30.4.2014 11:00
Stock Exchange releases, Current News

January - March 2014 Revenue and profit for the review period improved

Figures in brackets refer to the corresponding period the previous year, unless otherwise stated. January - March 2014: Revenue and profit for the review period improved • The Group's turnover between January and March was 191 (171) million euros • Operating profit for the first quarter of the year was 79 (79) million euros • The Group's profit for the review period was 62 (55) million euros • The cash flow from the Group's operations with capital expenditure deducted was 73 (38) million euros • The interest-bearing borrowings totalled 1,002.8 (992.5) million euros • Investments totalled 32 (34) million euros • The equity ratio was 32.0% (29.3%) • Earnings per share totalled 18,744 (16,550) euros

 

KEY FIGURES
 
Jan-March/14
Jan-March/13
change %
Jan-Dec/2013
Turnover
MEUR
191.3
170.6
12.1
543.1
Capital expenditure, gross
MEUR
31.6
34.4
-8.2
225.3
- % of turnover
%
16.5
20.2
 
41.5
Research and development expenses
MEUR
0.4
0.4
-8.1
1.8
- % of turnover
%
0.2
0.2
 
0.3
Personnel, average
 
287
268
 
277
Personnel at end of review period
 
289

276
 
287
Salaries and remunerations total
MEUR
5.1
4.57
 
19.0
Operating profit
MEUR
79.3
79.1
0.3
115.3
- % of turnover
%
41.5
46.4
 
21.2
Profit before taxes
MEUR
77.8
72.8
6.9
87.3
- % of turnover
%
40.7
42.7
 
16.1
Profit for the review period
MEUR
62.3
55.0
13.3
90.7
Comprehensive income for the review period
MEUR
61.9
50.3
23.2
86.1
Return on investments
%
     
6.3
Return on equity
%
     
15.0
Equity ratio
%
32.0
29.3
 
29.5
Interest-bearing net borrowings
MEUR
1,002.8
992.5
1.0
1,076.7
Debt to equity ratio
%
142.3
160.1
 
167.5
Profit/share
18,744.1
16,550.4
13.3
27,277.9
Dividend/A shares
     
2,018.26*
Dividend/B shares
     
2,018.26*
Equity/share
211,907
186,478
13.6
193,293
Dividend payout ratio A shares
%
     
7.4
Dividend payout ratio B shares
%
     
7.4
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


* The Board of Directors' proposal to the Annual General Meeting
  

Jukka Ruusunen, President & CEO of Fingrid says about the interim report:
"Finland imported affordable power from the west – transmission connections have seen a high degree of utilisation"

Affordable electricity has been available in the Nordic countries and significantly more of it was transmitted to Finland this year than last year. Power transmission connections between Finland and Sweden have functioned well, and Fingrid was able to make the full transmission capacity available to the markets for almost the entire time. The transmission capacity however was not sufficient to meet market needs in all situations, and for this reason the regional price in Finland has been higher than the Swedish regional price. The power transmission connections also functioned excellently during winter peak consumption, when Finland was heavily reliant on imported electricity.  

Fingrid's grid profits were 124 million euros as a result of an eight per cent rise in tariffs carried out at the start of the year and an increase in grid connection profits. Electricity consumption in Finland decreased by 3.3 per cent when compared to the corresponding period in 2013. Correspondingly, during the review period, Fingrid transmitted slightly more electricity than it did during the same period in the previous year. The import of electricity from Russia to Finland decreased significantly compared to last year, which can be seen in as a three million euro decrease in cross-border transmission income.  On the other hand, congestion income relating to Finland's and Sweden's regional price differences increased to 15 million euros while they were one million euros during the corresponding period last year.

FINGRID GROUP'S INTERIM REPORT JAN–MAR/2014

Calculation 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 equal instalments during 2015 and 2016 so that result is decreased by 11.6 million euros.

Financial result

The Group's turnover during the review period grew to 191 (171) million euros, and other operating income was 1 (1) million euros.

Grid profits were 124 (116) million euros. The profits grew as a result of an eight per cent rise in tariffs carried out at the start of the year and an increase in grid connection profits. Electricity consumption in Finland decreased by 3.3 per cent when compared to the corresponding period in 2013. Correspondingly, during the review period, Fingrid transmitted slightly more electricity than it did during the same period in the previous year: 18.2 (17.6) terawatt hours. The sale of imbalance power remained on the same level as last year at 41 (40) million euros. Congestion income between Finland and Sweden increased drastically and reached 15 (1) million euros. The rise in congestion income between Finland and Sweden was a result of the market situation and an increase in regional price differences. Cross-border transmission income between Finland and Russia fell to 2 (5) million euros as a result of a reduction in Russian imports. Congestion income between Finland and Estonia, as well as European inter-TSO compensation income decreased from the level in the corresponding period of last year.

