Response to interpellation 2023/24:200 on Vattenfall's wind power investments
Translated from Swedish by AI; the translation may contain errors. The Swedish text is the original.
Summary AI, written in advance
The debate concerns Vattenfall's wind power investments and return requirements. M considers that the current economic goals are working well and that there is no reason to tighten the return requirement 1. M argues that operational activities and individual investment decisions fall under the board's responsibility, not the owner minister's 1 2. M emphasizes that Vattenfall has significantly developed its wind power operations and that the company is performing well 2. - considers, however, that the return requirement should be raised because wind power is a risky business with low profitability 3. - criticizes previous business decisions and argues that political ideology has governed the company 3. - claims that wind power hinders nuclear power and that taxpayers should not pay for these investments.
Written by AI in advance and may contain errors. The numbers lead to the speech a statement builds on; check against the text below.
Finansministern Elisabeth Svantesson (M)
Madam Speaker! Elsa Widding has asked me three questions: firstly, whether I intend to work for a tightening of Vattenfall's return requirements, secondly, whether I have seen any analyses that preceded Vattenfall's wind power investments, and thirdly, whether I can imagine taking some initiatives in light of what Elsa Widding has stated regarding accountability in the event of large losses.
Economic goals are an important tool in the corporate governance of companies with state ownership. For Vattenfall AB, new economic goals were decided at an extraordinary general meeting in 2017. The new economic goals have since functioned well and contributed to a good development for the company. The economic goals for companies with state ownership are long-term but are adjusted as needed. I see no reasons today for Vattenfall's return requirements to be tightened.
Companies with state ownership are subject to the same laws as privately owned companies, for example, the Companies Act (2005:551). In the Companies Act, there is a division of responsibility between owners, the board, and the management. It is the company's board and management that are responsible for the company's organization, the management of its affairs, and the ongoing management of the company's operational activities. It is not a matter for me, as the Minister for Ownership, to review and assess individual investment decisions.
All business activities are associated with risk, which is a prerequisite for generating good returns. I have full confidence that Vattenfall's board and management handle the company's risks in a well-balanced manner so that the company achieves the economic goals decided by the annual general meeting over time.
Elsa Widding (-)
Madam Speaker! I thank the Minister for Finance for her clear answers to my questions. I agree with the Minister for Finance on much, but when it comes to Vattenfall's return requirements, I have some objections to the answer.
Just as the Minister says, a decision was made in 2017 regarding new economic targets for Vattenfall. I do not quite agree that these economic targets have functioned well since then and contributed to a good development for the company. Of course, the Minister cannot assess individual investment decisions, but it is the owner's responsibility to make an assessment of the return requirement based on the activities the company carries out. In that case, one must also understand how risky this activity actually is.
Does the return requirement really stand in proportion to the risk the company takes through its investments? That is what this is about, and I believe we are in complete agreement that when the risk in an activity increases, the return requirement must also increase.
That the Minister has confidence in the board and management of Vattenfall AB is very good. At the same time, we cannot neglect all the catastrophic business decisions that have been made in recent years, for example the Nuon deal, the sale of coal in Germany, and now the failed ventures in wind power.
Vattenfall's required rate of return has historically been 11 percent on employed capital, and 11 percent applied when Vattenfall owned a lot of baseload: nuclear power and hydropower in Sweden and nuclear power and coal power in Germany.
The coal power in Germany was a relatively risk-free asset because these plants were operated for a large part of the year's hours because it was needed to keep the system running. Suddenly, Vattenfall changed strategy and would sell the coal to Germany to instead invest on a large scale in wind power, which was considered to justify a lower return requirement due to the lower risk that the ownership of wind power would entail.
Coal was more or less given away for 124 million kronor. Assets that were already worth many billions were given away. Giving away the coal was a simple but extremely expensive way to reach the climate goals. Not a single gram of carbon dioxide was saved globally, but it looked good in the sustainability report. I think this is evidence of how political ideology, over sound business thinking, has been allowed to steer the company. Today, the company Leag has a value of a total of 24 billion, calculated with 2022 figures, and the operations have generated an operating profit of 12.7 billion since Vattenfall handed over to the new owner.
Vattenfall's financial operating result for the second quarter, April to June, was a loss of 2.7 billion. The period's result was a loss of 4.9 billion. The company discontinued the development of the wind power project Norfolk Boreas in the United Kingdom, which resulted in a negative impact on the result of 5.5 billion - this even before the company had made any formal investment decision. The group profit for the second quarter of the year is erased and should trigger the discussion on return requirements and perhaps also on the issue of responsibility.
Wind power investments are associated with a high risk in combination with low profitability. Why then does the owning entity not review the return requirement if it is a limited company we are talking about?
Finansministern Elisabeth Svantesson (M)
Madam Speaker! I leave aside what decisions Vattenfall made ten or fifteen years ago. Now it is I, as the owner minister, who has responsibility for this and other state-owned companies, and Vattenfall is one of the largest electricity companies in Europe and functions well in many ways. That less good decisions were made historically, I do not take responsibility for that, but I take responsibility for what happens now regarding the whole. Operational decisions, for example investment decisions, lie within the board's area of responsibility, and it is not a matter for me as owner minister to review or assess individual decisions.
I can however state that all companies that are large, which Vattenfall is, make a considerable number of decisions that involve risk. One makes investment calculations as good as possible. Often it works well, but sometimes one has to back out or take a loss on certain investments. That is the case with all business-driven activity.
Regarding the wind power operations, the company has developed it strongly with almost a doubling of the electricity production since 2017. It also constitutes a significant part of the company's value. Last year, 40 percent of the company's underlying result was comprised of this.
It is no secret that there is a majority in Sweden's Riksdag for nuclear power and that we are also clearly steering in the direction of more nuclear power. Vattenfall is moving forward with this and will hopefully make investment decisions that ensure Sweden gets more nuclear power in the future.
Let me summarize what I have tried to say. The government or I, as the owner minister, do not interfere in the operational decisions. Vattenfall is governed in the same way as all state-owned companies. People have different roles, and our and the Riksdag's role is, for example, to set direction and establish return requirements. I see no reason to change today's return requirements; on the contrary, I have confidence that Vattenfall's board and management handle both the operations' risks and opportunities in a well-balanced way so that Sweden and Swedish taxpayers get to share in the profits that arise, which has also occurred on many occasions by Vattenfall having contributed to the state's finances in a positive way.
Elsa Widding (-)
Madam Speaker! I wonder, of course, if the Prime Minister does not consider that wind power investments are associated with a very high risk in combination with low returns. A large part of the country's wind turbines are owned by companies that are on the brink of bankruptcy, so the general perception should be that it did not go as intended. This is what it is about.
Many municipalities and investors are concerned about the economy. A risky activity naturally presupposes a higher return requirement from the owner, and wind power is demonstrably just such an activity. An increased share of wind in the energy mix actually also complicates matters for nuclear power, because nuclear power may be forced to regulate down when it is very windy.
Nuclear power must be able to serve as base load and produce electricity for most of the year's hours to cover the high costs that building nuclear power entails. It is not obvious with so much wind in the system. A continued powerful expansion of wind power also increases the risk that fossil power will need to be used in even greater extent, alternatively that it will become increasingly common to regulate disconnection.
Why should Vattenfall contribute to this scenario, and why should Vattenfall's owners, that is to say the taxpayers, be involved in paying?
ANDRE VICE TALMANNEN
The Minister has now announced that she will refrain from making further speeches in this interpellation debate.
Source: The Swedish Parliament. The speeches come from the open data of the Riksdag, translated into English by AI, which may contain errors.