Vattenfall is one of the largest energy companies in Europe. The Swedish state-owned company operates in many countries across the continent and provides electricity, heating, and gas to millions of customers. As a large and stable utility company, Vattenfall can be an attractive investment option for many investors. Here is a guide on how to invest in Vattenfall stock.
About Vattenfall
Vattenfall is 100% owned by the Swedish state and headquartered in Solna, Sweden. The company was founded in 1909 and has grown to become one of Europe’s largest utilities with over 20,000 employees. Some key facts about Vattenfall:
- Provides electricity, heating and gas to 10 million customers across Sweden, Germany, the Netherlands, Denmark, Finland, France and the UK.
- Operates hydro, nuclear, coal, gas and wind power plants with a generation capacity of 35,000 MW.
- Owns and operates electricity distribution networks serving 3.3 million customers.
- Has 6.5 million customers connected to district heating networks.
- 2020 underlying operating profit was SEK 26 billion.
Vattenfall’s operations are organized into six business areas: Heat, Wind, Customers & Solutions, Power Generation, Distribution, and Markets.
Why Invest in Vattenfall?
Here are some of the key reasons investors may want to consider investing in Vattenfall stock:
- Stable utility business model – As an electric and gas utility, Vattenfall operates a stable business model with steady revenues and cash flows.
- State ownership – Full state ownership provides strong backing and reduces bankruptcy risk.
- Renewable energy focus – Vattenfall is investing heavily in renewable energy like wind and hydro power as part of Sweden’s sustainability goals.
- Decent dividends – Vattenfall has a good track record of paying steady dividends to its owner, the Swedish state. The dividend yield is typically around 5-7%.
- Nordic presence – Strong position in Sweden, Germany and other Nordic countries which have well-regulated and transparent utility markets.
For investors looking for stability, renewable energy exposure, and dividend income, Vattenfall checks many of the boxes as a long-term investment.
How to Buy Vattenfall Stock
Unlike many other public companies, investing in Vattenfall stock is not as straightforward because it is fully owned by the Swedish government. Here are the options for investing in Vattenfall:
Swedish Government Bonds
Since the Swedish government owns Vattenfall, one way to gain exposure is by investing in Swedish government bonds. The government’s finances and bond yields are impacted by Vattenfall’s financial performance. So Swedish bonds can be a proxy for investing in Vattenfall, albeit an indirect one.
Some popular Swedish government bonds include:
- Sweden 10-Year Government Bonds (SE0001131335)
- Sweden 2-Year Government Bonds (SE0016829030)
- Sweden 5-Year Government Bonds (SE0016829253)
These can be purchased through many online brokers and give exposure to Swedish sovereign debt. As the sole owner, the government’s fiscal position is tied to how well Vattenfall performs financially.
Vattenfall Corporate Bonds
While you can’t buy the company’s stock directly, Vattenfall does issue corporate bonds that individual investors can purchase. Some details on Vattenfall bonds:
- Issues bonds in Swedish Krona (SEK) with maturities ranging from 2 to 10 years.
- Bonds have investment grade A3/A- credit rating from Moody’s and S&P.
- Yields are moderate given the stability of Vattenfall.
- Individual bonds have face values of SEK 1 million+. So minimum investment is high.
Buying Vattenfall bonds gives direct credit exposure to the company. You receive fixed coupon payments and return of principal at maturity per the bond terms.
Some well-known Vattenfall corporate bonds include:
- Vattenfall AB SEK 1B 2.25% Bond maturing 2026 (XS1197275009)
- Vattenfall AB SEK 2B 1.5% Bond maturing 2025 (SE0010414956)
- Vattenfall AB SEK 2.5B 1.375% Bond maturing 2022 (SE0008294174)
These can be purchased through Nordic bond brokers for the minimum face value amounts.
Swedish ADRs on OTC Markets
Although rare, it is occasionally possible to purchase Vattenfall shares in the form of American Depositary Receipts (ADRs) on over-the-counter (OTC) markets in the US. These essentially represent fractional shares of the company not available on major exchanges. The ADR ticker symbol for Vattenfall is VTTLF.
The downside is these OTC shares are not very liquid, so it may be difficult to execute trades. But for a long-term buy-and-hold investor, they do provide direct equity exposure to Vattenfall’s business.
Risks of Investing in Vattenfall
While Vattenfall has a solid business model and state backing, there are also some risks to consider:
- Electricity and fuel price volatility – Energy prices can be volatile and affect Vattenfall’s margins.
- High debt load – Vattenfall carries significant debt that adds financial risk during downturns.
- Capex requirements – Major investments needed for power plants, grids, and renewables projects.
- Government ownership – Strategic priorities are set by political forces rather than only shareholder interests.
- Nuclear phase-out – Germany’s accelerated nuclear exit poses challenges for Vattenfall’s asset portfolio.
These risks are common across the utility sector. But prudent investors should be aware of them when assessing Vattenfall bonds or shares as an investment.
Vattenfall Financial Performance
To make sound investment decisions, it is helpful to review some of Vattenfall’s recent key financial performance figures:
Financial Metric | 2018 | 2019 | 2020 |
---|---|---|---|
Revenue | 152.1B SEK | 165.9B SEK | 158.8B SEK |
Operating Profit | 23.6B SEK | 26.9B SEK | 26.0B SEK |
Net Profit | 14.9B SEK | 18.0B SEK | 7.7B SEK |
Assets | 584B SEK | 638B SEK | 654B SEK |
Debt | 265.3B SEK | 288.1B SEK | 267.2B SEK |
Vattenfall has maintained good levels of profitability with over SEK 20B in operating profit annually in recent years. Revenue and assets are up considerably as well. The company carries a moderate debt load relative to its size and asset base. Credit rating agencies view Vattenfall as having a healthy investment grade balance sheet.
Conclusion
Vattenfall provides reliable electricity, heating and gas supply to millions of customers across Europe. While not a directly tradable stock, Swedish government bonds and corporate bonds offer a way to gain investment exposure to this state-owned utility. For dividend and stable income investors, Vattenfall represents a sound investment in an essential public service provider. As with any investment, proper due diligence is required before making a decision.