Developments during the year | Sustainable financial performanceCash flow <strong>and</strong> investmentsCash flow from operating activities (operating cash flow) improvedby SEK 2.3 billion to SEK 40.1 billion in <strong>2014</strong>. Funds from operations(FFO) increased by SEK 0.2 billion.Total investments increased by SEK 1.2 billion to SEK 29 billion in<strong>2014</strong>, of which SEK 6.5 billion pertained to investments in wind power,which thereby represented Vattenfall’s single largest investment itemin <strong>2014</strong>. During the year, assets were divested for combined total ofSEK 11.6 billion, net. Read more about Vattenfall’s divestments underthe Important events section, pages 8–9.Reduced debtNet debt decreased by SEK 19.5 billion, to SEK 79.5 billion, comparedwith the level at 31 December 2013, which is mainly attributable theproceeds from the sale of the electricity distribution operation inHamburg, the minority shareholding in Enea S.A., the AmagerværketCHP station in Denmark, <strong>and</strong> the MVB waste incineration plant inHamburg (together totalling SEK 11.6 billion, net). In other respects,the decrease in net debt is attributable to an improved cash flow fromoperating activities.Adjusted net debt (which includes, provisions for pensions <strong>and</strong>nuclear power) decreased by SEK 4.3 billion to SEK 158.3 billion. Thepositive cash flow from sales of assets <strong>and</strong> from operating activitieswas largely countered by the higher provisions for pensions <strong>and</strong> nuclearpower in Germany.The key ratio FFO/adjusted net debt improved to 20.3% from 19.6%,but was still below the target interval of 22%–30%.Operations requiring permitsDuring the year Vattenfall conducted operations that requirepermits under national legislation in Sweden, Finl<strong>and</strong>, Denmark,Germany, the Netherl<strong>and</strong>s <strong>and</strong> the UK. The Parent CompanyVattenfall AB conducts operations that require permits in accordancewith the Swedish Environmental Code. These consistprimarily of electricity <strong>and</strong> heat production plants that requirepermits <strong>and</strong>/or registration. Vattenfall’s other operations requiringpermits that make up a significant part of the business areconducted primarily by subsidiaries. Since Vattenfall’s securitiesoperations for electricity trading no longer requires a permit fromthe Swedish Financial Supervisory Authority, the company hasallowed that permit to lapse.Vattenfall’s R&D activitiesVattenfall conducts research <strong>and</strong> development (R&D) to contributeto the execution of Vattenfall’s strategy in both the short<strong>and</strong> long term. Most R&D expenditures are invested in improvingthe efficiency of Vattenfall’s existing plants <strong>and</strong> upgrading themto meet future needs. However, a growing share are invested inmore customer-centric R&D, in gaining a greater underst<strong>and</strong>ingof the future energy l<strong>and</strong>scape <strong>and</strong> in identifying new businessopportunities. Distinct focus areas are E-mobility <strong>and</strong> greatercustomer interaction.In <strong>2014</strong> Vattenfall invested SEK 474 million (672) in R&D (excludingresources allocated to the safe storage of spent nuclearfuel), corresponding to 0.3% (0.4%) of consolidated net sales.46 Vattenfall Annual <strong>and</strong> <strong>sustainability</strong> <strong>report</strong> <strong>2014</strong>
Customer solutionsthat enable sustainableuse of energyEnsure<strong>sustainability</strong> inthe supply chainSafeguardthe company’sTransform theproduction portfoliotowards lowerCO 2 emissions<strong>and</strong> morerenewablesIncreasefocus on otheremissionsProtect nature<strong>and</strong> species<strong>and</strong> safeguardbiodiversityImprove resourceefficiencyin Vattenfall’soperationsintegrityTakeresponsibilityEnsure afor Vattenfall‘shealthy <strong>and</strong>impacts on localsafe workplaceOur employees communitiesDevelopments during the year | Sustainable financial performanceSustainable consumptionSustainable productionOur peopleSustainable financial performanceAt Vattenfall it is our people who develop the business.Engaged employees, clear, visible <strong>and</strong> courageous leaders,a high performance culture <strong>and</strong> a healthy <strong>and</strong> safeworkplace are fundamental for the company’s success.Vattenfall strives to provide a workplace