Notes to the financial statements of parent company

1. ACCOUNTING PRINCIPLES

Fingrid Oyj's financial statements have been drawn up in accordance with the Finnish Accounting Standards (FAS). The items in the financial statements are valued at original acquisition cost.

Foreign currency transactions

Commercial transactions and financial items denominated in foreign currencies are recognised at the foreign exchange mid-rate quoted by the European Central Bank (ECB) at the transaction date. Interest-bearing liabilities and receivables and the derivatives hedging these items are valued at the mid-rate quoted by the ECB at the closing date. Foreign exchange gains and losses on interest-bearing liabilities and receivables, and on the instruments hedging these items, are recognised at maturity under finance income and costs. Foreign exchange rate differences arising from the derivatives used to hedge commercial currency flows are recognised to adjust the corresponding item in the income statement.

Interest and currency derivatives

Interest rate and currency swaps, foreign exchange forwards and interest rate options are used, in accordance with the Treasury Policy, to hedge the interest rate and foreign exchange risk, as well as the commercial items, in Fingrid’s balance sheet items. The accounting principles for derivative contracts are the same as for the underlying items. The interest rate items of interest rate and currency swaps and interest rate options are accrued and recognised in the income statement under interest income and costs. The interest portion of forward foreign exchange contracts hedging the interest-bearing liabilities and receivables is accrued over the maturity of the contracts and recognised under finance income and costs. Premiums paid or received on interest rate options are accrued over the hedging period.

Electricity derivatives

Fingrid hedges its loss energy purchases by employing futures instruments quoted on the NASDAQ OMX Oslo ASA. There can also be trading in the OTC market in instruments corresponding to Nasdaq OMX Oslo ASA’s financial instruments. The profits and losses arising from these contracts are used to adjust the loss energy purchases in the income statement in the period in which the hedging impacts profit or loss.

Research and development expenses

Research and development expenses are treated as annual expenses.

Valuation of fixed assets

Fixed assets are capitalised under immediate acquisition cost. Planned straight-line depreciation on the acquisition price is calculated on the basis of the useful life of the fixed asset. Depreciation on fixed assets taken into use during the financial year is calculated on an item-by-item basis from the month of introduction.

The depreciation periods are as follows:

Goodwill = 20 years

Other non-current expenses:

     Rights of use to line areas = 30–40 years
     Other rights of use according to useful life, maximum = 10 years
     Computer software = 3 years

Buildings and structures

     Substation buildings and separate buildings = 40 years
     Substation structures = 30 years
     Buildings and structures at gas turbine power plants = 20–40 years
     Separate structures = 15 years

Transmission lines

     Transmission lines 400 kV = 40 years
     Direct current lines = 40 years
     Transmission lines 110–220 kV = 30 years
     Creosote-impregnated towers and related disposal costs* = 30 years
     Aluminium towers of transmission lines (400 kV) = 10 years
     Optical ground wires = 10–20 years 

Machinery and equipment

     Substation machinery = 10–30 years
     Gas turbine power plants = 20 years
     Other machinery and equipment = 3–5 years

*Disposal costs are discounted at present value and added to the value of the fixed asset and recognised under provisions for liabilities and charges.

Goodwill is depreciated over a 20-year period, since grid operations are a long-term business in which income is accrued over several decades.

Emission rights

Emission rights are treated in accordance with the net procedure in conformance with statement 1767/2005 of the Finnish Accounting Board.

Valuation of inventories

Inventories are recognised according to the FIFO principle at acquisition cost, or at the lower of replacement cost or probable market price.

Cash in hand, bank receivables and financial securities

Cash in hand and bank receivables include cash assets and bank balances. Financial securities include certificates of deposit, commercial papers and investments in short-term money-market funds. Quoted securities and comparable assets are valued at the lower of original acquisition cost or probable market price.

Interest-bearing liabilities

Fingrid’s non-current interest-bearing liabilities consist of loans from financial institutions and bonds issued under the Euro Medium Term Note (EMTN) programme. The current interest-bearing liabilities consist of commercial papers issued under the domestic and international programmes and of the current portion of noncurrent borrowings and bonds maturing within a year. The outstanding notes under the programmes are denominated in euros and foreign currencies. Fingrid has both fixed and floating rate debt. The interest is accrued over the maturity of the debt. The differential of a bond issued over or under par value is accrued over the life of the bond. The arrangement fees of the revolving credit facilities are, as a rule, immediately recognised as an expense, and the commitment fees are recognised as an expense over the maturity of the facility.

Financial risk management

The principles applied to the management of financial risks are presented in chapters 6.2 and 6.3 of the Notes to the Consolidated Financial Statements.

Income taxes

Taxes include the accrued tax corresponding to the profit for the financial year as well as tax adjustments for previous financial years.

