2007-10-24 09:05:03 CEST
2007-10-24 09:05:03 CEST
REGULATED INFORMATION
Fingrid Oyj - Quarterly report
FINGRID GROUP'S INTERIM REPORT 1 JANUARY - 30 SEPTEMBER 2007
FINGRID GROUP'S INTERIM REPORT 1 JANUARY - 30 SEPTEMBER 2007
Review of operations
Electricity consumption
A total of 66 terawatt hours of electricity was consumed in Finland from the
beginning of 2007 to the end of September. This was as much as during the
corresponding period in 2006.
Transmission management
Electricity transmissions between Finland and Sweden mainly consisted of imports
from Sweden into Finland during the early part of the year. The transmission
situation in September was varying. A good water reservoir situation in Southern
Norway but insufficient transmission capacity from Southern Norway to the other
Nordic countries led to the continuous separation of system price and area
prices in the Nordic countries from the late summer onwards. However, the price
between Finland and Sweden has been practically the same: the prices have only
been different for about one per cent of the time.
Maintenance work in Russia, which restricted the import capacity on the Russian
connection, commenced in June, and the restrictions continued throughout the
summer and early autumn. A significant capacity restriction of 900 megawatts
(MW) also took place in electricity imports from Russia in September. The
restriction was caused by a fault in the Russian grid near Moscow.
The entire commercial transmission capacity of 1,300 MW on Fingrid's
cross-border lines from Russia to Finland will become available at the beginning
of 2008. The transmission capacity offered by Fingrid to the electricity market
players has raised interest, and reservation requests for 4,000 - 5,500 MW were
received by the end of September. Fingrid will confirm the transmission
reservations after it has received an account of corresponding reservations on
the transmission connections in Russia from the Russian transmission system
operator.
System security
During the summer, there were fewer disturbance situations in the grid caused by
thunder than in the previous years. During the construction work of the grid
errors caused short-term disturbances in the Lahti region in August and in the
Oulu region in early October.
The update of the operation control system for the Finnish grid, costing approx.
8 million euros, has been introduced. The system is now highly user friendly and
provides facilities for increasingly versatile utilisation of grid data. The
reliability of the operation control system is also enhanced.
Nordel, the organisation of the Nordic transmission system operators (TSOs),
published its forecast of the power balance in the Nordic countries for the
winter period of 2007 - 2008. The Nordic power balance is expected to be
positive at peak demand without imports from the neighbouring regions to the
Nordic area. The power balance in Finland will show a deficit without imports.
Electricity market
Nordel published its strategy for the coming years at the end of September. The
concrete agenda aims at more efficient functioning of the Nordic electricity
market, further integration of the Nordic electricity market with other markets,
and strengthened co-operation with the TSOs in the neighbouring North European
regions. By 2013, the Nordic TSOs will implement the package of five priority
cross-sections agreed earlier. The total investments will be one thousand
million euros. The next Nordic development plan will be published in the early
part of 2008.
In mid-September, the European Commission published a legislative package
concerning the electricity market. The energy package of the Commission contains
several proposals related to TSO operations. The foremost suggestions of changes
concern ownership of companies, strengthened status of the regulatory authority,
promotion of TSO co-operation, and enhanced transparency in the wholesale market
of electricity.
Capital expenditure
There were several ongoing modernisation and construction projects in the
Finnish grid throughout the summer, with several major projects to be completed
during the latter part of the year. A contract worth 9 million euros on the
construction of a 400 kilovolt transmission line Keminmaa - Petäjäskoski was
signed with Eltel Networks Oy. Once completed, this transmission line will
contribute to strengthened alternating current connections in the north.
Gross capital expenditure during the period examined totalled 56 million euros
(44 million euros during the corresponding period in 2006).
Financial result
The Group's revenue during the review period was 234 million euros (256 million
euros during the corresponding period in 2006). Revenue declined due to lower
sales of balance power and decrease in grid revenues. Sales of balance power
were decreased by a lower price of balance power, and grid revenues were
diminished by the tariff reduction which became into force at the beginning of
this year.
