25.10.2012 11:00
Stock Exchange releases

Fingrid Group's Interim Report 1 January - 30 September 2012

Financial result

The Group’s revenue between July and September was 106 million euros (88 million euros during the corresponding period in 2011). Other operating income was 0.7 million euros (0.7 million euros). Grid service income was 46 million euros (36 million euros) and sales of imbalance power 28 million euros (34 million euros). The operating profit of the Group between July and September was 7 million euros (-4 million euros), which contains -3 million euros (-2 million euros) of changes in the fair value of electricity derivatives. IFRS profit before taxes was 11 million euros (-6 million euros) between July and September.

The Group’s revenue between January and September was 368 million euros (331 million euros) and other operating income was 2 million euros (2 million euros). The operating profit of the Group between January and September was 56 million euros (39 million euros), which contains -12 million euros (-3 million euros) of changes in the fair value of electricity derivatives. The consolidated IFRS profit before taxes was 53 million euros (26 million euros) between January and September. The profit for the review period was 40 million euros (19 million euros) and the consolidated total comprehensive income was 46 million euros (-4 million euros). Gross capital expenditure between January and September totalled 83 million euros (168 million euros). The cash flow from the operations of the Group deducted by capital expenditure was 26 million euros positive (-81 million euros). The equity ratio of the Group was 26.4 per cent (27.1 per cent) at the end of the review period.

The grid service income of the Group rose to 191 million euros (151 million euros) between January and September as a result of the tariff increase of 30 per cent carried out at the beginning of the year. Electricity consumption in Finland decreased by 1.3 per cent from the corresponding period in 2011. The sales of imbalance power decreased to 104 million euros (121 million euros) as a result of a lower price of electricity. Inter-TSO compensation income decreased by 7 million euros mainly due to reduced electricity exports from Finland to Sweden. Fingrid’s cross-border transmission income on the connection between Finland and Russia decreased by 10 million euros from the corresponding period in the previous year because of a significantly smaller volume of electricity imports from Russia. The congestion income on the interconnection between Finland and Estonia decreased as a result of fewer hours with a different price of electricity between the two countries. Fingrid’s congestion income on the interconnection between Finland and Estonia was 6 million euros (9 million euros), which was paid to the owners of the transmission connection. On the other hand, Fingrid’s congestion income on the interconnection between Finland and Sweden rose considerably due to the market situation and great differences in the area prices of electricity. Fingrid’s congestion income between Finland and Sweden was 36 million euros (12 million euros).

 

Revenue and other income (million euros)1-9/12​1-9/11​​7-9/127-9/11​
Grid service income​ 191​ 151​ 46​ 36​
​Sales of imbalance power ​104 121​ 28​ 34​
ITC icome​ ​7 ​15 ​1 ​2
​Cross-border transmission income 7​ ​17 ​1 ​5
​Finland-Estonia congestion income** 6​ ​9 ​4 ​1
​Peak load capacity income** 14​ ​3 ​5 ​0
Finland-Sweden congestion income​ 36​ 12​ ​21 ​10
Other revenue​ ​3 ​3 ​1 ​1
​Other operating income ​2 ​2 ​1 ​1
Revenue and other income total 370​ ​332 ​107 ​89

 

 

The purchases of imbalance power decreased to 93 million euros (109 million euros) as a result of a lower price of electricity. The loss energy costs rose by 1 million euros from the corresponding period in 2011 due to the difference between the area price for Finland and Nord Pool’s system price. At the end of September, 88 per cent of Fingrid’s projected loss energy procurement for the remaining part of 2012 had been hedged at an average price of 48.1 euros per megawatt hour.
 

The depreciation costs increased by 6 million euros as significant new capital investment projects were completed. The costs of reserves, which safeguard the system security of the power system, rose by 8 million euros during the period under review because the temporary purchases of frequency controlled reserves in the hourly market in Finland and from the other Nordic TSOs were more expensive than earlier. The personnel costs increased by 1 million euros from the previous year. The maintenance management costs rose by 3 million euros from 2011. This was particularly due to the high repair costs of the Fenno-Skan 2 cable. The inter-TSO compensation costs went up by 2 million euros, because electricity imports from Sweden to Finland increased considerably from 2011.
 

