Fingrid Oyj
Fingrid Group’s Half-year report 1 January – 30 June 2017
Fingrid Oyj / Miscellaneous Helsinki, Finland, 2017-07-27 11:15 CEST (GLOBE NEWSWIRE) —
Fingrid Oyj
Fingridâs consolidated financial statements have been drawn up in accordance with the International Financial Reporting Standards (IFRS). This Half-year report has been drawn up in accordance with the IAS 34 Interim Financial Reporting standard and complies with the same accounting principles as those presented in the Groupâs 2016 financial statements. This Half-year report is unaudited. Unless otherwise indicated, the figures in parentheses refer to the same period of the previous year. Graphs can be seen in the PDF attachment to the JanâJun Half-year report. Fingrid is responsible for electricity transmission in Finlandâs nationwide grid, which Fingrid owns and which is an integral part of the power system in Finland. The transmission grid is the high-voltage trunk network which covers all of Finland. Major power plants, industrial plants and electricity distribution networks are connected to the grid. Finlandâs main grid is part of the Nordic power system, which is connected to the systems of Central Europe, Russia and Estonia. Fingrid is in charge of grid operation, and for the planning and monitoring of grid operation, as well as for maintaining and developing the system. An additional task is to participate in work carried out by ENTSO-E, the European Network of Transmission System Operators for Electricity, and in preparing European market and operational codes as well as network planning. Fingrid offers grid, cross-border transmission and balance services to its contract customers: electricity producers, network operators and the industry. Fingrid serves the electricity market by maintaining adequate electricity transmission capacity, by removing bottlenecks cross-border transmission links and by providing market data. Fingridâs turnover is made up of the service charges it collects for its services and from the revenue received from the sale of imbalance and balancing power.
CEO Jukka Ruusunen: âSignificant national and cross-national measures in the energy industryâ âIn financial terms, Fingridâs first half of 2017 overall has been as expected and the companyâs finances are on a stable footing. We have succeeded well in our mission: the reliability of electricity transmission has been excellent and there were no major disturbances in our grid during the first half of 2017. With the winter being mild, sufficient electricity supply was not in jeopardy at any point. Peak electricity consumption was reached on 5 January 2017, reaching 14,300 MWh/h. Because of the market situation, the transmission connections with our neighbouring countries brought in more electricity to Finland than ever before. The new import record is 4,750 MWh/h. In May, we found ourselves faced with a new situation yet again: there was too much electricity production in relation to consumption in Finland. The markets functioned, and the price of electricity on the balancing power markets for a four-hour period was negative â¬â1,000/MWh and for a two-hour period â¬â500/MWh. These are the all-time lowest imbalance power prices in Finland. Electricity consumers were paid for increased electricity consumption. Jorma Ollilaâs report for the Nordic Council on the development of Nordic energy co-operation was published in June. The report is based on the co-ordination of energy policies and well-functioning electricity markets, and it steers the development of Nordic energy co-operation in the right direction. The transition to a green, carbon-free power system requires close regional co-operation and leveraging the markets. The proposals are based on well-functioning markets and on strengthening them. Functioning markets will play a key role in the transformation to a more environmentally friendly electricity system with a higher share of renewables. We have been very active and have presented measures to cost-effectively renew the electricity system to meet the needs of future generations. In the beginning of April, Fingrid published âOur Shared Journey â a roadmap towards achieving a green power systemâ, which, like Ollilaâs report, it contains similar initiatives and measures, as well as ongoing projects to develop the markets. Over the coming decade, we will implement several nationally significant investments in Finlandâs transmission grid. In co-operation with Swedenâs TSO, we have launched the development of a third 400 kilovolt AC connection between Finland and Sweden. The project, which costs EUR 200 million, is due to be completed by 2025 at the latest. The connection will increase the transmission capacity between the two countries by 800 megawatts, representing an increase of 30 per cent from the current transmission capacity. Electricity produced in northern Finland and northern Sweden must be transferred to the south to serve the needs of industry and consumers. We have begun planning a northâsouth transmission connection, called the Forest Line, from Oulu to Petäjävesi. In addition to the above, we are preparing for the increased transmission needs between north and south by launching plans to double the âLake Lineâ in eastern Finland. In addition to preparing for the future, major upgrades to the grid are under way: this year we will realise a total of 32 investment projects. At the start of May, we adopted joint balance settlement for the electricity markets of Finland, Sweden and Norway. Joint balance settlement strengthens the markets across