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Fingrid Oyj (BR96)

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Monday 27 April, 2009

Fingrid Oyj

1st Quarter Results

RNS Number : 1895R
Fingrid Oyj
27 April 2009
 



Fingrid GROUP'S INTERIM REPORT 1 JANUARY - 31 MARCH 2009 

Review of operations


Power system operation

A total of 23.3 (25.1) terawatt hours of electricity was consumed in Finland from the beginning of 2009 to the end of March. The economic recession and reduced industrial production decreased electricity consumption. A total of 17.5 TWh of electricity was transmitted in Fingrid's grid during the same period, representing 75 per cent of the electricity consumption in Finland. 

Because of the mild winter and recession, the electricity consumption peak was only 13,008 megawatts (13,763 MW in 2008 according to Finnish Energy Industries). The peak power was 755 MW less than the peak figure in the previous winter, and as much as 1,906 MW less than the record peak power of 14,914 MW attained two years ago. 

From January to March, 0.4 TWh (1.9 TWh) of electricity was imported from Sweden into Finland, and 1.5 TWh (0.2 TWh) was exported from Finland into Sweden. Electricity imports from Russia from January to March were 3.1 TWh (2.5 TWh) and from Estonia 0.6 TWh (0.5 TWh). 

During the review period, there were no significant extensive faults in the grid. The dimensioning fault in the Finnish power system had to be raised temporarily in January from the earlier level of just under 900 MW to 1,300 MW. This was due to the changes made at the Olkiluoto nuclear power plants in order to secure nuclear safety. In order to control the situation, the import capacity from Sweden has been reduced temporarily by 100-300 MW until May, and the present maximum import capacity is hence 1,750-1,950 MW. The protection changes at Olkiluoto have no impact on the export capacity. 


Power system operation

1.-3. 2009

1.-3. 2008

Electricity consumption in Finland TWh

23.3

25.1

Fingrid's transmission volume TWh

17.5

17.3

Fingrid's loss energy volume TWh

0.3

0.3

Electricity transmissions Finland-Sweden



exports to Sweden TWh

1.5

0.2

imports from Sweden TWh

0.4

1.9

Electricity transmissions Finland-Estonia



imports from Estonia TWh

0.6

0.5

Electricity transmissions Finland-Russia



imports from Russia TWh

3.1

2.5


Promotion of electricity market

The average price on the spot market in Nord Pool (system price) and the area price for Finland were almost the same, i.e. approx. 38 €/MWh, during the first quarter of 2009. 


Maintenance work on the cross-border connection between Finland and Sweden restricted the available transmission capacity between the two countries, and transmission congestions restricted trading during 11 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 0.5 million euros between January and March. The Nordic congestion income during the review period was 9.6 million euros (37.3 million euros). Fingrid's share of this Nordic congestion income was 0.7 million euros (3.6 million euros).


A new Nordic balance service model was introduced at the beginning of 2009 in Finland, Sweden and Denmark. This reform will harmonise the rules of balance power trade in the Nordic countries. The main changes include the handling of electricity balances in two different balances -production and consumption balance - and the harmonisation of costs included in balance service. Another essential change was that production plans and regulating power bids must now be submitted 45 minutes before the beginning of each hour. The balance settlement for January was completed on schedule even though the new model required considerable changes in the procedures and data systems of both the electricity market parties and Fingrid.


Based on the Finnish act on securing the availability of peak load power reserves, Fingrid renewed the contracts for the power reserves for the period of 1 March 2009 to 28 February 2011.New principles for the starting of electricity generation by power plants covered by the power reserve arrangement on the Elspot market were taken into use in the same conjunction. The annual costs for maintaining the power reserve arrangement will increase from 10 million euros to approx. 13 million euros as a result of the new contracts. The power reserve fee was raised from 0.15 euros per MWh to 0.18 euros per MWh from 1 April 2009. The fee will be revised when needed to correspond to the actual costs and electricity consumption.

Between January and March, Fingrid's counter trade costs were only a few thousand euros, like during the corresponding period in 2008.