Operating profit without the change in the fair value of derivatives decreased
to 56 million euros (68 million euros). Operating profit declined mainly because
of the tariff reductions, repair costs of the sea cable damage, and rise in the
purchase costs of loss energy.
The operating profit in accordance with IFRS was 68 million euros (85 million
euros), which contains 12.6 million euros (17 million euros) of positive change
in the fair value of electricity derivatives. Fingrid introduced hedge
accounting in Group reporting for electricity derivatives as of 1 July. The
Group's positive change in the fair value of electricity derivatives totalled
12.6 million euros, of which 11.7 million euros materialised during the first
six months of the year, when the change in the fair value was recorded
completely in the income statement. The change in the fair value recognised in
the income statement for the third quarter was 0.9 million euros, and the
portion recorded in equity and deferred tax liabilities was 1.3 million euros.
The IFRS profit before taxes was 41 million euros (63 million euros). The equity
ratio was 26.6 per cent (26.0 per cent) at the end of the review period.
The Group's income flow is mainly accumulated during the first and fourth
quarters, therefore 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 good throughout the review
period. The net finance costs of the Group were 28 million euros (23 million
euros). Financial assets recognised at fair value in the income statement, and
cash and cash equivalents amounted to 221 million euros (204 million euros) at
30 September 2007. The interest-bearing liabilities, including derivative
liabilities, totalled 986 million euros (986 million euros), of which 768
million euros (757 million euros) were long-term and 217 million euros (229
million euros) were short-term.
The counterparty risk involved in the derivative contracts relating to financing
was 7 million euros (9 million euros). The company has an undrawn revolving
credit facility of 250 million euros.
Personnel
The total personnel of the Fingrid Group averaged 240 (238) during the review
period.
Auditing
The consolidated figures in this Interim Report are unaudited.
Events after the period in review and outlook for the remaining part of the year
In early October, the Finnish Ministry of Trade and Industry granted a
cross-border line permit to the extension of the submarine cable link between
Finland and Sweden. The extension will be carried out in co-operation between
Fingrid Oyj and Svenska Kraftnät. This project of approx. 300 million euros is
Fingrid's biggest construction project to date. The project due to be complete
in 2010 will improve the functioning of the Nordic electricity market.
On 23 October 2007 Fitch Ratings has assigned Fingrid Oyj a long-term issuer
default rating (IDR ) of AA- (AA minus), a short-term IDR of F1+ and a senoir
unsecured debt rating of AA. The outlook is stable.
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
Appendix: Tables for the interim report 1 January - 30 September 2007
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
Appendix: Tables for the Interim Report 1 January - 30 September 2007
--------------------------------------------------------------------------------
| Condensed | 2007 | 2006 | | 2007 | 2006 | | 2006 |
| consolidated | | | | | | | |
| income | | | | | | | |
| statement, | | | | | | | |
| million € | | | | | | | |
--------------------------------------------------------------------------------
| | Jan - | Jan - | Chang | Jul-S | Jul-S | Chang | Jan - |
| | Sep | Sep | e | ep | ep | e | Dec |
--------------------------------------------------------------------------------
| Revenue | 234.3 | 255.7 | -21.4 | 73.3 | 75.2 | -2.0 | 351.3 |
--------------------------------------------------------------------------------
| Other operating | 1.5 | 1.4 | 0.0 | 0.5 | 0.5 | 0.0 | 2.2 |
| income | | | | | | | |
--------------------------------------------------------------------------------
| Depreciation and | -38.3 | -38.1 | -0.2 | -12.8 | -12.7 | -0.1 | -52.3 |
| amortisation | | | | | | | |
| expense | | | | | | | |
--------------------------------------------------------------------------------
| Operating | -129.0 | -133.6 | 4.6 | -45.5 | -45.9 | 0.4 | -221.7 |
| expenses | | | | | | | |
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| Operating profit | 68.5 | 85.4 | -16.9 | 15.5 | 17.2 | -1.7 | 79.5 |
--------------------------------------------------------------------------------
| Finance income | -28.0 | -22.8 | -5.2 | -8.3 | -7.5 | -0.8 | -29.3 |
| and costs | | | | | | | |
