28.10.2014 11:30
Stock Exchange releases

Fingrid Group's Interim Report 1 January - 30 September 2014

Figures in brackets refer to the corresponding period the previous year, unless otherwise stated. Financial development January – September 2014 • The Group’s turnover between January and September was EUR 419 (388) million. • The Group's operating profit was EUR 116 (79) million. • The Group's profit for the review period was EUR 87 (43) million. • The cash flow from the Group's operations deducted by investments was EUR 92 (-7) mil-lion. • Net interest-bearing liabilities totalled EUR 1,070 (1,029) million. • Investments totalled EUR 87 (130) million. • The equity ratio was 30.4% (28.6%). • Earnings per share totalled EUR 26,288 (12,991). Financial development July – September 2014 • The Group’s turnover between July and September was EUR 114 (108) million. • Operating profit for the third quarter of the year was EUR 17 (10) million. • The Group's profit for the review period July – September was EUR 11 (3) million. ​

KEY FIGURES
 
Jan-Sept/14
Jan-Sept/13
Change
%
July-Sept/14
July-Sept/13
Change %
Jan-Dec/2013
Turnover
MEUR
419.0
388.0
8.0
113.6
107.8
5.4
543.1
Investments, gross
MEUR
87.1
130.5
-33.2
29.6
66.9
-55.7
225.3
- % of turnover
%
20.8
33.6
 
26.1
62.1
 
41.5
Research and development expenses
MEUR
1.2
1.2
3.1
0.3
0.3
6.6
1.8
- % of turnover
%
0.3
0.3
 
0.3
0.3
 
0.3
Personnel, average
 
302
278
8.6
314
289
8.7
277
Personnel at the end of period
 
314
286
9.8
314
   
287
Salaries and remunerations total
MEUR
15.0
13.5
10.7
4.6
4.1
11.9
19.0
Operating profit
MEUR
116.3
78.8
47.5
17.3
9.9
75.1
115.3
- % of turnover
%
27.8
20.3
 
15.2
9.2
 
21.2
Profit before taxes
MEUR
109.1
56.9
91.7
14.1
4.2
233.1
87.3
- % of turnover
%
26.0
14.7
 
12.4
3.9
 
16.1
Profit for the financial period
MEUR
87.4
43.2
102.4
11.2
3.3
237.9
90.7
Comprehensive income for the financial period
MEUR
87.6
42.6
105.4
11.8
7.0
68.1
86.1
Return on investments (ROI)
%
           
6.3
Return on equity (ROE)
%
           
15.0
Equity ratio
%
30.4
28.6
       
29.5
Interest-bearing net liabilities
MEUR
1069.6
1028.7
4.0
     
1076.7
Grearing
 
1.6
1.7
       
1.7
Profit/share
26 288.4
12 991.5
102.4
3382.8
1001.2
237.9
27 277.9
Dividend/A shares
           
29 788.3
Dividend/B shares
           
16 038.5
Equity/share
194 997
180 231
8.2
     
193 293
Dividend payout ratio A shares
%
           
109.2
Dividend payout ratio B shares
%
           
58.8
Number of shares
               
– Series A shares
shares
2 078
2 078
       
2 078
– Series B shares
shares
1 247
1 247
       
1 247
Total
shares
3 325
3 325
       
3 325

 

 

Fingrid Oyj's President & CEO Jukka Ruusunen: "Market fluctuations are visible in main grid pricing"

Electricity imports from the Nordic countries have been exceptionally great in comparison with recent years, and combined with increased electricity exports to the Baltic countries throughout the start of the year, have increased Fingrid's congestion income. However, the two factors have also increased costs resulting from compensating for the loss of electricity during transmission. Market prices for reserves required by the electricity system have been more affordable than previously. Cross-border transmission income relating to Russian imports have been at a low level due to the small volume of imports.