Deferred taxes

The company enters deferred tax assets for the congestion income it uses for investments, and they become taxable income and tax in the year in which they were used. The tax assets entered for congestion income are recognised in accordance with the depreciation used in taxation for investments covered by congestion income. Congestion income allocated to investments is entered as a reduction in acquisition cost. For the rest, deferred tax assets and liabilities are not recorded in the income statement or balance sheet, but are instead presented in the notes.

2. TURNOVER BY BUSINESS AREA
The business of Fingrid Oyj comprises entirely transmission grid business with system responsibility. For that reason, there is no distribution of turnover by business area.
TURNOVER, €1,000 2017 2016
Grid service income 412,082 382,395
Imbalance power sales 213,872 153,881
Cross-border transmission 20,711 24,015
ITC income 8,647 13,199
Income from peak load capacity services 293 295
Income from guarantee-of-origin services 234 244
Other operating income 9,553 7,382
Total 665,393 581,410
3. OTHER OPERATING INCOME, €1,000 2017 2016
     
Rental income 942 922
Capital gains of fixed assets 340 3,796
Contributions received 170 282
Congestion income 0 6,325
Other income 1,500 1,368
Total 2,952 12,693
4. MATERIALS AND SERVICES, €1,000 2017 2016
     
Purchases during the financial year 234,232 170,793
Loss energy purchases 47,397 57,555
Change in inventories, increase (-) or decrease (+) -1,260 396
Materials and consumables 280,369 228,745
Services 13,615 13,010
Total 293,984 241,755
5. PERSONNEL EXPENSES, €1,000 2017 2016
     
Salaries and bonuses 24,187 22,735
Pension expenses 4,139 4,433
Other personnel expenses 1,059 1,430
Total 29,385 28,598
Salaries and bonuses of the members of the Board of Directors and President and CEO, €1,000 2017 2016
Juhani Järvi, Chairman (since 6 June 2014) 39 34
Helena Walldén, Chairman (until 6 April 2016)   11
Juha Majanen, Vice Chairman (since 22 March 2012) 24 23
Sanna Syri, Member of the Board (since 14 April 2015) 19 20
Esko Torsti, Member of the Board (since 22 March 2012) 20 20
Anu Hämäläinen, Member of the Board (since 6 April 2016) 19 14
Jukka Ruusunen, Presiden and CEO 416 352
     
Number of salaried employees in the company during the financial year:    
Personnel, average 352 336
Personnel, 31 Dec 355 334
DEPRECATION ACCORDING TO PLAN, €1,000 2017 2016
Goodwill 4,289 6,433
Other non-current expenses 6,390 5,856
Buildings and structures 8,535 8,100
Machinery and equipment 48,104 50,973
Transmission lines 36,427 36,904
Total* 103,745 108,267
* deprecation on the electricity grid (notes 12 and 13) 89,658 88,967
7. OTHER OPERATING EXPENSES, €1,000 2017 2016
Contracts, assignments etc. undertaken externally 56,173 53,277
Grid rents 241 241
Other rental expenses 3,381 2,575
Other costs 10,331 9,681
Total 70,126 65,774
8. AUDITORS’ FEES, €1,000 2017 2016
PricewaterhouseCoopers Oy:    
Auditing fee 63 61
Tax consulting 20 21
Assignments referred to in the Auditing Act, Chapter 1, Section 1, Subsection 2 0 3
Other fees 41 60
Total 124 145
9. FINANCE INCOME AND COSTS, €1,000 2017 2016
Dividend income from Group companies 139 294
Dividend income from others 1,119 565
Interest and other finance income from others 4,768 7,332
  6,025 8,192
Interest and other finance costs to Group companies 0 0
Interest and other finance costs to others -23,205 -28,313
  -23,205 -28,313
Total -17,180 -20,121
10. INCOME TAXES, €1,000 2017 2016
Income taxes for the financial year 33197 25722
Income taxes for the previous financial years 6217  
Changes in deferred taxes -8,846 0
Total 30,568 25,722
Deferred tax assets in balance sheet, €1,000
On temporary differences from congestion income 8,846 0
Total 8,846 0
     
Deferred tax assets and liabilities of balance sheet, €1,000
Deferred tax assets
On temporary differences 295 296
  295 296
Deferred tax liabilities
On temporary differences 220 242
On appropriations 89,779 89,779
  90,000 90,021
Total 89,705 89,725
11. GOODWILL, €1,000 2017 2016
Cost at 1 Jan 128,664 128,664
Cost at 31 Dec 128,664 128,664
Accumulated depreciation according to plan 1 Jan -124,375 -117,942
Depreciation according to plan 1 Jan–31 Dec -4,289 -6,433
Carrying amount 31 Dec -0 4,289
     