The work group appointed by the Finnish Ministry of Employment and the Economy, studying the feed-in tariff for renewable energy, presented its proposal for the feed-in tariff system for wind power in the interim report published in early April. According to the proposal, Fingrid or its fully-owned subsidiary would administer the collection and payment system for the feed-in tariff for wind power. The final report of the work group will be complete by the end of June. The final report will also contain a proposal concerning a feed-in tariff for biogas electricity and an analysis of the application of the feed-in tariff arrangement to other sources of renewable energy.



Electricity market

1.-3. 2009

1.-3. 2008

Nord Pool system price, average €/MWh 

38.23

37.99

Area price Finland, average €/MWh

38.10

39.27

Congestion income in the Nordic countries million 

9.6

37.3

Congestion income between Finland and Sweden million 

0.5

0.1

Congestion income between Finland and Sweden %

4.8

0.3




Fingrid's share of the congestion income in the Nordic countries million 

0.7

3.6


Capital expenditure and grid maintenance

The Group's gross capital expenditure during the review period was 16.3 million euros (13.6 million euros during the corresponding period in 2008).  

In March, Fingrid completed its project extending over several years: replacement of 400 kilovolt aluminium towers. A total of 1,300 aluminium towers were replaced by steel towers over a distance of 750 kilometres because of aluminium corrosion. The project started south of Oulu in 2000 on the Pyhäselkä-Alapitkä-Huutokoski line. The last part of the project concerned line Vuolijoki-Huutokoski. The total costs of the project were approx. 32 million euros.

A grid analysis shared by Nordel and the Baltic region was completed in the early part of 2009. The analysis concluded, among other things, that a second transmission connection between Finland and Estonia is economically viable. Based on the findings, a survey concerning the implementation of the new connection has been launched. The EU has also included the project in its economy recovery package, and the use of this funding source is being studied.



Financial result 

The Group's revenue was 115 million euros (115 million euros) during the period under review. The grid tariff and Russian transmission tariff were raised by 4.5 per cent at the beginning of 2009.  The other operating income was 0.5 million euros (0.4 million euros). As a result of decreasing electricity consumption, grid revenue decreased slightly despite the 4.5 per cent tariff increase carried out at the beginning of the year. 

Revenue from the sales of balance power grew from the previous year to 30 million euros (27 million euros). Correspondingly, the purchases of balance power also grew to 28 million euros (23 million euros). These changes in sales and purchases were mainly due to the fact that the consumption and production balances are now handled in two different balances. Cross-border transmission income and peak load power income increased slightly from the corresponding period in 2008. ITC or inter-TSO compensations between the European TSOs grew to 3 million euros. Income and costs related to the feed-in tariff of peat decreased. Depreciation, loss energy, reserve power and personnel costs rose slightly. The changes in the first quarter from the corresponding period in 2008 are shown in the table below (in million euros).


Revenue

1-3/09

1-3/08




Grid service revenue

66.1

67.4

Sales of balance power

29.5

27.5

Cross-border transmission

6.3

5.3

ITC income

7.8

4.3

Peak load power

3.3

3.0

Feed-in tariff for peat

0.1

2.2

Congestion income

0.7

3.6

Other operational revenue and other income

2.0

1.9




Revenue and other income total

115.9

115.2


Costs

1-3/09

1-3/08




Depreciation

15.3

14.2

Purchase of balance power

27.9

23.2

ITC charges

4.3

3.6

Peak load power

3.7

3.4

Feed-in tariff for peat

0.1

2.1

Purchase of loss energy

15.0

13.2

Reserves

4.8

4.5

Maintenance management

3.2

1.9

Personnel

5.0

4.9

Other costs

4.3

4.5




Costs total

83.6

75.4


Operating profit excluding the change in the fair value of electricity derivatives was 32 million euros (40 million euros). Operating profit decreased primarily because of reduced grid service revenue, congestion income, and result of balance service. The IFRS operating profit was 35 million euros (38 million euros), which contains 3 million euros (-2 million euros) of positive change in the fair value of electricity derivatives. The IFRS profit before taxes was 29 million euros (29 million euros). The total comprehensive income for the review period was 11 million euros (13 million euros). The equity ratio was 26.9 (27.9) 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 three-month result.


