23.10.2009 12:00
Stock Exchange releases

Fingrid Group's Interim Report 1 January - 30 September 2009

Review of operations
 
Fingrid achieved excellent results in a benchmarking survey carried out by the Council of European Energy Regulators (CEER), measuring the overall efficiency of electricity transmission system operation. The benchmarking involved 22 European transmission system operators (TSOs) from 19 countries, and its results were published in early September. Fingrid Oyj and two other TSOs were found to be exceptionally efficient.
 
The working group appointed by the Finnish Ministry of Employment and the Economy, studying the feed-in tariff for renewable energy, completed its final report at the end of September. The working group suggests that Fingrid or its fully-owned subsidiary would co-ordinate the feed-in tariff system. At the moment, Fingrid manages similar arrangements such as the feed-in tariff for peat and the power reserve system.
 
Power system operation
 
From July to September 2009, electricity consumption in Finland totalled 17.1 terawatt hours (19.4 TWh during the corresponding period in 2008). A total of 13.9 TWh of electricity was transmitted in Fingrid’s grid during the same period, representing 81 per cent of the electricity consumption in Finland. Electricity consumption in Finland from January to September was 58.0 TWh (64.8 TWh), which was 10.5 per cent less than in 2008.
 
Between July and September, 1.2 TWh of electricity (0.5 TWh) was imported from Sweden to Finland, and 0.4 TWh (1.3 TWh) was exported from Finland to Sweden. From January to September, 2.2 TWh (3.5 TWh) of electricity was imported from Sweden to Finland, and 2.8 TWh (2.2 TWh) was exported from Finland to Sweden.
The volume of electricity imported from Estonia from July to September was 0.2 TWh (0.6 TWh), and 1.1 TWh (1.6 TWh) was imported from Estonia to Finland from January to September.
 
Electricity imports from Russia to Finland between July and September were 2.5 TWh (2.8 TWh), and between January and September 8.6 TWh (7.8 TWh).
 
A thunderstorm on 10 August caused a cross-border line disturbance between Finland and Sweden, as a result of which the Finnish power system segregated from the other Nordic countries into a frequency area of its own. The disturbance did not cause significant supply interruptions or disconnection of power plants. The previous time that the Finnish power system separated from the other Nordic countries was on 27 December 1983 as a result of a major disturbance originating from Hamra in Sweden.
 
An extensive power failure concerning some 60,000 people occurred in Northern Finland on 15 September. The failure originated from a failed protective relay at the Petäjäskoski substation, which is undergoing a major renovation project and was therefore subject to an exceptional switching situation.
 
Power system operation
1-9/09
1-9/08
7-9/09
7-9/08
Electricity consumption in Finland TWh
58.0
64.8
17.1
19.4
Fingrid's transmission volume TWh
45.6
48.1
13.9
15.5
Fingrid's loss energy volume TWh
0.7
0.7
0.2
0.2
Electricity transmissions
Finland-Sweden
exports to Sweden TWh
2.8
2.2
0.4
1.3
imports from Sweden TWh
2.2
3.5
1.2
0.5
Electricity transmissions
Finland-Estonia
exports to Estonia TWh
0.1
0
0
0
imports from Estonia TWh
1.1
1.6
0.2
0.6
Electricity transmissions
Finland-Russia
imports from Russia TWh
8.6
7.8
2.5
2.8
Promotion of electricity market
 
The average price (system price) in Nord Pool’s spot market during the third quarter in 2009 was 31.28 €/MWh (55.51 €/MWh during the corresponding period in 2008), and the area price for Finland was 35.56 €/MWh (65.90 €/MWh). From January to September, Nord Pool’s spot market price averaged 34.51 €/MWh (42.74 €/MWh) and the area price for Finland 35.99 €/MWh (50.56 €/MWh).
 
