Welcome to Vattenfall and this year-end report webcast. I'm Andreas Regnell, and with me in the studio I have, as always, our CEO, Anna Borg, and our CFO, Kerstin Ahlfont. During this session, we will go through the main events and the financial performance of 2022. After the initial discussion, we will, as always, open up for question, and as customary, we have the financial standard material available on the web. Let's start. Anna, 2022 was quite an extraordinary year, wasn't it? Yes, in several different aspects, I would say. First of all, to manage the day-to-day business in this very volatile market situation, but also to support our customers. We see a huge increase of inflow to our customer service, both on telephone and on the web. We are trying to support the best way we can, but we are having problems keeping up from time to time. We have seen huge price swings in the market. That has an impact on our customers, but it also has an impact on us from a liquidity perspective and when it comes to counterparty risks. We have had challenges supplying gas at competitive prices for our heating business in continental Europe. These are just a few examples. I think that energy is really on top of the agenda everywhere, also in the public debate, and I think that's good because it's needed in order to sort of get through this transition. I'm happy about that, and I'm also especially happy that nuclear is back on the agenda and is now seen as a natural part of the Swedish energy system. We are working hard to bridge the gap between supply and demand of fossil-free electricity. Yes, an exciting year. What about the financials, Kerstin? The business is doing well. The underlying operating profit grew by SEK 6 billion to SEK 37 billion. The balance sheet is strong if a further adjusted net debt is at 55%, and we have a good liquidity position. The reported net profit, however, is heavily impacted by temporary accounting effects related to our hedging business, but also negative development in the nuclear waste fund. We will get back to the financials in a bit, but let's start with a movie, covering some of the key developments during 2022. Carpe Futurum, Uppsala's new biofuel-operated heating plant was completed and inaugurated. The construction started in 2018 and has gone according to schedule, despite the extra challenges brought about by the coronavirus pandemic. Since May last year, Vattenfall conducts a strategic review of its Berlin heat business. A structured bidding process was launched in December, at the end of which Vattenfall will make a final decision on whether to sell or retain the business. Buyers must be both suited and willing to continue the decarbonization of the business and to also assume responsibility for the well-being of employees. Electricity consumption in Sweden is expected to increase rapidly over the coming decades. Therefore, Vattenfall last year initiated a feasibility study looking at the conditions for building at least two small modular reactors, SMRs, adjacent to the Ringhals Nuclear Power Plant. Vattenfall's largest onshore wind farm, Blakliden Fäbodberget, was completed and inaugurated between Åsele and Lycksele municipalities. SSAB, LKAB, and Vattenfall opened HYBRIT pilot facility for fossil-free hydrogen gas storage in Luleå. A bedrock cavern of Svartöberget where the gas is stored is about 30 meters below ground level and 100 meters from the entrance. The test period will last until 2024. The first power from Hollandse Kust Zuid wind farm, located around 18-35 kilometers off the Dutch coast, was successfully delivered to the Dutch electricity grid. The farm will be fully operational later in 2023. Hollandse Kust Zuid is jointly owned by Vattenfall, BASF, and Allianz. Vattenfall has been selected to build and operate Finland's first large offshore wind farm in a joint venture with Finnish state-owned business enterprise Metsähallitus. This project is planned to be finalized in the early 2030s. All this in only one year. Anna, is there anything else you would like to mention? Well, I think that this shows that even if the market is turbulent here and now, we are focusing on long-term solutions at the same time. I mean, new fossil-free electricity production, like we saw with the Hollandse Kust Zuid here, or lowering CO2 emissions, like we do with the Carpe Futurum project. We're also preparing to make sure we can add even more fossil-free capacity long term. For example, regarding this offshore project in Finland, wind power, but also when it comes to this pre-study of the small modular reactors at the Ringhals site. I think that one thing that is very important that was maybe not mentioned in this film is the both expansion and maintenance of the electricity grid, which is very much needed in order for the entire energy system to work. We see a clear increase in number of requests to connect to our grid, and that will continue. Maybe one additional piece of positive news is that we also got the approval and the concession to build the power lines to Oxelösund, which is needed for SSAB in order to