Fingrid Group's Interim report 1 January - 30 June 2015

The consolidated financial statements have been drawn up in accordance with the International Financial Reporting Standards (IFRS). Unless otherwise indicated, the figures in parentheses refer to the same period of the previous year. Financial development in January-June 2015 • The Group’s turnover in January-June was EUR 293.1 (305.3) million • The Group’s operating profit was EUR 82.1 (99.0) million • Consolidated profit for the period was EUR 52.3 (76.2) million • Cash flow from the Group’s operations, after capital expenditure, was EUR 45.6 (97.2) million • Interest-bearing net borrowing amounted to EUR 1,067.2 (1,056.2) million • Capital expenditure totalled EUR 67.8 (57.5) million • The equity ratio was 31.8 (29.8) per cent • Earnings per share totalled EUR 15,744 (22,906) Financial development in April-June 2015 • The Group’s turnover in April-June was EUR 113.2 (114.1) million • The Group’s operating profit for April-June was EUR 9.3 (19.7) million • Consolidated profit for the April-June period was EUR -3.0 (13.8) million

* Peak load capacity income and costs are related to the securing of sufficient electricity supply during peak consumption hours in compliance with the Finnish Peak Load Capacity Act. 

The Group’s operating profit for the second quarter was EUR 9.3 (19.7) million. Profit before taxes was EUR -3.7 (17.2) million. Profit for the period was EUR -3.0 (13.8) million and the comprehensive income was EUR -1.6 (13.9) million. The Group’s net cash flow from operations, with net capital expenditure deducted, was -6.8 (24.0) million euros in the financial period. The sale of the shares of the associated company Porvoon Alueverkko Oy during the period under review did not have a significant impact on the Group’s result or cash flow.

The Group’s operating profit in the first half of the year was EUR 82.1 (99.0) million. Profit before taxes was EUR 65.4 (95.0) million. Profit for the financial period was EUR 52.3 (76.2) million and the comprehensive income was EUR 55.4 (75.8) million. The biggest negative differences from the corresponding period last year are explained by changes in the market value of derivatives (EUR -22.9 million) and lower grid service income (EUR -9.5 million). The Group’s net cash flow from operations, with net capital expenditure deducted, was EUR 45.6 (97.2) million in the first half of the year. The equity ratio was 31.8 (29.8) per cent at the end of the review period.

The Group’s profit for the financial period is characterised by seasonal fluctuations, which is why the profit for the entire year cannot be directly estimated on the basis of profit from the period under review.

Electricity market

In the second quarter of the year, the average day-ahead Nordic market price (system price) of electricity between April and June was EUR 20.71 (25.68) per megawatt hour and the area price for Finland was EUR 25.83 (34.55) per megawatt hour. In January-June, the average day-ahead market price for the Nordics was EUR 24.40 (27.92) per megawatt hour and Finland’s area price was EUR 28.95 (34.89) per megawatt hour.

Congestion income between Finland and Sweden totalled EUR 48.6 (47.7) million. The increase in congestion income resulted in particular from the widening of the price difference between Finland and Sweden, due to a decline in Sweden’s area prices. The reason behind this was an exceptionally low market price in the Nordic countries, resulting from a high volume of hydroelectric power production.

The first commercial exports of electricity from Finland to Russia took place on 7 June. Commercial exports of electricity to Russia became possible at the end of 2014 when Fingrid and the Russian grid operator parties signed agreements on bidirectional electricity trade between Finland and Russia.

Previously, the transfer of electricity along 400 kilovolt cross-border transmission lines was only possible in one direction, from Russia to Finland. As of 1 June 2015, Fingrid took into use a new transmission tariff, where the tariff depends on the price difference between the area prices in Finland and north-western Russia. The purpose of the new tariff structure is to boost electricity trade between Finland and Russia particularly during periods of low price differences. During 2015, more electricity was exported to Russia than was imported. Transmission volumes were small.

Fingrid started up, by request of the Ministry of Employment and Economy, a review of a centralised electricity market information exchange solution, or datahub. The goal is to assemble all of the information exchange in one service. It is estimated that the implementation of the datahub will take approximately four years. This means that the actual launch of the information exchange solution will occur in 2019.

* The congestion income between Finland and Sweden as well as between Finland and Estonia is divided equally between the relevant TSOs. The income and costs of the transmission connections are presented in the tables in the Financial result section.