Financing

The financial position of the Group continued to be satisfactory. The uncertain situation in the money and capital markets continues, and it is difficult to anticipate its time frame. The net financial costs of the Group were 6 million euros (8 million euros) during the review period. Financial assets recognised at fair value in the income statement, and cash and cash equivalents amounted to 211 million euros (223 million euros) at 31 March 2009. The interest-bearing liabilities, including derivative liabilities, totalled 928 million euros (952 million euros), of which 633 million euros (732 million euros) were long-term and 295 million euros (220 million euros) were short-term.

The counterparty risk involved in the derivative contracts relating to financing was 8 million euros (9 million euros). The company has an undrawn revolving credit facility of 250 million euros.

On April 15 2009 international rating agency Fitch Ratings assigned Fingrid Oyj a Long-Term Issuer Default Rating (IDR) of 'AA-' (AA minus), senior unsecured debt rating of 'AA', and Short-Term IDR of 'F1+'. The agency also revised the outlook on the Long-Term IDR from Stable to Negative.

Personnel

The total personnel of the Fingrid Group averaged 242 (243) during the review period.

Annual General Meeting

Fingrid Oyj's Annual General Meeting was held in Helsinki on 19 March 2009. The Annual General Meeting accepted the financial statements for 2008, adopted the income statement and balance sheet, and granted discharge from liability to the members of the Board of Directors and to the President. 

Arto Lepistö, Deputy Director General, Ministry of Employment and the Economy, was elected as the Chairman of the Board, Timo Rajala, President and CEO, Pohjolan Voima Oy, as the First Deputy Chairman of the Board, and Timo Karttinen, Senior Vice President, Fortum Oyj, as the Second Deputy Chairman of the Board. The other Board members elected were Ari Koponen, Managing Director, Fortum Sähkönsiirto Oy, Ritva Nirkkonen, Fund Raising Manager, University of Jyväskylä, Special Duties, Anja Silvennoinen, Vice President, Energy, UPM-Kymmene Oyj, and Risto Autio, Director, Alternatives, Varma Mutual Pension Insurance Company. 

Auditing


The consolidated figures in this Interim Report are unaudited.

Outlook for the remaining part of the year

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 - 31 March 2009

Further information:
Jukka Ruusunen, President & CEO, +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



  

AppendicesTables for the Interim Report 1 January - 31 March 2009 

Condensed consolidated statement of comprehensive incomemillion euros

2009

Jan-Mar

2008

Jan-Mar

Change

2008

Jan-Dec

 Revenue

115.4

114.8

0.7

382.3

 Other operating income

0.5

0.4

0.1

2.5

 Depreciation and amortisation expense

-15.3

-14.2

-1.2

-59.5

 Operating expenses

-65.8

-63.1

-2.7

-257.0

 Operating profit

34.8

37.9

-3.1

68.4

 Finance income and costs

-5.8

-8.1

2.3

-31.4

 Portion of profit of associated companies

0.2

-0.3

0.5

0.5

 Profit before taxes

29.1

29.5

-0.4

37.5

 Income taxes

-7.5

-7.8

0.2

-9.7

 Profit for the period

21.6

21.7

-0.1

27.9






Other comprehensive income





Cash flow hedges

-10.6

-8.4

-2.1

-32.5

Translation reserve

0.2

0.0

0.3

-0.6

Available-for-sale financial assets




0.0

Total comprehensive income for the year

11.3

13.3

-2.0

-5.3






Profit attributable to:





Equity holders of the company

21.6

21.7

-0.1

27.9

Total comprehensive income attributable to:





Equity holders of the company

11.3

13.3

-2.0

-5.3











Earnings per share (euros)* belonging to the owners of the parent company, calculated from profit

