Research: Vattenfall AB

Transcription

1 Research: Vattenfall AB Return to Regular Format Publication date: 11-Jul-2005 Primary Credit Analyst(s): Andreas Zsiga, Stockholm (46) ; Secondary Credit Analyst(s): Magnus Pettersson, Stockholm (46) ; Corporate Credit Rating A-/Positive/A-2 Business profile Satisfactory Financial policy: Moderate Debt maturities: At January 2005 (excluding loans from associated companies of Skr14.4 billion) 2005: Skr7.7 bil 2006: Skr3.1 bil 2007: Skr7.7 bil 2008 Skr3.5 bil 2009: Skr 8.0 bil 2010 and thereafter: Skr24.3 bil Outstanding Rating(s) Vattenfall AB Sr unsecd debt A- CP A-2 Sub debt Foreign currency BBB+ Vattenfall Treasury AB Corporate Credit Rating History Mar. 2, 2000 July 3, 2001 A+/A-1 A-/A-2 Major Rating Factors Strengths: Large and geographically diverse operations. Modern, flexible, low-cost generation portfolio. Prudent trading and hedging policies. Significant cash flow certainty from regulated distribution and heating operations. Weaknesses: Rationale Exposure to competitive and volatile markets exacerbated by long generation position. Exposure to increasing regulatory pressure on monopoly operations. Challenges in integrating acquired companies. Inherent operating risks of nuclear operations. The ratings on Sweden-based utility Vattenfall AB reflect: its strong vertically integrated position in the North European electricity market; its competitive generation portfolio; significant energy utility monopoly operations; and strong cash flow generation.

2 Negative factors include exposure to competition and price volatility in the company's power generation business, political risks related to its nuclear and coal generation, and increasing regulatory pressure on its monopoly business. The ratings do not factor in any support from Vattenfall's 100% owner, the Kingdom of Sweden (AAA/Stable/A-1+). Political pressure on the company has increased, but the government appears to have no plans for restructuring or major changes in the group's strategy. The execution risks of Vattenfall's expansion in recent years have reduced because the integration process is complete. The company is now expected to become more acquisitive again. The asset-swap involving the 35% stake in Elsam A/S (BBB+/Stable/A-2) gives Vattenfall a strong generation position in Denmark. Standard & Poor's expects Vattenfall to pursue further growth opportunities in its current markets and in neighboring Western European countries, but considers the number of potential acquisition targets to be limited and that they are likely to be highly contested. The volatile Nordic wholesale power prices have normalized at about per megawatt-hour (MWh) following a period of high prices due to poor hydroelectricity supplies. German power prices remain above 35/MWh, but there is uncertainty about fuel prices, changing market rules, capacity development, and carbon-dioxide (CO2) emissions trading. Vattenfall's prudent hedging strategy limits its exposure to price volatility risk. Vattenfall's financial profile has improved over the past few years to become strong for the rating level, especially as key ratios are stronger on a net basis. Total adjusted debt at the end of the first quarter of 2005 was about 91.2 billion Swedish kronor (Skr; $11.7 billion) compared with Skr104.0 billion at yearend 2003, including Skr16.7 billion of unfunded pension liabilities and Skr3.1 billion of leasing liabilities. Coverage of gross interest by adjusted funds from operations (FFO; including interest on pension provisions and leasing adjustments) continued to improve in 2004 to about 6.3x from 4.5x in Rolling 12-month FFO to adjusted average gross debt was 26% at March 31, 2005 (25% for the first quarter of 2004). These key ratio levels are expected to be maintained at about 4.5x and 20% at the current rating level, assuming significant debt-funded acquisitions. Short-term credit factors Vattenfall's short-term rating is 'A-2'. The company is expected to have adequate internal liquidity over the short term, reflecting strong operating cash flow protected by hedging arrangements, and significant access to alternative sources of liquidity. Although much of Vattenfall's operations are in highly competitive and volatile markets, movements in sales prices and volumes are not expected to have a material negative impact on the company's liquidity and financial performance in the short term. The adequate liquidity position is supported by: Cash and short-term investments (at mid-june 2005) of about Skr9.5 billion, compared with Skr11.7 billion of short-term debt; Strong free operating cash flow (about Skr14.3 billion on a rolling 12-month basis in the first quarter of 2005), reflecting solid profitability and moderate capital expenditure needs in the utility operations; Access to unused committed credit facilities of 1.86 billion (of which 600 million matures in 2009), and good access to public debt markets; and The absence of rating triggers or onerous covenants in Vattenfall's financing agreements. Free operating cash flow is expected to remain at about or above Skr15 billion per year, based on sustained operating profitability and annual capital expenditures of about Skr10 