Fingrid Group – Management's Review 1.1.−31.3.2022

    Fingrid Group – Management's Review 1.1.−31.3.2022 

Fingrid OyjStock Exchange Release 22 April 2022 at 10.30 EET

FINGRID GROUP – MANAGEMENT’S REVIEW 1.1.−31.3.2022

Fingrid follows a six-month reporting period as referred to in the Securities Markets Act and publishes Management Reviews for the first three and nine months of the year; the Management Reviews contain key information illustrating the company’s financial and other development.

The information presented in the Management’s Review relates to Fingrid Group’s performance in January-March 2022 and the corresponding period of 2021, unless otherwise indicated. The figures presented here have been drawn up in accordance with the International Financial Reporting Standards (IFRS). The Management’s Review is not an interim report in accordance with the IAS 34 standard. The figures are unaudited.

• The temperatures in January-March were warmer than the long-term averages, which lowered electricity consumption. Grid transmission turnover remained at the previous year’s level, however, as the company raised the grid transmission fees by two per cent at the start of the year. Due to the increase in market-based costs, the company’s result decreased compared to the corresponding period of the previous year.
• Turnover during the period under review amounted to EUR 331.7 (277.9) million and operating profit, excluding the change in the fair value of derivatives, amounted to EUR 61.9 (85.6) million.
• The company’s liquidity has remained strong.

Review by the President & CEO: “Russia’s attack on Ukraine rearranged Europe’s energy markets”

Russia’s attack on Ukraine will, in time, mean the end of energy co-operation between Russia and the EU countries. Fingrid is, for its part, prepared for that the electricity imports from Russia will end. Finland is not dependent on electricity imported from Russia. The end of imports will increase demand for domestic electricity production, increase the need to import more electricity from Sweden and may decrease electricity exports to Estonia. As Fingrid sees it, the end of imports will stop sales related to cross-border transmission and increase the cost of acquiring electricity system reserves to some extent, as reserves can no longer be purchased from Russia.

One immediate impact of the Russian invasion has already been seen in the spike in already high gas prices. This has also raised electricity prices throughout Europe. In Finland, the price of electricity has remained somewhat lower than more southern areas of Europe. In the backdrop is low-fossil electricity production in Europe’s northernmost countries. The high price of electricity shows in Fingrid’s finances as higher purchase and sales prices for imbalance power. In addition, the divergence of area prices in Finland and Sweden is reflected, on one hand, as increased congestion income and, on the other hand, as balance surplus costs as Finland’s balance surplus is transmitted from Finland to Sweden through northern transmission links. Loss power costs have also grown, despite the company’s efforts to hedge against price fluctuations as effectively as possible. As a consequence of the mild winter, grid transmission turnover was lower than predicted during the review period. In the exceptional geopolitical situation, the price of metals and fuels has been high, which also affects Fingrid’s operations. In construction projects, we have prepared for possible supply chain problems.

In a challenging situation we have, however, been able to continue developing the power system of the future according to plan. We have received a lot of positive feedback on our work. Fingrid received the Hyvä YVA (Good EIA) award for the third time, this year for the environmental impact assessment related to the Järvilinja (Lake Line) power line project. Fingrid also won the Finnish Windpower Association’s Tuulivoimateko 2021 competition. The competition jury justified its choice by saying that Fingrid is an extremely important part of the development of wind power production in Finland.

Fingrid’s contribution to Finnish society is now even more important, both in our daily work securing the nation’s electricity supply and in developing the infrastructure needed for a carbon-neutral Finland, which at the same time will help Finland permanently break away from its dependency on Russia.

Key figures

€M	1−3/22	1−3/21	change %	1−12/21
Turnover	331.7	277.9	19.4	1,090.9
Operating profit*	61.9	85.6	-27.7	148.6
Profit before taxes	63.1	70.7	-10.7	187.6
Profit for the period	50.6	56.6	-10.6	150.1
Capital expenditure, gross	45.6	36.3	25.6	213.4
Net cash flow from operations**	245.3	112.3	118.3	251.4
Interest-bearing net debt	696.3	940.4	-26.0	938.5
Balance sheet total	2,749.6	2,274.6	20.9	2,559.5
Equity ratio %	25.4	30.3		25.3
* Operating profit excluding the change in the fair value of derivatives
** Net cash flow from operations, after capital expenditure