6491

6532

-41

8 379

no dilution effect 






Condensed consolidated balance sheetmillion euros

2009

31 Mar

2008

31 Mar

Change

2008

31 Dec

 ASSETS





 Non-current assets





  Goodwill

87.9

87.9

0.0

87.9

  Intangible assets

86.2

84.6

1.5

85.3

  Property, plant and equipment

1 113.5

1 085.3

28.2

1 113.1

  Investments

7.1

7.0

0.0

6.7

  Receivables

13.4

17.7

-4.2

9.9

 Current assets





  Inventories

5.0

4.7

0.4

4.6

  Receivables

44.7

53.6

-8.9

48.0

  Financial assets recognised in income statement at fair value

194.0

205.8

-11.7

200.0

  Cash and cash equivalents

16.8

17.3

-0.5

6.1

 Total assets

1568.7

1 563.9

4.8

1 561.6

 SHAREHOLDERS' EQUITY AND LIABILITIES





 Shareholders' equity belonging to the owners of the parent company





 Shareholders' equity

422.2

436.1

-14.0

417.6

 Non-current liabilities





  Non-current interest-bearing liabilities

633.1

732.3

-99.2

678.3

  Other non-current liabilities

168.5

114.7

53.7

150.1

 Current liabilities





  Current interest-bearing liabilities

295.0

219.8

75.2

254.5

  Trade and other payables

49.9

60.9

-11.0

61.0

 Total shareholders' equity and liabilities

1568.7

1 563.9

4.8

1 561.6




Key indicators, million euros

2009 

Jan -Mar

2008 

Jan - Mar

2008

Jan - Dec

 Revenue

115.4

114.8

382.3

 Capital expenditure, gross

16.3

13.6

87.9

  - % of revenue

14.1

11.9

23.0

 Research and development expenses

0.1

0.2

0.9

  - % of revenue

0.1

0.2

0.2

 Personnel, average

242

243

241

 Operating profit

34.8

37.9

68.4

 - % of revenue

30.1

33.0

17.9

 Profit before taxes

29.1

29.5

37.5

  - % of revenue

25.2

25.7

9.8

 Interest bearing liabilities, net*

717.3

729.0

726.7

 Equity ratio, %*

26.9

27.9

26.7

 Shareholders' equitymillion euros*

422.2

436.1

417.6

 Equity per share, euros*

126 971

131 169

125 600

 Earnings per share, euros*

6 491

6 532

8 379

* end of period










Consolidated statement of changes in total equitymillion euros

Share capital

Share premium account

Revaluation reserve

Translation reserve

Retained earnings

Total

 Capital and reserves 

 1 Jan 2008

55.9

55.9

9.4

0.2

308.6

430.0

 Dividend distribution





-7.2

-7.2

 Profit for period



-8.4

0.0

21.7

13.3

 Capital and reserves 

 31 Mar 2008

55.9

55.9

1.0

0.2

323.2

436.1

 Profit for period



-24.1

-0.5

6.1

-18.5

 Capital and reserves 

 31 Dec 2008

55.9

55.9

-23.2

-0.4

329.3

417.6

 Dividend distribution





-6.7

-6.7

 Profit for period



-10.6

0.2

21.6

11.3

 Capital and reserves 

 31 Mar 2009

55.9

55.9

-33.7

-0.1

344.2

422.2


 

Condensed consolidated cash flow statementmillion euros

2009 

Jan-Mar

2008

Jan-Mar

 2008

Jan-Dec

 Cash flow from operating activities

 

 


