FINGRID OYJ
interim report 30 April 2008 at 10.00
FINGRID GROUP'S INTERIM REPORT 1 JANUARY - 31 MARCH 2008
Review of operations
Power system operation
From the beginning of 2008 to the end of March, 25 terawatt hours of electricity
was consumed in Finland. This was 2.6 per cent less than during the
corresponding period in 2007. The winter with exceptionally mild weather
decreased electricity consumption.
Electricity transmissions between Finland and Sweden consisted of imports from
Sweden into Finland during the early part of the year. The replacement of
aluminium transmission line towers between Huutokoski and Vuolijoki caused a
restriction in the transmission capacity to Sweden, but this had no impact on
the functioning of the market. Soft ground complicated the replacement of the
towers, and the work needs to be continued next winter.
Transmissions between Estonia and Finland comprised imports into Finland. The
import capacity on the Russian transmission connection was restricted by
maintenance work in Russia throughout the period under review. Fingrid gave
permission to North West Power Plant 2 in St Petersburg to connect to the
Finnish grid during the faults and service of North West Power Plant 1.
Because of the mild weather, the electricity consumption peak in Finland (13,763
megawatts according to Finnish Energy Industries) was 10 % below the consumption
peak in the previous years (14 914 MW in 2007). Peak power subject to the Power
Reserve Act was not started on a single occasion.
The second nuclear power unit at Olkiluoto tripped from the grid on 5 January
2008, as a result of which imports from Sweden rose up to the full transmission
capacity. Electricity consumption on that day was not significantly high
(peaking at approx. 13,000 megawatts). Despite this, Fingrid issued a notice of
a strained power situation in the evening, because the restarting of the
Olkiluoto unit was delayed and because there were no domestic regulation bids
available to cover the increase in consumption resulting from night-rate
electricity loads. More production capacity became available after the notice,
and the situation did not escalate into a power shortage.
Falling of a transmission line tower in Paimio as a result of guy corrosion
caused a transmission interruption of a couple of weeks on the Lieto-Salo 400 kV
transmission line. The event did not cause damage to the environment or
interruptions in electricity supply.
Promotion of electricity market
Finland and Sweden constituted an uniform wholesale market area of electricity
during the review period, since congestions limited trade for only one per cent
of the hours during the early part of 2008.
Nordel, the organisation of the Nordic transmissions system operators, published
its new Grid Master Plan in March, extending to the period after 2015. The new
grid programme together with national capital investment projects will double
the Nordic capital investments in the transmission grid to an annual level of
600 - 800 million euros. In addition to enhancing the efficiency of the
electricity market, the Grid Master Plan will also facilitate the achievement of
environmental goals, because the grid reinforcements will contribute to the
wide-spread use of renewable forms of energy.
In February, Fingrid increased the amount of electricity market information
published on its website. The new items include an hourly consumption forecast,
and volumes and prices of balance and regulation power.
Capital expenditure and grid maintenance
Active grid construction continued during the period examined. Gross capital
expenditure totalled 14 million euros (12 million euros during the corresponding
period in 2007).
Fingrid and Svenska Kraftnät are jointly constructing a second HVDC connection
between Finland and Sweden (Fenno-Skan 2). The new connection will improve the
electricity transmission capacity between Finland and Sweden, integrating the
electricity market in the two countries even more closely together. The
submarine cable will be supplied by Nexans Norway AS through a contract worth
approx. 150 million euros. Fenno-Skan 2 will be commissioned at the end of 2011.
Fingrid has decided to renew four 110 kilovolt transmission lines because of the
ageing of conductors and increased transmission needs. These projects will be
completed during 2009 - 2010.
Environmental impact assessment processes concerning 400 kilovolt transmission
line routes between Hyvinkää and Hikiä as well as between Länsisalmi and
Vuosaari have been completed.
In the coming years, transmission capacity will be elevated by 220 kilovolt
lines in Lapland because of increasing electricity consumption in that region.
The construction of the Petäjäskoski-Valajaskoski-Isoniemi line in Lapland has
been launched.
Financial result
The Group's revenue was 115 million euros (101 million euros). Revenue rose due
to increased sales of balance power.
Operating profit without the change in the fair value of derivatives was 40
million euros (35 million euros). The operating profit grew mainly because of
reduced maintenance management costs and purchasing costs of loss energy. The
operating profit in accordance with IFRS was 38 million euros (33 million
euros), which contains 2 million euros (- 2 million euros) of negative change in
the fair value of electricity derivatives. The IFRS profit before taxes was 29
million euros (25 million euros). The equity ratio was 27.9 % (26.2 %) 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 good. The net finance costs
of the Group were 8 million euros (8 million euros). Financial assets recognised
at the fair value in the income statement, and cash and cash equivalents
amounted to 223 million euros (211 million euros) at 31 March 2008. The
interest-bearing liabilities, including derivative liabilities, totalled 952
million euros (965 million euros), of which 732 million euros (750 million
euros) were long term and 220 million euros (214 million euros) were short-term.