Accumulated depreciation difference 1 Jan -4,289 -10,722
Decrease in depreciation difference reserve 1 Jan–31 Dec 4,289 6,433
Accumulated depreciation in excess of plan 31 Dec 0 -4,289
12. OTHER NON-CURRENT EXPENSES, €1,000 2017 2016
Cost at 1 Jan 183,719 180,861
Increases 1 Jan–31 Dec 5,959 3,548
Decreases 1 Jan–31 Dec -126 -690
Cost at 31 Dec 189,553 183,719
Accumulated depreciation according to plan 1 Jan -103,949 -98,519
Decreases, depreciation according to plan 1 Jan–31 Dec 60 427
Depreciation according to plan 1 Jan–31 Dec -6,390 -5,856
Carrying amount 31 Dec* 79,273 79,770
     
Accumulated depreciation difference 1 Jan -52,620 -53,378
Increase in depreciation difference reserve 1 Jan–31 Dec -5,908 -737
Decrease in depreciation difference reserve 1 Jan–31 Dec 6,481 1,496
Accumulated depreciation in excess of plan 31 Dec -52,047 -52,620
*Net capital expenditure in electricity grid, €1,000 2017 2016
Carrying amount 31 Dec 71,258 74,378
Carrying amount 1 Jan -74,378 -77,101
Depreciation according to plan 1 Jan–31 Dec 4,030 3,941
Decreases 1 Jan–31 Dec 66 263
Total 976 1,482
13. TANGIBLE ASSETS, €1,000 2017 2016
Land and water areas    
Cost at 1 Jan 15,701 15,349
Increases 1 Jan–31 Dec 274 393
Decreases 1 Jan–31 Dec 0 -41
Cost at 31 Dec 15,974 15,701
     
Buildings and structures    
Cost at 1 Jan 253,104 218,637
Increases 1 Jan–31 Dec 24,614 34,634
Decreases 1 Jan–31 Dec -5 -168
Cost at 31 Dec 277,712 253,104
Accumulated depreciation according to plan 1 Jan -59,464 -51,436
Decreases, depreciation according to plan 1 Jan–31 Dec 5 73
Depreciation according to plan 1 Jan–31 Dec -8,535 -8,100
Carrying amount 31 Dec 209,719 193,640
Accumulated depreciation difference 1 Jan -12,694 -12,649
Increase in depreciation difference reserve 1 Jan–31 Dec -9,383 -970
Decrease in depreciation difference reserve 1 Jan–31 Dec 8,535 925
Accumulated depreciation in excess of plan 31 Dec -13,542 -12,694
     
Machinery and equipment    
Cost at 1 Jan 1,091,578 1,029,839
Increases 1 Jan–31 Dec 31,938 61,839
Decreases 1 Jan–31 Dec -718 -100
Cost at 31 Dec 1,122,798 1,091,578
Accumulated depreciation according to plan 1 Jan -515,261 -464,296
Decreases, depreciation according to plan 1 Jan–31 Dec 718 8
Depreciation according to plan 1 Jan–31 Dec -48,104 -50,973
Carrying amount 31 Dec 560,151 576,317
Accumulated depreciation difference 1 Jan -90,425 -97,309
Increase in depreciation difference reserve 1 Jan–31 Dec -44,144 -782
Decrease in depreciation difference reserve 1 Jan–31 Dec 48,104 7,665
Accumulated depreciation in excess of plan 31 Dec -86,466 -90,425
     
Transmission lines    
Cost at 1 Jan 1,290,658 1,221,808
Increases 1 Jan–31 Dec -1,658 74,414
Decreases 1 Jan–31 Dec -433 -5,565
Cost at 31 Dec 1,288,567 1,290,658
Accumulated depreciation according to plan 1 Jan -481,783 -448,824
Decreases, depreciation according to plan 1 Jan–31 Dec 184 3,944
Depreciation according to plan 1 Jan–31 Dec -36,427 -36,904
Carrying amount 31 Dec 770,541 808,875
Accumulated depreciation difference 1 Jan -288,869 -274,839
Increase in depreciation difference reserve 1 Jan–31 Dec -44,400 -50,934
Decrease in depreciation difference reserve 1 Jan–31 Dec 36,427 36,904
Accumulated depreciation in excess of plan 31 Dec -296,842 -288,869
     
Other property, plant and equipment    
Cost at 1 Jan 118 118
Cost at 31 Dec 118 118
     
Prepayments and purchases in progress    
Cost at 1 Jan 59,404 120,816
Increases 1 Jan–31 Dec 94,299 116,534
Transfers to other tangible and intangible assets 1 Jan - 31 Dec -70,047 -177,946
Cost at 31 Dec 83,656 59,404
     
Tangible assets total* 1,640,160 1,654,054
     
*Net capital expenditure in electricity grid, €1,000 2017 2016
Carrying amount 31 Dec 1,609,354 1,618,586
Carrying amount 1 Jan -1,618,586 -1,635,324
Depreciation according to plan 1 Jan–31 Dec 85,628 85,026
Decreases 1 Jan–31 Dec 249 1,742
Total 76,645 70,030
 