billion in the current Vattenfall group. The company policy is to maintain the equivalent of 10% of group turnover in cash or committed credit lines, or the equivalent of the next 90 days' debt maturities, whichever is greater. Outlook The positive outlook reflects the potential for further credit improvement if Vattenfall continues to produce strong operational performance and free cash flow after dividends, and does not use the headroom under its ratings to make acquisitions. A significant credit-dilutive acquisition could weaken the risk profile from its current strong level, and result in the outlook returning to stable. Management has developed a strong track record, however, and is not expected to undertake any deals that could threaten the company's objective of maintaining a rating in the 'A' category. Some increased regulatory

3 pressure in monopoly activities in Sweden and Germany is factored into the ratings. Business Description Vattenfall's strategy focuses on electricity and heating operations in the Nordic region, Germany, and Poland. The German companies within the group have been integrated into Vattenfall Europe AG, which is about 94% owned by Vattenfall. The company's vision of being a leading European energy company with a 10% market share in the region suggest that it could become acquisitive again over time. Expansion is expected to focus on core activities, with a geographical focus on countries where it already has operations and neigboring countries in Western Europe. In the medium term, Standard & Poor's expects about 60% of cash flow to come from electricity generation and supply, with the remainder from electricity transmission and distribution and the heating business. Barring expansion outside current markets, the projected cash flow is expected to be geographically split as follows: 40%-45% in the Nordic region; 50%-55% in Germany; and, in the longer term, 5%-10% in Poland. Ownership Vattenfall is a commercially operated limited liability company. The policy of Sweden's Social Democratic minority government is to retain 100% state ownership of the company, although Standard & Poor's does not factor state support into the rating. The Swedish government has recently increased the political pressure on the company on issues such as environmental investment, investment strategy, and prices. Standard & Poor's considers dilution of state ownership possible in the medium to long term, particularly if a center-right government came to power. Such a dilution is highly uncertain, however, given the political sensitivity of such a scheme and the current parliamentary situation, with the minority government depending on support from parties to the left. Privatization could increase the company's strategic freedom, reduce the risk of political involvement, and enhance financial flexibility by allowing equity financing. Business Profile Exposure to competition and tougher monopoly regulation Vattenfall's business risk is negatively affected by exposure to the highly competitive and fully deregulated Nordic and German electricity markets. The historically benign monopoly electricity transmission and distribution and heating regulations are expected to become more challenging. Nuclear operations remain exposed to inherent political risks, although political development in both Germany and Sweden could prove positive for the company. The rating factors in gradual pressure on Vattenfall's German network tariffs as a result of the establishment of an independent regulator later in Swedish regulation is also becoming more challenging (see "Nordic Power Market: Stable Ratings Prospects Despite Normalizing Prices and Increased Regulatory Pressure", published on RatingsDirect on Jan. 17, 2005). The new, controversial regulatory model, where reasonable tariffs are calculated based on the simulated cost for an optimal service area network, adjusted for the quality of service provided, suggests that utilities are generally overcharging by some 15%-20% Any tariff adjustment is expected to take place gradually over the medium term. Vattenfall's allocation of CO2 emission allowances (mainly relevant to the fossil fuel-intensive German and Polish operations) leaves the company slightly short, but the cost of acquiring further CO2 allowances is expected to be passed through to customers. Vattenfall's Nordic and German district heating businesses benefit from their loosely regulated quasimonopoly status. Standard & Poor's expects the noncyclical, albeit temperature-dependent, heating operations to continue to support Vattenfall's business position, although there is a risk that the heating business could be regulated more strictly in the future. On the other hand, Polish heat regulation is expected to become more transparent over time on the back of economic growth and increased stability. Current policy is to phase out nuclear power in Sweden and Germany. The Swedish phase-out continued with a second reactor closure in May Vattenfall has agreed to give away compensating nuclear capacity to the owner Sydkraft AB (A/Stable/A-1), neutralized by monetary compensation from the government. Negotiations for a voluntary phase-out agreement have failed.