national market borders and is a step closer to the deeper integration of the Nordic electricity markets. Cross-border co-operation in balance settlement is new in entire Europe. The balance settlement will be prepared in future by eSett Oy, which is jointly owned by the TSOs and operates out of Finland. The Swedish and Norwegian TSOs presented a proposal to the Danish and Finnish TSOs on a balance management model for developing the real-time markets in the Nordic countries. In Fingridâs view, it is unfortunate that the proposal, which will have an impact on Nordic TSO collaboration, was not prepared jointly by the TSOs. In our view, it is important that the key principles are prepared jointly by the key stakeholders. Our goal is to enable open, effective electricity markets based on fair principles in the best interest of the entire Baltic Sea region and all electricity market parties. We will continue the discussion with Nordic TSOs.â Financial result
Fingridâs congestion income from connections between Finland and Sweden decreased to EUR 10.4 (29.9) million. This is a consequence of the weakening hydrological situation in the Nordic countries and the rise in the Nordic price level following the strengthening price of coal, which has reduced the regional price differences between Finland and Sweden. Fingridâs congestion income from the links between Finland and Estonia amounted to EUR 0.1 (2.3) million. In accordance with the regulation on congestion income, Fingrid has booked the congestion income it received during the reporting period to the HirvisuoâPyhäselkä grid investment project, which supports the transmission of electricity from northern Sweden to Finland. Between January and June, electricity consumption totalled 43.5 (43.6) terawatt hours. Imbalance power sales amounted to EUR 85.0 (74.6) million. The growth in sales in largely due to the higher price of imbalance power. Cross-border transmission income from the connection between Finland and Russia remained at the previous yearâs level, i.e. EUR 10.8 (10.8) million. Imbalance power costs increased from the previous yearâs level to EUR 69.7 (58.2) million, mainly as a consequence of the rise in prices. Loss power costs amounted to EUR 21.2 (30.7) million. The declining loss power costs have been affected by the lower price of loss power procurement and the lower volume of loss power. At the end of June, approximately 105 (100) per cent of Fingridâs projected loss power procurement for the remainder of 2017 was hedged at an average price of EUR 31.1 (35.9) per megawatt hour. The cost of reserves to safeguard the gridâs system security increased slightly to EUR 24.9 (24.1) million. The growth in reserve costs was affected by the procurement of automatic frequency regulating reserve, which was not activated at all during the first half of the previous year. Depreciation amounted to EUR 48.4 (48.2) million. Grid maintenance costs have remained nearly at the previous yearâs level, at EUR 9.6 (9.5) million. Personnel costs amounted to EUR 14.7 (14.3) million.
The Groupâs operating profit in the first half of the year was EUR 103,7 (100,4) million. Profit before taxes was EUR 92,5 (96,7) million. The differences from the corresponding period of the previous year are explained by changes in the market value of derivatives (EUR â23.3 million), and the growth in grid service income (EUR +22.2 million). Profit for the period was EUR 73,9 (77,4) million and comprehensive income was EUR 74,1 (80,5) million. The Groupâs net cash flow from operations, with net capital expenditure deducted, was EUR 85.8 (73.7) million during the review period. The equity to total assets ratio was 35.7 (33.5) per cent at the end of the review period.
The Groupâs profit for the financial period is characterised by seasonal fluctuations, because the higher tariff on grid service income during the winter period is valid from the first day of December until the last day of February, in addition to which, electricity transmission is higher during the cold period in question, due to the higher consumption of electricity. Since much of the Groupâs operating profit for the review period is accumulated during the winter tariff months, the profit for the entire year cannot be directly estimated based on the profit from the period under review.
Grid assets represent the majority of the companyâs property, plant and equipment. Grid assets include 400-, 220-, 110-kilovolt transmission lines, DC lines, transmission line right-of-ways, substations and the areas they encompass (buildings, structures, machinery and equipment, substation access roads), gas turbine power plants, fuel tanks, generators and turbines. These assets are valued in the balance sheet at the original acquisition cost less accumulated depreciation and potential impairment. If an asset is made up of several parts with useful lives of different lengths, the parts are treated as separate items and are depreciated over their separate useful lives. Intangible assets consist of computer software and land use and emission rights. Computer software is valued at its original acquisition cost and depreciated on a straight line basis during its estimated useful life. Land use rights, which have an indefinite useful life, are not depreciated but are tested annually for impairment. Fingridâs grid investment programme promotes the national climate and energy strategy, improves system security, increases transmission capacity and promotes the electricity markets. The annual capital expenditure in the grid continues to be extensive.