The great fluctuation in market-driven profits and costs is visible in main grid pricing. Fingrid has decided to lower grid fees for next year by an average of two per cent. In addition, grid fees will be reduced by around 50 per cent in December this year. The basic outlook for the market situation will remain the same until the third Olkiluoto unit is commissioned. The transmission situation may be affected by changes to the capacity fee system in use in Russia.

Fingrid's investment programme has progressed on schedule and in accordance with cost plans.  The power line project between Hikiä and Forssa progressed as planned during the summer months. In Ostrobothnia, work on a project between Kokkola and Oulu began in September. The project between Ulvila and Kristiina has progressed according to plan and the overall project will be complete during autumn this year.

Fingrid Group's Interim Report 1 January – 30 September 2014

Accounting principles

Fingrid's interim report has been drawn up in accordance with standard IAS 34, Interim Financial Reporting. In this interim report, Fingrid has followed the same principles as in the annual financial statements for 2013, with the exception of hedge accounting for electricity derivatives, which was stopped at the start of 2014. As a result of this, the entire change in the fair value of the derivatives in question was recorded and will continue to be recorded in the income statement. The hedge fund in the balance sheet will be dismantled in the income statement during 2015 and 2016 in fixed instalments such that it decreases the result by EUR 11.6 million.

Financial result

The Group's turnover for the third quarter of the year was EUR 114 (108) million. Grid service income during the third quarter was  58 (54) million. Other operating income was 0 (1) million euros. Costs during the third quarter were 105 (108) million.

The Group’s turnover between January and September was EUR 419 (388) million. Grid service income increased during early 2014 to EUR 244 (228) million, primarily as a result of the eight per cent rise in tariffs implemented from the start of the year. Other operating income was 2 (3) million euros. Costs for January-September were EUR 316 (318) million.

Between January and September, electricity consumption in Finland totalled 60.8 (61.8) terawatt hours. The sale of imbalance power was EUR 110 (113) million. Fingrid's congestion income from connections between Finland and Sweden grew significantly to EUR 36 (12) million. The increase in congestion income arose from a market situation in which Finland imported a significant amount of electricity from Sweden. Cross-border transmission income on the connection between Finland and Russia fell to EUR 6 (10) million. This is due to a decrease in imports from Russia. Congestion income between Finland and Estonia decreased and ITC income rose compared with the level in the corresponding period of last year.

The sale of imbalance power was EUR 110 (113) million. Imbalance power costs fell from last year to EUR 76 (89) million. Imbalance service prices were reduced from 1 August 2014. Loss energy costs rose to EUR 49 (43) million due to a larger difference between the Finnish regional price and system price and due to larger energy losses compared with the reference period. At the end of September, approximately 97 (99) per cent of Fingrid's projected loss energy procurement for the remaining part of 2014 had been hedged at an average price of EUR 43.5 (47.5) per megawatt hour.

The costs of reserves to ensure grid operational reliability fell to EUR 46 (49) million as the result of a decrease in the market prices of reserves and a favourable market situation. Depreciations totalled EUR 68 (60) million euros. Maintenance costs fell to EUR 11 (15) million since costs in the previous year were elevated by the cost of repairs to the Fenno-Skan 1 direct current connection. Personnel costs were EUR 18 (17) million.

Turnover and other income (EUR million)
Jan-
Sept/14
Jan-Sept/13
Change %
July-Sept/14
July-Sept/13
Change %
Grid service income
244
228
7.0
58
54
7.2
Sales of imbalance power
110
113
-2.6
34
38
-12.0
ITC income
8
6
37.3
2
1
105.2
Cross-border transmission income
6
10
-38.8
2
2
-11.6
Finland-Estonia congestion income*
2
3
-32.3
1
1
131.7
Peak load capacity income**
6
12
-48.5
2
2
-14.9
Finland-Sweden congestion income
36
12
188.3
12
8
53.5
Other turnover
7
5
62.9
3
2
81.2
Other operating income
2
3
-36.6
0
1
-34.8
             
Turnover and other income total
421
391
7.6
114
108
5.2

 