facilitate their electric arc furnace. Yes, that's good news. Now let's get back to the numbers. Kerstin, in the beginning, you mentioned the strong underlying profit, a strong balance sheet, and good liquidity, but also large temporary negative effects, impacting the net profit for the year. Let's start in that end. Mm ... the net profit for the year. I think it was expected for it to be lower than 2021. That was an exceptional year with large positive one-off effects like the nuclear settlement, the sale of Stromnetz Berlin, and SEK 10 billion of positive fair value adjustments. This year, in the other direction, a very significant difference between underlying profit and profit for the year. Let's do some more explanations. Yeah. The answer actually lies in what you mentioned last there, the changes in fair values. By fair values, you mean the market of futures and forward contracts primarily in the electricity and gas market. How can you explain how this works? Absolutely. Vattenfall use futures and forward contracts, meaning that we enter into agreements to buy or sell electricity or gas at a specific price and at a specific time in the future, we call this normally hedging. We do it in order to lock in our margin for both the generation portfolio but also for our end customer business. If you take the example on our electricity sales business on the continent, you need to remember that on the continent, Vattenfall produce less electricity compared to what we sell to customers, meaning we need to source electricity on the wholesaler market. We do that to a certain extent by using hedges. Let's say that we have an agreement with an end customer where we sell 1 megawatt-hour at the price of EUR 52 to be delivered in 2024. Then to cover for that, we enter into a futures contract where we buy one megawatt-hour in 2024 for EUR 50. That contract has a value that gets recorded in the balance sheet. Assume then that three months later, the price for electricity in 2024, for whatever reason, and that is the price that this future contract's value is based upon, say that that price has increased. We still have the contract to buy for EUR 50, and obviously that contract has then become more valuable. That is what we in accounting language call that it has a higher fair value. That change in fair value needs to be recorded somewhere. In most cases, we utilize something that is called hedge accounting, and then that change in fair value is recorded in the balance sheet only. Hedge accounting cannot be used for all contracts. For hedge accounting, you need, for example, certain documentation or a certain credit quality on your counterpart. If that is not there, then that change in fair value ends up in the profit and loss statement and impacts your EBIT. For Vattenfall, you need to remember that we have another side of the trade. We have this contract where we have sold 1 megawatt-hour for EUR 52 in 2024. That contract is only recognized in the P&L when we deliver that electricity. This means that we have a certain imbalance in the profit and loss statement until both contracts are actually realized, because then they both come into the underlying EBIT, and there they will net themselves out. What remains over time in the underlying EBIT is your underlying margin. In this then specific example, that is then EUR 2. Of course, this is just one example, and this can go in different directions. Even if it would be sort of a negative fair value, these are the principles that apply. Important to understand, clearly. How does this connect to the market price developments in Vattenfall during 2022? Well, in order to answer that, I would like to set the scene a bit by saying a few words on the market development over the last one and a half years. I mean, even prior to Russia's invasion of Ukraine, we saw prices increasing dramatically, and that is what you see on the right-hand side of this graph. That was due to increased gas prices and due to unfavorable weather conditions. At that time, we thought that this was a dramatic market development. Now, if you look at it in the context of 2021 and 2022, you can see that those movements were, although big, relatively small to the movements we've seen in 2022. The reason for that is that in the beginning of 2022, the general belief was that prices would go down after the heating season when you use less fuel. That is usually what happens. instead. The prices continued to go up, mainly due to the fact that gas prices was increasing after Russia's invasion and starting the war in Ukraine, and because we saw lower nuclear availability, especially in France. Instead, the prices continued up, and they actually peaked during the summer, which is very, very unusual. We move into the winter season, where we are now. It's unusually warm, which means that there are less fuels being used for heating. The gas storages are relatively well filled, and this has led to a steep price decrease in the fourth quarter. Connecting this back to the fair value logic that Kerstin just described, this means in practice that during the last