14. INVESTMENTS, €1,000 2017 2016
Interests in Group companies    
Cost at 1 Jan 507 505
Increases 1 Jan–31 Dec 0 3
Cost at 31 Dec 507 507
     
Interests in associated companies    
Cost at 1 Jan 8,588 8,588
Decreases 1 Jan–31 Dec 0 0
Cost at 31 Dec 8,588 8,588
     
Other shares and interests    
Cost at 1 Jan 1,965 1,885
Increases 1 Jan–31 Dec 139 227
Decreases 1 Jan–31 Dec -8 -147
Cost at 31 Dec 2,097 1,965
Investments total 11,192 11,060
15. INVENTORIES, €1,000 2017 2016
Materials and consumables at 31 Dec 13,248 12,139
Work in progress 281 131
Total 13,529 12,269
16. OTHER NON-CURRENT RECEIVABLES, €1,000 2017 2016
Loan receivables from Group companies 5,000 2,808
Loan receivables from associated companies 4,000 4,000
Total 9,000 6,808
17. RECEIVABLES FROM GROUP COMPANIES, €1,000 2017 2016
Current:    
Trade receivables 772 799
Interest receivables 62 27
Total 833 827
18. RECEIVABLES FROM ASSOCIATED COMPANIES, €1,000 2017 2016
Current:    
Trade receivables 3,888 125
Interest receivables 46 18
Total 3,934 144
19. PREPAYMENTS AND ACCRUED INCOME, €1,000 2017 2016
Interest and other financial items 6,545 7,333
Accruals of sales and purchases 2,201 1,666
Tax assets 2,331 0
Other prepayments and accrued income 789 200
Total 11,866 9,199
20. UNRECORDED EXPENSES AND PAR VALUE DIFFERENTIALS ON THE ISSUE OF LOANS INCLUDED IN PREPAYMENTS AND ACCRUED INCOME, €1,000 2017 2016
Par value differentials 1,624 1,039
21. CASH AND CASH EQUIVALENTS, €1,000 2017 2016
Commercial papers 6,496 12,991
Short-term money market funds 56,472 44,402
Bank deposits 10,000 10,000
Cash in hand and bank receivables 10,303 11,939
Total 83,271 79,333
22. SHAREHOLDERS' EQUITY, €1,000 2017 2016
     
Share capital 1 Jan 55,922 55,922
Share capital 31 Dec 55,922 55,922
     
Share premium account 1 Jan 55,922 55,922
Share premium account 31 Dec 55,922 55,922
     
Profit from previous financial years 1 Jan 175,954 162,088
Dividend distribution -98,000 -90,000
Profit from previous financial years 31 Dec 77,954 72,088
Profit for the financial year 123,358 103,866
     
Shareholders’ equity 31 Dec 313,158 287,799
Distributable shareholders’ equity 201,313 175,954
Number of shares Series A shares Series B shares Total
1 Jan 2017 2,078 1,247 3,325
31 Dec 2017 2,078 1,247 3,325
       

Series A shares confer three votes each at the Annual General Meeting and Series B shares one vote each. When electing members of the Board of Directors, Series A shares confer 10 votes each at the Annual General Meeting and Series B shares one vote each.

Series B shares have the right before Series A shares to obtain the annual dividend specified below from the funds available for profit distribution. If the annual dividend cannot be distributed in some year, the shares confer a right to receive the undistributed amount from the funds available for profit distribution in the subsequent years; however, such that Series B shares have the right over Series A shares to receive the annual dividend and the undistributed amount. Series B shares have no right to receive any other dividend.

Fingrid Oyj's Annual General Meeting decides on the annual dividend. Eighty-two (82) per cent of the dividends to be distributed for each financial year is distributed for all Series A shares and eighteen (18) per cent for all Series B shares, however such that EUR twenty (20) million of the dividends to be distributed for each financial year is first distributed for all Series B shares. If the above-mentioned EUR twenty (20) million minimum amount for the financial period is not distributed (all or in part) for Series B shares in a financial period, Series B shares confer the right to receive the undistributed minimum amount in question (or the accumulated undistributed minimum amount accrued during such financial periods) in the next profit distribution, in any disbursements paid out, or in any other distribution of assets prior to any other dividends, disbursements or asset distribution until the undistributed minimum amount has been distributed in full for Series B shares.

There are no non-controlling interests.

