The foremost business risks of the company include risks relating to the functioning of the power system, such as a major disturbance or power shortage, and incorrect or unanticipated capital expenditure projects, for example due to a change in regional electricity consumption or generation. Also, risks related to official regulation, such as changes in Finnish or European regulation, can weaken the financial position of the company or its opportunities to pursue the objectives related to the development of the electricity market. An unanticipated increase in costs or decrease in income as a result of the realisation of the counterparty risk or sudden changes in the price of electricity or in the interest rate level may have the same effect. Other significant risks include personnel risks related to issues such as electrical safety and expertise in the transmission industry.
Fingrid is prepared for a wide-spread disturbance concerning Finland or the Nordic power system by means of various reserves, procedural guidelines, contingency plans, and exercises. In its strategy, the company also focuses on the versatile utilisation of the operation control system, expedited disturbance management, and management of power shortage situations. A wide-spread disturbance in the power system may be caused by several simultaneous faults in the grid, inoperability of Fingrid’s operation control system, insufficiency of production capacity, or an external event which prevents grid operation entirely or partially.
The objective is to avoid incorrect or unanticipated capital expenditure by updating nation-wide and regional grid plans regularly, by consolidating customer co-operation, and by conducting co-operation with the other transmission system operators.
Fingrid’s operations are subject to official regulation and supervised by the Energy Market Authority. The company aims to establish well-working and transparent co-operation and interaction with the various stakeholders, to contribute actively to the reports and task forces of authorities, and to focus on working within ENTSO-E, the European organisation of transmission system operators, so that it can develop the electricity market at market terms and assess the financial changes pertaining to regulation.
An unanticipated increase in costs or decrease in income is restricted by enhancing financial control in the Group and assessment concerning financial latitude. Derivatives are used for hedging against changes in the price of electricity and the interest rate level. The counterparty risk involved in the obligations of parties which have a contractual relationship with Fingrid is limited contractually, by using various limits and by regularly monitoring the financial standing of the counterparties.
The expertise and occupational safety risks pertaining to personnel risks are limited by the company’s strategic long-term personnel planning, allocated training programmes for both the company’s own personnel and service providers, and by auditing the work sites systematically in order to attain the best practices and to enhance occupational safety. Keeping up an active employer image through communications and co-operation with educational establishments and students constitutes part of the limitation of personnel risks.
As part of its corporate social responsibility, Fingrid has identified the risks that have a major impact on society. These include a major disturbance or an extensive disturbance with a long duration, diminished confidence in the electricity market, postponement of cross-border line construction projects, delayed reinforcement programme for the trunk grid, and unexpected and long-term restrictions in transmission capacity.
In its selected strategic focal areas, Fingrid has also taken the management of these risks into account and made preparations for the risks in its action plan using various means, such as those described above in conjunction with a major disturbance. The company aims to contribute to the integration of the European electricity market and intensification of market mechanisms by constructing new cross-border transmission connections and by publishing market information which has bearing on the transparency of the market. The company prepares and allocates resources for projects which reinforce the cross-border connections and the trunk grid, and takes environmental impacts into account in planning and construction with a long time span. Long-term restrictions in transmission capacity inflict financial disadvantage on the customers and society. This disadvantage is minimised by securing the critical items in the transmission grid and on the cross-border connections and by means of efficient outage planning, for example by optimising the timing of outages so that the financial impact on the customers is kept to a minimum.
The financing risks of the company are described comprehensively in accordance with the requirements of IFRS 7 in the notes to the financial statements of 2010.