Costs (million euros)1-9/12​1-9/11​​7-9/127-9/11​
Purchase of imbalance power​ 93​ ​109 ​25 ​30
​Purchase of loss energy 48​ ​47 ​16 ​17
​Depreciation 56​ ​50 ​19 ​17
​Finland-Estonia grid rents** ​6 ​9 ​4 ​0
​Reserve costs 29​ ​21 ​11 ​10
​Personnel ​16 ​14 ​5 ​4
​Peak load capacity costs*** ​14 ​2 ​5 ​0
​Maintenance management costs ​15 ​12 ​4 ​4
​ITC transmission costs ​11 ​8 ​4 ​4
Other costs​ ​17 ​16 ​6 ​5
Costs total ​303 289​ ​97 ​91
Operating profit* 68​ ​43 ​10 ​-3
​Operating profit of Group, IFRS ​56 ​39 ​7 ​-4

  

* Excluding the change in the fair value of derivatives
** Fingrid’s income from the congestion income between Finland and Estonia was 5.7 million euros. The costs (grid rents between Finland and Estonia) were 5.6 million euros, which was paid to the owners of the Estlink transmission connection. The difference of 0.1 million euros received by Fingrid was created during disturbances on the Estlink connection.
*** The peak load capacity income and costs are related to the securing of the sufficiency of electricity during peak consumption hours within the framework of the Finnish Peak Load Capacity Act.

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.

Capital expenditure

The EstLink 2 direct current interconnector being built between Finland and Estonia has been in an active construction and installation phase throughout the summer and autumn of 2012. At best, the project has had a total of 8 construction sites in progress, with up to a total of about 150 employees working at the sites simultaneously. The construction and installation work is progressing according to schedule in both Finland and Estonia. The total budget of the project is 320 million euros, which is divided between Fingrid and Elering.

The commissioning and guarantee tests of the Forssa reserve power plant, which will improve the system security of the Finnish transmission system, were completed successfully during the autumn. The plant will be commissioned in the spring of 2013. The total budget of the project is approx. 110 million euros.
 
In June, Fingrid Oyj made a decision to construct the new Kristinestad 400/110/20 kilovolt substation. The main contractor is Infratek Finland Oy. The contract covers a new 400/110/20 kilovolt substation located about 6 km from the current Kristiina substation.
 

ABB will renew and expand Fingrid’s 400/110/20 kilovolt substation in Ulvila. The Ulvila substation is one of the most important nodes in the transmission grid in Finland. Among other things, it supplies the energy produced by the Olkiluoto nuclear power plant to the transmission grid. This project is Fingrid’s biggest substation renovation project to date.

The Hyvinkää - Hikiä transmission line project is in an active construction stage. This project is the first to use Fingrid’s new field tower. Its benefits include a greater land area available for cultivation, improved level of safety, and a light visual appearance. The construction of the foundations of the field tower is commencing during the autumn. The first field tower will rise in the vicinity of the area of the housing fair arranged in Hyvinkää in 2013. The Hikiä substation project has proceeded as planned. During the autumn, work such as foundation work for the 400 kilovolt bay will be carried out within the substation.

 
The security of electricity supply in the Kainuu region will be improved by building a new Ontojoki substation near the existing Katerma substation. The Katerma and Kallioinen hydropower plants will be connected to the new substation. The substation will also have outgoing bays to Seitenoikea and Tihisenniemi. The project is part of the grid development plan for the Kainuu region. The Katerma - Kuhmo 110 kilovolt line has been renewed earlier, and the renewal of the Tihisenniemi - Katerma 110 kilovolt transmission line is starting. The total project cost is approximately 4.9 million euros, and the substation will be completed in 2015. 

 

Several wind turbines are being constructed along the northern part of the Gulf of Bothnia, and the transmission capacity of the grid must be upgraded so that the new production capacity can be connected to the grid. On the transmission line between Isohaara and Simo, the conductors will be replaced on the existing towers to achieve a greater transmission capacity. Between Isohaara and Kittilänjärvi, high-temperature conductors will be used to attain a higher transmission capacity without the need to replace the existing towers with more rugged ones. The conductors will be replaced in 2013 and 2014 at a total cost of approx. 1.5 million euros.
 
Fingrid made a capital investment decision for the supply of conductors for 2013 to 2014. Midal Cables Limited of Bahrain was chosen as the conductor supplier. The purchase covers the conductors of all known new transmission line projects in 2013 and 2014. The scope of the contract is a total of 3,320 km of conductors.
 