Imbalance power costs fell and were 27 (32) million euros. Loss energy costs grew by three million euros due to an increase in the price of loss energy. At the end of the period under review, approximately 98 per cent of Fingrid's projected loss energy procurement for the remaining part of 2014 had been hedged at an average price of 44.1 euros per megawatt hour. Depreciation costs increased by three million euros as significant new capital investment projects were completed. The costs of reserves to ensure grid operational reliability grew slightly and were 13 (12) million euros. Personnel-, maintenance management- and inter-TSO compensation costs remained more or less at the level of the previous year.

 

Turnover and other income (million €)
Jan-March/14
Jan-March/13
change %
       
Grid service revenue
124
116
7.1
Sales of imbalance power
41
40
3.9
ITC income
4
3
39.3
Cross-border transmission income
2
5
-49.7
Finland-Estonia congestion income*
0
1
-18.9
Peak load capacity income**
2
5
-56.4
Finland-Sweden congestion income
15
1
2,087.5
Other turnover
2
1
46.4
Other operating income
1
1
25.0
       
Turnover and other income total
191
171
12.2

  

Costs (million €)
Jan-March/14
Jan-March/13
change %
       
Purchase of imbalance power
27
32
-14.0
Cost of loss energy
18
15
22.5
Depreciation
22
19
14.1
Estlink grid rents*
0
1
-100.0
Cost of reserves
13
12
7.1
Personnel costs
6
6
12.9
Cost of peak load capacity**
2
5
-57.4
Maintenance management costs
3
4
-31.8
ITC charges
3
3
12.7
Other costs
11
8
43.6
       
Costs total
106
103
2.4
       
Operating prot excluding the change in the fair value of commodity derivatives
87
69
26.8
Operating profit of Group
79
79
0.3

 

*Fingrid's income from the congestion income between Finland and Estonia was 0.4 million euros. There were no costs (Finland-Estonia grid rental) during the period under review, since the EstLink connection has been under Fingrid's ownership since 30.12.2013. Before the transferral of ownership, congestion income profits between Finland and Estonia were paid as grid rental 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.


The operating profit of the Group was 79 (79) million euros, including -8 (11) million euros) of changes in the fair value of commodity derivatives. The profit before taxes was 78 (73) million euros. Profit for the period under review was 62 (55) million euros and the comprehensive income was 62 (50) million euros. The cash flow from the Group's operations with capital expenditure deducted was 73 (38) million euros. The equity ratio was 32.0 (29.3) 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 six-month period.

Investments and maintenance

The EstLink 2 high-voltage direct current connection between Estonia and Finland has been available for market use since the start of December 2013. The connection was handed over to owners in February 2014 and has significantly increased power transmission between the countries. EstLink 2 was officially inaugurated on 6 March 2014 in ceremonies taking place simultaneously in Püssi, Estonia and in Porvoo, Finland. The connection tripled the transmission capacity between Finland and Estonia and removed one of the worst transmission bottlenecks in the Baltic Sea region. The major project kept to its schedule and budget, despite being challenging.

The construction of wind power has made significant progress in Northern Ostrobothnia. At the turn of the year, Fingrid made new investment decisions relating to Siikajoki, Raasakka, Keminmaa, Taivalkoski and Ossauskoski. A new 110 kilovolt substation will be built in Siikajoki in order to allow the connection of wind power in the area to the grid. In addition, power lines will also be renewed in Raasakka, and the Isohaara–Taivalkoski 110 kilovolt cable will be run to Keminmaa.  Basic renovations will be carried out on the Taivalkoski and Ossauskoski substations. These investments are valued at approximately 15 million euros in total.

Several challenges are under way for Fingrid on the western coast. The greatest challenge is the Ulvila–Kristinestad connection, which includes two power line projects and two substation projects. The component projects are under way and progressing according to plan. The entire connection is due for completion in early autumn 2014.

Work on the Hikiä–Forssa power line project began in spring. A mild winter has posed challenges to foundation work, but nevertheless, work has progressed according to schedule. In accordance with Fingrid's updated occupational safety requirements, a separate safety supervisor financed by Fingrid was appointed for the project.
In Eastern Finland, the Varkaus–Kontiolahti power line project has progressed as planned. The project saw the erection of Fingrid's first 110 kilovolt field tower between Varkaus–Hovinpaikka. The tower is the same design as the 400 kilovolt field tower which won the Fennia Design Prize. All in all, a total of 25 towers will be erected in the project. Field towers are mostly used to replace towers which are erected in fields using stay cables. The use of the newer towers frees up field space for agriculture.

Power system

From the start of the year until the end of March, Finland consumed 23.8 (24.6) terawatt hours of electricity. During the same period, 18.2 (17.6) TWh of electricity was transmitted in Fingrid's grid, representing 76 (72) per cent of the electricity consumption in Finland.

Domestic electricity production capacity and import were sufficient to cover the winter peak consumption. According to Fingrid's operation control measurements, electricity consumption during winter 2014 was 14,288 megawatts at its greatest. The highest electricity production volume in Finland in the early part of 2013 was approx. 12,100 megawatts, and power plants worked without significant disturbance during the period of cold weather. It was not necessary to take into use any of the nation-wide peak load capacity of 365 megawatts.