Transmission congestions between Finland and Sweden restricted trading for 5.14 per cent of the hours in the early part of the year. The congestion income caused by transmission congestions on the border between Finland and Sweden totalled 0.38 million euros from July to September. The Nordic congestion income during the same period was 36.17 million euros (81.19 million euros). Fingrid’s portion of this Nordic congestion income was 2.4 million euros (7.7 million euros). Between January and September, the congestion income resulting from transmission congestions on the border between Finland and Sweden was 0.92 million euros (0.22 million euros). The Nordic congestion income between January and September was 54.36 million euros (222.12 million euros). Fingrid’s portion of this congestion income in the early part of the year was 3.7 million euros (21.2 million euros).
 
Fingrid’s counter trade costs from January to September were approx. 0.6 million euros (0 million euros during the corresponding period in 2008).
 
The Commission of the European Union reprimanded all the EU member states for neglect concerning electricity market regulations. For Finland, the relevant issues mainly concerned efforts by authorities and to some extent also Fingrid. The Finnish Government contested the neglect in its response. The complaints made by the Commission were irrelevant in many respects, and potential earlier shortcomings have already been corrected.
 
On 9 September, the Finnish Competition Authority made a decision as a result of a request for action made by RAO Nordic. RAO Nordic claimed that Fingrid had misused its dominating market position on the market for cross-border transmission of electricity. The Competition Authority considered that there is no reason to take further action in the matter, and the Competition Authority removed the matter from processing.
 
Electricity market
1-9/09
1-9/08
7-9/09
7-9/08
NordPool system price, average €/MWh
34.51
42.74
31.28
55.51
Area price Finland, average €/MWh
35.99
50.56
35.56
65.90
Congestion income in the Nordic
countries million €
54.4
222.1
36.2
81.2
Congestion income between
Finland and Sweden million €
0.9
0.2
0.4
0.1
Congestion hours between
Finland and Sweden %
5.1
0.7
3.7
1.3
Fingrid's share of the congestion income
in the Nordic countries million €
3.7
21.2
2.4
7.7
Capital expenditure and grid maintenance
 
The Group’s gross capital expenditure from July to September was 34.8 million euros (20 million euros during the corresponding period in 2008). Gross capital expenditure between January and September totalled 88.1 million euros (55 million euros).
 
In 2009, Fingrid is making significant capital investments in the grid in Finland and in cross-border connections. Several new and renovated connections will be commissioned in the autumn. One project completed in the summer of 2009 was the 400/110/20 kilovolt transformer substation at Pikkarala, contracted by Siemens Osakeyhtiö.
 
Fingrid is gradually shifting from the 220 kilovolt voltage level to 400 kilovolts in Ostrobothnia in Western Finland. In the first stage, the contractor for the Seinäjoki-Tuovila transmission line is the German company SAG, and the contractor for the Tuovila substation is Infratek Oy. Fingrid has also signed a contract with Eltel Networks on renewing the 2x110 kilovolt transmission line between Lieto and Koroinen.
 
Major renovation and maintenance management projects on the existing grid have also been launched in the autumn. Fingrid and Svenska Kraftnät have ordered from ABB the renewal of the control and protection system of the Fenno-Skan 1 submarine cable link between Finland and Sweden originally commissioned in 1989. Basic renovations of the 220 kilovolt lines Leväsuo-Kalajoki and Kalajoki-Ventusneva as well as repair work for guy corrosion for 2009-2010 have been ordered from Empower Oy.
 
The opening of the electricity market in Estonia, required by the EstLink 2 project, has made progress. The Estonian Government has made a decision to open the Estonian wholesale market for electricity, and the Estonian Parliament will handle the proposal later in the autumn. The rules for the present connection EstLink1 are being changed so that the Nordic electricity exchange could begin work in Estonia in April 2010.
 
Financial result
 
The Group’s revenue from July to September was 71 million euros (87 million euros). The sales of balance power were 18 million euros (28 million euros) and purchases of balance power 18 million euros (22 million euros). The IFRS loss before taxes was -6 million euros (9 million euros).
 
The Group’s revenue was 255 million euros (280 million euros) from January to September. The grid tariff and Russian transmission tariff were raised by 4.5 per cent at the beginning of 2009. The other operating income was 1.5 million euros (1.6 million euros). As a result of decreasing electricity consumption, grid revenue decreased despite the 4.5 per cent tariff increase carried out at the beginning of the year.
 