half of 2021, we had increased prices and Vattenfall had increased fair values. We had +SEK 10 billion of fair values when we ended 2021. Some of these were realized in 2022 going into the underlying EBIT, as Kerstin described, and then out of fair values. When the prices dropped in Q4, we could see that the fair values of the contracts we now have for future deliveries have gone down. The swings have been very, very big, but the business is doing well because the margins are locked in. This is accounting effects. They are temporary. It's not money in or out of Vattenfall. The result is good, the cash flow is good, the liquidity is good, and the balance sheet is doing fine. Maybe just to add to that, I mean, this is only a portion of our contracts. For the majority of the contracts, we apply hedge accounting. Historically, this has not, you know, had a large impact on our profit and loss statement. The reason why it has it now is these large price fluctuations that we see. Clearly a very important thing to understand, to interpret our results for this year. Let's move out of that and go into the underlying results for the different businesses. Yes. The underlying EBIT actually shows how the business is performing. When it comes to our wind business, we have more than doubled the result in 2022 compared to 2021. That is mainly due to two things. It's increased prices for the wind power that we actually produce, but it's also more production. We have more wind farms up and spinning. For example, Danish Kriegers Flak was up all year of 2022, while it was only partially there in 2021. In our Customer and Solutions business, we're also doing better compared to the year before. That increased result is mainly due to two things. The first one is a sourcing effect, and the second one is that more customers are choosing Vattenfall. We have increased our customer base with more than 400,000 customers in Germany during the year. It seems like the customers are appreciating the sort of stability that an established player like Vattenfall can provide. Despite this increase in customer service calls and the fact that we're not always able to sort of respond within the time that we would like, we still see an increase in customer satisfaction. That's very good, and we'll get back to that when we discuss. Yeah ... strategic targets. Okay, a higher result from wind and Customer Solutions. How about the other segments, Kerstin? If you start with distribution, there we have a lower result, and the main effect there in the year-over-year comparison is because we divested our grid operations in Germany last year. We also see increased cost for the transmission networks, mainly then in Sweden. If you look at the heat business, there we also see a lower result, which is due to unfavorable clean spark spreads, and they have actually been on average negative due to the high gas prices. The fuel prices, however, we adjust for those in our heat price to the end customer, but that comes with a time delay. We also hedge parts of our spread exposure on the continent. The result from the hedges are reported in the power generation segment. Let's go to the power generation segment, Anna. Yes. Here we have a lower result compared to 2021. That's mainly due to lower achieved prices in the Nordics due to price area differences. Although we have covered this in our earlier quarterly reports, maybe it's good to remind ourselves on why this is. We hedge our Nordic production in the so-called system price. This is. We have our hydro production mainly in the northern part of Sweden, where the prices have been lower. That means that the system price is not an effective hedge for our production the same way it used to be historically, and this has caused losses. That has also meant that we have decreased our hedge ratio for our Nordic business, and this is now gradually becoming visible in our numbers if you look at those. In Q4, in addition, there was very small price area differences between the different areas in Sweden, which means that the achieved price in the fourth quarter is actually EUR 55 per megawatt hour, which is much higher than it's been during the earlier quarters in the years. Then we also have a lower realized trading result for the full year compared to 2021. That's the combination of factors that gives this result. Thank you. Now as we present the year-end result, we also discuss the strategic targets. Mm-hmm. Let's start with the financial metrics since we are on the topic. Absolutely. As I mentioned in the beginning, the balance sheet is strong, and we have a good liquidity position. If you look at our capital structure metric, FFO over adjusted net debt, that ends up at 55%. Then we have this impact from received margin calls, and if we exclude that, then we end up at roughly 47%. That is actually almost on the same level as last year, despite the large one-offs we had then with the divestment of Stromnetz Berlin and the compensation we got in Germany for the early closure of nuclear. The reason why we can keep the same level is that we have a strong and