Costs (EUR million)
Jan-
Sept/14
Jan-
Sept/13
Change %
July-Sept/14
July-Sept/13
Change %
Purchase of imbalance power
76
89
-14.9
24
31
-20.8
Cost of loss energy
49
43
13.3
15
16
-7.0
Depreciation
68
60
14.1
23
20
13.3
EstLink grid rents*
0
3
-100.0
 
1
-100.0
Reserve costs
46
49
-7.5
18
17
2.5
Personnel costs
18
17
7.4
5
5
6.1
Peak load capacity costs**
6
11
-49.3
2
2
-17.0
Maintenance management costs
11
15
-22.2
5
5
-11.7
ITC transmission costs
8
9
-5.1
3
4
-22.1
Other costs
35
22
56.8
11
7
55.5
             
Costs total
316
318
-0.4
105
108
-2.3
             
Operating proexcluding fair value of commodity derivatives
105
74
42.1
9
1
1003.0
Operating profit of Group, IFRS
116
79
47.5
17
10
75.1


*Fingrid's income from the congestion income between Finland and Estonia was EUR 1.9 million. There were no costs (Finland-Estonia grid rents) during the review period, since the EstLink connection has been under Fin-grid's ownership since 30.12.2013. Before the transferral of ownership, congestion income between Finland and Estonia was paid as grid rent to the owners of the 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. (Laki sähköntuotannon ja -kulutuksen välistä tasapainoa varmistavasta tehoreservistä 117/2011).

 

The Group's operating profit for the third quarter of the year was EUR 17 (10) million. Profit before taxes was EUR 14 (4) million. Profit for the period under review was EUR 11 (3) million and the comprehensive income was 12 (7) million. The net cash flow of the Group deducted by investments was EUR -5 (-46) million negative.

The Group's operating profit for the start of the year was EUR 116 (79) million. Profit before taxes was EUR 109 (57) million. The greatest positive differences from the corresponding period last year are explained by changes in the fair value of derivatives (EUR 23 million) and by congestion income in the Nordic countries (EUR 23 million). Profit for the financial period was EUR 87 (43) million and the comprehensive income was 88 (43) million. The net cash flow of the Group deducted by investments was EUR 92 (-7) million positive at the start of the year. The equity ratio was 30.4 (28.6) per cent at the end of the review period.

In September, Fingrid decided to reduce its grid fees for December by approximately 50 per cent because the company sets its grid fees annually with the aim of moderate profit permitted by the authorities. During the review period, decisions were made concerning Fingrid's pricing for 2015. Grid service prices for next year will be reduced on average by two per cent in comparison to the current unit prices for this year.
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 six-month period.

Investments and maintenance

At the end of September, Fingrid made procurement decisions on the basic maintenance of substations and power lines for 2015 - 2017. Nationwide grid basic maintenance agreements were put out to tender for both substations and power lines by work area. The procurement value for substation basic maintenance is approximately EUR 14 million and the value of power line basic maintenance is approximately EUR 6 million.

During the review period, Fingrid made a contract with ABB Oy concerning the construction of substations in Hirvisuo and Kuolajärvi. The sizeable 400/110/20 kilovolt substation in Hirvisuo, Kokkola, is part of a strategic procurement entity to strengthen the aging 220 kilovolt network in Ostrobothnia, whose transmission capacity is now inadequate. The value of the contract is approximately EUR 10 million.

Fingrid's investment programme has progressed according to plan.  The major project between Hikiä and Forssa progressed on schedule during the summer months. In addition to new construction, part of the historic Rautarouva (Iron Lady) power line is dismantled.

In September, foundation work began on the Hirvisuo-Pyhänselkä project, which will strengthen the Ostrobothnian network's transmission capacity and allow for the connection of new electricity producers. The project between Ulvila and Kristinestad has progressed according to plan and the overall project will be complete during autumn this year.