Revenue from the sales of balance power decreased on the previous year to 66 million euros (76 million euros). The purchases of balance power, 61 million euros, were also below those in 2008 (68 million euros). These changes in purchases were mainly due to the fact that the consumption and production balances are now handled in two different balances. The Nordic congestion income, 4 million euros, decreased significantly from the previous year (21 million euros). Cross-border transmission income and peak load power income increased slightly from the corresponding period in 2008. Net proceeds from the ITC or inter-TSO compensations between the European TSOs grew to 10 million euros. Income and costs related to the feed-in tariff of peat increased somewhat. Depreciation costs, maintenance management costs, reserve power costs and personnel costs rose, while loss energy costs decreased slightly. The changes between January and September as well as July and September 2009 from the corresponding periods in 2008 are shown in the table below.
 
Revenue
1-9/09
1-9/08
7-9/09
7-9/08
Grid service revenue
130.7
135.6
32.2
33.7
Sales of balance power
66.4
76.3
18.3
27.9
Cross-border transmission
18.0
16.4
5.4
5.8
ITC income
21.9
16.3
7.8
6.7
Peak load power
9.4
7.8
3.0
2.5
Feed-in tariff for peat
0.3
0.2
0.1
0.1
Congestion income
3.7
21.2
2.4
7.7
Other revenue
4.2
6.5
1.6
2.7
Other operating income
1.5
1.6
0.5
0.6
Revenue and other income total
255.9
281.9
71.3
87.7
Costs
1-9/09
1-9/08
7-9/09
7-9/08
Depreciation
48.2
44.5
15.9
14.9
Purchase of balance power
60.8
67.6
17.5
21.6
ITC charges
11.9
11.0
3.4
4.1
Peak load power
9.9
7.2
3.1
2.0
Feed-in tariff for peat
0.2
0.0
0.0
0.0
Purchase of loss energy
36.7
37.5
11.4
11.0
Reserves
15.7
14.2
5.9
4.9
Maintenance management
12.3
9.0
4.7
3.3
Personnel
14.1
13.7
3.9
3.9
Other costs
13.6
13.6
4.3
5.3
Costs total
223.4
218.5
70.0
71.1
From January to September, operating profit excluding the change in the fair value of electricity derivatives was 33 million euros (63 million euros). Operating profit decreased primarily because of reduced grid service revenue, and smaller congestion income resulting from transmission congestions. The IFRS operating profit was 35 million euros (61 million euros), which contains 2 million euros (-2 million euros) of positive change in the fair value of electricity derivatives. The IFRS profit before taxes was 20 million euros (37 million euros), and the total comprehensive income for the review period was 11 million euros (38 million euros). The equity ratio was 26.4 (29.3) 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 nine-month result.
 
Financing
 
The financial position of the Group continued to be satisfactory. The net financial costs of the Group from July to September were -6 million euros (-7 million euros). The net financial costs of the Group also decreased between January and September to -15 million euros (-25 million euros). Financial assets recognised at fair value in the income statement, and cash and cash equivalents amounted to 204 million euros (213 million euros) at 30 September 2009. The interest-bearing liabilities, including derivative liabilities, totalled 977 million euros (939 million euros), of which 627 million euros (686 million euros) were long-term and 350 million euros (254 million euros) were short-term.
 
The counterparty risk involved in the derivative contracts relating to financing was 19 million euros. The company has an undrawn revolving credit facility of 250 million euros.
 
Personnel
 
The total personnel of the Fingrid Group averaged 250 (240) during the review period.
 
Auditing
 
The consolidated figures in this Interim Report are unaudited.
 
Events after the review period and outlook for the remaining part of the year
 
On 9 October 2009, Moody's Investors Service downgraded Fingrid's long-term rating to A1 from Aa3. The short-term rating remained at P-1. The outlook changed from stable to negative.
 
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 2009
 
Further information:
Jukka Ruusunen, President & CEO, tel. +358 (0)30 395 5140 or +358 (0)40 593 8428
Tom Pippingsköld, CFO, tel. +358 (0)30 395 5157 or +358 (0)40 519 5041