4 Meanwhile, a potential change of government in Germany could extend the lifetime for the nuclear generation, which is capped by the Nuclear Consensus Agreement. This would be beneficial for the industry by extending the lifetime of the low-cost generation asset and reduce investment needs. Prosperous but competitive markets Vattenfall benefits from operating in the prosperous and stable Nordic countries and Germany, although this is balanced by the modest 1.0%-1.5% volume growth in these markets. Exposure to the riskier Polish market is expected to remain fairly limited. The company's geographical coverage allows for some diversification benefits. Nevertheless, the company remains exposed to long positions in power generation in competitive and slow-growing markets. The tightening of the supply and demand balance, and increasing power prices, have mitigated this exposure in the past months. The company has about 5.0 million electricity supply customers, with some 3.0 million in Germany, largely in the Hamburg and Berlin urban areas. Prices in both the Nordic region and Germany have recovered from the initial pressure experienced at market opening. This reflects a shift from wet to drier weather patterns in the Nordic area and less destructive competition in Germany, higher fuel prices, and some capacity reductions in both markets. Standard & Poor's expects Nordic wholesale prices to normalize with hydro supplies at about 25-30/MWh in the medium term, with significant volatility induced by the dependence on hydro generation. Longer term, Standard & Poor's expects harmonization with the higher Continental European price level. German wholesale prices are expected to remain at well above 35/MWh in the short to medium term. Development is likely to be driven by pricing of emission trading, fuels, and import volumes from France and Eastern Europe. Vattenfall's German downstream outreach is low compared with that of competitors such as E.ON AG (AA-/Negative/A-1+) and RWE AG (A+/Negative/A-1), enhancing the long generation position. The stable and profitable electricity distribution business is expected to provide a key strength for Vattenfall's business profile, because market risk is below average. Vattenfall has about 1.3 million Nordic customers, most of whom are in rural areas. The 3.3 million German network customers are mainly located in urban areas, which is a positive factor. Vattenfall Europe's transmission operations also have low market risk, despite serving the less prosperous eastern part of Germany. The distribution operations of the Polish GZE, with some 1.1 million customers, carry higher market risk but are still too limited to have a material impact on Vattenfall's market risk. Robust operations underpin the ratings Vattenfall's energy operations, including its holdings in Germany and Poland, are robust and underpin the ratings. Negative factors include a high proportion of nuclear generation, inherent CO2 emissions-related risks, and weather-related reliability problems in the Swedish networks. Table 1 Vattenfall AB Operating Statistics Total capacity (MW) N.A. 31,685 31,800 28,000 16,500 Generation (GWh) 167, , , ,900 84,000 Nuclear (%) Oil and coal (%) Hydro (%) Purchases (GWh) 52,000 57,700 57,200 34,800 16,200 Retail customers (000s) 5,040 4,860 4,600 2,100 2,100 Type of network (kv) up to 440 up to 440 up to 440 up to 440 up to 130 District heating deliveries (GWh) 34,500 35,600 30,600 22,800 14,600 Number of employees 33,017 35,300 34,200 23,800 13,100 GWh--Gigawatt-hours. kv--kilovolts. N.A.--Not available Generation. The Vattenfall group's generation portfolio is modern, competitive, well diversified, and flexible, consisting largely of state-of-the-art lignite plants (in Germany), well-performing nuclear plants, and significant low-cost and low-risk Swedish hydro generation. The commissioning of the