Power system

Electricity consumption in Finland between July and September totalled 18.0 (18.2) terawatt hours. During the same period, 15.6 (15.2) TWh of electricity was transmitted in Fingrid's grid, representing 86.7 per cent of the electricity consumption in Finland.

Between January and September, electricity consumption in Finland totalled 60.8 (61.7) TWh. During the same period, 49.6 (47.7) TWh of electricity was transmitted in Fingrid's grid, representing 81.6 per cent of the electricity consumption in Finland.

Electricity transmission between Finland and Sweden consisted extensively of imports to Finland. Between July and September, 4.7 (4.3) TWh of electricity were imported from Sweden to Finland, and 0.3 (0.04) TWh were exported from Finland to Sweden. Between January and September, 14.0 (9.1) TWh of electricity were imported from Sweden to Finland, and 0.1 (0.7) TWh were exported from Finland to Sweden. The transmission capacity between the countries has occasionally been limited due to disturbance in the direct current connections running between Finland and Sweden. Technical research carried out on the Fenno-Skan 1 cable found that the cable cannot be used to transmit electricity at full power. The cable's maximum transmission power was permanently reduced from 1 July 2014 to a maximum of 400 megawatts.

Electricity transmission between Finland and Estonia has been dominated by exports from Finland to Estonia. The new EstLink 2 connection has clearly increased the transmission of electricity between Finland and Estonia. The volume of electricity imported from Estonia from July to September was 0.01 (0.1) TWh, and 0.6 (0.3) TWh were exported from Finland to Estonia. The volume of electricity imported from Estonia to Finland between January and September was 0.04 (0.4) TWh, and 2.9 (0.9) TWh were exported from Finland to Estonia. Transmission capacity was occasionally limited due to disturbance in the direct current connections running between Finland and Estonia.

Between July and September, 0.6 (0.7) TWh of electricity were imported from Russia to Finland, and the import volume between January and September was 1.9 (3.4) TWh. The transmission capacity between Russia and Finland has been fully available for use with the exception of annual maintenance work carried out on the Russian network in July. The transmission capacity was lower than usual during the maintenance work, but nevertheless sufficient to meet market needs. As was the case last year, the import of electricity from Russia has been low. There are, however, large fluctuations in imports within 24 hour periods.

As a member of the Power and District Heat Pool, Fingrid was involved in the organisation of the VALVE (Valot verkkoon 2014) disturbance exercise held in Rovaniemi on 23 September 2014 by power companies and authorities. The major disturbance exercise tested the nationwide restoration of electricity supply in the event of major disturbance.

During the summer, the number of disturbance incidents in the grid was higher than usual. Thunderstorms caused the majority of disturbance, but some disturbance was caused by device and planning errors.
Power system operation
Jan-Sept/14
Jan-Sept/13
July-Sept/14
July-Sept/13
Electricity consumption in Finland TWh
60.8
61.8
18.0
18.2
Fingrid's transmission volume TWh
49.6
47.7
15.6
15.2
Fingrid's loss energy volume TWh
0.9
0.8
0.3
0.3
Electricity transmission Finland - Sweden
       
Exports to Sweden TWh
0.1
0.7
0.03
0.04
Imports from Sweden TWh
14.0
9.1
4.7
4.3
Electricity transmission Finland - Estonia
       
Exports to Estonia TWh
2.9
0.9
0.6
0.3
Imports from Estonia TWh
0.04
0.4
0.01
0.1
Electricity transmission Finland - Russia
       
Imports from Russia TWh
1.9
3.4
0.6
0.7

 

 

Electricity market

The average price (system price) in the Nordic electricity exchange during the third quarter, between July and September, was EUR 31.80 (35.85)/MWh and the area price for Finland was EUR 37.83 (42.70)/MWh. Between January and September, the average price in the Nordic spot market was EUR 29.23 (38.85)/MWh, and the area price for Finland was EUR 35.88 (41.58)/MWh.

Finland's counter trade costs between January and September were approximately EUR 8.6 (0.6) million.
 