Related parties are presented in the notes to Fingridâs 2016 financial statements. All transactions between Fingrid and related parties take place on market terms. The company has not lent money to the top management, and the company has no transactions with the top management. At the close of the reporting period, the Republic of Finland owned 53.1 per cent of the companyâs shares. The Finnish Parliament has authorised the Ministry of Finance to reduce the stateâs ownership in Fingrid Oyj to no more than 50.1 per cent of the companyâs shares and votes.
Financing Equity and liabilities as shown in the balance sheet are managed by the Group as capital. The principal aim of Fingridâs capital management is to ensure that the Group is capable of uninterrupted operations and can rapidly recover from any exceptional circumstances. Additional key goals include maintaining an optimal capital structure such that Fingrid Oyjâs credit rating remains solid, cost of capital remains reasonable, and the Group can pay dividends to its shareholders. Fingrid Oyjâs credit rating remained high, reflecting the Groupâs strong overall financial situation and debt service capacity. Between January and June the Groupâs net financial costs amounted to EUR 12,1 (4,0) million, including the change in the fair value of derivatives of EUR 4,0 million negative (EUR 5,5 million positive). Interest-bearing borrowings totalled EUR 1,123.4 (1,120.5) million, of which non-current borrowings accounted for EUR 834.0 (800.3) million and current borrowings for EUR 289.3 (320.2) million. The Group did not issue new long-term debt during the reporting period.
The Groupâs liquidity remained good. Cash and cash equivalents, and financial assets recognised at fair value through profit or loss on 30 June 2017 were EUR 83.7 (79.6) million. The Group additionally has an undrawn revolving credit facility of EUR 300 million to secure liquidity and a total of EUR 50 million in uncommitted overdraft facilities. The annual general meeting decided on a dividend payment of EUR 37,536.09 for each Series A share and EUR 16,038.49 for each Series B share, representing a total dividend payout of EUR 97,999,992.05. EUR 77,954,261.01 remains in the distributable funds. The net fair value of financial derivatives was EUR 10.2 (14.7) million. The Groupâs foreign exchange and commodity price risks are mainly hedged. Changes in the market value of the underlying assets of the derivatives may affect the Groupâs earnings as changes in fair value of derivatives. The exposure of the loan portfolio to interest rate risk is measured by using a Cash Flow at Risk (CFaR) type of model. According to the model, there is a 95% (99%) probability that Fingridâs interest expenditure will amount to no more than EUR 20 (21) million during the next 12 months.
The purpose of Fingridâs loss power price hedging is to reduce the effect of volatility in market prices to the loss power purchase costs and to give adequate predictability in order to keep the pressure to change transmission fees moderate. The change in the fair value of electricity futures used in Fingridâs loss power price hedging was EUR 3.4 million negative (EUR 10.4 million positive). The volatility in the fair value of electricity futures can be significant. The negative impact on profit was caused by the impact of decreased spot price of electricity to the fair value of electricity futures. Fingrid holds its bought futures to maturity. The sensitivity of electricity price to the fair value of electricity futures is measured as the difference a 10 per cent fluctuation in market price would have on outstanding electricity futures on the reporting date. A positive/negative change of 10 per cent in the market price of electricity would have an impact of EUR 8.6 million/EUR -8.6 million on the Groupâs profit before taxes. Management of system security In JanuaryâJune, electricity consumption in Finland amounted to 43.5 (43.6) terawatt hours. Inter-TSO transmission in the same period amounted to 0.8 (2.6) terawatt hours. The total electricity transmission in Finland was 44.3 (46.2) terawatt hours. Fingrid transmitted a total of 32.8 (35.3) terawatt hours in its grid, representing 74.0 (76.5) per cent of the total electricity transmission in Finland. During this period, the electricity Fingrid transmitted to its customers amounted to 31.9 (32.7) terawatt hours, which represents 73.4 (75.0) per cent of Finlandâs