Vattenfall Treasury

Vattenfall AB 3 Month Report

Vattenfall Treasury AB
15 May 2001


                       Comments by the Chief Executive

- Acquisitions and higher prices boost net sales

- 17 per cent improvement in profit before tax and minority interests

- Acquisitions in Germany under completion

Market Development

During the first quarter of 2001, net sales increased by 27 per cent to SEK11.6
billion compared with the corresponding period of 2000. The improvement is due
to a growth in volume as a result of acquisitions and, in particular, due to
higher electricity spot prices. Operating profit rose by 21 per cent to just
over SEK 3.3 billion. Higher electricity spot prices and a greater volume of
sales to the NordPool Power Exchange were the main contributing factors to the
increase in profit. Profit before tax and minority interests increased by 17 per
cent to SEK 2.8 billion.

Nordic electricity spot prices have declined since the deregulation of the
electricity market in 1996 due to a number of years of unusually high 
precipitation. The price level rose during the first quarter of 2001 as a result
of low precipitation and greater demand due to the cold winter.

Acquisitions in Germany under Completion

In April, Vattenfall and the other contractual parties signed an agreement
concerning Bewag AG, where HEW and Mirant specify their intention to hold equal
stakes in Bewag, about 43 per cent each.

In May, the earlier agreement with Sydkraft and E.ON Energie concerning
Vattenfall's acquisition of 37.2 per cent of the shares in Hamburgische
Electricitats-Werke (HEW) will be completed. In this way, Vattenfall will
achieve a majority ownership of 71.3 per cent in HEW.

Together with Mirant, Bewag, HEW and Veag/Laubag, we shall now continue our work
to build, in three steps, a new major player, where the Vattenfall Group intends
to have the leading role. Our aim is to achieve a rapid consolidation so that we
can exploit the dynamics created by the agreement and continue to be an
attractive energy provider for customers.

Network Investments

After the disruptions to the electricity network that occurred in the south of
Sweden at around new year, the Board of Directors decided on a comprehensive
action plan to reinforce the network and improve customer service.

Other Agreements

In February, Vattenfall acquired a 32 per cent stake in the Polish distribution
company, GZE and is thereby entering the end-customer market in Poland.

In March, Vattenfall made a public offer to the other shareholders in Arrowhead
AB to acquire the remaining shares. Arrowhead will need considerable
restructuring. A close cooperation between Connection and Arrowhead is being
considered in order to provide a clear strategic future direction for the two

In early April, a letter of intent was signed with Birka Energi to exchange
certain fixed assets and to swap Vattenfall's 63 per cent shareholding in AB
Ryssa Elverk with Birka Energi's wholly-owned AB Kallstrommen and its
subsidiary, AB Avesta Elnat.

Market development for intelligent services has been considerably weaker than
expected. Sensel AB is therefore adjusting its direction by drastically reducing
its operating expenses and seeking new ownership and partnership solutions.

Birka Energi and Vattenfall have reached an agreement concerning co-operation on
UMTS network services for third-generation mobile telephony and on
infrastructure services for broadband.

Together with ten other European power companies, Vattenfall signed a
shareholders' agreement to launch an independent B2B e-procurement exchange
called Eutilia.

Annual Meeting of Shareholders

At the General Meeting of Shareholders on April 26, Dag Klackenberg took over as
Chairman of the Board and Annette Brodin  Rampe, Peter Fallenius and
Vattenfall's President were also elected to the Board.

Lars G Josefsson
President and Chief Executive Officer


Key Figures and Ratios                   January - March             Change
SEK million                              2001       2000                  %
Net sales                              11,559      9,106                 27
Operating profit                        3,340      2,766                 21
Operating margin (%)                     28.9       30.4
Profit before tax and minority 
  interests                             2,814      2,410                 17
Pre-tax profit margin (%)                24.3       26.5
Profit for the period                   1,984      1,721                 15
Earnings per share for the period       15.07      13.07

Vattenfall's financial performance varies considerably during the year. A
substantial portion of income for the year is normally generated during the
first months of the year, when electricity demand is greatest. This means that
the margins for the period are high, compared with the margins for the year as a


Sales and Performance

Net sales increased by 27 per cent or SEK 2,453 million to SEK 11,559 million.
The increase is primarily attributable to increased sales on the power exchange
and to an increase in district-heating and transmission income, largely as a
result of company acquisitions.

