Finance and treasury
From the company’s finance perspective, the year was successful and went according to plans. Both the result and the company’s cost-effectiveness remained good. Considerable day-to-day efforts were made to maintain cost-effectiveness. The transmission grid tariffs were raised slightly at the start of the year, as a result of which, it is now in reasonably good balance in relation to the cost-level and investments for the coming years. Fingrid is still one of the lowest-priced TSOs in Europe, while the company’s transmission reliability is among the best in the world. According to the company’s own calculations, 2017 resulted in somewhat of a deficit in relation to the result that would have been permitted in regulation. The company’s long- and short-term debt management and hedging against financing risks in the international capital markets required, as usual, a good deal of work from the company and was very successful. Increasingly effective use of capital employed, a key success factor for uninterrupted and continuously developing grid operations, will remain in our focus. Overall, the company’s finances and financing are on a stable footing, which enables a controlled transition to a clean power system.
The Group’s turnover was EUR 672.0 (586.1) million. Grid service income increased to EUR 412.1 (382.4) million, as a result of the change in grid pricing enacted at the start of the year and due to the growth in electricity consumption, which is a key element in the tariff. Electricity consumption in Finland totalled 85.5 (85.1) terawatt hours during the year. Fingrid transmitted 66.2 (68.5) terawatt hours of electricity in its grid, which represents 75.5 (77.3) per cent of all electricity transmitted in Finland. Imbalance power sales amounted to EUR 213.9 (153.9) million. The increase in imbalance power sales resulted from the transfer of imbalance settlement to eSett Oy*1, following which the imbalance power sold to cross-border imbalance responsible parties is reported as external turnover. Cross-border transmission income from the connection between Finland and Russia decreased to EUR 20.7 (24.0) million, as a result of Russia’s lower realised transmission tariff. The transmission tariff used in imports from Russia is based on the difference between Finland’s and north-western Russia’s area prices. Fingrid’s congestion income from connections between Finland and Sweden decreased to EUR 25.5 (37.5) million, which was used for the Hirvisuo-Pyhänselkä grid investment. Other operating income totalled EUR 2.9 (12.7) million. The decline in other operating income resulted from the EUR 6.3 million in congestion income recognised in 2016 in compliance with the regulation concerning the costs from maintaining cross-border capacity and countertrade, and from a decline of EUR 3.5 million in capital gains on fixed assets.
The Group’s total costs amounted to EUR 499.0 (442.2) million. Imbalance power costs grew from the previous year’s level, to EUR 186.0 (121.7) million due to the above-mentioned transfer of imbalance settlement to eSett Oy. Loss power costs amounted to EUR 47.5 (57.6) million. The declining loss power costs have been affected by the lower price of loss power procurement and the slightly lower volume of loss power. The realised average price of loss power procurement was EUR 37.62 (43.87) per megawatt hour. The costs of reserves to safeguard the grid’s system security amounted to EUR 51.5 (50.5) million. Depreciation totalled EUR 96.9 (99.2) million. Grid maintenance costs amounted to EUR 24.5 (24.1) million and personnel costs to EUR 29.4 (28.6) million.
The company’s credit rating remained high, reflecting the company’s strong overall financial situation and debt service capacity. The Group’s net financial costs during the financial period were EUR 22.8 (18.7) million, including a change of EUR -8.2 (5.1) million in the fair value of financial derivatives.
Interest-bearing borrowings totalled EUR 1,082.7 (1,107.7) million, of which non-current borrowings accounted for EUR 813.4 (842.9) million and current borrowings for EUR 269.3 (264.9) million. In 2017, the company issued a EUR 100 million 10-year green bond to finance investments made by the company that are expected to have positive long-term net environmental impacts.
The company’s liquidity remained good. Financial and cash assets recognised at fair value through profit or loss totalled EUR 83.3 (79.7) million on 31 Dec. 2017. The company additionally has an undrawn revolving credit facility of EUR 300 million to secure liquidity and EUR 50 million in uncommitted overdraft facilities. Fingrid used the second extension option of the revolving credit facility during the period under review. This extended the maturity of the revolving credit facility until 11 December 2022.
The counterparty risk arising from derivative contracts relating to financing was EUR 8 (16) million. Fingrid’s foreign exchange and commodity price risks were hedged.
Fingrid has credit rating service agreements with S&P Global (S&P) and Fitch Ratings (Fitch).
- On 31 October 2017, S&P maintained the rating for Fingrid Oyj’s unsecured senior debt and long-term company rating at ‘AA-’ and the short-term company rating at ‘A-1+’, with a stable outlook.
- On 5 December 2017, Fitch affirmed the rating for Fingrid Oyj’s unsecured senior debt at ‘AA-’, the long-term company rating at ‘A+’, and ‘F1’ for the short-term company rating, with a stable outlook. The rating received by Fingrid was, at the time of issuing, the highest valid rating given by Fitch to any European regulated TSO.
Fingrid reports on its tax footprint and does not carry out special arrangements to minimise taxes. Dividends are mainly paid to the State of Finland and to Finnish pension insurance and insurance companies.
|Fingrid's tax footprint, MEUR||2017||2016||2015|
|Unemployment insurance contributions||0.74||0.85||0.48|
|Social security contributions||0.22||0.46||0.44|
|Real estate tax||0.42||0.41||0.39|
Electricity tax on auxiliary power
|Taxes payable total||
|Taxes to be collected and remitted|
|Value added tax, net remitted||62.00||50.41||38.88|
|Electricity tax (incl. emergency-preparedness contribution)||35.71||38.47||36.25|
|Taxes to be remitted total||104.95||95.85||81.90|
|The summary includes taxes and charges that Fingrid is under legal obligation to pay or to collect the tax or payment in question. However, taxes that are included in the purchase price of a product or service and which Fingrid is not under legal obligation to declare are not included in the summary data. For 2017, all taxes and similar charges have been paid in Finland. The Group did not have any operations outside Finland during the periods presented here.|
*eSett Oy is a company owned jointly by the Finnish, Swedish and Norwegian transmission system operators, responsible for imbalance settlement in Finland, Sweden and Norway.
Key events of 2017
Fingrid’s green bond as part of the company’s overall sustainability model
In November, Fingrid issued a EUR 100 million green bond, which sparked wide international interest and expanded the company’s investor base. As part of its financing strategy, Fingrid has created a Green Bond Framework that has received a second opinion from the independent research institute CICERO.
Within the Green Bond Framework, the company finances projects that connect renewable energy production to Fingrid’s transmission network, reduce electricity transmission losses and create smart solutions that save energy.
The financing collected through Fingrid’s Green Bond also contributes to the global development of a sustainable debt investment market.
The listing of this Green Bond, the first issued at the corporate level in Finland, received attention at the London Stock Exchange on 11 January 2018, when Fingrid opened the market.