The counterparty risk involved in the derivative contracts relating to financing
was 9 million euros (6 million euros). The company has an undrawn revolving
credit facility of 250 million euros.
Moody's Investors Service updated Fingrid's credit opinion on 29 January 2008.
The rating stayed the same. The long-term rating is Aa3 and the short-term
rating is P-1. The future outlook is stable (Stable Outlook).
Personnel
The total personnel of the Fingrid Group averaged 243 (230) during the review
period.
Annual General Meeting
Fingrid Oyj's Annual General Meeting was held in Helsinki on 18 March 2008. The
Annual General Meeting accepted the financial statements for 2007, 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, Industrial Counsellor, 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, Managing Director, Jyväskylä Regional
Development Company Jykes Ltd, Anja Silvennoinen, Vice President, Energy,
UPM-Kymmene Oyj, and Jorma Tammenaho, Portfolio Manager, Mutual Pension
Insurance Company Ilmarinen.
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 2008
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: Interim report tables 1 January - 31 March 2008
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| Condensed consolidated income | 2008 | 2007 | Change | 2007 |
| statement, million euros | Jan-Mar | Jan-Mar | | Jan-Dec |
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| Revenue | 114.8 | 101.1 | 13.6 | 334.6 |
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| Other operating income | 0.4 | 0.4 | 0.0 | 1.9 |
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| Depreciation and amortisation | -14.2 | -12.8 | -1.4 | -55.5 |
| expense | | | | |
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| Operating expenses | -63.1 | -55.6 | -7.5 | -190.3 |
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| Operating profit | 37.9 | 33.2 | 4.7 | 90.7 |
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| Finance income and costs | -8.1 | -8.0 | -0.1 | -34.9 |
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| Portion of profit of associated | -0.3 | 0.2 | -0.5 | 0.7 |
| companies | | | | |
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| Profit before taxes | 29.5 | 25.4 | 4.1 | 56.5 |
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| Income taxes | -7.8 | -6.6 | -1.2 | -14.5 |
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| Profit for the period | 21.7 | 18.8 | 2.9 | 41.9 |
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| Earnings per share (euros)* | 6 532 | 5 666 | 866 | 12 616 |
| 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 | 2008 | 2007 | Change | 2007 31 |
| sheet, million euros | 31 Mar | 31 Mar | | Dec |
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| ASSETS | | | | |
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| Non-current assets | | | | |
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| Goodwill | 87.9 | 87.9 | 0.0 | 87.9 |
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| Intangible assets | 84.6 | 80.4 | 4.3 | 84.4 |
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| Property, plant and equipment | 1 085.3 | 1 065.4 | 19.9 | 1 085.6 |
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| Investments | 7.0 | 7.4 | -0.3 | 7.4 |
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| Receivables | 17.7 | 13.9 | 3.7 | 33.9 |
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| Current assets | | | | |
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| Inventories | 4.7 | 3.8 | 0.9 | 4.8 |
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| Receivables | 53.6 | 50.1 | 3.5 | 48.8 |
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| Financial assets recognised in | | | | |
| income statement | | | | |
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| at fair value | 205.8 | 182.7 | 23.1 | 209.0 |
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| Cash and cash equivalents | 17.3 | 28.4 | -11.1 | 3.0 |
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| Total assets | 1 563.9 | 1 520.0 | 43.9 | 1 564.8 |
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| SHAREHOLDERS' EQUITY AND | | | | |
| LIABILITIES | | | | |
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| Shareholders' equity belonging | | | | |
| to the owners of the parent | | | | |
| company | | | | |
--------------------------------------------------------------------------------
| Shareholders' equity | 436.1 | 397.5 | 38.6 | 430.0 |
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| Non-current liabilities | | | | |
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| Interest-bearing liabilities | 732.3 | 750.6 | -18.3 | 766.5 |
--------------------------------------------------------------------------------
| Other liabilities | 114.7 | 105.0 | 9.7 | 110.5 |
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| Current liabilities | | | | |
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| Interest-bearing liabilities | 219.8 | 214.2 | 5.6 | 200.1 |
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| Trade and other liabilities | 60.9 | 52.7 | 8.2 | 57.7 |
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| Total shareholders' equity and | 1 563.9 | 1 520.0 | 43.9 | 1 564.8 |
| liabilities | | | | |
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| Key indicators, million euros | 2008 | 2007 Jan | 2007 |
| (*end of | Jan - Mar | - Mar | Jan-Dec |
| period) | | | |
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| Revenue | 114.8 | 101.1 | 334.6 |
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| Capital expenditure, gross | 13.6 | 12.2 | 79.2 |
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| - % of revenue | 11.9 | 12.1 | 23.7 |
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| Research and development expenses | 0.2 | 0.2 | 1.2 |
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| - % of revenue | 0.2 | 0.2 | 0.4 |