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| Portion of | 0.5 | 0.8 | -0.4 | 0.2 | 0.3 | -0.1 | 1.2 |
| profit of | | | | | | | |
| associated | | | | | | | |
| companies | | | | | | | |
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| Profit before | 40.9 | 63.4 | -22.5 | 7.3 | 10.0 | -2.6 | 51.5 |
| taxes | | | | | | | |
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| Income taxes | -10.5 | -16.3 | 5.8 | -1.9 | -2.5 | 0.7 | -13.1 |
--------------------------------------------------------------------------------
| Profit for the | 30.3 | 47.1 | -16.8 | 5.5 | 7.4 | -2.0 | 38.3 |
| period | | | | | | | |
--------------------------------------------------------------------------------
| Earnings per | 9 128 | 14 167 | -5 | 1 645 | 2 238 | -594 | 11 531 |
| share (euros)* | | | 039 | | | | |
| belonging to the | | | | | | | |
| owners of the | | | | | | | |
| parent company, | | | | | | | |
| calculated | | | | | | | |
| from profit | | | | | | | |
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| *no dilution | | | | | | | |
| effect | | | | | | | |
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| Condensed consolidated balance sheet, | 2007 | 2006 | | 2006 |
| million euros | | | | |
--------------------------------------------------------------------------------
| | 30 | 30 Sep | Change | 31 Dec |
| | Sep | | | |
--------------------------------------------------------------------------------
| ASSETS | | | | |
--------------------------------------------------------------------------------
| Non-current assets | | | | |
--------------------------------------------------------------------------------
| Goodwill | 87.9 | 87.9 | 0.0 | 87.9 |
--------------------------------------------------------------------------------
| Intangible assets | 80.7 | 80.4 | 0.3 | 80.4 |
--------------------------------------------------------------------------------
| Property, plant and equipment | 1 | 1 | 28.5 | 1 065.8 |
| | 082.9 | 054.4 | | |
--------------------------------------------------------------------------------
| Investments | 7.9 | 6.8 | 1.1 | 7.2 |
--------------------------------------------------------------------------------
| Receivables | 23.9 | 43.0 | -19.1 | 13.4 |
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| Current assets | | | | |
--------------------------------------------------------------------------------
| Inventories | 4.7 | 3.1 | 1.6 | 3.8 |
--------------------------------------------------------------------------------
| Receivables | 30.3 | 36.0 | -5.7 | 51.2 |
--------------------------------------------------------------------------------
| Financial assets recognised in income | | | | |
| statement | | | | |
--------------------------------------------------------------------------------
| at fair value | 206.9 | 200.8 | 6.1 | 186.7 |
--------------------------------------------------------------------------------
| Cash and cash equivalents | 14.6 | 3.0 | 11.6 | 17.4 |
--------------------------------------------------------------------------------
| Total assets | 1 | 1 | 24.3 | 1 513.8 |
| | 539.7 | 515.4 | | |
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| SHAREHOLDERS' EQUITY AND LIABILITIES | | | | |
--------------------------------------------------------------------------------
| Shareholders' equity belonging to the | | | | |
| owners of the | | | | |
--------------------------------------------------------------------------------
| parent company | | | | |
--------------------------------------------------------------------------------
| Shareholders' equity | 410.2 | 394.3 | 15.9 | 385.5 |
--------------------------------------------------------------------------------
| Non-current liabilities | | | | |
--------------------------------------------------------------------------------
| Non-current interest-bearing | 768.3 | 757.0 | 11.3 | 757.5 |
| liabilities | | | | |
--------------------------------------------------------------------------------
| Other non-current liabilities | 103.8 | 97.8 | 6.0 | 97.0 |
--------------------------------------------------------------------------------
| Current liabilities | | | | |
--------------------------------------------------------------------------------
| Current interest-bearing liabilities | 217.2 | 229.2 | -12.0 | 212.8 |
--------------------------------------------------------------------------------
| Trade and other payables | 40.2 | 37.1 | 3.2 | 60.9 |
--------------------------------------------------------------------------------
| Total sharehoulders' equity and | 1 | 1 | 24.3 | 1 513.8 |