5 German 1,060 MW Goldisthal pump-storage plant allows the company to further exploit the spread between peak- and base-load prices and maintain base-load thermal output. The vertical integration of lignite fuel supply in Germany reduces operational risks, and the control over this important cost item allows for increased margins in situations where power prices are boosted by high fuel prices. The company has historically proved able to managed mining-related environmental issues. CO2 emissions, however, are inherently high in all coal-fired generation, and further emissions restrictions or penalties could constitute a future risk. Mitigating factors include the fact that domestic coal remains integral to the German government's long-term energy policy and that Vattenfall Europe's lignite supply is not subsidized or greatly affected by world coal market prices. In both Sweden and Germany, Vattenfall is a highly experienced nuclear operator, with a good operational and safety track record. Nevertheless, nuclear operations have inherent safety and political risks (as demonstrated by the 13-month standstill of Vattenfall's German Brunsbüttel plant during ). The planned closure of some nuclear capacity (the 33.3%-owned Stade plant in 2003, and the 66.7%-owned Brunsbüttel plant in 2008) would reduce nuclear risk, while also reducing cash generation potential. The transfer of ownership stakes entitling Sydkraft to capacity in Vattenfall's Ringhals nuclear plant, established as part of compensation settlement regarding the closure of the Barsebäck unit 2 in May 2005, is expected to be neutral. The negative operating and cash-generating impact is expected to be fully balanced by an adequate compensation payment, based on market valuation of assets, from the Swedish government (although this has yet to be agreed). Trading. Vattenfall runs an extensive in-house trading and portfolio management activity integrated into one trading organization. Risk-management practices appear adequate. Trading is asset based, with the focus on hedging own generation and supply activities to prevent exposure to price volatility and generate revenue certainty. This creates a time lag before price increases and reductions fully affect the cash flow, which means that cash flow can be sustained or even increased despite falling spot market prices. The level of proprietary trading is limited. Electricity transmission and distribution. Electricity distribution is a key strength of the group, and the company is expected to be able to enhance performance further by sharing best practices and exploiting economies of scale. The Nordic operations are generally efficient, but some quality problems (related to severe recurring snow-related disturbances) have been revealed, and mediumterm investments have been increased to improve performance. The German network operations are of good quality, and benefit from having a mainly urban customer base. Vattenfall controls about 30% of the German transmission grid, a low-risk asset. GZE's network area in the industrialized south of Poland is also densely populated, and is reportedly fairly efficient. Heating. Vattenfall is a major supplier of district and industrial heating in the Nordic region. Outside the Nordic region, operations will be dominated by heat supplies to the major urban areas of Warsaw, Berlin, and Hamburg. Most of this generation comes from coal- or oil-fired combined heat and power plants, but necessary environmental upgrading has been performed. Standard & Poor's expects Vattenfall to maintain stable and profitable heating operations. Above-average competitiveness Vattenfall's competitive position is above average in both the Nordic and German markets, reflecting its low-cost generation, the ability to exploit economies of scale in all areas of operations, and its experience of a competitive market environment. Negative factors include the imbalance between generation and end-user sales, although this problem could reduce as the capacity balance tightens. Vattenfall is able to offer qualified energy facility management and other energy-related services, which are expected to prove more important for the group's future competitive position in the largeuser customer segments. Plans to add noncore-related values and services to the increasingly commoditized core energy products have proved costly and have been abandoned, which is a positive factor. Financial Policy: Moderate Over the past two years, Vattenfall has focused on improving its financial profile after recent acquisitions weakened the balance sheet and credit metrics. Further financial improvement in the medium to long term will be influenced by the group's attitude to further debt-financed expansion and the owner's dividend requirements. These are moderate at one-third of net income. Financial objectives include EBIT net interest coverage of 3.5x-5.0x (5.3x in 2004) and a 15% return on equity (22.4% in 2004). The company management has publicly committed to maintaining a rating in the 'A' category.