 Profit for the financial year

21.6

21.7

33.0

 Adjustments

26.1

30.7

109.1

 Changes in working capital

-6.8

-1.9

4.8

 Interests paid

-7.1

-7.3

-40.8

 Interests received

2.5

2.8

9.0

 Taxes paid

-0.3

-0.6

-2.3

 Net cash flow from operating activities

36.0

45.4

112.6





 Cash flow from investing activities




 Purchase of property, plant and equipment

-22.0

-14.2

-83.6

 Purchase of intangible assets

-1.2

-0.3

-3.1

 Purchase of other assets

0.0

0.0

0.0

 Proceeds from other investments

0.0

0.0

0.0

 Proceeds from sale of property, plant and equipment

0.0

0.0

0.2

 Repayment of loans receivable

0.0

0.0

0.1

 Dividends received

0.0

0.0

0.6

 Net cash flow from investing activities

-23.2

-14.5

-85.7





 Cash flow from financing activities




 Withdrawal of loans

101.1

32.9

354.4

 Repayment of loans

-101.7

-45.0

-382.0

 Dividends paid

-6.7

-7.2

-7.2

 Net cash flow from financing activities

-7.4

-19.3

-34.7





 Net change in cash and cash equivalents

5.4

11.6

-7.9

 Cash and cash equivalents 1 Jan

206.1

212.0

212.0

 Impact of changes in fair value of investments 

-0.7

-0.5

2.1

 Cash and cash equivalents 31 Mar

210.8

223.1

206.1




Derivative agreements, million euros

31 Mar 2009

31 Mar 2008

31 Dec 2008


Net fair value

Notional value

Net fair value

Notional value

Net fair value

Notional value

 Interest and currency derivatives

 


 




 Cross-currency swaps

-18

343

-37

384

-22

367

 Forward contracts

0

22

-1

74

1

19

 Interest rate swaps

0

159

-1

181

0

134

 Call optionsbought

1

360

8

360

2

330

 Total

-19

884

-31

999

-19

851


Net fair value

Volume

MT

Net fair value

Volume MT

Net fair value

Volume MT

Commodity derivatives







Call options on metals, bought



1

   3400



Total



1

   3400




Net fair value

Volume TWh

Net fair value

Volume TWh

Net fair value

Volume TWh

 Electricity derivatives







 Electricity forward contracts, Nord Pool    Clearing designated as hedge accounting

-46

3.50

8

2.80

-35

3.52

 Electricity forward contracts, Nord Pool Clearing

0

0.00

1

0.52

0

0.00

 Forward contracts of electricity, others

0

0.06

1

0.09

0

0.07

 Total

-47

3.56

10

3.41

-35

3.59





Commitments and contingencies, million euros

31 Mar 2009

31 Mar 2008

31 Dec 2008

 Pledges / bank balances

17

11

6

 Rental liabilities

9

9

9

 Commitment fee of revolving credit facility

1

0

1

 Total

26

20

16

 Capital commitments

237

75

219

 Other financial liabilities

2

2

2


Changes in propertyplant and equipment, million euros

31 Mar 2009

31 Mar 2008

31 Dec 2008

 Carrying amount at beginning of period

1 113

1 086

1 086

 Increases

15

13

81

 Decreases



0

 Depreciation and amortisation expense

-15

-14

-54

 Carrying amount at end of period

1 113

1 085

 113


Related party transactions and balances, million euros

31 Mar 2009

31 Mar 2008

31 Dec 2008

Sales

28

13

99

 Purchases

25

45

109

 Receivables

2

15

9

 Liabilities

0

3

1


Accounting principles. This interim report has been drawn up in accordance with standard IAS 34 Interim Financial Reporting. In this interim reportFingrid has followed the same principles as in the annual financial statements for 2008. The Group has adopted the new standards that came into force 1 January 2009 IAS Presentation of Financial Statements and IAS 23 Borrowing Costs.


Segment reporting. The entire business of the Fingrid Group is deemed to comprise transmission system operation in Finland with system responsibility, only constituting a single segment. There are no essential differences in the risks and profitability of individual products and services. This is why segment reporting in accordance with the IFRS 8 standard is not presented.

                            

Corporate rearrangements. There have been no changes in the Group structure during the period reviewed.


Seasonal fluctuation. The Group's operations are characterised by extensive seasonal fluctuations.


General clause. Certain statements in this release concern the future and are based on the present views of management. Due to their nature, they contain some risk and uncertainty and are subject to changes in economy and the relevant business. 



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