Finance and treasury

From a financial standpoint, 2018 was an excellent year. The positive earnings development, excellent cost-effectiveness, systematic and moderate investment rate and the predicted slight growth in electricity consumption give us the opportunity to reduce grid transmission fees by an average of eight per cent from the start of 2019, whereas transmission fees in 2018 remained unchanged. According to the company’s own calculations, 2018 resulted in somewhat of a surplus in relation to the result permitted in regulation.

Fingrid is still one of the lowest-priced TSOs in Europe, while the company’s transmission reliability is among the best in the world. The company’s long- and short-term debt management and hedging against financing risks in the international capital markets continued according to plan. The effective use of capital employed is a key success factor for uninterrupted and continuously developing grid operations, and that 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 852.8 (672.0) million. Grid service income increased to EUR 423.2 (412.1) million, as a result of the growth in electricity consumption. Electricity consumption in Finland totalled 87.4 (85.5) terawatt hours during the year. Fingrid transmitted 68.6 (66.2) terawatt hours of electricity in its grid, which represents 75.5 (75.5) per cent of all electricity transmitted in Finland. Imbalance power sales amounted to EUR 348.8 (214.0) million. The increase in imbalance power sales was partly the result of increased balance power prices and partly the result of 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. Cross-border transmission income from the connection between Finland and Russia increased to EUR 35.5 (20.7) million, as a result of increased cross-border transmissions and the higher cross-border 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 increased to EUR 28.2 (25.5) million, which was used for the Hirvisuo–Pyhänselkä grid investment, in line with the regulations. EUR 1.3 million in congestion income was left unused and will be used for investments earmarked for financing with congestion income. Other operating income totalled EUR 10.8 (2.9) million. The increase in other operating income resulted from an EUR 8.0 million increase in the capital gains from the sale of fixed assets.

The Group’s total costs amounted to EUR 659.0 (499.0) million. Imbalance power costs grew from the previous year’s level, to EUR 320.0 (185.7) million, due to the increase in balance power prices and the above-mentioned transfer of imbalance settlement to eSett Oy. Loss power costs amounted to EUR 47.7 (47.5) million. The realised average price of loss power procurement was EUR 37.88 (37.62) per megawatt hour. The cost of reserves to safeguard the grid’s system security increased to EUR 56.7 (51.5) million due to an increase in procurements for the frequency regulating reserve. Depreciation totalled EUR 99.7 (96.9) million. Grid maintenance costs decreased to EUR 21.2 (24.5) million; the change is due to updates to the protection and control scheme for Keminmaa’s series capacitor and to substation access control systems carried out in 2017.Personnel costs amounted to EUR 32.2 (29.4) million, and EUR 3.6 (2.6) million was used for R&D projects.

The company’s credit rating remained high, reflecting its strong overall financial situation and debt service capacity. The Group’s net financial costs in 2018 were EUR 15.2 (22.8) million, including a change of EUR 6.7 million (-8.2) in the fair value of financial derivatives.

Interest-bearing borrowings totalled EUR 1,059.6 (1,082.7) million, of which non-current borrowings accounted for EUR 771.5 (813.4) million and current borrowings for EUR 288.1 (269.3) million.

The company’s liquidity remained good. Financial and cash assets recognised at fair value through profit or loss totalled EUR 85.3 (83.8) million on 31 December 2018. The company additionally has an undrawn revolving credit facility of EUR 300 million to secure liquidity (until 11 December 2022) and EUR 50 million in uncommitted overdraft facilities.

The counterparty risk arising from derivative contracts relating to financing was EUR 14 (8) million. Fingrid’s foreign exchange and commodity price risks were hedged.

Fingrid has credit rating service agreements with S&P Global Ratings (S&P) and Fitch Ratings (Fitch).

  • On 2 November 2018, 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.
  • Fitch’s rating for Fingrid’s unsecured senior debt at the end of the year was ‘AA-’, for the long-term company rating ‘A+’, and ‘F1’ for the short-term company rating, with a stable outlook. The rating received by Fingrid was, at the time of issuing (5 December 2017), 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

2018

2017

2016

Taxes payable                                     
       
 

Income tax

50.42

39.42

25.78

 

Unemployment insurance contributions

0.73

0.74

0.85

 

Social security contributions

0.19

0.22

0.46

 

Real estate tax

0.42

0.42

0.41

 

Electricity tax on auxiliary power

-0.001

0.005

0.02

Taxes payable total

 

51.75

40.80

27.52

Taxes to be collected and remitted

       
 

Value added tax, net remitted

75.05

62.00

50.41

 

Electricity tax (incl. emergency-preparedness contribution)

44.81

35.71

38.47

 

Tax prepayments

7.70

7.23

6.97

Taxes to be remitted total

 

127.56

104.95

95.85

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. Most of the summary’s taxes and charges concern Finland. The Group has had little business operations in Denmark since 2018, as a consequence of which a low amount of income tax has been paid to Denmark and a low amount of tax prepayments on the salaries paid to personnel in Denmark have been remitted. The Group’s operations mainly concern Finland. Payable income taxes reported for 2017 have been restated more accurately.

Key events of 2018

Fingrid wins award for climate friendly bonds