Operating expenses amounted to SEK 8,879 million, an increase of SEK 2,341 
million which is largely due to acquired companies. The cost of products sold
increased by SEK 2,062 million, while selling expenses, research and development
costs and administrative expenses increased by SEK 279 million. Depreciation
amounted to SEK 1,336 million. 

Operating profit amounted to SEK 3,340 million (2,766). The operating margin was
28.9 per cent (30.4). Financial income and expenses - net amounted to SEK -526
million (-356).

Interest cover was 4.6 times (5.9). 
Profit before tax and minority interests amounted to SEK 2,814 million (2,410).
The pre-tax profit margin was 24.3 per cent (26.5).

The stake in HEW has been accounted for in accordance with the equity method. If
HEW had been a part of the Vattenfall Group under the agreements now being
signed, net sales would have amounted to about SEK 17,700 million and operating
profit would have amounted to about SEK 3,800 million.

Financial Position

Liquid assets amounted to SEK 5,213 million (December 31, 2000: 7,543). SEK
1,413 million of liquid assets (December 31, 2000: 1,374) comprised investments
concerning interest-arbitrage transactions.

The net indebtedness, namely, interest-bearing liabilities and provisions less
liquid assets amounted to SEK 45,172 million (December 31, 2000: 43,311).

Equity amounted to SEK 38,091 million, which is an increase of SEK 2,971 million
since year-end 2000. The dividend of SEK 990 million, proposed by the Board, was
adopted by the General Meeting of Shareholders. The equity-assets ratio was 37.3
per cent (December 31, 2000: 35.3).


The Group's investments amounted to SEK 5,093 million (4,352), of which
acquisitions of group companies amounted to SEK 114 million (3,648), associated
companies, SEK 3,758 million (156) and other long-term securities, SEK 270
million (26). SEK 951 million (522) was invested in tangible and intangible


During the period, 32 per cent of the shares in Gornoslaski Zaklad
Elektroenergetyczny (GZE) were acquired. A further 8 per cent of the shares in
HEW as well as an additional stake in Arrowhead were acquired.


At the end of March, the number of employees, expressed in terms of man years,
amounted to 13,260 (December 31, 2000: 13,123).

Generation Nordic Countries

Net sales increased by SEK 1,098 million to SEK 5,431 million. Operating profit
increased by SEK 1,020 million to SEK 2,275 million. The improvement is due to
increased electricity sales to power exchanges at higher prices and to reduced
costs. A total of 10.7 TWh (8.9) of hydro power and 16.6 TWh (14.8) of
nuclear power was produced.

Sales Nordic Countries

Sales Nordic Countries comprises the following business units: Sales Sweden,
Sales Norway, Sales Finland, Mega and Supply & Trading.

Net sales increased by SEK 192 million to SEK 4,887 million. Operating profit
decreased by SEK 285 million to SEK - 168 million, due to the higher price of
purchased electricity. The volume sold amounted to 16.1 TWh.

Heat Nordic Countries

Net sales amounted to SEK 912 million (670). Operating profit increased by SEK
69 million to SEK 153 million. The increase is mainly due to the acquisition of
Uppsala Energi and part of the Finnish company, Hameenlinnan Energia (Vattenfall
Kaukolampo). The weather, which was favourable for business during the first
quarter, also had a positive impact on performance. The volume sold amounted to
2.4 TWh (1.7 TWh).

Electricity Networks Nordic Countries

Electricity Networks Nordic Countries comprises the Electricity Networks Sweden
and the Electricity Networks Finland business units.

Net sales amounted to SEK 2,580 million (2,307). Operating profit increased to
SEK 1,075 million (1,016). The change is mainly due to the acquisition of
Keski-Suomen Valo and Hameenlinnan Energia. Transmission volumes amounted to
34.8 TWh (31.7).