| liabilities | 539.7 | 515.4 | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Key indicators, million euros | 2007 | 2006 | 2006 |
--------------------------------------------------------------------------------
| | Jan - Sep | Jan - | Jan - |
| | | Sep | Dec |
--------------------------------------------------------------------------------
| Revenue | 234.3 | 255.7 | 351.3 |
--------------------------------------------------------------------------------
| Capital expenditure, gross | 55.7 | 44.1 | 69.6 |
--------------------------------------------------------------------------------
| - % of revenue | 23.8 | 17.2 | 19.8 |
--------------------------------------------------------------------------------
| Research and development expenses | 0.7 | 0.8 | 1.2 |
--------------------------------------------------------------------------------
| - % of revenue | 0.3 | 0.3 | 0.4 |
--------------------------------------------------------------------------------
| Personnel, average | 240 | 238 | 238 |
--------------------------------------------------------------------------------
| Operating profit | 68.5 | 85.4 | 79.5 |
--------------------------------------------------------------------------------
| - % of revenue | 29.2 | 33.4 | 22.6 |
--------------------------------------------------------------------------------
| Profit before taxes | 40.9 | 63.4 | 51.5 |
--------------------------------------------------------------------------------
| - % of revenue | 17.4 | 24.8 | 14.7 |
--------------------------------------------------------------------------------
| Interest bearing liabilities, net* | 764.0 | 782.4 | 766.3 |
--------------------------------------------------------------------------------
| Equity ratio, %* | 26.6 | 26.0 | 25.5 |
--------------------------------------------------------------------------------
| Shareholders' equity* | 410.2 | 394.3 | 385.5 |
--------------------------------------------------------------------------------
| Equity per share, euros* | 123 366 | 118 586 | 115 952 |
--------------------------------------------------------------------------------
| Earnings per share, euros* | 9 128 | 14 167 | 11 531 |
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| * end of period | | | |
--------------------------------------------------------------------------------
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| Consolidated | Share | Share | Revalu | Transla | Retain | Total |
| statement of changes | | premiu | a- | tion | ed | |
| in total equity, | capit | m | tion | reserve | earnin | |
| million euros | al | accoun | reserv | | gs | |
| | | t | e | | | |
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| Capital and reserves | 55.9 | 55.9 | 0.0 | 0.2 | 241.9 | 353.9 |
| 1 Jan 2006 | | | | | | |
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| Change in translation | | | | -0.1 | | -0.1 |
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| Dividend distribution | | | | | -6.6 | -6.6 |
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| Profit for period | | | | | 47.1 | 47.1 |
--------------------------------------------------------------------------------
| Capital and reserves | 55.9 | 55.9 | 0.0 | 0.1 | 282.4 | 394.3 |
| 30 Sep 2006 | | | | | | |
--------------------------------------------------------------------------------
| Change in translation | | | | 0.0 | | 0.0 |
--------------------------------------------------------------------------------
| Profit for period | | | | | -8.8 | -8.8 |
--------------------------------------------------------------------------------
| Other changes | | | 0.0 | | | 0.0 |
--------------------------------------------------------------------------------
| Capital and reserves | 55.9 | 55.9 | 0.0 | 0.1 | 273.6 | 385.5 |
| 31 Dec 2006 | | | | | | |
--------------------------------------------------------------------------------
| Cash flow hedges | | | 1.0 | | | 1.0 |
--------------------------------------------------------------------------------
| Change in translation | | | | 0.3 | | 0.3 |
--------------------------------------------------------------------------------
| Dividend distribution | | | | | -6.9 | -6.9 |
--------------------------------------------------------------------------------
| Profit for period | | | | | 30.3 | 30.3 |
--------------------------------------------------------------------------------
| Capital and reserves | 55.9 | 55.9 | 1.0 | 0.3 | 297.0 | 410.2 |
| 30 Sep 2007 | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| | 2007 | 2006 | 2006 |
--------------------------------------------------------------------------------
