Poor financial performance by Vattenfall's renewables business during the third quarter (Q3) has been attributed to poor wind conditions in the UK and Sweden and to the cost of repairing the export cable and onshore infrastructure linking Thanet offshore wind farm with the UK grid.
While the energy company's group-wide net sales fell in Q3 by 12%, wind energy sales fell by 42.8%, resulting in an operating loss for the division of SEK394m (€45.7m). Despite this, Vattenfall's renewables division – which is comprised solely of wind energy assets as its hydro assets are reported separately – remains on track to outperform its 2011 sales. Over the first nine months of 2012, the division recorded SEK2.3bn in net sales, representing more than a 10% increase on the same period in 2011.
As previously reported by Windpower Offshore, the cable problems at Thanet were overcome during the second quarter, but it seems much of the cost has been attributed to Q3. "The Q3 figures and reference to Thanet Offshore Wind Farm relate to costs associated with the cable repair. The cable repair was completed in April this year and the scheme has been operating normally since then,” a Vattenfall spokesperson told Windpower Offshore.
Another factor in the poor Q3 financial performance of Vattenfall's renewables business may have been increased costs, particularly staff costs. As the company gears up to build larger offshore wind projects, staffing levels within its renewables business have naturally grown. During Q3, the division boasts 470 full-time equivalents, representing an almost 38% increase on the same period in 2011.
Wind energy accounted for the smallest proportion of Vattenfall's Q3 electricity generation, just 1.8% in Q3 and 1.9% over the first nine months of the year. Offshore wind contributed more than half of Vattenfall's wind-generated electricity, accounting for 57.1% in Q3.
The importance of offshore wind to Vattenfall's wider wind energy business is due to increase further. The company is currently building the 288MW Dan Tysk project in the German North Sea, in partnership with Stadtwerke München, and it is part of the consortium that will develop the 7.2GW East Anglia development zone in UK waters. A consent application for first phase East Anglia projects is widely expected to be submitted to regulators next month.
Writedown of gas assets
Despite the current dominance of gas-generated electricity within Vattenfall's asset portfolio, the company's chief executive Øystein Løseth used release of the Q3 results to acknowledge a structural shift taking place within continental Europe, which is seeing renewable-generated electricity increasingly take the place of gas. “We see this as the new normal,” said Løseth.
The increasing importance of renewable sources of electricity was a key factor in Vattenfall's decision to make a SEK8.5bn write down on its thermal assets, particularly the gas-fired power stations it owns in the Netherlands.
In other news, a reorganisation of Vattenfall's corporate structure taking effect 1 November will see its standalone renewables division integrated into the other business units (BUs). From now on, Vattenhall's generation division will feature four businesses, with wind energy development sitting within its sustainable energy projects BU and operational wind assets sitting within its production BU.