in which all of itsemployees have equal opportunities <strong>and</strong> tools to developthemselves <strong>and</strong> thereby develop the company.How is Vattenfall working with this?Vattenfall is committed to creating a work environment that attracts<strong>and</strong> develops people with key competencies <strong>and</strong> encourages them toperform to the best of their potential. As a large employer Vattenfallcan offer varying work tasks <strong>and</strong> career paths, such as through jobrotation <strong>and</strong> training programmes. The company’s leaders have animportant role in instilling trust <strong>and</strong> commitment, <strong>and</strong> helping employeesperform to their utmost by conveying <strong>and</strong> driving clear strategies,encouraging feedback, <strong>and</strong> being visible <strong>and</strong> accessible.Regular goal <strong>and</strong> performance reviews provide all employees anopportunity, together with their respective managers, to set personalgoals <strong>and</strong> visualise their contribution to Vattenfall’s performance.Individual development plans are also an important component forfostering a high performance culture within the organisation. Thedevelopment plans serve as a foundation for ensuring that every employeehas the right conditions to perform <strong>and</strong> develop.Diversity <strong>and</strong> equal opportunity are key building blocks of a successfulcompany, <strong>and</strong> Vattenfall strives to incorporate these into theday-to-day business activities. At Group level Vattenfall runs a femalementorship programme aimed at increasing the share of female managers.Special emphasis is put on diversity in development initiatives<strong>and</strong> in the recruitment process. In Germany, where the share of femalemanagers is the lowest, every management vacancy is viewed as anopportunity to increase the ratio of female managers.Every other year the Group-wide employee survey, My Opinion, isconducted. The survey gives all employees an opportunity to anonymouslyexpress their views about Vattenfall as an employer <strong>and</strong> abouttheir workplace <strong>and</strong> own development opportunities. It is an importanttool for performance measurement <strong>and</strong> provides guidance for continuousimprovement at the local, regional <strong>and</strong> Group-wide levels.StrategyOffer an attractive <strong>and</strong> inspiring work environment in whichemployees can develop to their full potential <strong>and</strong> see how theirwork contributes to the company’s strategic targets. The strategyhas four clear goals:Committed employeesClear, visible <strong>and</strong> courageous leadersA high performance culture <strong>and</strong> organisationA healthy <strong>and</strong> safe workplace – read more on page 49Targets/KPIsCommitment index higher than 62Leadership index higher than 75Share of female managers above 24%Achievements <strong>2014</strong>Approximately 700 managers participated in Vattenfall’sleadership development programmeA Group-wide process was established for setting goals,giving <strong>and</strong> receiving feedback, <strong>and</strong> monitoring results. Theresults of this work will be followed up in the My Opinionemployee survey in 2015Speakers’ Corner, an internal forum, was held on some 30occasionsChallengesChallenging market conditions requiring reorganisation <strong>and</strong>restructuring will affect our people <strong>and</strong> may affect employeecommitmentA decline in students’ views of Vattenfall as a potential employerhas been noticedThe energy sector’s new conditions <strong>and</strong> changed consumerbehaviours are pointing to a need for new competence – tobe able to adapt, change, develop <strong>and</strong> take on new dutiesEmployee key ratiosNumber ofemployees (FTEs) Women, % Men, % < 30 years, % 30–50 years, % >50 years, %Position Manager 2,627 18% 82% 2% 53% 45%Other positions 27,554 24% 76% 12% 44% 43%Country Sweden 8,870 25% 75% 10% 51% 39%Germany 16,158 23% 77% 12% 38% 50%Netherl<strong>and</strong>s 4,369 26% 74% 8% 58% 34%Other countries 784 24% 76% 9% 58% 33%Total 30 181 24% 76% 11% 45% 44%1) For more detailed information on Vattenfalls employees see Note 53 to the consolidated accounts.Vattenfall Annual <strong>and</strong> <strong>sustainability</strong> <strong>report</strong> <strong>2014</strong> 47
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