| Condensed consolidated cash flow statement, | Jan - | Jan - | Jan - |
| million euros | Sep | Sep | Dec |
--------------------------------------------------------------------------------
| Cash flow from operating activities | | | |
--------------------------------------------------------------------------------
| Profit for the financial year | 30.3 | 47.1 | 38.3 |
--------------------------------------------------------------------------------
| Adjustments | 63.9 | 59.3 | 111.6 |
--------------------------------------------------------------------------------
| Changes in working capital | 14.0 | 0.4 | -6.8 |
--------------------------------------------------------------------------------
| Interests paid | -35.1 | -36.8 | -41.6 |
--------------------------------------------------------------------------------
| Interests received | 5.7 | 2.6 | 5.4 |
--------------------------------------------------------------------------------
| Taxes paid | -1.2 | -1.9 | -2.3 |
--------------------------------------------------------------------------------
| Net cash flow from operating activities | 77.7 | 70.7 | 104.7 |
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| | | | |
--------------------------------------------------------------------------------
| Cash flow from investing activities | | | |
--------------------------------------------------------------------------------
| Purchase of property, plant and equipment | -63.7 | -49.1 | -65.5 |
--------------------------------------------------------------------------------
| Purchase of intangible assets | -1.9 | -1.8 | -2.4 |
--------------------------------------------------------------------------------
| 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 | 0.0 | 0.0 | 0.0 |
| equipment | | | |
--------------------------------------------------------------------------------
| Repayment of loans receivable | 0.1 | 0.1 | 0.1 |
--------------------------------------------------------------------------------
| Dividends received | 0.0 | 0.6 | 0.6 |
--------------------------------------------------------------------------------
| Net cash flow from investing activities | -65.5 | -50.1 | -67.3 |
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| | | | |
--------------------------------------------------------------------------------
| Cash flow from financing activities | | | |
--------------------------------------------------------------------------------
| Withdrawal of loans | 319.8 | 227.9 | 228.4 |
--------------------------------------------------------------------------------
| Repayment of loans | -308.7 | -227.5 | -243.3 |
--------------------------------------------------------------------------------
| Dividends paid | -6.9 | -6.6 | -6.6 |
--------------------------------------------------------------------------------
| Net cash flow from financing activities | 4.2 | -6.2 | -21.5 |
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| | | | |
--------------------------------------------------------------------------------
| Net change in cash and cash equivalents | 16.4 | 14.3 | 15.9 |
--------------------------------------------------------------------------------
| Cash and cash equivalents 1 Jan | 204.1 | 187.9 | 187.9 |
--------------------------------------------------------------------------------
| Impact of changes in fair value of | 1.0 | 1.6 | 0.3 |
| investments | | | |
--------------------------------------------------------------------------------
| Cash and cash equivalents 30 Sep | 221.5 | 203.8 | 204.1 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| | 30 Sep 2007 | 30 Sep 2006 | 31 Dec 2006 |
--------------------------------------------------------------------------------
| Derivative agreements, | Net | Notion | Net | Notion | Net | Notion |
| million euros | fair | al | fair | al | fair | al |
| | value | value | value | value | value | value |
--------------------------------------------------------------------------------
| Interest and currency | | | | | | |
| derivatives | | | | | | |
--------------------------------------------------------------------------------
| Cross-currency swaps | -45 | 382 | -37 | 327 | -44 | 322 |
--------------------------------------------------------------------------------
| Forward contracts | -6 | 138 | 1 | 112 | -3 | 94 |
--------------------------------------------------------------------------------
| Interest rate swaps | 1 | 181 | 0 | 228 | -1 | 213 |
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| Call options, bought | 11 | 440 | 8 | 550 | 11 | 530 |
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| Total | -39 | 1 141 | -27 | 1 217 | -37 | 1 159 |