total consumption. Between January and June, 7.5 (8.9) terawatt hours of electricity were imported from Sweden to Finland, and 0.2 (0.1) terawatt hours were exported from Finland to Sweden. Transmission capacity between the countries was partly limited for brief periods during the review period, due to grid maintenance work. In JanuaryâJune, 0.6 (2.4) terawatt hours of electricity were exported to Estonia. Transmission capacity between the countries was partly limited between 5â10 June, during the EstLink1 connectionâs annual maintenance. Between January and June, 3.0 (3.0) terawatt hours of electricity were imported from Russia to Finland. Transmission capacity from Russia to Finland was fully available during the reporting period, with the exception of some brief disturbances due to maintenance work on the Russian side which limited electricity transmission. Electricity imports from Russia were relatively low, as in the previous years. There are major intraday variations in import volumes, however. Electricity transmission capacity from Finland to Russia was fully available during the period under review, except for the period of 4â30 June, when maintenance work was being carried out in Russia. Winter 2016â2017 was mild, which reduced the need for electricity. The peak in winter electricity consumption was reached on 5 January 2017, during a brief period of cold temperatures. Consumption reached a maximum of 14,273 MWh/h, with Finlandâs electricity production contributing 9,963 MWh/h and net imports amounting to 4,309 MWh/h. Peak consumption in the winter of 2016â2017 fell short of the record consumption of winter 2015â2016, which was 15,105 MWh/h. There were no major disturbances with extensive consequences in the grid during the period under review. There were exceptionally few outages on the international DC links.
Transmission system operator Fingrid and nuclear power company Teollisuuden Voima (TVO) have begun preparations to connect Olkiluoto 3 (OL3), which is under construction in Eurajoki, to the national grid. According to the supplierâs schedule, the reactor unitâs regular power production will begin at the end of 2018. The connection requires special arrangements, because once completed, OL3 will be considerably larger than previous electricity production units. Fingrid and TVO have now agreed on the practical implementation of system protection for OL3 which will allow the unit to be connected to the electricity system.
Developing the electricity market In JanuaryâJune the average day-ahead market price for the Nordics was EUR 29.28 (23.97) per megawatt hour and Finlandâs area price was EUR 31.92 (30.32) per megawatt hour. Between January and June, congestion income between Finland and Sweden totalled EUR 20.9 (59.8) million. The substantial decrease in congestion income was affected by the lower area price difference between Finland and Sweden. This was partly a consequence of the weakening hydrological situation in the Nordic countries and the rise in the Nordic price level following the strengthening price of coal. The reliable operation of transmission connections between Finland and Sweden and the improved availability of the NordBalt connection between Sweden and Lithuania helped reduce regional price differences. In April, Fingrid published a roadmap for developing the electricity markets. âOur Shared Journey â a roadmap towards achieving a green power systemâ sparked extensive debate and received positive feedback from stakeholders. Joint balance settlement for the electricity markets of Finland, Sweden and Norway was introduced at the start of May. Joint balance settlement strengthens the markets across national market borders and is a step closer to the deeper integration of the Nordic electricity markets. The balance settlement will be prepared by eSett Oy, which is jointly owned by the TSOs and operates out of Finland. During the period, Fingrid became the first European TSO to introduce an open data service that centrally distributes information about Finlandâs electricity system and market. The open data opens up opportunities for external operators to develop new services and applications.
Fingrid used EUR 1.6 (2.3) million for countertrade during the review period. The majority of the countertrade costs arose in connection with outages in the InkooâEspoo 400 kV power line in April. Countertrade was used to ensure system security in southwest Finland.
