Vattenfall writes down $4.6 bln, splits operations

STOCKHOLM (AP) Sweden's Vattenfall, the largest utility in the Nordic region, said Tuesday it has written down 29.7 billion kronor ($4.6 billion) off the value of its assets and intends to split its operations into two due to the increasingly bleak prospects for energy markets.

Vattenfall, which is wholly owned by the Swedish state, said the second-quarter writedown was mainly on gas- and coal-fired plants in the Netherlands and Germany, combined heat and power plants in the Nordic region, and trading operations.

"The impairments are significant...but this is the reality we are facing and we have to react according to what we know about the marketplace today," CEO Oystein Loseth said in a statement.

A large portion of the writedown involves Nuon Energy NV, a Netherlands-based utility that Vattenfall purchased for 89 billion kronor ($13.7 billion) four years ago a decision that has now put Swedish officials on the defensive.

"Given what we know today with an extended financial crisis, a changed energy market and falling electricity prices 89 billion kronor was a high price for Nuon," Sweden's minister for financial markets, Peter Norman, told reporters Tuesday. "The price was, however, in line with similar acquisitions made at that time and was supported by external advisers."

Europe's energy market continues to suffer from the region's economic malaise, a sharp drop in the price for coal and carbon emissions, and uncertainty surrounding Germany's drive to increase renewables. Many utilities have been forced to make similar impairments on core assets.

Vattenfall, which posted sales of 167 billion kronor ($26 billion) last year, called the prospects for Europe's energy market "gloomy" and saw no recovery in the foreseeable future. The company said that the writedown would not affect its cash flow.

"I am a bit surprised about the magnitude of the writedown given that Vattenfall also made an impairment in late 2012," said Jakob Magnussen, a Denmark-based analyst at Danske Bank.

"When it's more likely than not that they're going to see significantly lower income from an asset...they have to do the impairment. This brings the asset more in line with what the market perceives as the fair value of these assets," Magnussen said.

Vattenfall will split its operations in two one for the Nordic countries and the other for the rest of Europe. The changes will go into effect January 2014 and give the company "greater financial and strategic flexibility."