Fingrid Group's Interim Report 1 January - 30 June 2008
Review of operations
Power system operation
From the beginning of 2008 to the end of June, 45 terawatt hours of electricity was consumed in Finland. This was 2.3 per cent less than during the corresponding period in 2007. The winter with mild weather decreased electricity consumption. A total of 32.6 terawatt hours of electricity was transmitted in Fingrid’s grid, representing 72 per cent of the electricity consumption in Finland.
Electricity transmissions between Finland and Sweden consisted of imports from Sweden into Finland during the early part of the year. From mid-April, the direction of transmissions has varied. From January to June, 3.0 terawatt hours of electricity was imported from Sweden into Finland (2.2 terawatt hours during the corresponding period in 2007), and 0.9 terawatt hours (1.1 terawatt hours) was exported from Finland into Sweden. The replacement of aluminium transmission line towers between Huutokoski and Vuolijoki caused a restriction in the export capacity to Sweden, but this had no impact on the separation of area prices between Finland and Sweden.
The import capacity on the Russian transmission connection was restricted by maintenance work in Russia until the end of March. During the early part of the year, 5.0 terawatt hours (5.3 terawatt hours) of electricity was imported from Russia into Finland. Fingrid gave permission to the new North West Power Plant 2 in St Petersburg to connect to the Finnish grid during the service of North West Power Plant 1.
Transmissions on the Estlink connection from Estonia mainly comprised imports into Finland, with the volume being 1.0 terawatt hours (0.9 terawatt hours) between January and June. The import volumes have been smaller during night time than during the day. The transmission grid in Estonia has restricted the transmission capacity made available from Finland to Estonia.
The number of disturbance situations in the Finnish grid was smaller than average during the first half of 2008. During the review period, there were no significant extensive faults in the grid.
Promotion of electricity market
Finland and Sweden constituted a uniform wholesale market area of electricity during the review period, since congestions in cross-border transmissions limited trade for only under 1 per cent of the hours during the first half of 2008. The bottleneck revenues on the border between Finland and Sweden, caused by transmission restrictions, totalled 0,1 million euros.
On 27 June 2008, the European transmission system operators signed a letter of intent of the establishment of the new European Network of Transmission System Operators for Electricity (ENTSO-E) by the end of 2008. It will serve not only as a collaboration organisation and interest group for the transmission business but also as a co-operation organisation conforming to the principles of the EU’s Third Legislative Package of the Internal Electricity Market, aiming to promote the integration of the European electricity market and the security of supply of the European transmission grid.
One of the main duties of the new organisation is to develop shared technical and market rules. The present TSO organisations will be abolished and their operations will be transferred to the new organisation within 6 months from its establishment.
In June, Fingrid increased the amount of electricity market information published on its website. The new items include the production forecast for the following day and bottleneck revenues on the border between Finland and Sweden.
Capital expenditure and grid maintenance
The Group’s gross capital expenditure during the review period was 35 million euros (36 million euros during the corresponding period in 2007).
Several significant procurement contracts were signed during the period under review. The submarine cable for the new direct current link between Finland and Sweden (Fenno-Skan 2) will be supplied by Nexans Norway AS, and the construction of the converter stations by ABB Ab. The total value of these is approx. 260 million euros, half of which will be covered by Fingrid. All relevant permits for the link have been acquired both in Sweden and Finland. The connection is due to be ready at the end of 2011.
The total value of other significant procurement decisions made between April and June is approx. 54 million euros. These comprise the Isoniemi 220/110/20 kilovolt (kV) substation, Isoniemi-Vajukoski 220 kV transmission line, Asmunti and Tuomela 400 kV series capacitor stations, Kopula 400/110 kV substation, Petäjäskoski 400 kV and Valajaskoski 220 kV substations, expansion of the Keminmaa substation, and purchases for the Katerma-Kuhmo 110 kV transmission line.
Fingrid is making preparations for increasing the volume of fast disturbance reserves by 100 to 400 megawatts in the coming years. The company will study whether the present production capacity in Finland has plant units applicable to reserve power operation, and whether there are industrial loads which can be shed and which can hence reduce the need to construct new reserve power capacity. Environmental impact assessments for the new reserve power plants will be launched in 6 locations in the late summer. The preliminary cost estimate of the project is approx. 60 - 240 million euros.
The occurrence of corrosion in tower guys has been studied during the spring, and plans have been drawn up for the replacement of guys suffering from corrosion. The inspections concern a total of 1800 tower locations. The repairs of the most urgent ones of these will commence in the autumn and the remainder in the next few years. The cost estimate of the project is approx. 7 million euros.
Financial result
The Group’s revenue was 193 million euros (161 million euros). Transmission revenues grew slightly to 102 million euros (101 million euros). The sales volume of balance power was 48 million euros (27 million euros) and purchases of balance power 46 million euros (24 million euros). Fingrid´s share of the inter-Nordic bottleneck revenues grew because of capacity restrictions between Norway, Sweden and Denmark, and were in all 13 million euros (6 million euros). The cross-border transmission revenues on the Russian and Estonian connections totalled 11 million euros (13 million euros).
Operating profit without the change in the fair value of derivatives was 47 million euros (41 million euros). Operating profit was mainly raised by increased bottleneck revenues. Moreover, the compensations for the European market place had a positive impact of 4 million euros on the operating profit. Operating profit was decreased by factors such as higher depreciations and smaller cross-border transmission revenues.
The operating profit in accordance with IFRS was 46 million euros (53 million euros), which contains 1 million euros (+12 million euros) of negative change in the fair value of electricity derivatives. The IFRS profit before taxes was 28 million euros (34 million euros). The equity ratio was 30.1 (26.7) per cent at the end of the review period.
The Group’s income flow is characterised by seasonal fluctuations, which is why the financial result for the entire year cannot be directly estimated on the basis of the six-month result.
Financing
The financial position of the Group continued to be good. The net finance costs of the Group were 18 million euros (20 million euros). Financial assets recognised at fair value in the income statement, and cash and cash equivalents amounted to 205 million euros (200 million euros) at 30 June 2008. The interest-bearing liabilities, including derivative liabilities, totalled 939 million euros (966 million euros), of which 715 million euros (788 million euros) were long-term and 224 million euros (178 million euros) were short-term.
The counterparty risk involved in the derivative contracts relating to financing was 8 million euros (6 million euros). The company has an undrawn revolving credit facility of 250 million euros.
International rating agency Standard & Poor’s Rating Services (S&P) updated Fingrid Oyj’s credit opinion on 11 July 2008. There were no changes from the previous rating.The long-term credit rating is A+ and the short-term rating is A-1. The outlook is stable.
Personnel
The total personnel of the Fingrid Group averaged 253 (237) during the review period.
Auditing
The consolidated figures in this Interim Report are unaudited.
Outlook for the remaining part of the year
The profit of the Fingrid Group for the entire year without the change in the fair value of derivatives is expected to decrease somewhat on the previous year.
Board of Directors
Appendices: Tables for the interim report 1 January - 30 June 2008
Further information:
Jukka Ruusunen, President & CEO, +358 (0)30 395 5140 or +358 (0)40 593 8428
Tom Pippingsköld, CFO, +358 (0)30 395 5157 or +358 (0)40 519 5041
Jukka Ruusunen, President & CEO, +358 (0)30 395 5140 or +358 (0)40 593 8428
Tom Pippingsköld, CFO, +358 (0)30 395 5157 or +358 (0)40 519 5041