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Government backs Vattenfall management despite major losses

Published tisdag 23 juli 2013 kl 09.26
"Vattenfall are still performing strongly in the Nordic area"
(3:48 min)

State-owned power company Vattenfall says the company has lost value to the tune of almost SEK 30 billion less, and will break the company up into Nordic and continental European parts.

The Minister for Financial Markets says the government may have to ask for less profit from Vattenfall. As recently as the autumn the government dropped its expected dividends of its company's capital, from 15 to 9 percent.

But the minister says the government still has confidence in Vattenfall's management.

In a press release Vattenfall says the major loss in value is because of "market development and higher business risks." The firm has been making major purchases of European energy companies in the last decade, but now says its German and Dutch operations have gone down in value by almost SEK 20 billion.

"Like other European energy producers, Vattenfall is affected by the increasingly gloomy market prospects. The company now makes the assessment that the market will not recover in the foreseeable future," says the press release.

Credit analyst Ingvar Matsson, at Swedbank, says to news agency TT that "in a way this is not unexpected", and that the news is not a serious threat to Vattenfall's credit status.

After Vattenfall bought Nuon for SEK 89 billion in 2009, after Nuon lost 42 percent of its value.

Peter Norman said that it was Vattenfall's board that decided to make the disastrous purchase of Dutch company Nuon, after consulting with then-Enterprise Minister Maud Olofsson. He says the minister had decided, after an investigation, that the price for Nuon was reasonable.

News agency TT reports that based on documents from the Ministry of Enterprise, it looks like at the time, the government was informed of what was going on, and that the deal was being discussed in the inner cabinet and at meetings that the prime minister Fredrik Reinfeldt attended.

However, TT reports that according to Norman, the deal was not discussed during these occasions, and Olofsson did not take the question up with other party leaders in the government coalition.

The leader of the opposition Social Democrats, Stefan Löfven, is demanding a commission look into the "shipwreck".

"No board or solo minister can properly do business like this without the prime minister and finance minister being aware of it," he says.

However, Anna Kinberg Batra, the group leader of the conservative Moderates, who lead the government alliance, says a special commission is not necessary.

"There are clear and robust rules for how to run a company. Parts of this will be investigated in the Parliament's standing committee on the constitution. Against the background of this, devising a new commission is not serious," she writes to TT.

Vattenfall is now worth SEK 29.7 billion less:

Gas and hard coal-fired power plants in the Netherlands: SEK 14.5 billion

Hard coal-fired power plants in Germany: SEK 4.1 billion

Combined heat and power plants in the Nordic region: SEK 2.5 billion

Goodwill originating mainly from trading operations: SEK 6.8 billion

Other assets: SEK 1.8 billion.

Source: Vattenfall

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