Fingrid group's interim report 1 January – 31 March 2015
Unless otherwise indicated, the figures in parentheses refer to the same period of the previous year. Financial development in January - March 2015 • The Group’s turnover in January - March was EUR 179.9 (191.3) million • The Group’s operating profit was EUR 72.8 (79.3) million • Consolidated profit for the period was EUR 55.4 (62.3) million • The Group's net cash flow operations, after capital expenditure, was EUR 52.4 (73.2) million • Interest-bearing net amounted to EUR 999.3 (1,002.8) million • Capital expenditure totalled EUR 24.1 (31.6) million • The equity ratio was 33.5 (32.0) per cent • Earnings per share were EUR 16,656 (18,744)
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KEY FIGURES
|
|
1-3/2015
|
1-3/2014
|
change %
|
1-12/2014
|
|
Turnover
|
€M
|
179.9
|
191.3
|
-6.0
|
567.2
|
|
Capital expenditure, gross
|
€M
|
24.1
|
31.6
|
-23.8
|
129.5
|
|
- of turnover
|
%
|
13.4
|
16.5
|
|
22.8
|
|
Research and development expenses
|
€M
|
0.4
|
0.4
|
2.2
|
1.7
|
|
- of turnover
|
%
|
0.2
|
0.2
|
|
0.3
|
|
Average number of employees
|
|
313
|
287
|
9.1
|
305
|
|
Number of employees at end of period
|
|
312
|
289
|
8.0
|
313
|
|
Salaries and bonuses, total
|
€M
|
5.5
|
5.1
|
6.4
|
20.5
|
|
Operating profit
|
€M
|
72.8
|
79.3
|
-8.2
|
142.8
|
|
- of turnover
|
%
|
40.5
|
41.5
|
|
25.2
|
|
Profit before taxes
|
€M
|
69.2
|
77.8
|
-11.1
|
132.9
|
|
- of turnover
|
%
|
38.5
|
40.7
|
|
23.4
|
|
Profit for the period
|
€M
|
55.4
|
62.3
|
-11.1
|
106.5
|
|
Comprehensive income for the period
|
€M
|
57.0
|
61.9
|
-7.9
|
106.1
|
|
Equity ratio
|
%
|
33.5
|
32.0
|
|
31.0
|
|
Interest-bearing net borrowings
|
€M
|
999.3
|
1,002.8
|
-0.3
|
1,046.1
|
|
Gearing
|
|
1.4
|
1.4
|
|
1.6
|
|
Earnings per share
|
€
|
16,655.62
|
18,744.08
|
-11.1
|
32,027.89
|
|
Dividend, Series A shares
|
€
|
|
|
|
21,655.44
|
|
Dividend, Series B shares
|
€
|
|
|
|
16,038.49
|
|
Equity per share
|
€
|
217,721
|
211,907
|
2.7
|
200,568
|
|
Dividend payout ratio, A shares
|
%
|
|
|
|
67.6
|
|
Dividend payout ratio, B shares
|
%
|
|
|
|
50.1
|
|
Number of shares
|
|
|
|
|
|
|
– Series A shares
|
qty
|
2,078
|
2,078
|
|
2,078
|
|
– Series B shares
|
qty
|
1,247
|
1,247
|
|
1,247
|
|
Total
|
qty
|
3,325
|
3,325
|
|
3,325
|
Jukka Ruusunen, President & CEO of Fingrid: “Mild winter lowered electricity consumption”
Electricity consumption in Finland was lower in the first quarter of the year, due to the mild winter. As a consequence of the decline in consumption and the reduction in grid pricing that was enacted at the start of the year, Fingrid’s grid service income decreased compared to the previous year. Because of the mild winter, peak electricity consumption was lower than normal, and electricity demand could be met with domestic production and imported electricity. In severe cold spells, power balance in future could be strained.
The market situation resulted in high transmission capacity utilisation between Finland and Sweden, but, compared to last year, regional price differences caused by insufficient trans-mission capacity were smaller, and Fingrid received less congestion income.
In January, the Energy Authority granted Fingrid a licence to operate high voltage electricity transmission system (the Finnish Main Grid). At the end of March, Fingrid defined its Main Grid for the first time. The definitions apply to all transmission lines, electricity substations and other devices that fall under the scope of the transmission service and Main Grid. The obligation to define the Main Grid is based on the valid Electricity Market Act.
