Fingrid Group's financial statements and annual report 2010: Profit improved significantly and capital investments continued to stay at a high level
- operating profit of the Group 74 million euros (51 million euros in 2009) - operating profit of the Group in the last quarter 23 (16) million euros - revenue 456 (359) million euros - capital investments 144 (136) million euros - equity ratio 28.6 (27.2) % - interest-bearing net borrowings 855 (798) million euros - the Board of Directors proposes that a dividend of 2,018.26 euros per share be paid.Jukka Ruusunen, Fingrid’s President & CEO, on the financial statements:
“Fingrid’s financial result improved significantly as a result of growing electricity consumption, increases made in the grid tariff, and operational improvements. All the key indicators improved. However, net borrowing by the company is growing due to our sizeable capital investment programme.
In 2010, Fingrid issued a total of 86 million euros worth of bonds in the form of private placements, and withdrew a long-term loan of 20 million euros from the Nordic Investment Bank (NIB) and a long-term loan of 150 million euros from the European Investment Bank (EIB).
Fingrid is making capital investments totalling 1,700 million euros in the transmission grid and reserve power in the next 10 years. On an annual level, this means capital investment costs of 100 to 200 million euros. The capital investments require additional borrowing and also increases in the transmission tariffs in the coming years.
The high-voltage transmission grid in Finland survived the summer storms with little damage. There were no significant disturbances in the transmission grid in 2010, although the average time with no electricity, caused by disturbances at the connection points, grew somewhat from the previous years.
The year 2010 was significant in terms of the enlargement of the electricity market. The largest electricity market in the world was created in November, when the Nordic countries were integrated with Western Continental Europe. The market was also integrated between Finland and Estonia, when the full capacity on the present Estlink connection was made available to the market. A capital investment decision on the construction of a new submarine cable between Finland and Estonia was also made in 2010.”
Financial result
Revenue of the Fingrid Group in 2010 was 456 million euros (359 million euros in 2009). Other operating income was 7 (2) million euros.
Grid revenue rose by 24 million euros on the previous year as a result of the tariff increase of 4.5 per cent and higher electricity consumption. The sales of imbalance power were 160 (92) million euros and purchases of imbalance power 145 (85) million euros. Cross-border transmission income remained at the same level as in the previous year.
The loss energy costs rose by 13 million euros to 65 million euros due to an increase in the volume of loss energy procured and a rise in the average area price for Finland. The depreciation and reserve costs also grew from the previous year.
The maintenance management costs and personnel costs remained at the same level as in 2009. There were no essential changes in the net income from the feed-in tariff for peat and from the peak load power arrangement as compared to the previous year.
Revenue and other
operating income (million €) 1-12/10 1-12/09 10-12/10 10-12/09
operating income (million €) 1-12/10 1-12/09 10-12/10 10-12/09
Grid service revenue 211 188 64 57
Sales of imbalance power 160 92 49 26
Cross-border transmission 24 24 6 6
Estlink congestion income 9 0 6 0
Nordic congestion income 9 5 1 1
Peak load reserve 14 13 2 4
ITC income 19 28 5 6
Feed-in tariff for peat 1 3 0 3
Other revenue 9 5 4 0
Other operating income 7 2 4 1
Revenue and other income total 463 361 142 105
Costs (million €) 1-12/10 1-12/09 10-12/10 10-12/09
Purchase of imbalance power 145 85 49 25
Purchase of loss energy 65 52 19 15
Depreciation 67 65 17 16
Reserves 22 21 6 5
Personnel 20 20 6 6
Maintenance management 18 18 5 6
Peak load reserve 13 13 3 3
ITC charges 10 16 2 4
Estlink grid rents 9 0 6 0
Feed-in tariff for peat 1 3 0 3
Other costs 21 19 7 5
Costs total 391 312 120 89
Operating profit* 72 49 22 16
* excluding the change in the fai value of electricity derivatives
The operating profit of the Group was 74 (51) million euros. Of the change in the fair value of electricity derivatives, +2 (+2) million euros were recognised in the income statement.
In the last quarter, the operating profit was 23 (16) million euros.
In the last quarter, the operating profit was 23 (16) million euros.
The Group’s profit for the year was 42 (25) million euros. The company’s Board of Directors will propose to the Annual General Meeting of Shareholders that 2,018.26 euros of dividend per share be paid.
The return on investment was 5.1 (3.9) per cent and the return on equity 8.7 (5.7) per cent. The equity ratio was 28.6 (27.2) per cent at the end of the review period.