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| Personnel, average | 243 | 230 | 241 |
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| Operating profit | 37.9 | 33.2 | 90.7 |
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| - % of revenue | 33.0 | 32.8 | 27.1 |
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| Profit before taxes | 29.5 | 25.4 | 56.5 |
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| - % of revenue | 25.7 | 25.1 | 16.9 |
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| Interest bearing liabilities, net* | 729.0 | 753.7 | 754.6 |
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| Equity ratio, %* | 27.9 | 26.2 | 27.5 |
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| Shareholders' equity* | 436.1 | 397.5 | 430.0 |
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| Equity per share, euros* | 131 169 | 119 553 | 129 338 |
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| Earnings per share, euros* | 6 532 | 5 666 | 12 616 |
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| * end of period | | | |
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| Consolidated | Share | Share | Reval- | Trans-l | Retained | Total |
| statement of | capita | premiu | uation | ation | earnings | |
| changes in total | l | m | reserv | reserve | | |
| equity, million | | accoun | e | | | |
| euros | | t | | | | |
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| Capital and | 55.9 | 55.9 | 0.0 | 0.1 | 273.6 | 385.5 |
| reserves 1 Jan 2007 | | | | | | |
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| Change in | | | | 0.0 | | 0.0 |
| translation | | | | | | |
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| Dividend | | | | | -6.9 | -6.9 |
| distribution | | | | | | |
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| Profit for period | | | | | 18.8 | 18.8 |
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| Capital and | 55.9 | 55.9 | 0.0 | 0.1 | 285.5 | 397.5 |
| reserves 31 Mar | | | | | | |
| 2007 | | | | | | |
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| Cash flow hedges | | | 9.3 | | | 9.3 |
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| Change in | | | | 0.1 | | 0.1 |
| translation | | | | | | |
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| Profit for period | | | | | 23.1 | 23.1 |
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| Other changes | | | 0.0 | | | 0.0 |
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| Capital and | 55.9 | 55.9 | 9.4 | 0.2 | 308.6 | 430.0 |
| reserves 31 Dec | | | | | | |
| 2007 | | | | | | |
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| Cash flow hedges | | | -8.4 | | | -8.4 |
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| Change in | | | | 0.0 | | 0.0 |
| translation | | | | | | |
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| Dividend | | | | | -7.2 | -7.2 |
| distribution | | | | | | |
--------------------------------------------------------------------------------
| Profit for period | | | | | 21.7 | 21.7 |
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| Capital and | 55.9 | 55.9 | 1.0 | 0.2 | 323.2 | 436.1 |
| reserves 31 Mar | | | | | | |
| 2008 | | | | | | |
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--------------------------------------------------------------------------------
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| Condensed consolidated cash flow | 2008 | 2007 | 2007 |
| statement, million euros | Jan-Mar | Jan-Mar | Jan-Dec |
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| Cash flow from operating activities | | | |
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| Profit for the financial year | 21.7 | 18.8 | 41.9 |
--------------------------------------------------------------------------------
| Adjustments | 30.7 | 28.8 | 92.0 |
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| Changes in working capital | -1.9 | -2.0 | 7.2 |
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| Interests paid | -7.3 | -7.0 | -45.2 |
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| Interests received | 2.8 | 1.3 | 8.5 |
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| Taxes paid | -0.6 | -0.6 | -0.8 |
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| Net cash flow from operating activities | 45.4 | 39.3 | 103.6 |
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| | | | |
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| Cash flow from investing activities | | | |
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| Purchase of property, plant and | -14.2 | -19.8 | -78.1 |
| equipment | | | |
--------------------------------------------------------------------------------
| Purchase of intangible assets | -0.3 | -0.5 | -6.2 |
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| Purchase of other assets | 0.0 | 0.0 | 0.0 |
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| Proceeds from other investments | 0.0 | 0.0 | 0.0 |
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| Proceeds from sale of property, plant | 0.0 | 0.0 | 0.0 |
| and equipment | | | |
--------------------------------------------------------------------------------
| Repayment of loans receivable | 0.0 | 0.0 | 0.1 |
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| Dividends received | 0.0 | 0.0 | 0.7 |
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| Net cash flow from investing activities | -14.5 | -20.2 | -83.6 |
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| | | | |
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| Cash flow from financing activities | | | |
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| Withdrawal of loans | 32.9 | 20.6 | 402.7 |
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| Repayment of loans | -45.0 | -26.5 | -408.7 |
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| Dividends paid | -7.2 | -6.9 | -6.9 |
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| Net cash flow from financing activities | -19.3 | -12.7 | -13.0 |