FINGRID GROUP'S INTERIM REPORT 1 JANUARY - 31 MARCH 2015
Accounting principles
Fingrid’s interim report has been drawn up in accordance with standard IAS 34, Interim Financial Reporting. In preparing this Interim Report, Fingrid has applied the same accounting principles as those used for its 2014 financial statements.
Financial result
The Group’s turnover in January-March was EUR 179.9 (191.3) million. Grid service income declined to EUR 115.4 (124.2) million in the first quarter. The decline can be attributed to lower electricity consumption and the two-percent reduction in grid pricing enacted at the start of the year. Other operating income totalled 0.8 (1.2) million. Costs in the January-March period amounted to EUR 103.9 (105.5) million.
Electricity consumption in Finland totalled 23.4 (23.9) terawatt hours between January and March. Imbalance power sales amounted to EUR 40.2 (41.3) million. Fingrid's congestion income from connections between Finland and Sweden declined to EUR 11.0 (15.0) million as a result of the market situation, in which Finland has imported a significant amount of electricity from Sweden, but the regional price differences are smaller than they were in 2014. Cross-border transmission income from the connection between Finland and Russia increased to EUR 5.6 (2.5) million. The increase was due to the growth in Russian imports, which is attributed to the weakening rouble. Both congestion income from connections between Finland and Estonia and Inter-Transmission System Operator Compensation ITC income remained at the same level as the corresponding period of last year.
Imbalance power sales amounted to EUR 40.2 (41.3) million. Imbalance power costs grew slightly from last year´s level, to EUR 27.8 (27.2) million. Loss energy costs declined to EUR 15.9 (18.1) million, due to lower loss volumes than in the comparison period. At the end of March, approximately 101 (98) per cent of Fingrid's projected loss energy procurement for the remaining part of 2015 was hedged at an average price of EUR 40.1 (44.1) per megawatt hour.
With the market situation for reserves remaining favourable, the cost of reserves to safeguard the system security of the Main Grid fell slightly to EUR 12.0 (12.8) million. Depreciations to-talled EUR 22.9 (22.1) million. Maintenance costs, which amounted to EUR 2.7 (2.8) million, remained almost at last year’s level. Personnel costs grew slightly as a consequence of the increased number of personnel and were EUR 6.6 (6.3) million.
The Group’s turnover in January-March was EUR 179.9 (191.3) million. Grid service income declined to EUR 115.4 (124.2) million in the first quarter. The decline can be attributed to lower electricity consumption and the two-percent reduction in grid pricing enacted at the start of the year. Other operating income totalled 0.8 (1.2) million. Costs in the January-March period amounted to EUR 103.9 (105.5) million.
Electricity consumption in Finland totalled 23.4 (23.9) terawatt hours between January and March. Imbalance power sales amounted to EUR 40.2 (41.3) million. Fingrid's congestion income from connections between Finland and Sweden declined to EUR 11.0 (15.0) million as a result of the market situation, in which Finland has imported a significant amount of electricity from Sweden, but the regional price differences are smaller than they were in 2014. Cross-border transmission income from the connection between Finland and Russia increased to EUR 5.6 (2.5) million. The increase was due to the growth in Russian imports, which is attributed to the weakening rouble. Both congestion income from connections between Finland and Estonia and Inter-Transmission System Operator Compensation ITC income remained at the same level as the corresponding period of last year.
Imbalance power sales amounted to EUR 40.2 (41.3) million. Imbalance power costs grew slightly from last year´s level, to EUR 27.8 (27.2) million. Loss energy costs declined to EUR 15.9 (18.1) million, due to lower loss volumes than in the comparison period. At the end of March, approximately 101 (98) per cent of Fingrid's projected loss energy procurement for the remaining part of 2015 was hedged at an average price of EUR 40.1 (44.1) per megawatt hour.
With the market situation for reserves remaining favourable, the cost of reserves to safeguard the system security of the Main Grid fell slightly to EUR 12.0 (12.8) million. Depreciations to-talled EUR 22.9 (22.1) million. Maintenance costs, which amounted to EUR 2.7 (2.8) million, remained almost at last year’s level. Personnel costs grew slightly as a consequence of the increased number of personnel and were EUR 6.6 (6.3) million.