6 The parent company, Vattenfall AB, is not subject to structural subordination. The new group has total assets of about Skr260 billion, which should be adjusted upward by a substantial amount of assessed market values in excess of book values (mainly in the Nordic region). Priority liabilities in the subsidiaries are assessed to be equivalent to about 25% of total adjusted assets. This is an acceptable level, given that Vattenfall also performs significant operations and directly controls fixed assets in hydropower generation with a book value of about Skr26 billion, which is significantly lower than the assessed market value. Accounting and adjustment issues Vattenfall's financials are reported according to Swedish GAAP. The company will apply International Financial Reporting Standards from Significant areas of change include: On-balance-sheet reporting of Swedish nuclear decommissioning assets and liabilities, boosting the asset and liability side by some Skr24 billion (consolidated numbers, not adjusted for pro-rata ownership shares); Resolution of negative goodwill provisions of some Skr10.1 billion, reported in equity; Minority interests of about Skr9.4 billion reported in equity; and Adjustment of interest expenses in the profit and loss statement to include the accretion of asset-retirement obligations (pensions, nuclear, and mining), adding about Skr1 billion previously included in operating expenses. The impact of hedge accounting will not be seen until the closing balance of the 2005 accounting year. Standard & Poor's adjusts Vattenfall's reported debt by about Skr28 billion. The changes are summarized in table 2. Pension ARO Nuclear ARO Mining ARO Debt (Skr) 17, Leasing 3,100 8, Interest (Skr) 120 reclassifed Comment Table 2 Vattenfall AB Accounting Adjustments* The unfunded pension liability of Skr17.0 billion (Skr16.5 billion in 2004) is added as off-balancesheet debt. Interest of Skr800 million (Skr880 million in 2004; reported as operating expenditure) is added to total interest (in adjusted ratios). Vattenfall s Swedish nuclear asset-retirement obligations (ARO), with a liability calculated at about Skr21.4 billion, is matched by a government-controlled nuclear decommissioning fund with a Vattenfall share of Skr22.3 billion at year-end The German ARO calculated pro-rata by ownership is about Skr13 billion. The co-owned nuclear companies have accumulated funds to match the liabilities. These funds are lent to the owners, and in the case of Vattenfall reported at about Skr 15.6 billion by the end of March 2005 in long-term debt. Mining-related AROs of Skr8.5 billion are included as debt in the adjusted ratios, with an interest accretion of Skr90 million (no adjustment is made for 2004). Future operating leasing liabilities of Skr3.1 bn, applying a 3.7% discount rate, are added to offbalance-sheet liabilities. Lease-related operating costs are moved from operating expenditure, split into an interest component of about Skr120 million and a depreciation component of about Skr 360 million. *As reported per end of 2005 based on International Financial Reporting Standards (IFRS). As reported at March 31, 2005 based on IFRS. Skr--Swedish kronor. Financial Profile Profitability and cash flow Vattenfall's profitability and cash flow are underpinned by its monopoly electricity distribution and heating operations. The operations in Germany and Poland are considered to be less volatile than those in Scandinavia, bringing stability to Vattenfall's financial profile. Both profitability and cash flow debt-protection measures have developed to become strong for the rating level due to higher prices, cost savings, and lower interest costs. Adjusted FFO interest coverage rose to 6.3x in 2004 from 4.5x in FFO to adjusted gross debt improved to 25% in 2004 from 16% in 2002, and reached 26% at March 31, 2005, on a rolling 12- month basis. The high liquidity makes key net ratios stronger. At the 'A-' rating level, and assuming an unchanged business risk, the company should maintain these key ratios at least at the level of

