Fingrid Group's annual review and financial statements 2008
Operating environment
Power system operation
In 2008, electricity consumption in Finland decreased by 3.8 per cent on the previous year, to 86.9 terawatt hours (90.3 terawatt hours in 2007). The winter with exceptionally mild weather decreased electricity consumption. The economic recession in the autumn also decreased the need for electricity by industries. A total of 65.4 terawatt hours (68.2) of electricity was transmitted in Fingrid’s grid, representing 75 per cent of the electricity consumption in Finland.
A total of 3.7 terawatt hours of electricity was imported from Sweden into Finland (4 terawatt hours in 2007), and 4.2 terawatt hours (3.7) was exported from Finland into Sweden in 2008.
Electricity transmissions from the Baltic countries on the Estlink connection from Estonia mainly consisted of imports into Finland. The import volume on this connection was 2.3 terawatt hours (1.9).
Electricity transmissions from the Baltic countries on the Estlink connection from Estonia mainly consisted of imports into Finland. The import volume on this connection was 2.3 terawatt hours (1.9).
Electricity imports from Russia into Finland totalled 10.9 terawatt hours (10.2) in 2008.
Power system operation |
2008 |
2007 |
Electricity consumption in Finland TWh |
86.9 |
90.3 |
Fingrid’s transmission volume TWh |
65.4 |
68.2 |
Electricity transmissions Finland-Sweden |
||
exports to Sweden TWh |
4.2 |
3.7 |
imports from Sweden TWh |
3.7 |
4.0 |
Electricity transmissions Finland-Estonia |
||
imports from Estonia TWh |
2.3 |
1.9 |
Electricity transmissions Finland-Russia |
||
imports from Russia TWh |
10.9 |
10.2 |
Promotion of electricity market
There were no problems in the transmission connections between Finland and Sweden. In practice, the two countries constituted a uniform wholesale market area of electricity, with the same spot price for 98 per cent of the time. Only 0.5 per cent of all congestion income accumulated on the border between Finland and Sweden. This income totalled more than 240 million euros in the Nordic countries. The most significant restrictions in the available electricity transmission capacity existed in the cables running at the bottom of the Oslo Fjord and on the Skagerrak connection between Southern Norway and Jutland in Denmark.
The average price of electricity on the spot market in 2008 was 45 €/MWh (28 €/MWh in 2007), while transmission congestions raised the area price in Finland to a level of 51 €/MWh (30 €/MWh).
The integration of the European electricity market is progressing swiftly in line with the establishment of the new European organisation ENTSO-E. From the transmission system operators (TSOs), the new organisation calls for greater input in the development of the market and market rules in Europe.
An agreement on the harmonisation of balance service was reached between the Nordic countries, and the new procedure was introduced at the beginning of 2009. The main changes include the handling of electricity balances in two different balances – production and consumption balance – and the harmonisation of costs included in balance service. A so-called two-price model is applied to the balance deviation in the production balance, and a single-price model is applied to the balance deviation in the consumption balance.
Electricity market |
2008 |
2007 |
Nord Pool system price, average €/MWh |
44.74 |
27.93 |
Area price Finland, average €/MWh |
51.02 |
30.01 |
Congestion income in the Nordic countries million € |
244.1 |
173.6 |
Congestion income between Finland and Sweden million € |
1.3 |
2.7 |
Congestion income between Finland and Sweden % |
1.6 |
0.5 |
Fingrid's share of the congestion income in the Nordic countries million € |
23.2 |
22.6 |
Capital expenditure and grid maintenance
Construction of the Finnish grid continued actively throughout the year. There will also be significant construction projects in the coming years, because Fingrid is making capital investments totalling 1,600 million euros in the transmission grid and reserve power over the next 10 years. This will enable the connection of one large nuclear power unit and 2,000 megawatts of geographically decentralised wind power capacity to the Finnish grid by 2020 as well as the renewal of ageing parts of the grid.
One of the most important projects completed in 2008 was the Ulvila-Kangasala 400 kilovolt (kV) transmission connection, which reinforces electricity transmission from the west coast to Pirkanmaa. Moreover, the 110 kV line between Kankaanpää and Lålby in Western Finland was renewed. In all, some 40 construction projects on the main grid were in progress.
Alongside the Nordic analysis, the viability of three transmission connections between the Baltic countries and Poland as well as between the Baltic countries and the Nordic countries was studied. The first stage of the study was completed at the turn of 2008 and 2009. The study concerned a new transmission connection Estlink 2 between Finland and Estonia, a link between Sweden and the Baltic countries, and a connection between Lithuania and Poland. In order to maintain the security of electricity supply in the Baltic area, the EU established a group consisting of the EU member states in the area of the Baltic Sea to think of ways in which to develop the electricity market and transmission connections in the area over a long time span (Baltic Interconnection Plan). Fingrid contributes actively to the work of this group.