|
Turnover and other income (€M)
|
1-3/2015
|
1-3/2014
|
change %
|
1-12/2014
|
|
Grid service income
|
115
|
124
|
-7.1
|
326
|
|
Imbalance power sales
|
40
|
41
|
-2.8
|
151
|
|
ITC income
|
4
|
4
|
4.6
|
12
|
|
Cross-border transmission income
|
6
|
2
|
127.3
|
9
|
|
Finland–Estonia congestion income
|
0.4
|
0.4
|
-14.3
|
2
|
|
Peak load capacity income*
|
2
|
2
|
0.8
|
8
|
|
Finland–Sweden congestion income
|
11
|
15
|
-26.6
|
49
|
|
Other turnover
|
1
|
2
|
-39.2
|
9
|
|
Other operating income
|
1
|
1
|
-34.1
|
5
|
|
Turnover and other income total
|
181
|
192
|
-6.1
|
572
|
|
Costs (€M)
|
1-3/2015
|
1-3/2014
|
change %
|
1-12/2014
|
|
Purchase of imbalance power
|
28
|
27
|
2.1
|
107
|
|
Loss energy costs
|
16
|
18
|
-12.5
|
66
|
|
Depreciation
|
23
|
22
|
3.7
|
92
|
|
Cost of reserves
|
12
|
13
|
-6.0
|
62
|
|
Personnel costs
|
7
|
6
|
5.4
|
25
|
|
Peak load capacity costs**
|
2
|
2
|
-3.0
|
8
|
|
Maintenance management costs
|
3
|
3
|
-3.7
|
19
|
|
ITC costs
|
4
|
3
|
17.8
|
11
|
|
Other costs
|
11
|
11
|
-6.1
|
46
|
|
Costs total
|
104
|
106
|
-1.5
|
435
|
|
Operating profit, excl. the change in the fair value of commodity derivatives
|
77
|
87
|
-11.7
|
137
|
|
Consolidated operating profit, IFRS
|
73
|
79
|
-8.2
|
143
|
* 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 in January - March 2015 was EUR 72.8 (79.3) million. Profit before taxes was EUR 69.2 (77.8) million. The biggest negative differences from the corresponding period last year are explained by the lower grid service income (EUR -8.8 million) and the lower congestion income from the connections between Finland and Sweden (EUR -4.0 million). Profit for the period amounted to EUR 55.4 (62.3) million and the comprehensive income to 57.0 (61.9) million. The Group´s net cash flow from operations, with net capital expenditure deducted, was 52.4 (73.2) million euros positive. The equity ratio was 33.5 (32.0) 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 this three-month period.
Investments and maintenance
The focus of the grid investment programme is to develop the Ostrobothnian transmission grid and modernise the old transmission connection from eastern Finland to western Finland known as the Iron Lady.
The Kokkola–Oulu connection that is part of the Ostrobothnia project proceeded according to plan. Work has been under way at the Hirvisuo, Pyhäselkä and Tuovila substations. The work has been progressing well, in spite of the mild winter and some challenging disturbances.
Work on the Hikiä–Forssa transmission line related to modernising the Iron Lady was on schedule at both the substation and the transmission line.
In accordance with procurement decisions Fingrid made in the first quarter of the year, ABB Oy will construct a new 400/110 kilovolt transformer substation in Isokangas, north of Oulu. The contract is valued at approximately EUR 8.5 million, and the substation is expected to be completed by the end of 2016. A second, 220/110/20 kilovolt transformer substation in the Vajukoski area of Sodankylä is being built by Empower PN Oy. That contract is valued at roughly EUR 6 million, and the substation is expected to be completed in summer 2016.
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 this three-month period.
Investments and maintenance
The focus of the grid investment programme is to develop the Ostrobothnian transmission grid and modernise the old transmission connection from eastern Finland to western Finland known as the Iron Lady.
The Kokkola–Oulu connection that is part of the Ostrobothnia project proceeded according to plan. Work has been under way at the Hirvisuo, Pyhäselkä and Tuovila substations. The work has been progressing well, in spite of the mild winter and some challenging disturbances.
Work on the Hikiä–Forssa transmission line related to modernising the Iron Lady was on schedule at both the substation and the transmission line.
In accordance with procurement decisions Fingrid made in the first quarter of the year, ABB Oy will construct a new 400/110 kilovolt transformer substation in Isokangas, north of Oulu. The contract is valued at approximately EUR 8.5 million, and the substation is expected to be completed by the end of 2016. A second, 220/110/20 kilovolt transformer substation in the Vajukoski area of Sodankylä is being built by Empower PN Oy. That contract is valued at roughly EUR 6 million, and the substation is expected to be completed in summer 2016.
Power system
The winter was milder than average. Peak electricity consumption of 13.494 MWh/h was reached at the end of January. During that period, electricity was imported from Sweden using nearly full transmission capacity, but at the same time, electricity was exported from Finland to Estonia. Finnish power plants had available production capacity during the peak consumption period. Finland’s electricity supply was not in jeopardy, and there was no need to use peak load capacity.