Counter trade
Jan-
Sept/14
Jan-Sept/13
July-Sept/14
July-Sept/13
Counter trade between Finland and Sweden, MEUR
5.9
0.3
2.0
0.1
Counter trade between Finland and Estonia, MEUR
0.6
0.0
0.4
0.0
Counter trade between Finland's internal connections, MEUR
2.1
0.2
0.2
0.0
Total counter trade, MEUR
8.6
0.6
2.6
0.1

 

Factors that had the most significant effect on the growth in counter trade costs were the disruptions in the Fenno-Skan 1 and 2 connections in March and June, which amounted to EUR 2.9 million; the fault in the 400 kV Petäjäskoski-Letsi border line amounting to EUR 1.3 million, and the running of local power stations to ensure operational reliability during outages required by network construction work in early summer, which amounted to EUR 1.2 million.

 

Electricity market
Jan-
Sept/14
Jan-Sept/13
July-Sept/14
July-Sept/13
Nord Pool system price, average €/MWh
29.23
38.85
31.80
35.85
Area price Finland, average €/MWh
35.88
41.58
37.83
42.70
Congestion income between Finland and Sweden, million €*
71.5
24.8
23.7
15.5
Congestion hours between Finland and Sweden %*
49.1
16.6
53.8
31.0
Congestion income between Finland and Estonia, million €*
3.7
5.5
2.6
1.1
Congestion hours between Finland and Estonia %*
8.8
27.6
12.6
23.0

 *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.

 

At the start of the year, Fingrid launched an investigative project to determine a future electricity market information exchange solution for at least ten years. The investigation includes an assessment of the current information exchange situation and future needs. Factors relating to the selection of a solution were examined in September in a discussion event attended by over 120 information exchange specialists. As the result of its investigative work, Fingrid will present Datahub as the electricity market information exchange solution for the future. The final decision on the implementation of Datahub will be made by the Ministry of Employment and the Economy.
 
Financing

The financial position of the Group continued to be satisfactory. The Group's net financing costs between July and September were EUR 3 (6) million.  The net financing costs between January and September were EUR 8 (23) million, including the change of EUR 8 million positive (9 million negative) in the fair value of derivatives.

Financial assets recognised at fair value in the income statement, and cash and cash equivalents amounted to EUR 180 (222) million on 30 September 2014. Moreover, the company also has an undrawn revolving credit facility of EUR 250 million.

Interest-bearing borrowings totalled EUR 1,249 (1,250) million, of which EUR 1,014 (1,042) million were non-current and EUR 235 (208) million were current.

The counterparty risk involved in the derivative contracts relating to financing was EUR 47 (52) million.

Personnel

The Group's overall number of personnel was on average 302 (278), of which 276 (264) were in a permanent employment relationship.

Auditing

The consolidated figures in this Interim Report are unaudited.

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

In September, Fingrid decided to reduce its grid fees for December by approximately 50 per cent because the company sets its grid fees annually with the aim of moderate profit permitted by the authorities.

The profit for the entire year 2014 before taxes and without any changes in the fair value of derivatives is estimated to be on the same level as last year. It is difficult to predict Fingrid's financial result for the entire year due to the uncertainty involved in reserve costs, congestion income, loss energy costs and cross-border transmission with Russia.

On 14 October 2014, international credit rating agency Standard & Poor's Rating Services (S&P) lowered Fingrid Oyj's credit rating to A+, outlook stable. The credit rating was lowered as a direct result of a decline in the credit rating of the State of Finland. As such, ratings from S&P are "A+" (long-term global scale rating), previously "AA-" and "A-1" (short-term global scale rating), previously "A-1+". The "K1" rating (Nordic regional scale rating) remained unchanged. The company's Stand-Alone Credit Profile, which is the basis for the credit rating and which does not take into account support from state ownership, remains "a".

Appendices: Tables for the Interim Report 1 January - 30 September 2014

Further information:
Jukka Ruusunen, President & CEO, tel. +358 30 395 5140 or +358 40 593 8428