During the second quarter of the year, Fingrid used EUR 1.7 (3.7) million for countertrade. The biggest costs were caused by disturbances in the DC connection between Finland and Sweden in May, and by countertrade carried out to maintain system security in April during transmission outages in Ostrobothnia and northern Finland.

During the first half of the year, Fingrid used EUR 2.7 (6.5) million for countertrade. The biggest costs were caused by disturbances in the DC connection between Finland and Sweden in February and May, and by countertrade carried out to maintain system security in March and April during transmission outages in Ostrobothnia and northern Finland.

Financing

The company’s financial position remained satisfactory and liquidity remained good. The company’s net financial costs between April and June were EUR 13.0 (2.7) million. Between January and June the company’s net financial costs amounted to EUR 16.9 (4.6) million, including the change in the fair value of derivatives of EUR 6.9 million negative (EUR 5.3 million positive). Financial and cash assets recognised at fair value through profit or loss on 30 June 2015 were EUR 109.1 (203.4) million. The company has reduced financial and cash assets during the second quarter to achieve a more efficient capital structure. Fingrid agreed with the banks on a total of EUR 50 million uncommitted overdraft facilities in order to secure liquidity. An undrawn committed revolving credit facility of EUR 250 million is additionally available to the company.

Interest-bearing borrowings totaled EUR 1,176.2 (1,259.7) million, of which non-current borrowings accounted for EUR 951.5 (1,011.9) million and current borrowings for EUR 224.7 (247.8) million.

The change in the fair value of electricity derivatives during the period under review includes EUR 3.6 million from a dismantled hedge fund resulting from the discontinuation of hedge accounting, as an item reducing the Group’s result.

The counterparty risk arising from derivative contracts relating to financing was EUR 23 (33) million. Fingrid’s foreign exchange and commodity price risks are generally fully hedged.

Personnel

The total number of personnel employed by the Group averaged 319 (297), of which 283 (271) were in a permanent employment relationship.

Other matters

Fingrid Oyj’s Annual General Meeting was held on 14 April 2015. The Annual General Meeting approved the financial statements for 2014, confirmed the income statement and balance sheet, and discharged the members of the Board of Directors and the CEO from liability.

The Annual General Meeting elected Fingrid Oyj’s Board of Directors for 2015. Continuing as board members are Helena Walldén (Chairman), Juha Majanen (Vice Chairman), Juhani Järvi and Esko Torsti. Sanna Syri was elected as a new member. A more detailed presentation of the board members is available on the company’s website. The Annual General Meeting decided on a dividend payment of EUR 21,655.44 for each Series A share and EUR 16,038.49 for each Series B share, representing a total dividend payout of EUR 65,000,001.35.

In a share transaction completed on 9 April 2015, LocalTapiola General Mutual Insurance Company and LocalTapiola Mutual Life Insurance Company sold a total of 97 of their Fingrid Series B shares to the State Pension Fund.

In a share transaction completed on 7 July 2015, the Finnish State transferred a total of 443 of its Fingrid Series A shares to the National Emergency Supply Agency. The State’s combined ownership in the company remains unaltered.

In a transaction completed on 17 June 2015, Fingrid Oyj sold its shares in Porvoon Alueverkko Oy to Porvoon Sähköverkko Oy, which is part of the Porvoon Energia Oy - Borgå Energi Ab Group. The transaction covered Fingrid’s entire ownership in the company, i.e. 1/3 of all of Porvoon Alueverkko Oy’s shares and votes. The transaction had a minor positive effect on Fingrid’s second quarter result.

On 21 January 2013, Fingrid launched an appeal to the decision of the Market Court to the Supreme Administrative Court. The appeal concerned the confirmation of methods applied in determining the grid owner’s income from grid operations and payments for transmission service for the 2012–2015 control period. The Supreme Administrative Court rejected Fingrid’s appeal in its verdict on 29 June 2015. The verdict has no financial impact on Fingrid’s financial result for the control period.

Auditing

The consolidated figures in this Interim Report are unaudited.

Events after the review period and outlook for the rest of the year

In an arrangement completed on 1 July 2015, Pohjola Insurance Ltd transferred a total of 149 of its Fingrid B Shares to Aino Ky. On 1 July 2015, the State Pension Fund sold altogether 181 of its Fingrid B Shares to Aino Ky.

Fingrid Group’s profit for the 2015 financial period, excluding changes in the fair value of derivatives and before taxes, is expected to decline from the previous year. Uncertainty related to reserve costs, congestion income, loss energy costs and cross-border transmission with Russia make it difficult to forecast the result for the full financial year. The company’s debt service capacity is expected to remain stable.