good underlying EBITDA this year. When it comes to our return on capital employed, if I may, that is based on the reported EBIT, which means that we have these temporary accounting effects impacting that, which is why it's 4.2%. Again, if you then look at the underlying level connected to how the business is doing, the return on capital employed is 12.5%, which is higher compared to last year when the corresponding number was 11.5%. This is also one of the main reasons why our board of directors have decided to propose a dividend of SEK 4 billion for the year of 2022. Good. Let's now move over to the other strategic targets. Right. If we start at the top with our customer engagement, we can see that is increasing. We measure that as our Net Promoter Score. We're of course very happy about that because it's happening despite all the challenges in the market for our customers. We also see that we improve when it comes to CO2 emission intensity, that is becoming lower. To some extent, there is an effect of the warm winter here, also long term, we see the same trend. I'm especially happy that we also see an increase when it comes to engagement among our employees, because that is very important for us when we are sort of now executing on all these quite large and challenging projects that we need to deliver on. We have improved also from a safety perspective. We measure that as lost time injury frequency. We now see some results from the safety initiatives that we started and talked about earlier in 2022. I'm very happy to see that that is now bringing results, but we are not done. We will continue to focus on this. Kerstin and I already covered the financial targets, which are also strategic, of course. Yes. A reasonably green list there. We also published our two-year investment plan. Yes. We are increasing our investments. The net investments over the next two years are 77 billion SEK. 50 billion SEK out of that is growth, and it's mainly happening in fossil-free electricity production. In short term, it's the mature project, so mainly wind. We're also expanding and maintaining our electricity grids. In total for these two years, we put 11 billion SEK into our grids, and that is really needed in order to be able to meet this increase of requests to connect, both from industries transforming, but also from consumers, who would like maybe to have their own solar panels, et cetera. I think it's important to say that this is only a two-year picture. Many of our investments are happening over much longer time periods than that, this is heavily impacted by exactly what projects are, sort of on the line exactly these two years. We are increasing our investments also long term. You're mentioning that we're doing a lot of big projects, and one thing that has been high on the agenda for during the last year is the inflation. Mm. How are we handle the cost inflation in all this? For the projects that are already decided, we have typically already sort of contracted the suppliers. There we have actually limited impact from the inflation when we talk about the projects that are in construction now. However, for future projects, there we will see an impact on project cost if inflation remains on these levels, and there we try to have very good collaboration with our suppliers and being innovative and find new ways. One example is that we are looking into increasing flexibility in the contract when it comes to the raw material, so we don't have to lock in the commodity price at a very high level for future projects. Good. Another topic. Last year, we talked a lot about political interventions. I think there's been quite a lot of it, or at least discussions on it lately. What do you think are the latest development and the impact on Vattenfall? It is challenging times, in general, of course. You see that in all of Europe, I think that extraordinary times also require extraordinary efforts, that is the main reason why we see a lot of compensation schemes from governments throughout Europe towards the customers. There is also the revenue caps, also decided on the EU level and implemented in each of the countries. They've been implemented or are being implemented from December last year and onwards. In Denmark, Germany and the Netherlands, they have already been implemented in December, so we have one year of impact in 2022, and the impact on Vattenfall was approximately SEK 150 million, so very limited. In Sweden and U.K., we expect this to be implemented and start this year. If you look at the price level on the market right now, the impact on Vattenfall is very limited, but that can of course change quickly if the prices start to increase a lot again. I think it's important to say that the root cause of the high prices is not the market mechanism. It's the gap between supply and demand of fossil-free electricity in Europe and the high gas prices. The revenue caps, the market interventions, et cetera, they create uncertainty in terms of how this market will work, and there is a very large risk that will sort of halt investments because investors see this