price has surged year on year after a cold, dry winter and surging fuels and carbon markets, averaging 42.05 euros per megawatt hour in the first half of 2021, compared with 10.53 euros per megawatt for the same period in 2020.

However, large differences between the system price in the Nordics and individual price areas due to higher renewables capacity in northern Sweden and grid constraints depressed the price achieved after hedges, Vattenfall said.

“I think for quite some time the market will have to live with that,” Borg told Reuters.

While grid constraints will diminish over time as capacity is build out, there will still be more volatility than there has been historically due to the increased share of renewables in the energy system, she added.

Vattenfall hedges against price volatility by selling some of its future production in the forward markets, and by the end of June it had achieved Nordic electricity prices of 30 euros per megawatt hour (MWh) for this year.

For 2022 production, it has hedged 73% of its planned output, up from 56% at the end of March, with the price unchanged at 28 euros/MWh. For 2023, it has hedged 33% at an average 33 euros/MWh, up from 25% and 26 euros/MWh at the end of the first quarter.

On the wholesale market, Nordic power for 2022 last traded at 31.85 euros per megawatt hour.

$1 = 8.6989 Swedish crowns Reporting by Nora Buli in Oslo Editing by Mark Potter