The environmental impact assessment report concerning the 400 kilovolt transmission line project between Central Finland and the Oulujoki river was completed and delivered to the co-ordination authority. The co-ordination authority, the Centre for Economic Development, Transport and the Environment in Central Finland, put the assessment report on public display. The project and the key outcomes of the assessment work were communicated in public meetings in August and September 2012.
 
Fingrid was among the best transmission system operators in ITOMS (International Transmission Operations and Maintenance Study) for the ninth consecutive time. Fingrid’s performance in cost-effectiveness decreased slightly, because the company has been focusing greatly on safety and system security in recent years by improving the guy structures of transmission line towers. The 2010/2011 study concerned 27 TSOs around the world.
 
The Group’s gross capital expenditure between July and September was 26 million euros (58 million euros during the corresponding period in 2011). Gross capital expenditure between January and September totalled 83 million euros (168 million euros).

 

Power system operation
 
Electricity consumption in Finland between July and September totalled 18.3 terawatt hours (18.2 TWh) during the corresponding period in 2011). A total of 15.1 TWh of electricity was transmitted in Fingrid’s grid during the same period, representing 82 per cent of the electricity consumption in Finland. Between January and September electricity consumption in Finland totalled 61.9 terawatt hours (62.7 TWh).
Electricity transmissions between Finland and Sweden have consisted of imports to Finland. Revision work on the control systems of the Fenno-Skan transmission link restricted the capacity offered to the electricity market towards the end of the period under review. Between July and September, 4.7 TWh of electricity were imported from Sweden to Finland (3.1 TWh), and 0.0 TWh (0.0 TWh) were exported from Finland to Sweden. Between January and September, 11.5 TWh of electricity were imported from Sweden to Finland (3.8 TWh), and 0.2 TWh (3.3 TWh) were exported from Finland to Sweden.

 

The electricity transmissions between Finland and Estonia were dominated by exports from Finland to Estonia. The transmission capacity has been available to the market in the normal manner. The volume of electricity imported from Estonia from July to September was 0.1 TWh (0.1 TWh), and 0.5 TWh (0.2 TWh) were exported from Finland to Estonia between July and September. The volume of electricity imported from Estonia to Finland between January and September was 0.2 TWh (1.4 TWh), and 1.2 TWh (0.2 TWh) were exported from Finland to Estonia.
 
The electricity transmission capacity from Russia was limited in the summer by the annual maintenance work on the transmission connection, but at the same time the demand for transmission capacity has also been smaller than in the previous years. Between July and September, 0.4 TWh (2.3 TWh) of electricity were imported from Russia to Finland, and between January and September the import volume was 3.0 TWh (8.5 TWh).

As a result of numerous construction projects, demanding transmission outages were carried out in the grid especially in Ostrobothnia and Eastern Uusimaa. As a whole, the transmission reliability of the grid was good during the review period, although some disturbances were experienced. A major disruption occurred in the Vaasa region on 13 August 2012, when 63,000 people were left without electricity. Electricity was restored in Fingrid’s grid in nine minutes.
A busbar fault occurred in Alajärvi in August, resulting in the tripping of three 400 kilovolt lines in Fingrid’s grid. However, this did not cause any supply interruptions to the customers. In early July, a voltage transformer exploded at the Rauma substation, putting the Fenno-Skan 1 HVDC link out of use and causing a 400 kilovolt busbar fault. The interference caused interruptions in the industrial processes of nearby customers.

 

Power system operation1-9/12​​1-9/11​7-9/127-9/11​
Electricity consumption in Finland TWh 61.9​ ​62.7 ​18.3 ​18.2
​Fingrid's transmission volume TWh 47.0​ ​48.0 ​15.1 ​14.6
​Fingrid's loss energy volume TWh 0.9​ ​0.9 ​0.3 ​0.3
Electricity transmission Finland-Sweden​
​Exports to Sweden TWh ​0.2 3.3​ 0.0​ ​0.0
​Imports from Sweden TWh ​11.5 3.8​ ​4.7 3.1​
​Electricity transmissions Finland-Estonia
​Exports to Estonia TWh ​1.2 ​0.2 ​0.5 ​0.2
Imports from Estonia TWh​ ​0.2 1.4​ ​0.1 ​0.1
​Imports from Russia TWh 3.0​ ​8.5 ​0.4 ​2.3

  

 

Electricity market
 
Due to the good water reservoir situation, the price of electricity in the Nordic electricity exchange has been significantly lower this year than during the corresponding period in 2011. The extraordinary market situation and restrictions encountered in electricity transmissions between Finland and Sweden have created area price differences in the market.
 