Ensuring transmission capacity The modernisation of the oldest part of the national grid, from Forssa to Lieto and Yllikkälä to Koria, is proceeding according to plan. The total cost of the ForssaâLieto project is EUR 28 million, and the cost of the YllikkäläâKoria project is EUR 14 million. Detailed planning of the Forest Line, which runs through central Finland, has also begun. Olkiluotoâs 400 kilovolt switching station, which is outdated and has insufficient system security, will be modernised in Eurajoki. The Olkiluoto substation is one of the most important grid nodes, with three nuclear power plants connected to it. The procurement contract is valued at approximately EUR 9.4 million. A procurement decision was also made on the modernisation of the 400 kilovolt substation at Inkoo; the value of the project is roughly EUR 9.1 million. Five other procurement decisions have also been made during 2017, with a total value of approximately EUR 15 million. A total of 15 substation projects and 17 power line projects or transmission line arrangements are under way in 2017. A competitive tender process for three-year contracts covering basic maintenance on substations and power lines, as well as basic and special maintenance on secondary equipment, has begun. The new contractual periods will begin on 1 January 2018. The combined value of the contracts is roughly EUR 28 million. The grid experienced very few disturbances and failures. The measures launched to improve the reliability and availability of HVDC connections between Sweden and Estonia have produced excellent results since early 2017. Swedenâs Fenno-Skan connections have been 100% available, and there were three brief interruptions on Estoniaâs EstLink connections. By international standards, Fingridâs grid asset management is world-class. In spring, Fingrid placed at the top in the International Transmission Asset Management Study (ITAMS), as it has for several years now. In June, Fingrid published a draft of its grid development plan for 2017â2027. The draft is based on the regional grid plans drawn up together with customers. The plan also takes into account the Baltic Sea regionâs development plan and the ten-year grid plan covering all of Europe. Fingridâs stakeholders have the opportunity to give feedback and comment on the draft until 8 September 2017. Planning has begun on a third AC connection to be built between Finland and Sweden. With the support of the Swedish TSO, Svenska Kraftnät, Fingrid has applied for Project of Common Interest (PCI) status for the project from the EU. Such status is granted to projects that are essential to the EUâs internal energy markets and to achieving the targets of the EUâs energy policies. Projects with PCI status can benefit from, among other things, faster permit processing, and they are entitled to later apply for financial support from the EU. An environmental impact assessment (EIA) procedure was also launched at Fingrid related to the construction of a power line.
Fingrid received positive feedback on the responsibility of its operations when the Finnish Association for Impact Assessment granted the company their annual award for good EIA activities for the environmental assessment procedure carried out on the power lines required to connect the Hanhikivi 1 nuclear power plant to the grid. Personnel The total number of personnel employed by the Group averaged 347 (332), of which 296 (284) were in a permanent employment relationship. Personnelâs wages and salaries amounted to EUR 12,1 (11,5) million i.e. 3,7 (3,9) per cent of the turnover.
Fingrid ranked second in the survey Finlandâs Most Inspiring Workplaces 2017.
Personnel satisfaction is also reflected in the low rate of absences due to illness: in JanuaryâJune, the sick-leave rate was 1 (1) per cent. Other matters Fingrid Oyjâs Annual General Meeting was held in Helsinki on 24 May 2017. The Annual General Meeting approved the financial statements for 2016 and discharged the members of the Board of Directors and the CEO from liability. The AGM elected Fingrid Oyjâs Board of Directors for the term that ends at the close of the next Annual General Meeting. Juhani Järvi continues as Chair of the Board of Directors. The other Board members are Juha Majanen (Vice Chair), Anu Hämäläinen, Sanna Syri and Esko Torsti.
The Annual General Meeting decided to pay dividends in accordance with the Boardâs proposal. Legal proceedings and proceedings by authorities Fingrid appealed to the Helsinki Administrative Court on the Tax Administrationâs preliminary ruling on income taxation regarding the treatment of congestion income. The appeal and its ruling do not have an impact on Fingridâs result. Events after the review period and outlook for the rest of the year Fingrid Groupâs profit for the 2017 financial period, excluding changes in the fair value of derivatives and before taxes, is expected to improve somewhat from the previous year. Grid service pricing for 2017 is set in such a way as to achieve a regulatory-allowed financial result in 2017. Based on the current estimate, it appears that the year will show a slight deficit. Results forecasts for the full year are complicated especially by the uncertainty related to grid income, ITC income and cross-border transmission income, and to reserve and loss power costs. In the Nordic countries, these are dependent on temperature variations as well as changes in precipitation and the hydrological situation, which affect electricity consumption and electricity prices in Finland and its nearby areas, and thereby also the volume of electricity transmission in the grid. The companyâs debt service capacity is expected to remain stable.
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The EQS Distribution Services include Regulatory Announcements, Financial/Corporate News and Press Releases. |
Language: | English |
Company: | Fingrid Oyj |
Finland | |
ISIN: | XS0113638653 |
Category Code: | MSC |
TIDM: | BR96 |
Sequence No.: | 4468 |
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