23. ACCUMULATED APPROPRIATIONS, €1,000 2017 2016
Accumulated depreciation from the difference between depreciation according to plan and depreciation carried out in taxation 448,897 448,897
24. BONDS, €1,000         2017 2016
           
Currency Nominal value Maturity date Interest    
EUR 20,000 11.04.2017 floating rate   20,000
EUR 25,000 11.04.2017 floating rate   25,000
EUR 30,000 15.06.2017 3,07%   30,000
EUR 50,000 20.09.2020 floating rate 50,000 50,000.00
EUR 30,000 19.09.2022 floating rate 30,000 30,000.00
EUR 30,000 11.09.2023 2,71% 30,000 30,000
EUR 300,000 03.04.2024 3,50% 300,000 300,000
EUR 100,000 23.11.2027 1,125 % 100,000  
EUR 25,000 27.03.2028 2,71% 25,000 25,000
EUR 10,000 12.09.2028 3,27% 10,000 10,000
EUR 80,000 24.04.2029 2,95% 80,000 80,000
EUR 30,000 30.05.2029 2,89% 30,000 30,000
        655,000 630,000
           
           
JPY 500,000 22.06.2017 1,28%   4,507
        0 4,507
           
           
NOK 200,000 11.04.2017 5,16%   24,620
NOK 200,000 10.11.2017 5,12%   23,725
NOK 200,000 12.11.2019 5,37% 23,725 23,725
NOK 100,000 16.09.2025 4,31% 12,512 12,512
        36,237 84,582
           
           
SEK 1,000,000 19.11.2018 floating rate 107,307.65 107,308
        107,308 107,308
           
Bonds, non-current, total       691,237 698,544
Bonds, current, total       107,308 127,852
Total       798,544 826,396
   
25. LOANS FALLING DUE IN FIVE YEARS OR MORE, €1,000 2017 2016
Bonds 617,512 517,512
Loans from financial institutions 72,554 90,216
Total 690,066 607,728
26. LIABILITIES TO GROUP COMPANIES, €1,000 2017 2016
Current:    
Other liabilities 1,158 1,103
Total 1,158 1,103
27. LIABILITIES TO ASSOCIATED COMPANIES, €1,000 2017 2016
Current:    
Trade payables 3,376 152
Total 3,376 152
28. OTHER LIABILITIES, €1,000 2017 2016
Current:    
Other loans/Commercial papers (international and domestic) 145,243 120,128
Value added tax 12,378 11,860
Electricity tax 3,092 3,093
advances received 923 923
Other liabilities 588 667
Total 162,225 136,671
29. ACCRUALS, €1,000 2017 2016
Current:    
Interest and other financial items 11,757 12,822
Salaries and additional personnel expenses 6,613 5,693
Accruals of sales and purchases 8,751 5,766
Other accruals 5,150 5,277
Total 32,271 29,558
30. PROVISIONS FOR LIABILITIES AND CHARGES, €1,000 2017 2016
Creosote-impregnated and CCA-impregnated wooden towers, disposal costs 1,474 1,481
Total 1,474 1,481
31. DERIVATIVE AGREEMENTS, €1,000
  2017 2016 Hierarchy level
Interest rate and currency derivatives Fair value pos. 31.12.17 Fair value neg. 31.12.17 Net fair value 31.12.17 Nominal value 31.12.17 Fair value pos. 31.12.16 Fair value neg. 31.12.16 Net fair value 31.12.16 Nominal value 31.12.16  
  3,837 -12,660 -8,822 143,544 6,930 -12,487 -5,558 196,396 Level 2
Forward contracts   -123 -123 1,167 46   46 2,271 Level 2
Interest rate swaps 23,209 -7,487 15,722 430,000 26,667 -6,725 19,943 360,000 Level 2
Bought interest rate options 787   787 571,587 1,350   1,350 514,685 Level 2
Total 27,833 -20,270 7,563 1,146,298 34,993 -19,212 15,781 1,073,352  
Electricity derivatives
johdannaiset
Fair value pos. 31.12.17 Fair value neg. 31.12.17 Net fair value 31.12.17 Nominal value 31.12.17 Fair value pos. 31.12.16 Fair value neg. 31.12.16 Net fair value 31.12.16 Nominal value 31.12.16  
Electricity future contracts. NASDAQ OMX Commodities 1,009.71 -134.63 875.08 1.13         Level 1
Electricity forward contracts. NASDAQ OMX Commodities 2,904.97 -1,244.44 1,660.52 3.75 1,639.52 -8,157.40 -6,517.87 4.07 Level 1
Total 3915 -1379 2536 4.88 1640 -8157 -6518 4.07  
32. COMMITMENTS AND CONTINGENT LIABILITIES, €1,000 2017 2016
     
Rental liabilities    
Liabilities for the next year 4,079 3,536
Liabilities for subsequent years 28,192 28,653
  32,270 32,189
Right-of-use agreements    
Liabilities for the next year 10,769 7,601
Liabilities for subsequent years 62,011 72,677
  72,780 80,278
Pledges    
Pledge covering property lease agreements 0 9
Pledge covering customs credit account 200 280
Pledge covering excise duty 280 0
  480 289
Other financial commitments    
Rent security deposit, guarantee 38 38
Credit facility commitment fee and commitment fee:    
Commitment fee for the next year 400 395
Liabilities for subsequent years 1,154 1,154
  1,592 1,587
33. OPERATING CASH FLOW ADJUSTMENTS, €1,000 2017 2016
Business transactions not involving a payment transaction    
Depreciation 103,745 108,267
Capital gains/losses (-/+) on tangible and intangible assets -340 -3,778
Total 103,404 104,489
34.  LEGAL PROCEEDINGS AND PROCEEDINGS BY AUTHORITIES