7 4.5x and 20%. With sustained or improved FFO levels and reduced debt, these key ratios could improve further in the medium term. With annual reinvestment needs of about Skr10 billion, Vattenfall's expected internal funding of capital expenditure should be strong at about 200% of net cash flow. This should leave the company with annual free cash flow of at least Skr10 billion in the medium term. The final cash flow impact on debt will depend on any acquisitions, the associated potential debt consolidation, and the owner's dividend requirement. Table 3 Vattenfall AB Profitability Income statement (mil. Skr) Gross revenues 113, , ,025 69,003 32,527 Operating expenses (excluding DD&A) 88,209 82,483 71,537 49,862 22,739 Depreciation and amortization 14,665 14,496 15,218 10,830 5,477 EBITDA 35,684 24,878 24,855 21,272 11,408 Interest incurred 3,661 4,704 4,962 4,125 2,461 Net interest incurred 2,631 3,281 3,005 1,986 1,541 Net income 11,776 9,123 7,566 4,190 2,970 Earnings protection (x) Pretax interest coverage Adjusted pretax interest coverage Net pretax interest coverage Adjusted net pretax interest coverage EBITDA interest coverage Total debt/ebitda Return on average equity (%) Total operating expenditure/revenues (%) Skr--Swedish krona. Table 4 Vattenfall AB Cash Flow Cash flow (mil. Skr) Net income 11,776 9,123 7,566 4,190 2,970 Depreciation 14,665 14,496 15,218 10,830 5,477 Funds from operations (FFO) 24,159 18,804 17,206 13,148 5,780 Common dividends 2,600 1,937 1,364 1,784 1,580 Net cash flow (NCF) 21,559 16,867 15,842 11,364 4,200 Net capital expenditures (capex) 8,289 6,585 9,282 4,965 3,081 Discretionary cash flow 13,084 9,669 9,557 3,693 1,420 Cash flow adequacy (x) Capex/average total capital NCF/capex NCF/capex and net acquisitions FFO/average total debt Adjusted FFO/average total debt* FFO/average net debt Adjusted FFO/average net debt* FFO interest coverage Adjusted FFO interest coverage FFO net interest coverage Adjusted FFO net interest coverage *Including interest-bearing pension liabilities. Including interest on pension liabilities. Skr--Swedish krona.

8 Capital structure and financial flexibility Vattenfall's use of free cash flow to reduce debt resulted in a significant fall in adjusted leverage decreased to about 55% by March 31, 2005, from a high 67% at the end of It could be expected to be maintained at about the 2005 level assuming Vattenfall uses its financial headroom to carry out acquisitions. In the absence of any debt-funded acquisitions, this ratio could reduce further to less than 50% in the short term. Some of Vattenfall's assets, including its Swedish hydropower stations, are carried in the balance sheet at low historical book values, and debtleverage ratios would look substantially stronger if equity were adjusted for these hidden values. Vattenfall's capital structure and liability management is adequate: Debt duration is strong, with an average time to maturity on net debt of about six years. The maturity profile is good, with debt maturities fairly well spread over the medium term, and some very long-dated debt. The refinancing of some 25% existing debt in should be manageable. Interest exposure is adequate. About one-half of the debt has floating interest rates. The average interest duration is an adequate two years, within the company's policy range of 2.5 years plus or minus one year. Foreign exchange exposure is limited. Vattenfall's interest-bearing debt is hedged in Swedish kronor or euro. The German operations provided the company with a natural hedge in the Eurozone. Liquidity is adequate bordering on strong. Short-term debt of about Skr7 billion at the end of March 2005 and annual capital expenditure of about Skr10 billion is balanced by a cash and liquid investments position of about Skr16 billion and