• Operating profit, excluding the change in the fair value of derivatives linked to operational activities, amounted to EUR 61.9 (85.6) million. The decrease in operating profit is a consequence of the increase in imbalance and reserve costs caused by the exceptional electricity market situation at the start of the year, and of the increased loss power procurement costs.
• Congestion income from cross-border transmission connections amounted to EUR 166.6 (25.6) million. This income will be used in the next few years mainly for investments aimed at improving the transmission connections in order to prevent congestion.
• Net cash flow from operations has increased, mainly as a result of the growth in congestion income.

Main business events

• During January-March, the system security of Fingrid’s main grid was at a very high level, and there were no significant grid disturbances affecting the electricity market. The main grid’s disturbance-clearing readiness was raised three times during the review period due to poor weather.

• The weather was mild in the first few months of the year. Between January and March, electricity consumption in Finland totalled 23.1 (25.2) terawatt hours. In the same period, Fingrid transmitted a total of 20.0 (19.4) terawatt hours in its grid, representing 78.2 (72.3) per cent of the total electricity transmission in Finland. During this period, the electricity Fingrid transmitted to its customers amounted to 17.5 (17.8) terawatt hours, which represents 75.7 (70.5) per cent of Finland’s total consumption.
  • Peak electricity consumption during the 2021–2022 winter season was reached already in December 2021, when consumption amounted to 14,175 megawatts. It was met with 10,169 megawatts of domestic production and 4,006 megawatts of imports. Finland’s area price of electricity on the day-ahead market was €645.83/MWh during the peak consumption hour.
  • The Olkiluoto 3 nuclear power plant was connected to the main grid on 12 March with no problems. The connection allows electricity generated by Olkiluoto 3 to be transferred via the main grid to electricity consumers.
  • In January, the European Union granted funding of EUR 127 million for the Aurora Line transmission link between Finland and Sweden. The granted funding is part of the Connecting Europe Facility funding instrument. Aurora Line, to be completed in 2025, is the most important main grid investment of the decade.
  • Fingrid had 54 substations and approximately 650 kilometres of transmission lines under way. The company made an investment decision concerning the refurbishment of the Salo substation.
  • Fingrid launched a map service for its customers that allows them to see aggregated data on the grid’s connection possibilities in different periods as well as information about public production projects that are under planning or under way. More than 1,000 projects are currently in the planning or implementation phase.
  • On 21 February, Datahub, a centralised information exchange system for the retail market of electricity, was successfully launched. Datahub is managed by Fingrid. The system centralises data from roughly 3.8 million points of electricity consumption and significantly accelerates information exchange in the electricity retail market.
  • Jukka Metsälä, M.Sc. (Tech.), MBA, was appointed on 7 February 2022 as Fingrid’s new CFO and member of the executive management group effective 5 May 2022, and his area of responsibility is the company’s finances and treasury, and business development and strategy. Tuomas Rauhala, D.Sc. (Tech.) was appointed on 24 February 2022 as Senior Vice President of Power System Operations and as a member of the executive management group effective 1 June 2022. Metsälä and Rauhala will report to the company’s President & CEO Jukka Ruusunen.
  • On 30 March 2022, Fingrid Oyj’s Annual General Meeting approved the financial statements for 2021 and decided on the dividend payment. The first instalment of the dividend, totalling EUR 88,691,600.00, was paid on 4 April 2022. Hannu Linna was elected as Chair of the Board of Directors, and Päivi Nerg was re-elected as Deputy Chair. Sanna Syri was re-elected as a Board member. Sami Kurunsaari and Jukka Reijonen were elected as new Board members.

The company has not changed its earnings guidance from what is stated in the Financial Statements Bulletin of 1 March 2022.

Further information:Jukka Ruusunen, President & CEO+358 30 395 5140 or [phone]

Jussi Pohjanpalo, Acting Chief Financial Officer+358 30 395 5176 or [phone]

Fingrid is Finland’s transmission system operator. We secure reliable electricity for our customers and society, and shape the clean, market-oriented power system of the future.

Fingrid delivers. Responsibly. www.fingrid.fi

Fingrid OyjStock Exchange Report 22 April 2022