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
The company will pay its income taxes in accordance with the underlying tax rate, with no tax planning
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
Fingrid’s reserve power plants are included in the property, plant and equipment of the transmission system.

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
MANAGEMENT OF BALANCE OPERATION, SEPARATED INCOME STATEMENT	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
Turnover includes EUR 56.7 (9.2) million in sales of imbalance power to balance provider Fingrid Oyj, and Materials and services includes EUR 54.7 (6.5) million euros in purchases by Fingrid Oyj.
*The increase in imbalance power sales and purchases resulted from the transfer of imbalance settlement to eSett Oy, following which the imbalance power sold to cross-border imbalance responsible parties is reported as external turnover and the imbalance power purchased from them is reported as external purchases.

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
SHAREHOLDERS' EQUITY AND LIABILITIES	€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
ASSETS	€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
SHAREHOLDERS' EQUITY AND LIABILITIES	€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