January through March, electricity consumption in Finland totalled 23.4 (23.9) terawatt hours. Inter-TSO transmission during the period amounted to 1.3 (1.3) terawatt hours, adding up to a total electricity transmission of 24.7 (25.2) terawatt hours in Finland. Fingrid transmitted a total of 17.9 (18.2) terawatt hours in its grid, representing 72.5 (72.2) per cent of the total electricity transmission in Finland. During this period, Fingrid transmitted 16.6 (16.9) terawatt hours of electricity to its customers which amounts to 70.9 (70.4) per cent of Finland’s total consumption.
Between January and March, 4.2 (5.1) TWh of electricity were imported from Sweden to Finland, and 0.1 (0.0) TWh were exported from Finland to Sweden. The transmission capacity on the DC connections between Finland and Sweden was limited in March during a period of maintenance work in Sweden.
The volume of electricity imported from Estonia to Finland between January and March was 0.01 (0.01) TWh, and 1.1 (1.3) TWh were exported from Finland to Estonia. During a period of maintenance and testing on a reserve power plant in Estonia, transmission capacity was limited for a few days.
Between January and March was 2.0 (0.8) TWh of electricity was imported from Russia to Finland. The volume of imports from Russia has fluctuated due to the market situation and according to the time of day. Transmission capacity from Russia to Finland was fully available during the reporting period, with the exception of nearly a week of maintenance work performed on the Russian grid in March.
The winter was milder than average. Peak electricity consumption of 13.494 MWh/h was reached at the end of January. During that period, electricity was imported from Sweden using nearly full transmission capacity, but at the same time, electricity was exported from Finland to Estonia. Finnish power plants had available production capacity during the peak consumption period. Finland’s electricity supply was not in jeopardy, and there was no need to use peak load capacity.
January through March, electricity consumption in Finland totalled 23.4 (23.9) terawatt hours. Inter-TSO transmission during the period amounted to 1.3 (1.3) terawatt hours, adding up to a total electricity transmission of 24.7 (25.2) terawatt hours in Finland. Fingrid transmitted a total of 17.9 (18.2) terawatt hours in its grid, representing 72.5 (72.2) per cent of the total electricity transmission in Finland. During this period, Fingrid transmitted 16.6 (16.9) terawatt hours of electricity to its customers which amounts to 70.9 (70.4) per cent of Finland’s total consumption.
Between January and March, 4.2 (5.1) TWh of electricity were imported from Sweden to Finland, and 0.1 (0.0) TWh were exported from Finland to Sweden. The transmission capacity on the DC connections between Finland and Sweden was limited in March during a period of maintenance work in Sweden.
The volume of electricity imported from Estonia to Finland between January and March was 0.01 (0.01) TWh, and 1.1 (1.3) TWh were exported from Finland to Estonia. During a period of maintenance and testing on a reserve power plant in Estonia, transmission capacity was limited for a few days.
Between January and March was 2.0 (0.8) TWh of electricity was imported from Russia to Finland. The volume of imports from Russia has fluctuated due to the market situation and according to the time of day. Transmission capacity from Russia to Finland was fully available during the reporting period, with the exception of nearly a week of maintenance work performed on the Russian grid in March.
|
Power system operation
|
1-3/2015
|
1-3/2014
|
1-12/2014
|
|
Electricity consumption in Finland, TWh
|
23.4
|
23.9
|
83.3
|
|
TSO transmission in Finland, TWh
|
1.3
|
1.3
|
3.9
|
|
Transmission within Finland, TWh
|
24.7
|
25.2
|
87.2
|
|
Fingrid’s transmission volume, TWh
|
17.9
|
18.2
|
67.2
|
|
Fingrid's electricity transmission to customers, TWh
|
16.6
|
16.9
|
63.3
|
|
Fingrid’s loss energy volume, TWh
|
0.3
|
0.3
|
1.3
|
|
Electricity transmission Finland–Sweden
|
|
|
|
|
exports to Sweden TWh
|
0.1
|
0.0
|
0.2
|
|
Imports from Sweden, TWh
|
4.2
|
5.1
|
18.1
|
|
Electricity transmission Finland–Estonia
|
|
|
|
|
Exports to Estonia, TWh
|
1.1
|
1.3
|
3.6
|
|
Imports from Estonia, TWh
|
0.01
|
0.01
|
0.1
|
|
Electricity transmission Finland–Russia
|
|
|
|
|
Imports from Russia, TWh
|
2.0
|
0.8
|
3.3
|
Electricity market
The market situation resulted in considerable electricity imports from Sweden to Finland, and the area price for Finland was higher than in other Nordic countries. In January - March 2015, the average Nordic price (system price) of electricity was EUR 28.13 (30.19) per megawatt hour, and the area price for Finland was EUR 32.10 (35.24) per megawatt hour.