The Fingrid Group and Fingrid Oyj employed 263 persons, including temporary employees, at the end of 2010. The corresponding figure a year before was 260. The number of permanent personnel was 249 (245).
Capital investments
Fingrid’s gross capital expenditure in 2010 was 144 million euros (136 million euros in 2009). Of this amount, a total of 109 (126) million euros were used for the transmission grid and 31 (5) million euros for reserve power. IT-related capital expenditure was approximately 4 (4) million euros.
Research and development were allocated a total of 1.5 (1.3) million euros. Some 60 research and development projects were in progress in 2010. The foremost R&D input was placed on the development work for transmission line towers and on promoting the system security of the grid and market integration.
Fingrid’s annual expenditure in the transmission grid has increased considerably from the level of 40 million euros in the early part of the millennium to over 140 million euros. The sharp increase in capital investments is the result of the promotion of the functioning of the electricity market, connection of new generating capacity to the transmission grid, renewal of the ageing grid, and regional changes in electricity consumption and production patterns in Finland.
ENTSO-E’s Ten Year Network Development Plan was drawn up in 2010 between the European transmission system operators. The plan encompasses significant capital investment proposals worth approx. 25 thousand million euros so as to enhance the European transmission system.
Power system
Electricity consumption in Finland in 2010 totalled 87.5 terawatt hours (81.3 terawatt hours in 2009), which was almost 8 per cent more than in the previous year. A total of 68.1 (62.8) terawatt hours of electricity was transmitted in Fingrid’s grid, representing 78 per cent of the electricity consumption in Finland.
A total of 2.8 terawatt hours (2.7 terawatt hours in 2009) of electricity was imported from Sweden to Finland during 2010, and 5.7 (4.1) terawatt hours was exported from Finland to Sweden.
The volume of electricity imports from Estonia to Finland on the Estlink connection was 2.0 (1.8) terawatt hours, and 0.2 terawatt hours of electricity was exported from Finland to Estonia.
Electricity imports from Russia to Finland totalled 11.6 (11.7) terawatt hours in 2010.
Electricity market
The weather was cold in all the Nordic countries in the early part of 2010. This was reflected in the price spikes of wholesale electricity. Towards the end of the year, the prices were raised by cold weather and scant water reservoirs in Norway. As a result, the price level in the spot market was clearly higher than in 2009. The average system price was 53 euros per megawatt hour (35 €/MWh in 2009), and the average area price for Finland was 57 €/MWh (37 €/MWh).
Fingrid accumulated 9 million euros of Nordic congestion income in the year under review. This was mainly created on the border between the bidding areas of Southern Norway and Denmark, but in accordance with the allocation principles applied until the end of November 2010, Fingrid also received a share of this income. In the future, congestion income will only be allocated between the countries creating the income.
In 2010, Fingrid used 0.2 million euros for counter trade (0.7 million euros in 2009). This mainly resulted from disturbances on the cross-border connections and partly from transmission restrictions within Finland.
Events after the closing of the financial year and estimate of future outlook
Changes are taking place in Fingrid’s ownership arrangements, because the EU’s directive concerning the internal electricity market requires that transmission system companies are unbundled from electricity generating and selling companies by March 2012. By virtue of a preliminary agreement, Fortum Power and Heat Oy is selling its shareholding of 25 per cent in Fingrid to the State of Finland and Mutual Pension Insurance Company Ilmarinen. Pohjolan Voima Oy is also negotiating the divestment of its holding of 25 per cent in Fingrid to the State of Finland and Ilmarinen. After the share transaction, the holding of the State of Finland in Fingrid would be 53.1 per cent and that of Ilmarinen 19.9 per cent. The other shareholders, which are mainly Finnish pension insurance and insurance companies, would have a holding of 27 per cent.
Fingrid is making capital investments totalling 1,700 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. This is why Fingrid will have to raise its grid transmission tariffs in the coming years.
On 28 January 2011, international rating agency Standard & Poor’s Rating Services (S&P) placed Fingrid Oyj’s long-term corporate credit rating of A+ and short-term corporate credit rating of A-1 on CreditWatch with positive implications.
In other respects, there have been no material events or changes in Fingrid’s business or financial situation after the closing of the financial year.
These financial statements have been audited.
The financial statements and annual review are appended to this stock exchange release, and a separate corporate governance statement of Fingrid Oyj has also been provided.
Further information:
Jukka Ruusunen, President & CEO, tel. +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, tel. +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