A lawsuit was initiated against Fingrid in December 2016, demanding non-specified liquidated damages due to an alleged breach of contract. The legal proceedings ended with the district court issuing an interlocutory judgement in December 2017, according to which Fingrid had not been proven to have committed a contractual breach.

Fingrid has appealed to the Market Court against the decision issued by the Energy Authority on 2 January 2017 to the extent where the Energy Authority required Fingrid to submit the terms and conditions concerning the balancing power agreements and the grounds for the determination of fees for approval by the Energy Authority. According to Fingrid, under the legislation in force at the time the decision was issued, it was not required to submit the terms and conditions related to the procurement of balancing power beforehand to the authority for approval. The matter is still before the Market Court. The legal proceedings do not have a substantial impact on the company’s financial result or financial position.

35.  SEPARATION OF BUSINESSES IN ACCORDANCE WITH THE ELECTRICITY MARKET ACT

Imbalance power and regulating power

Each electricity market party must ensure its electricity balance by making an agreement with either Fingrid or some other party. Fingrid buys and sells imbalance power in order to stabilise the hourly power balance of an electricity market party (balance responsible party). Imbalance power trade and pricing are based on a balance service agreement with equal and public terms and conditions.

Fingrid is responsible for the continuous power balance in Finland by buying and selling regulating power in Finland. The balance responsible parties can participate in the Nordic balancing power market by submitting bids on their available capacity. The terms and conditions of participation in the regulating power market and the pricing of balancing power are based on the balance service agreement.

Fingrid is responsible for organising national imbalance settlement. As of the beginning of May 2017, Fingrid has transferred the imbalance settlement to eSett Oy, a company jointly owned by the Finnish, Swedish and Norwegian transmission system operators.

The balance settlement takes place after the utilisation hours by determining the actual electricity generation, consumption and electricity trade. The outcome of the balance settlement is power balances for each party to the electricity trade.

Management of balance operation

In accordance with a decision by the Energy Market Authority, Fingrid Oyj shall separate the duties pertaining to national power balance operation by virtue of Chapter 12 of the Electricity Market Act. The management of balance operation is a part of grid operations.

The income statement of the balance service unit is separated by means of cost accounting as follows:

Income direct
Separate costs direct
Production costs matching principle
Administrative costs matching principle
Depreciation matching principle in accordance with Fingrid Oyj's depreciation principle
Finance income and costs on the basis of imputed debt
Income taxes based on result

The average number of personnel during 2017 was 11 (12). The operating profit was 0,5 (3,7) per cent of turnover.

MANAGEMENT OF BALANCE OPERATION, SEPARATED INCOME STATEMENT 1 Jan - 31 Dec, 2017 1 Jan - 31 Dec, 2016
1 000 € 1 000 €
TURNOVER* 219,344 165,393
Other operating income 1 1
Materials and services* -213,014 -156,520
Personnel costs -1,148 -1,385
Depreciation and amortisation expense -434 -181
Other operating expenses -3,718 -1,129
     
OPERATING PROFIT 1,028 6,178
Finance income and costs 81 48
     
PROFIT/LOSS BEFORE APPROPRIATIONS AND TAXES 1,110 6,226
Appropriations -81 -89
Income taxes -206 -884
PROFIT/LOSS FOR THE FINANCIAL YEAR 823 5,253
MANAGEMENT OF BALANCE OPERATION, SEPARATED BALANCE SHEET
ASSETS 31 Dec 2017 31 Dec 2016
  €1,000 €1,000
NON-CURRENT ASSETS    
Intangible assets    
Other non-current expenses 1,311 385
Tangible assets    
Machinery and equipment 461 247
Prepayments and purchases in progress   62
Investments    
Interests in associated companies 2,001 2,001
TOTAL NON-CURRENT ASSETS 3,772 2,695
CURRENT ASSETS    
Non-current    
Loan receivables from associated companies 4,000 4,000
Current receivables    
Trade receivables 2,649 27,420
Receivables from Group companies 10,594 18,469
Receivables from associated companies 13,214 144
Other receivables 2,234 1,504
  28,690 47,537
Cash in hand and bank receivables 1 1
TOTAL CURRENT ASSETS 32,691 51,538
TOTAL ASSETS 36,463 54,233
SHAREHOLDERS' EQUITY AND LIABILITIES 31 Dec 2017 31 Dec 2016
€1,000 €1,000
EQUITY    
Share capital 32 32
Share premium account 286 286
Profit from previous financial years 21,873 16,620
Profit for the financial year 823 5,253
TOTAL SHAREHOLDERS' EQUITY 23,013 22,190
ACCUMULATED APPROPRIATIONS -389 -470
LIABILITIES    
Current liabilities    
Trade payables 520 30,724
Liabilities to Group companies   906
Liabilities to associated companies 13,113  
Accruals 206 884
  13,839 32,513
TOTAL LIABILITIES 13,839 32,513
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 36,463 54,233

