FINGRID GROUP – MANAGEMENT’S REVIEW 1 JANUARY–30 SEPTEMBER 2024
FINGRID GROUP – MANAGEMENT’S REVIEW 1 JANUARY–30
SEPTEMBER 2024
Fingrid follows a six-month reporting period in compliance with
the Securities Markets Act and publishes Management’s Reviews for
the first three and nine months of the year; the Management’s
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-September 2024 and the
corresponding period of 2023, 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 transmission reliability rate of Fingrid’s grid was high,
at 99.99930 (99.99996) per cent. Electricity consumption in
Finland grew to 60.5 (56.7) terawatt hours in January–September.
The electricity consumed in Finland was clean, with an emission
factor of 31 (35) gCO2/kWh.
- The company’s investments were higher than in the previous
year. The company estimates that the gross capital expenditure in
2024–2027 will amount to roughly EUR 2 billion, EUR 747 million of
which is committed.
- The need for new connections to the main grid for electricity
is high, and the number of connection enquiries continued to grow.
1139 (1126) MW in renewable production capacity was connected to
the main grid.
- Turnover for January–September was significantly higher than in
the previous year. The balance service’s share of the company’s
turnover was 54 (58) per cent. Grid investments and expansion of
the operations as well as the weather-dependency of the power
system have increased the company’s costs.
- Grid service fees were waved in January, February and June.
This and growing costs were compensated by recognising EUR 351.4
(259.6) million in congestion income in the company’s result.
- Operating profit, excluding the change in the fair value of
derivatives linked to operational activities, was EUR 167.8 (112.7)
million. The allowed profit rose due to the higher interest rate
level and extensive investment programme. The aim of the company is
to achieve the allowed return. Profit before taxes was EUR 139.1
(-101.2) million. The company’s financial position remained
strong.
Key figures
€M |
1−9/24 |
1−9/23 |
change % |
1−12/23 |
Turnover |
961.6 |
806.1 |
19.3 |
1 193.2 |
Operating
result* |
167.8 |
112.7 |
48.8 |
186.1 |
Earnings before
taxes * |
161.4 |
111.8 |
44.3 |
186.0 |
Result for the
period |
111.4 |
-80.8 |
237.9 |
1.2 |
Net cash flow
from operations |
111.2 |
196.7 |
-43.5 |
219.3 |
Accumulated
congestion income |
209.7 |
221.1 |
-5.2 |
317.0 |
Capital
expenditure, gross |
345.2 |
208.4 |
65.6 |
322.0 |
Interest-bearing
net debt |
898.6 |
459.6 |
95.5 |
535.2 |
* Excluding the change in the fair value of derivatives |
Review by the President & CEO: Strong development of
the grid continues – ensuring a sufficient electricity supply calls
for joint measures.
“Finland continues to advance at the forefront of the energy
transition in Europe. Investments particularly in clean energy
generation, the electrification of heating and data centres are
progressing rapidly. Enquiries concerning connecting electricity
generation and consumption to the grid have continued to grow, and
at the same time, 1139 MW of new production has been connected to
the grid. Electricity consumption increased 8 percent in the first
nine months of 2024 compared to the same period last year.
During the review period, Finland had the lowest average monthly
area price of electricity among European countries in July and
August. In September, periods of power plant maintenance and
faults, limited cross-border transmission capacity due to grid
maintenance and construction work and low wind power production
caused an increase in the price level and price spikes.
There is still a substantial need to reinforce the main grid.
The longer-term prospects for the development of electricity
production and consumption are unchanged. Some consumption projects
have progressed slower than expected. This has also negatively
affected the forecasted growth of wind and solar power.
Strong development of the electricity grid continued, and
capital expenditure costs were higher than in the previous year.
The Aurora Line transmission link project between northern Finland
and Sweden is progressing, and Fingrid published a market
announcement concerning the new cross-border connection, which will
be commissioned on 1 January 2026. Alongside the investments, we
aim to further increase the main grid’s utilisation rate through
various solutions. We have presented, for instance, a revision of
the grid’s connection pricing and the introduction of flexible
connections.
Fingrid has worked in close co-operation with several
stakeholders to prepare a proposal on the development of eastern
Finland’s electricity grid. There is room for new electricity
production and consumption projects in eastern Finland’s grid, and
we are also prepared to develop the main grid in co-operation with
regional electricity distribution network companies and operators
as customer needs become more concrete.
Fingrid published a forecast of the adequacy of electricity in
Finland in winter 2024–2025. The situation appears stable, assuming
that major production plant failures are avoided and cross-border
connections function normally. In the event of a disturbance, there
is little extra flexibility available. Fingrid therefore considers
the working group appointed by the Ministry of Economic Affairs and
Employment to explore ways to promote security of supply and
flexibility of the electricity market to be important. Finland
needs a cost-effective, targeted capacity mechanism to support the
adequacy of electricity and to mitigate possible extreme spikes in
electricity prices.
At the end of the review period, we announced that we will raise
grid service fees at the start of 2025. The reason for the increase
is investments in the main grid to meet customers’ needs and the
growing costs of managing the electricity system.”
Main business events
- The total electricity transmission in Finland in
January–September was 60.5 (56.7) terawatt hours. During this
period, the electricity Fingrid transmitted to its customers
amounted to 48.3 (44.3) terawatt hours, which represents 79.9
(78.1) per cent of Finland’s total consumption. Fingrid transmitted
in its grid a total of 83.5 (83.5) per cent of the total
electricity transmission in Finland.