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| | 30 Sep 2007 | 30 Sep 2006 | 31 Dec 2006 |
| | | | |
--------------------------------------------------------------------------------
| | Net | Volume | Net | Volume | Net | Volume |
| | fair | TWh | fair | TWh | fair | TWh |
| | value | | value | | value | |
--------------------------------------------------------------------------------
| Electricity derivatives | | | | | | |
--------------------------------------------------------------------------------
| Forward contracts of | 11 | 3.17 | | | | |
| electricity, Nord Pool | | | | | | |
| Clearing* | | | | | | |
--------------------------------------------------------------------------------
| Forward contracts of | -1 | 0.06 | 31 | 2.49 | -3 | 2.81 |
| electricity, Nord Pool | | | | | | |
| Clearing | | | | | | |
--------------------------------------------------------------------------------
| Forward contracts of | 2 | 0.11 | 2 | 0.12 | 1 | 0.14 |
| electricity, others | | | | | | |
--------------------------------------------------------------------------------
| Total | 12 | 3.34 | 33 | 2.61 | -2 | 2.96 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Commitments and | 30 Sep 2007 | 30 Sep 2006 | 31 Dec 2006 |
| contingensies, million | | | |
| euros | | | |
--------------------------------------------------------------------------------
| Pledges / bank balances | 4 | 1 | 14 |
--------------------------------------------------------------------------------
| Rental liabilities | 9 | 9 | 10 |
--------------------------------------------------------------------------------
| Commitment fee of | 1 | 1 | 1 |
| revolving credit facility | | | |
--------------------------------------------------------------------------------
| Total | 14 | 10 | 25 |
--------------------------------------------------------------------------------
| Capital commitments | 74 | 82 | 64 |
--------------------------------------------------------------------------------
| Other financial | 1 | 1 | 1 |
| liabilities | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Changes in property, plant | 30 Sep 2007 | 30 Sep 2006 | 31 Dec 2006 |
| and equipment, million | | | |
| euros | | | |
--------------------------------------------------------------------------------
| Carrying amount at | 1 066 | 1 048 | 1 048 |
| beginning of period | | | |
--------------------------------------------------------------------------------
| Increases | 54 | 43 | 68 |
--------------------------------------------------------------------------------
| Decreases | 0 | | 0 |
--------------------------------------------------------------------------------
| Depreciation and | -37 | -37 | -51 |
| amortisation expense | | | |
--------------------------------------------------------------------------------
| Carrying amount at end of | 1 083 | 1 054 | 1 066 |
| period | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Related party transactions | 30 Sep 2007 | 30 Sep 2006 | 31 Dec 2006 |
| and balances, milllion | | | |
| euros | | | |
--------------------------------------------------------------------------------
| Sales | 64 | 62 | 87 |
--------------------------------------------------------------------------------
| Purchases | 54 | 76 | 108 |
--------------------------------------------------------------------------------
| Receivables | 3 | 3 | 3 |
--------------------------------------------------------------------------------
| Liabilities | 3 | 2 | 6 |
--------------------------------------------------------------------------------
Accounting principles
This 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 2006.
IFRS 7 (Financial Instruments: Disclosures) will be adopted in the annual
financial statements for 2007.
The Group has analysed the potential impacts of these revised standards and
interpretations, and they are
not expected to be significant.
Hedge accounting*
Since 1 July 2007, the company has adopted hedge accounting for electricity
derivatives, according to IAS 39,
based on cash flow hedging of loss power procurement. Hedge accounting is
adpoted on exchange traded annual and quarter contracts bought by the company (*
marked contracts). Changes in fair value of the contracts that qualify for
hedge accounting are recorded in the equity, hedge accounting reserve. Changes
in fair value of the
other electricity derivatives are onwards recorded in the income statement.
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 IAS 14 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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