Development of information exchange

It is Fingrid’s task to develop the exchange of information required for electricity trade and imbalance settlement as set out in the Electricity Market Act. Fingrid’s information exchange services are part of the electricity markets’ information exchange environment. In order to develop the effective and accurate exchange of information, Fingrid works in close co-operation with e.g. electricity market parties, interest groups, service providers, supervisory authorities, legislators, organisations that develop national and international communications and other transmission system operators.

In accordance with a decision by the Energy Market Authority, Fingrid Oyj must separate the duties pertaining to the development of information exchange by virtue of Chapter 12 of the Electricity Market Act. The development of information exchange is a part of grid operations.

The separation of the income statement for the development of information exchange is realised by means of cost accounting as follows:

Income direct
Separate costs direct
Administrative costs matching principle
Income taxes based on result
DEVELOPMENT OF INFORMATION EXCHANGE, SEPARATED INCOME STATEMENT 1 Jan - 31 Dec, 2017 1 Jan - 31 Dec, 2016
€1,000 €1,000
     
TURNOVER 575 595
Personnel costs -116 -144
Other operating expenses -374 -392
OPERATING PROFIT 86 59
PROFIT/LOSS BEFORE APPROPRIATIONS AND TAXES 86 59
Income taxes -17 -12
PROFIT/LOSS FOR THE FINANCIAL YEAR 69 48
DEVELOPMENT OF INFORMATION EXCHANGE, SEPARATED BALANCE SHEET
ASSETS 31 Dec 2017 31 Dec 2016
€1,000 €1,000
CURRENT ASSETS    
Trade receivables 0.78  
Other receivables 130 147
TOTAL CURRENT ASSETS 131 147
TOTAL ASSETS 131 147
SHAREHOLDERS' EQUITY AND LIABILITIES 31 Dec 2017 31 Dec 2016
€1,000 €1,000
     
EQUITY    
Share capital 3 3
Profits/losses from previous financial years -589 -636
Profit for the financial year 69 48
TOTAL SHAREHOLDERS' EQUITY -518 -586
LIABILITIES    
Current liabilities    
Trade payables 11 12
Liabilities to Group companies 575 686
Other liabilities 62 36
  649 734
TOTAL LIABILITIES 649 734
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 131 147

Grid operations

Grid operations refers to licensed electricity system operation that takes place on the electricity grid. Electricity system operations are defined in Chapter 1 of the Electricity Market Act (588/2013) and grid operations are defined in Chapter 5. Of Fingrid Oyj’s operations, activities related to the management of the power reserve system and guarantees of origin for electricity, as well as the data hub project that was started in 2015 are not included in grid operations. Operations that are not part of grid operations constitute ‘other operations’ as referred to in Chapter 12 of the Electricity Market Act and must be separated from grid operations in accordance with that Chapter.

The income statement and balance sheet of grid operations and other operations have, in compliance with Chapter 12 of the Electricity Market Act, been separated by means of cost accounting as follows:

Income direct
Separate costs direct
Production costs matching principle
Administrative costs matching principle
Depreciation matching principle in accordance with Fingrid Oyj's depreciation principle
Finance income and costs on the basis of imputed debt
Income taxes based on result
Balance sheet items  matching principle
SEPARATED INCOME STATEMENT TRANSMISSION SYSTEM OPERATION OTHER OPERATION
1 Jan - 31 Dec, 2017 1 Jan - 31 Dec, 2017
€1,000 €1,000
TURNOVER 663,176 2,217
Other operating income 2,952  
Materials and services -293,984  
Personnel costs -28,182 -1,203
Depreciation and amortisation expense -103,745  
Other operating expenses -69,112 -1,014
     
OPERATING PROFIT 171,106 0
Finance income and costs -17,424 245
     
PROFIT BEFORE EXTRAORDINARY ITEMS 153,682 245
     
PROFIT/LOSS BEFORE APPROPRIATIONS AND TAXES 153,682 245
Income taxes -30,519 -49
PROFIT/LOSS FOR THE FINANCIAL YEAR 123,163 196
SEPARATED BALANCE SHEET TRANSMISSION SYSTEM OPERATION OTHER OPERATION
ASSETS 31 Dec 2017 31 Dec 2017
  €1,000 €1,000
Intangible assets:    
Goodwill    
Other intangible assets 79,273  
  79,273  
Tangible assets    
Land and water areas 15,974  
Buildings and structures 209,719  
Machinery and equipment 560,151  
Transmission lines 770,541  
Other property, plant and equipment 118  
Prepayments and purchases in progress 83,656  
  1,640,159  
Investments:    
Interests in Group companies   507
Interests in associated companies 8,588  
Other shares and interests 2,097  
  10,685 507
     