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| | | | |
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| Net change in cash and cash equivalents | 11.6 | 6.4 | 7.1 |
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| Cash and cash equivalents 1 Jan | 212.0 | 204.1 | 204.1 |
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| Impact of changes in fair value of | -0.5 | 0.7 | 0.8 |
| investments | | | |
--------------------------------------------------------------------------------
| Cash and cash equivalents 31 Mar | 223.1 | 211.1 | 212.0 |
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--------------------------------------------------------------------------------
| Derivative | 31 Mar 2008 | 31 Mar 2007 | 31 Dec 2007 |
| agreements, | | | |
| million euros | | | |
--------------------------------------------------------------------------------
| | Net | Notional | Net | Notional | Net | Notional |
| | fair | value | fair | value | fair | value |
| | value | | value | | value | |
--------------------------------------------------------------------------------
| Interest and | | | | | | |
| currency | | | | | | |
| derivatives | | | | | | |
--------------------------------------------------------------------------------
| Cross-currency | -37 | 384 | -47 | 320 | -47 | 376 |
| swaps | | | | | | |
--------------------------------------------------------------------------------
| Forward | -1 | 74 | -2 | 97 | -4 | 94 |
| contracts and | | | | | | |
| options | | | | | | |
--------------------------------------------------------------------------------
| Interest rate | -1 | 181 | -1 | 213 | -1 | 213 |
| swaps | | | | | | |
--------------------------------------------------------------------------------
| Call options, | 8 | 360 | 11 | 490 | 11 | 530 |
| bought | | | | | | |
--------------------------------------------------------------------------------
| Total | -31 | 999 | -39 | 1 120 | -40 | 1 213 |
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| | Net | Volume | Net | Volume | Net | Volume |
| | fair | TM | fair | TM | fair | TM |
| | value | | value | | value | |
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| Commodity | | | | | | |
| derivatives | | | | | | |
--------------------------------------------------------------------------------
| Call options on | 1 | 3 400 | | | | |
| metals, bought | | | | | | |
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| Total | 1 | 3 400 | | | | |
--------------------------------------------------------------------------------
| | Net | Volume | Net | Volume | Net | Volume |
| | fair | TWh | fair | TWh | fair | TWh |
| | value | | value | | value | |
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| Electricity | | | | | | |
| derivatives | | | | | | |
--------------------------------------------------------------------------------
| Forward | 8 | 2.80 | -5 | 2.85 | 19 | 3.03 |
| contracts of | | | | | | |
| electricity, | | | | | | |
| Nord Pool | | | | | | |
| Clearing | | | | | | |
| designated as | | | | | | |
| hedge | | | | | | |
| accounting | | | | | | |
--------------------------------------------------------------------------------
| Forward | 1 | 0.52 | 1 | 0.14 | 1 | 0.28 |
| contracts of | | | | | | |
| electricity, | | | | | | |
| others | | | | | | |
--------------------------------------------------------------------------------
| Call options, | 1 | 0.09 | | | 2 | 0.14 |
| bought | | | | | | |
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| Total | 10 | 3.41 | -4 | 3.00 | 23 | 3.45 |
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--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Commitments and | 31 Mar 2008 | 31 Mar 2007 | 31 Dec 2007 |
| contingensies, million | | | |
| euros | | | |
--------------------------------------------------------------------------------
| Pledges / bank balances | 11 | 24 | 0 |
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| Rental liabilities | 9 | 10 | 9 |
--------------------------------------------------------------------------------
| Commitment fee of | 0 | 1 | 0 |
| revolving credit | | | |
| facility | | | |
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| Total | 20 | 35 | 9 |
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| Capital commitments | 75 | 73 | 71 |
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| Other financial | 2 | 1 | 2 |
| liabilities | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Changes in property, | 31 Mar 2008 | 31 Mar 2007 | 31 Dec 2007 |
| plant and equipment, | | | |
| million euros | | | |
--------------------------------------------------------------------------------
| Carrying amount at | 1 086 | 1 066 | 1 066 |
| beginning of period | | | |
--------------------------------------------------------------------------------
| Increases | 13 | 12 | 74 |
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| Decreases | 0 | | 0 |
--------------------------------------------------------------------------------
| Depreciation and | -14 | -12 | -54 |
| amortisation expense | | | |
--------------------------------------------------------------------------------
| Carrying amount at end of | 1 085 | 1 065 | 1 086 |
| period | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Related party | 31 Mar 2008 | 31 Mar 2007 | 31 Dec 2007 |
| transactions and | | | |
| balances, million euros | | | |
--------------------------------------------------------------------------------
| Sales | 13 | 31 | 90 |
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| Purchases | 45 | 21 | 78 |
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| Receivables | 15 | 1 | 8 |
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| Liabilities | 3 | 3 | 5 |
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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 2007.
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.