Fingrid’s gross capital expenditure in 2008 was 88 (79) million euros.
Financial result
Revenue of the Fingrid Group in 2008 was 382 million euros (335 million euros in 2007). Other operating income was 3 million euros (2 million euros). Grid service revenue decreased slightly despite the 4.5 per cent tariff increase carried out at the beginning of the financial year. This was mainly due to the rapid decline in global economy, which is why electricity consumption by Finnish industries went down quickly towards the end of the year.
Revenue from the sales of balance power grew from the previous year to 105 (64) million euros. Correspondingly, the purchases of balance power also grew to 95 (59) million euros. This was mainly due to the elevated sales prices and purchase prices of balance power. Cross-border transmission income and peak load power income remained almost at the same level as in 2007. ITC or inter-TSO compensations between the European TSOs grew by 4 million euros. Depreciation, loss energy, reserve power and personnel costs rose slightly. Income and costs related to the feed-in tariff for peat decreased. The corresponding changes during the last quarter of the financial year are shown in the table below (in million euros).
Revenue |
1-12/08 |
1-12/07 |
9-12/08 |
9-12/07 |
Grid service revenue |
189 |
190 |
53 |
55 |
Sales of balance power |
105 |
64 |
28 |
23 |
Cross-border transmission |
22 |
23 |
6 |
6 |
ITC income |
23 |
19 |
7 |
8 |
Peak load power |
11 |
10 |
3 |
3 |
Feed-in tariff for peat |
0.4 |
2 |
0.1 |
1 |
Congestion income |
23 |
23 |
2 |
4 |
Other operational revenue and other income |
11 |
6 |
3 |
1 |
Revenue and other income total |
385 |
336 |
103 |
101 |
Costs |
1-12/08 |
1-12/07 |
9-12/08 |
9-12/07 |
Depreciation |
59 |
56 |
15 |
17 |
Purchase of balance power |
95 |
59 |
27 |
22 |
ITC charges |
16 |
16 |
4 |
3 |
Peak load power |
10 |
10 |
3 |
3 |
Feed-in tariff for peat |
0.1 |
1.5 |
0.0 |
1.5 |
Purchase of loss energy |
50 |
47 |
13 |
12 |
Reserves |
20 |
18 |
5 |
5 |
Maintenance management |
16 |
16 |
6 |
5 |
Personnel |
20 |
19 |
6 |
6 |
Other costs |
17 |
16 |
5 |
5 |
Costs total |
302 |
258 |
84 |
78 |
Operating profit excluding the change in the fair value of electricity derivatives was 83 (79) million euros during the financial year. In the last quarter, operating profit excluding the change in the fair value of electricity derivatives was 19 (23) million euros.
The IFRS operating profit of the Group was 68 (91) million euros. Fingrid introduced hedge accounting in Group reporting for electricity derivatives as of 1 July 2007.The prices of electricity derivatives decreased significantly during the last quarter of the financial year, and of the negative change in the fair value of electricity derivatives, 58 million euros, 14 million euros (12) were recognised in the income statement and a total of 44 million euros in equity and deferred tax receivables.
The Group’s profit for the year was 28 (42) million euros.
The return on investment was 5.8 (7.3) per cent and the return on equity 6.6 (10.3) per cent. The equity ratio was 26.7 (27.5) per cent at the end of the review period.
The cash flow from the operations of the Group deducted by capital expenditure and dividends was 20 (13) million euros.
The Fingrid Group and Fingrid Oyj employed 249 persons, including temporary employees, at the end of 2008. The corresponding figure a year before was 244 persons.
As a result of the recession in economy, electricity consumption in Finland in 2009 is expected to decrease further.
Fingrid will continue the implementation of its extensive capital expenditure programme. Fingrid is making capital investments totalling 1,600 million euros in the transmission grid and reserve power in the next 10 years. The investments on an annual level are about 100 - 200 million euros. The extensive capital investments have a negative impact on cash flow and will require additional borrowing.
These financial statements have been audited.
Appendix:
Fingrid Oyj, Annual review and financial statements 2008
Fingrid Oyj, Annual review and financial statements 2008
Additional information:
CEO Jukka Ruusunen, +358 30 395 5140 or +358 40 593 8428
CFO Tom Pippingsköld, +358 30 395 5157 or +358 40 519 5041
CEO Jukka Ruusunen, +358 30 395 5140 or +358 40 593 8428
CFO Tom Pippingsköld, +358 30 395 5157 or +358 40 519 5041