TOTAL NON-CURRENT ASSETS 1,730,117 507
CURRENT ASSETS    
Inventories 13,528.91  
     
Receivables    
Non-current    
Loan receivables from Group companies   5,000
Loan receivables from associated companies 4,000  
Deferred tax assets 8,846  
  12,846 5,000
Current    
Trade receivables 75,074  
Receivables from Group companies 5,445 833
Receivables from associated companies 3,934  
Other receivables 1,448  
Prepayments and accured income 11,866  
  97,767 833
Financial securities 62,968  
Cash in hand and bank receivables 20,303  
TOTAL CURRENT ASSETS 207,413 5,833
TOTAL ASSETS 1,937,530 6,340
SEPARATED BALANCE SHEET TRANSMISSION SYSTEM OPERATION OTHER OPERATION
SHAREHOLDERS' EQUITY AND LIABILITIES 31 Dec 2017 31 Dec 2017
  €1,000 €1,000
     
EQUITY    
Share capital 55,920 3
Share premium account 55,922  
Profit from previous financial years 77,695 259
Profit for the financial year 123,163 196
TOTAL SHAREHOLDERS' EQUITY 312,700 458
     
ACCUMULATED APPROPRIATIONS 448,897  
     
PROVISIONS FOR LIABILITIES AND CHARGES 1,474  
     
LIABILITIES    
Non-current liabilities    
Bonds 691,237  
Loans from financial institutions 129,541  
  820,778  
Current liabilities    
Bonds 107,308  
Loans from financial institutions 22,474  
Trade payables 25,308  
Liabilities to Group companies 1,158 5,445
Liabilities to associated companies 3,376  
Other liabilities 162,053 172
Accruals 32,006 266
  353,682 5,883
TOTAL LIABILITIES 1,174,459 5,883
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 1,937,530 6,340
Other non-current assets included in the separated balance sheet for grid operations
SEPARATED BALANCE SHEET TRANSMISSION SYSTEM OPERATION
ASSETS 31 Dec 2017
  €1,000
Intangible assets:  
Other intangible assets 8,016
  8,016
Tangible assets  
Land and water areas 15,732
Buildings and structures 4,258
Machinery and equipment 9,557
Transmission lines 1,140
Other property, plant and equipment 118
Prepayments and purchases in progress 83,656
  114,462
   
TOTAL NON-CURRENT ASSETS 122,477
   

Congestion income in grid operations

The congestion income received by a grid owner must be used for the purposes stated in EC Regulation 714/2009, Article 16, Paragraph 6: guaranteeing the actual availability of the allocated capacity, and maintaining or increasing interconnection capacities through network investments. As a consequence of the change in the regulation governing Fingrid’s grid pricing, the company will include the congestion income received after 1 January 2016 as accruals in the item other liabilities in the balance sheet. Of the accruals, congestion income will be recognised in the income statement as other operating income when their corresponding costs, as defined in the regulation, accrue as annual expenses in the income statement. Alternatively, they are entered in the balance sheet against investments, as defined by regulation, to lower the acquisition cost of property, plant and equipment, which lowers the depreciation of the property, plant and equipment in question. The congestion income received before 1 January 2016 was recognised in turnover. The congestion income from 2017 was used entirely for the Hirvisuo–Pyhänselkä grid investment, and the congestion income from 2016 was used for improving and maintaining the cross-border transmission connections, and in part also for the Hirvisuo–Pyhänselkä grid investment. The Hirvisuo–Pyhänselkä grid investment supports the cross-border transmission from northern Sweden to Finland.

Congestion income, €1,000 2017 2016
Congestion income on 1 Jan    
Accumulated congestion income 25,752 39,863
Expenses matching congestion income   -6,325
Investments matching congestion income -25,752 -33,538
Congestion income on 31 Dec    
     

Countertrade

In terms of the costs arising from countertrade used to safeguard system security in grid operations, congestion income may be used to offset countertrade costs arising from cross-border transmission connections.

Counter trade, €1,000 2017 2016
Counter-trade between Finland and Sweden 366 2,531
Counter-trade between Finland and Estonia 96 87
Counter-trade between Finland's internal connections 1,295 1,242
Total counter-trade 1,756 3,861
36. EMISSION RIGHTS
Fingrid has not been granted free-of-charge emission rights for the emissions trade period 2013–2020.
The use of emission rights had no impact on the financial result in 2016.
  2017 2016
Total CO2 emissions tCO2 5,817 10,335