The average price (system price) in the Nordic electricity exchange during the third quarter was 20.88 euros per megawatt hour (35.95 €/MWh during the corresponding period in 2011), and the area price for Finland was 30.96 €/MWh (43.35 €/MWh). Between January and September, the average price in the Nordic spot market was 29.26 €/MWh (51.43 €/MWh), and the area price for Finland was 35.36 €/MWh (53.37 €/MWh).
 

Due to the great area price differences, Fingrid has accumulated considerable congestion income; this year a total of about 36 million euros between Finland and Sweden, and a total of about 6 million euros between Finland and Estonia.

 
Fingrid’s counter trade costs between January and September were approx. 3.7 million euros (1.3 million euros during the corresponding period in 2011).
 
Fingrid Oyj and Scandem Oy have signed an agreement on portfolio management for Fingrid’s loss energy. The objective is to hedge against electricity price fluctuations as well as possible, thus safeguarding the stable price of the grid tariff.
 
As the Estonian and Lithuanian electricity markets joined the Nordic power market, the transmission system operators in these two countries ‒ Elering and Litgrid ‒ became co-owners of electricity exchange Nord Pool Spot AS on 1 August 2012 with a holding of approximately 2 per cent each. Fingrid owns about 19 per cent of Nord Pool Spot AS.
 
Electricity market1-9/12​1-9/11​7-9/12​7-9/11​
Nord Pool system price, average €/MWh​ ​29.26 51.43​ ​20.88 ​35.95
​Area price Finland, average €/MWh 35.36​ ​53.37 30.96​ 43.35​
​Congestion income between Finland and Sweden, million €* 72.5​ ​23.0 ​42.0 ​19.0
​Congestion hours between Finland and Sweden % * 41.2​ ​24.5 ​48.7 ​46.6
​Congestion income between Finland and Estonia, million €* 11.5​ ​17.8 ​7.2 ​0.9
Congestion hours between Finland and Estonia %*​ 38.9​ ​50.4 ​48.7 ​12.5
  
* The congestion income between Finland and Sweden as well as between Finland and Estonia is divided between the relevant TSOs in equal proportions. The income and costs of the transmission connections are presented in the tables under Financial result.
 
Financing
 
The net financial costs of the Group between July and September turned to income and were 4 million euros (1 million euros of costs during the corresponding period in 2011). The net financial costs between January and September were 3 million euros (14 million euros), including the positive change of 13 million euros (1 million euros positive) in the fair value of derivatives. Financial assets recognised at fair value in the income statement, and cash and cash equivalents amounted to 245 million euros (202 million euros) at 30 September 2012. Moreover, the company has an undrawn revolving credit facility of 250 million euros.
 
The financial position of the Group continued to be satisfactory. The interest-bearing borrowings totalled 1,254 million euros (1,141 million euros), of which 1,059 million euros (707 million euros) were long-term and 194 million euros (434 million euros) were short-term.
 
The counterparty risk involved in the derivative contracts relating to financing was 89 million euros (54 million euros).
 
Moreover, the company has an undrawn revolving credit facility of 250 million euros.
 
Personnel
 
The total personnel of the Fingrid Group averaged 269 (265) during the review period.
Auditing

The consolidated figures in this Interim Report are unaudited.
 
Events after review period and outlook for the remaining part of the year
 
International credit rating agency Fitch Ratings has affirmed Fingrid Oyj’s senior unsecured debt rating at A+ on 16 October, 2012. Long-term Issuer Default Rating remained (IDR) at A and Short-term IDR remained at F1. The Outlook on the Long-term IDR is Stable. The ratings remained unchanged.
 
The profit of the Fingrid Group for the entire accounting period without the change in the fair value of derivatives is expected to increase clearly from the level of 2011. The uncertainty involved in congestion income and in cross-border income on the interconnections from Russia makes it difficult to anticipate Fingrid’s financial result for the entire year.

Board of Directors


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