Large amounts of electricity were transmitted from Sweden to Finland as a result of the market situation. During the period under review, production capacity was generally completely available for use. The most significant restriction on capacity took place during disruption to the Fenno-Skan 2 connection which occurred on 20 March 2014. The connection was out of service for just under 24 hours. Between January and March, 5.1 (2.3) TWh of electricity were imported from Sweden to Finland, and 0.0 TWh (0.3 TWh) were exported from Finland to Sweden.

There were no significant electricity transmission restrictions in the transmission capacity on the Russian or Estonian borders between January and March. The new EstLink 2 connection to Estonia has been available to the markets for use for almost the entire time. Exports to Estonia via EstLink 1 and 2 were plentiful, but turned into import during Finland's peak consumption hours. A technical test on the bidirectional transmission of electricity was carried out on the Russian connection on 12 March 2014.

The amount of imports from Russia has fluctuated due to the market situation and according to the time of day. 0.9 (1.8) TWh was imported to Finland from Russia, with 0.01 (0.2) TWh imported from Estonia. Exports to Estonia totalled 1.3 (0.3) TWh.
The most significant disruption during the period under review occurred on 24 March 2014 along the Hikiä–Forssa 110 kilovolt line. A fallen tree on the line caused an electricity outage lasting a few hours and affecting 24,000 customers. At the time of the event, there was an exceptional connection situation due to ongoing maintenance work, which meant that both the duration and extent of the disruption were larger than normal. In the Hyvinkää region, a 400 kilovolt tower fell over on 25 March 2014 during replacement work. The disruption did not cause any breaks in service or personal injuries. On 20 March 2014 due to the disruption in the Fenno-Skan connection, replacement power of a value just under two million euros was procured by starting up reserve power plants, and by purchasing electricity from domestic suppliers and from Russia.

In order to restore the deteriorated frequency quality, Nordic grid companies have started the test use of a new reserve type, the automatic frequency control reserve. A maximum of 300 megawatts of reserve is maintained for selected hours, of which Fingrid's share is a maximum of 69 megawatts.

 

Power system operation
Jan-March/14
Jan-March/13
     
Electricity consumption in Finland TWh
23.8
24.6
Fingrid's transmission volume TWh
18.2
17.6
Fingrid's loss energy volume TWh
0.3
0.3
Electricity transmission Finland - Sweden
   
Exports to Sweden TWh
0
0.3
Imports from Sweden TWh
5.1
2.3
Electricity transmission Finland - Estonia
   
Exports to Estonia TWh
1.3
0.3
Imports from Estonia TWh
0
0.2
Electricity transmission Finland - Russia
   
Imports from Russia TWh
0.9
1.8

 

 

Electricity market

Price coupling was introduced on the day-ahead markets, or spot markets, of north-western Europe (NWE) in February. The procedure means calculating the price for electricity in the entire area for each hour of the next day simultaneously, taking into account all purchase and sales offers and transfer capacities. The arrangement covers the Nordic countries, Baltic region, Germany, France, Benelux countries and Great Britain. The electricity exchanges and main grid companies in the area have been preparing the price coupling since 2010. It is to be expanded to other European countries in the next few years.

During the first quarter of the year, the average price (system price) of the Nord Pool spot markets was 30 (42) euros per megawatt hour and the Finnish regional price was 35 (42) euros per megawatt hour.

During the first quarter of 2013, Fingrid used 2.9 (0.1) million euros for counter trade.
Electricity market
Jan-
March/14
Jan-March/13
     
Nord Pool system price, average €/MWh
30.19
42.03
Area price Finland, average €/MWh
35.24
42.10
Congestion income between Finland and Sweden, million €*
30.0
1.4
Congestion hours between Finland and Sweden %*
62.0
7.4
Congestion income between Finland and Estonia, million €*
0.8
1
Congestion hours between Finland and Estonia %*
11.3
26.5
     

 

* 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 financial position of the Group continued to be satisfactory. The net financial costs of the Group were 9 (7) million euros during the review period. Net financing costs without changes in the fair value of derivatives were 12 (5) million euros. Financial assets recognised at fair value in the income statement, and cash and cash equivalents amounted to EUR 230 million (EUR 225 million) on 31 March 2014. In addition, the company has an undrawn revolving credit facility of 250 (250) million euros.

Interest-bearing borrowings totalled 1,233 (1,218) million euros, of which 973 (1,056) million euros were long-term and 260 (161) million euros were short-term.

The counterparty risk involved in the derivative contracts relating to financing was 39 million euros (80 million euros).

Personnel

The total personnel of the Fingrid Group averaged 287 (268) during the review period.

Auditing

The consolidated figures in this Interim Report are unaudited.

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

Fingrid Group's profit for the financial year 2014 before taxes and without the change in the fair value of derivatives is expected to increase from the previous year. The uncertainty involved in reserve costs, 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.
 
Appendices:
Tables for the interim report January -  March 2014

Further information:
Jukka Ruusunen, President & CEO, tel. +358 (0)30 395 5140 or +358 (0)40 593 8428
Jan Montell, Chief Financial Officer, tel. +358 (0)30 395  5213 or +358 (0)40 592 4419