Net sales improved by SEK 78 million to SEK 660 million. Operating profit
increased by SEK 23 million to SEK 20 million.

Poland and Germany

Net sales amounted to SEK 1,053 million (917). Operating profit improved by SEK
39 million to SEK 215 million. A total of 1.5 TWh of thermal power and 5.4 TWh
of district-heating was produced. The volume sold amounted to 1.2 TWh and 5.4
TWh, respectively.

Other Business

Other Business comprises the business units New Business and other businesses,
including Vattenfall Naturgas, service companies and non-core business.

Net sales amounted to SEK 1,123 million (709). Operating profit decreased by SEK
352 million to SEK -222 million, mainly as a result of the operating losses in
Arrowhead and Sensel.

Parent Company

Net sales amounted to SEK 5,419 million (5,196). Profit after net financial
items was SEK 1,185 million (911). Investments during the period amounted to SEK
8,491 million. Liquid assets amounted to SEK 1,259 million (December 31, 2000:
48). Funds in the group account managed by Vattenfall Treasury AB amounted to
SEK 7,302 million (December 31, 2000: 123).

Accounting Policies

The Swedish Financial Accounting Standards Council recommendation RR9 has not
yet been applied in full. Otherwise, the same accounting policies have been
applied as for the annual accounts 2000.

Stockholm, May 15, 2001

Lars G Josefsson
President and Chief Executive Officer

Consolidated Income Statement
                                             January - March         Full year
Amounts in SEK million                       2001        2000            2000
Net sales                                  11,559       9,106          31,695
Cost of products sold *                    -7,704      -5,642         -23,484

Gross profit                                3,855       3,464           8,211

Selling expenses, research and development costs
and administrative expenses**              -1,175        -896          -4,732
Other operating income and operating 
expenses - net                                412         165           2,551
Participations in the result of associated 
 companies                                    248          33             658

Operating profit                            3,340       2,766           6,688

Financial income                              253         139           1,037
Financial expenses                           -779        -495          -2,536
Profit before tax and minority interests    2,814       2,410           5,189
Tax                                          -844***     -675****      -1,757
Minority interests in the profit 
for the period                                 14         -14            -462
Net profit for the period                   1,984       1,721           2,970

* Of which, depreciation amounted to SEK 1,248 million (1,092 and 5,186,

** Of which, depreciation amounted to SEK 52 million (SEK 34 million and SEK 291
million, respectively)

*** Calculated on the basis of a standard tax rate of 30 per cent.

**** Calculated on the basis of a standard tax rate of 28 per cent.

Profit Areas
                                 Net sales       Full     Operating profit    
                             January - March     year January - March  Full year
Amounts in SEK million          2001    2000      2000    2001    2000      2000
Generation Nordic Countries    5,431   4,333    15,934   2,275   1,255     4,930
Sales Nordic Countries         4,887   4,695    16,503    -168     117       634
Heat Nordic Countries            912     670     1,951     153      84       -63
Electricity Networks 
Nordic Countries               2,580   2,307     7,551   1,075   1,016     1,619
Services                         660     582     2,832      20      -3        72
Poland and Germany             1,053     917     2,495     215     176       418
Other Business                 1,123     709     2,457    -222     130      -880
Other and Eliminations *      -5,087  -5,107   -18,028      -8      -9       -42

Total                         11,559   9,106    31,695   3,340   2,766     6,688

* Mainly concerns trade between Sales Nordic Countries, Electricity Networks
Nordic Countries and Generation Nordic Countries.