Congestion income between Finland and Sweden totalled EUR 22.0 (30.0) million. The decline in congestion income is attributed to the general decline in the price level of electricity and the improved availability of the transmission connections between countries.
The market situation resulted in considerable electricity imports from Sweden to Finland, and the area price for Finland was higher than in other Nordic countries. In January - March 2015, the average Nordic price (system price) of electricity was EUR 28.13 (30.19) per megawatt hour, and the area price for Finland was EUR 32.10 (35.24) per megawatt hour.
Congestion income between Finland and Sweden totalled EUR 22.0 (30.0) million. The decline in congestion income is attributed to the general decline in the price level of electricity and the improved availability of the transmission connections between countries.
|
Electricity market
|
1-3/2015
|
1-3/2014
|
1-12/2014
|
|
Nord Pool system price, average €/MWh
|
28.13
|
30.19
|
29.61
|
|
Area price Finland, average €/MWh
|
32.10
|
35.24
|
36.02
|
|
Congestion income between Finland and Sweden, €M*
|
22.0
|
30.0
|
97.7
|
|
Congestion hours between Finland and Sweden, %*
|
44.7
|
62.1
|
47.8
|
|
Congestion income between Finland and Estonia, €M*
|
0.7
|
0.8
|
4.8
|
|
Congestion hours between Finland and Estonia, %*
|
6.5
|
11.3
|
8.2
|
* 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 first quarter of the year, Fingrid used EUR 1.0 ((2.9) million for countertrade. The biggest costs were caused by disturbances in the DC connection between Finland and Sweden in February and by countertrade related to grid construction to maintain system security in Ostrobothnia.
|
Countertrade
|
1-3/2015
|
1-3/2014
|
1-12/2014
|
|
Countertrade between Finland and Sweden, €M
|
0.2
|
2.8
|
7.7
|
|
Countertrade between Finland and Estonia, €M
|
0.0
|
0.0
|
0.8
|
|
Countertrade between Finland’s internal connections, €M
|
0.8
|
0.0
|
1.7
|
|
Total countertrade, €M
|
1.0
|
2.9
|
10.1
|
Financing
The Group's financial position remained satisfactory. The Group's liquidity remained good. The Group´s net financial costs between January and March were EUR 3.9 (2.0) million, including the positive change of EUR 1.3 million positive (2.8 million positive) in the fair value of derivatives.
Financial and cash assets recognised at fair value throught profit or loss on 31 March 2015 were 183.4 (230.4) million. The company additionally has an undrawn revolving credit facility of EUR 250 million.
Interest-bearing borrowings totalled EUR 1,182.8 (1,233.3) million, of which non-current loans accounted for EUR 955.2 (973.1) million and current loans for EUR 227.6 (260.2) million.
The change in the fair value of derivatives in January–March 2015 includes EUR 1.4 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 37 (39) million. Fingrid’s foreign exchange and commodity price risks are generally fully hedged.
Personnel
The total number of personnel employed by the Group averaged 313 (287), of which 282 (269) were in a permanent employment relationship.
Other matters
In January 2015, the Finnish Energy Authority issued a decision in which it appointed Fingrid Oyj as the transmission system operator responsible for the Main Grid, as referred to in the Electricity Market Act, and granted the company a licence to operate the Main Grid. The decision nullifies the previous electricity network licence granted in 1997.
At the end of March, the Group defined its Main Grid for the first time. The definitions apply to all transmission lines, electricity substations and other devices that fall under the scope of the transmission service and grid. The obligation to define the network is based on the valid Electricity Market Act.
Auditing
The consolidated figures in this Interim Report are unaudited.
Events after the review period and outlook for the rest of the year
Fingrid’s report on the creation of a data hub as a future solution for exchanging information in the electricity market was examined by the Ministry of Employment and the Economy, and Fingrid was requested to initiate the data hub project.
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.
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.
Further information:
Jukka Ruusunen, President & CEO, tel. +358 30 395 5140 or +358 40 593 8428
Jan Montell, Chief Financial Officer, tel. +358 30 395 5213 or +358 40 592 4419