about Skr5.6 billion in unused backup facilities. The company maintains the policy of fully matching its outstanding CP with liquid assets and unused committed facilities, and to have these cash reserves equaling 10% of turnover. About Skr3.5 billion of the cash and liquid assets are earmarked for the German nuclear accident joint insurance agreement ("Solidarvereinbarung"). The cyclicality of cash flows resulting from the seasonal demand pattern for electricity and heating is manageable. There are no contingent requirements. Vattenfall's debt and committed backup facilities do not include any rating triggers, onerous financial covenants, or material adverse change clauses, which is positive. Funding diversity is adequate to strong. Vattenfall is a well-established borrower with strong bank relationships and access to a wide variety of funding alternatives, including a $6 billion European MTN program, a Skr10 billion domestic MTN program, bank loans, CP programs in the Swedish and euro market, and about Skr17.2 billion in unused committed bank lines with banks of high credit quality (of which Skr7 billion are used to back-up CP borrowing). Vattenfall's financial flexibility is adequate: Shareholder pressure is average. Government ownership is neutral from a shareholders' perspective. Overall, it could allow for some more flexibility in dividend payout, but reduces the room for using equity funding of growth. The recent issue of deeply subordinated capital notes of about 1 billion (equal to about Skr9.4 billion, equivalent to 7% of current capitalization), with a 60% equity treatment by Standard & Poor's, provides some flexibility. Capital expenditure flexibility is adequate to weak. Standard & Poor's considers there to be some flexibility in capital expenditure programs. Vattenfall's debt capacity is adequate bordering on strong. The company had unused facilities of about Skr50 billion under its various debt issuance programs, equivalent to 60% of outstanding debt, and 300% of short-term debt. Ownership support and regulatory relief are weak. There is no ownership support factored into the ratings owing to the historical absence of any equity infusions into the company, our view of Vattenfall as a commercial investment, and the absence of any supporting statements. The room for any financial regulation is very restricted given the regulation applied in Vattenfall's core markets. Table 5 Vattenfall AB Capital Structure Balance sheet (mil. Skr)

9 Cash and equivalents* 13,616 14,647 15, ,400 75,430 Net plant 179, , , ,984 68,089 Total assets 256, , , , ,005 Short-term debt 8,894 15,702 27,582 30,113 9,551 Long-term debt 64,119 69,845 67,158 58,420 41,116 Common equity 71,504 61,885 55,089 58,658 40,105 Total capitalization 144, , , ,191 90,772 Total off-balance-sheet obligations 3,100 2,300 2, Balance sheet ratios (%) Long-term debt/capital Common equity/total capitalization Total debt/total capitalization Adjusted total debt/total capitalization Net debt/net total capitalization *Excluding financial investments. Excluding interest-bearing pension liabilities. Including interest-bearing pension liabilities. Skr-- Swedish krona. Rated Peer Comparison Table 6 Vattenfall AB Peer Comparison Vattenfall AB Energie Baden Wuerttemberg AG RWE AG Endesa S.A. Corporate credit rating A-/Positive/A-2 A-/Stable/A-2 A+/Negative/A-1 A/Negative/A-1 Country Sweden Germany Germany Spain Year of data Financial statistics (mil. ) Gross revenues 12,323 11,177 42,137 18,065 Funds from operations (FFO) 2, ,559 3,882 Total assets 27,927 24,119 93,369 48,031 Total debt 7,937 5,913 25,637 16,505 Net debt 6,456 (1,231) 12,062 16,201 Gross capital expenditures ,429 2,664 FFO interest coverage (x) FFO/net debt (%) 28.6 N.A FFO/debt (%) N.A.--Not applicable. Group Address InfrastructureEurope@standardandpoors.com Copyright Standard & Poor's, a division of The McGraw-Hill Companies. All Rights Reserved. Privacy Policy