Consolidated Balance Sheet 
                                              March 31     March 31      Dec. 31
Amounts in SEK million                            2001         2000         2000

Fixed assets
Intangible assets                                2,714        1,941        2,993
Tangible assets                                 68,286       59,579       68,089
Financial assets                                23,135       11,293       18,859

Total fixed assets                              94,135       72,813       89,941

Current assets
Inventories                                      5,091        4,883        5,558
Current receivables                             11,825        9,142       11,963
Liquid assets *                                  5,213        9,600        7,543
Total current assets                            22,129       23,625       25,064

Total assets                                   116,264       96,438      115,005

Equity, provisions and liabilities
Equity **                                       38,091       34,980       35,120
Minority interests in equity                     4,761        3,424        4,985
Interest-bearing provisions                        272        1,203          187
Other provisions                                13,639       11,362       13,792
Long-term interest-bearing liabilities          42,118       23,219       41,116
Other long-term liabilities                        713        1,034          878
Current interest-bearing liabilities *           7,995       14,819        9,551
Other current liabilities                        8,675        6,397        9,376

Total equity and liabilities                   116,264       96,438      115,005

Pledged assets                                     755                       709
Contingent liabilities                           7,203                     7,162

* Includes interest-arbitrage transactions of SEK 1,413 million (1,696 and 1,374

** Includes a proposed, as yet unpaid dividend for the previous year.

Consolidated Cash Flow Statement 
                                                                January -  March
Amounts in SEK million                                         2001         2000

Internally generated funds                                    3,541        3,196
Cash flow from changes in operating assets and liabilities     -519       -1,143

Cash flow from operating activities                           3,022        2,053

Investments                                                  -5,093       -4,352
Sales                                                           936          152
Liquid assets in acquired/sold companies, net                     2           61

Cash flow after investments                                  -1,133       -2,086

Dividends                                                         -            -
Financing                                                    -1,273        6,919

Cash flow for the period                                     -2,406        4,833

Liquid assets at the beginning of the period                  7,543        4,860
Translation differences                                          77          -93
Cash flow for the period                                     -2,406        4,833

Liquid assets at the end of the period                        5,213        9,600

Changes in Equity
                                                       Jan. - March  Jan - March

                                                               2001         2000
Opening balance                                              35,120       33,347
Change in accounting policies                                    98           42
Change in tax rate                                                -          -10
Change in translation difference                                889         -120
Net profit for the period                                     1,984        1,721

Closing balance                                              38,091       34,980

Earnings per Share 
                                                    January - March    Full year
                                                       2001    2000         2000
Number of shares ('000)                             131,700 131,700      131,700
Earnings per share                                    15.07   13.07         22.5

Key Ratios
(in per cent unless otherwise specified)
                                                April 2000 - March  Jan. 2000 - 
                                                              2001    Dec. 2000
Return on capital employed                                     9.1          8,9
Return on equity after standard tax                           10.6          9,9

                                                 Jan. - March 2001 Jan. - March 
Operating margin                                              28.9         30.4
Pre-tax profit margin                                         24.3         26.5
Equity-assets ratio                                           37.3         40.6
Debt cover, times                                              1.2          0.9
Interest cover, times                                          4.6          5.9


Return on capital employed: Operating profit in relation to average total assets
less non-interest-bearing liabilities, provisions and liquid assets.

Return on equity after standard tax: Profit before tax and minority interests
less minority interests and tax at a standard rate of 28 per cent in relation to
the average of equity at the start and the end of the period.

Operating margin: Operating profit in relation to net sales.

Pre-tax profit margin: Profit before tax and minority interests in relation to
net sales.

Equity-assets ratio: Equity (including minority interests) in relation to the
balance sheet total at the end of the period less interest-arbitrage

Debt cover, times: Interest-bearing liabilities and provisions plus minority
interests in equity less liquid assets in relation to equity (including minority
interests) at the end of the period.

Interest cover, times: Operating profit including financial income in relation
to financial expenses.

(This report has not been audited by Vattenfall's auditors.)

Vattenfall's semi-annual report for 2001 will be published on August 29, 2001.

This report has been translated from the Swedish original.

Published by Vattenfall's press office,                  tel +46 8 739 50 10

For further information contact:

Lars G Josefsson, President and Chief Executive Officer, tel +46 8 739 50 05
Matts Ekman, Chief Financial Officer,                    tel +46 8 739 50 08
Karl-Erik Olsson, Director, Media Communications,        tel +46 8 739 75 83 
                                                         or +46 70 538 81 38