uncertainty. The only way out of this situation is actually to get rid of the dependence of gas, so you're not impacted by the gas price, and then invest into fossil-free generation and grids in Europe, and that's the only way out. Very clear that that's the only way out. That actually concludes this part of the session, and soon we will be back with the question and answer session. Thank you. Time for questions. I have from, Andrew Moulder, welcome. When do you expect to take the final decision on the burning heat business? Is there a timeline, for firm offers from the bidders? We are working on that process. It's progressing very well, and we expect to make a decision during 2023. Matas Kadusauskas, Covalis Capital. Your retail recorded another very strong quarter. I would assume it includes positive results from managing the hedge book sellbacks. Can you confirm this? Can you as well explain how you adjusted your book, given structural decline in demand? Yeah, I mean, we can confirm that. Parts of the results in the business area Customer and Solutions is because of the sourcing activities and our hedging activities there. We were also able to sell back some volumes that our customers did not need. We will not go into details exactly how we are managing our sourcing books, given the changes that we have seen in the market. Thank you. From Samu Williamson. In Q4, we saw higher transmission capacity between price areas SE2 and SE3, resulting in a dramatic narrowing of price area differences in Sweden. Throughout the year, you have stated adjusting your hedging strategy due to large price area differences resulting in lower hedging ratios. Are you now adjusting your strategy back to hedge more now when the price area differences have narrowed? At least your change in hedge ratio for 2024 would indicate so. We have not made any additional changes in the hedge strategy. It is of course good that the price area differences are smaller in the last quarter. The sort of fundamentals in the market haven't changed. We still look at the risk the same way. No, I think. Yeah, that's it. That's. That's the last one. A very clear and good answer. Then from Mads Plesching, Energy Watch. With inflation and increasing interest rates, investment costs are higher across the board, be it electricity grids, charging infrastructure, or production plants. At the same time, you're poised to increase investments in nuclear in the coming year. How will all this affect your ability or indeed willingness to keep up the investments in offshore wind? What difference will it make if more governments implement upfront costs, be it lease or concession payments? Well, I think it's a good observation, of course, that the return requirements are going up because of increasing interest rates, and that goes for the investors we work with, and that goes also for us in Vattenfall when we look at projects. We have a sort of an increasing investment plan anyhow and where we are looking at different types of investments, where we are investing heavily in wind, but also we have started this feasibility study for nuclear. Here we need to time investments, of course, over time, and all investments will not come at the same time. This is part of our strategic portfolio discussions that we have these days. Maybe just to add to that, we are constantly making prioritizations when it comes to investments. As I indicated earlier, these uncertainties around the market setup and possible price caps, et cetera, of course, increases the uncertainty also in some of the projects that we have planned for earlier. We will have to evaluate that as we go. Thank you. From Anton Tigerstedt, Montel News. Are Vattenfall planning to book LNG import capacities at one of Germany's new terminals, which are due to come online later this year? If at FSRUs Wilhelmshaven 2 Stade Lubmin 2. If so, how much volumes are you aiming at? No, we are not aiming at booking capacity there. We are sourcing on the market hubs in Europe when we need gas. Thank you. Andrew Moulder is back. When I look at your cash flow development, there is a change in working capital and a change in short-term investment with both of these movements, sorry, mostly due to margin calls. Why are these not both featured in working capital? Are these actual cash flows, or are they non-cash adjustments to EBITDA? We have changes in working capital, of course, and due to the margin calls, where there has year of sort of comparing from the start of the year to the end of the year, it has been an outflow of margin calls. That is also visible in our working capital. We also have other changes there. For example, we had when we started the year, inventories in terms of EUAs certificates, which we also sold off in the fourth quarter, which had this, sort of, counteracting effect. Yes. Of the working capital. Okay. Thank you. Any more questions? I haven't checked if there are any questions on the phone. No questions on the phone and no more questions. Thank you all for attending this year-end report webcast. Welcome back in the Q1 report. Thank you and bye.