- By the end of September this year, 1139 (1126) MW of renewable
production capacity had been connected to the main grid, 1048 (805)
MW of which was wind power and 91 (321) MW solar power. The total
capacity of the electricity production connection enquiries during
the review period grew. In total, Fingrid has received
approximately 400 GW of requests to connect to the main grid for
electricity production, approximately 60 GW for electricity
consumption, and approximately 20 GW for electricity storage.
- Fingrid announced that it will raise grid service fees by an
average of 8% as of 1 January 2025. The increase is necessitated by
investments in the main grid and the growing costs of managing the
electricity system.
- During the review period, system security remained at a high
level, despite brief disturbances, more connections and extensive
construction work. The transmission reliability rate decreased
slightly from the previous peak year due to a few isolated faults,
such as the fall of an old transmission line pylon in Loimaa, a
busbar fault at a substation in Joensuu, and a fault in the
transmission line between Hämeenlinna and Kangasala. Cross-border
transmission connections have been constricted, as the EstLink 2
connection was out of service from 26 January until 4 September
2024 due to a failure, and the capacity of the connection between
Finland and northern Sweden has been limited due to grid
maintenance and construction in both Finland and Sweden.
- The occupational safety accident frequency over a 12-month
period was 7 (7), while the target for 2024 was set at below 5.
Fingrid aims for zero accidents in its operations.
- As an operator critical to security of supply, Fingrid at the
beginning of September participated in the Finnish Defence Forces’
local defence exercise, which focused on protecting critical
infrastructure from a cyber-security perspective. Such exercises
are an important part of the company’s preparedness and a means for
testing out guidelines and procedures in practice.
- Fingrid published a forecast of the adequacy of electricity in
Finland in winter 2024–2025. The situation appears stable, assuming
that major production plant failures are avoided and cross-border
connections function normally. In the event of a disturbance, there
is little extra flexibility available. If production and imports
are not enough to cover consumption, there is a risk of a power
shortage. Fingrid therefore considers the working group appointed
by the Ministry of Economic Affairs and Employment to explore ways
to promote security of supply and flexibility of the electricity
market to be important. Finland needs a cost-effective, targeted
capacity mechanism to support the adequacy of electricity and to
mitigate possible extreme spikes in electricity prices.
- Fingrid increased its revolving credit facility agreement tied
to the company’s sustainability goals from EUR 300 million to EUR
500 million. The increase will strengthen Fingrid’s long-term
liquidity as operations expand and the weather dependence of
electricity production and the investment needs of the main grid
grow.
Legal proceedings and proceedings by
authorities
The EU Agency for the Cooperation of Energy Regulators (ACER),
on 14 September 2022, made a decision on long-term price risk
hedging opportunities between Finland and Sweden. In its decision,
ACER requested that the Finnish and Swedish TSOs ensure the
availability of other long-term cross-zonal hedging products and
develop the necessary arrangements for providing hedging products.
Fingrid filed an appeal against the decision to ACER’s Board of
Appeal on 14 November 2022. The Board of Appeal issued its
resolution on the appeal on 24 October 2023, where it confirmed
ACER’s original decision. Fingrid submitted to the Energy Authority
on 22 December 2023 its proposal for improving the price risk
hedging opportunities between Finland and Sweden. The Energy
Authority approved Fingrid’s proposal on 18 June 2024. The Energy
Authority has asked Fingrid to provide further clarification
concerning the implementation of the arrangement by 18 December
2024 in order to support the operations of the electricity
wholesale markets. The further clarification does not entail a
separate approval process.
Fingrid received an expropriation permit for the widening of the
Torna–Lautakari right-of-way for the neutral line on 27 October
2022. In the kick-off meeting for the expropriation procedure on 1
December 2022, the expropriation committee decided that the
expropriating party is obligated to assume responsibility for the
tree stands within the scope of the rights and restrictions set in
the expropriation permit, unless otherwise agreed. The final
meeting of the expropriation procedure was held on 16 November
2023. Fingrid appealed against the decision concerning the
Torna–Lautakari tree stands’ expropriation to the Southwest Finland
District Court’s Land Rights Court on 22 December 2023.
On 20 December 2023, Fingrid Datahub Oy filed a proposal with
the Energy Authority to change the model concerning Fingrid Datahub
Oy’s financial regulation for the regulatory period 2024–2027 and
simultaneously proposed that the regulatory model be developed
further.
On 2 January 2024, Fingrid appealed to the Market Court against
the Energy Authority’s decision on the terms and conditions of
balance service. The appeal mainly concerns the collateral model
for balance responsible parties presented in the decision. In
November 2023, the Energy Authority issued a decision on the terms
and conditions for balance responsible parties, which include the
principles for how collateral requirements are determined. The
Energy Authority’s decision includes major changes to the current
collateral terms and conditions and sets apart Finland’s collateral
model from that used in other Nordic countries. The most
significant changes to the current collateral model include a major
reduction in the required collaterals, elimination of the
requirement to provide an adequate additional collateral and a
possible collateral ceiling.
On 29 January 2024, Fingrid appealed to the Market Court against
the Energy Authority’s decision on the methods concerning the
specification of the profit for the electricity transmission grid
operations for the sixth regulatory period 1 January 2024–31
December 2027 and seventh regulatory period 1 January 2028–31
December 2031. According to Fingrid’s assessment, the decision on
the regulatory methods is a significant weakening of the
electricity transmission grid operations’ reasonable profit
regulatory method that expired at year-end. In Fingrid’s view, the
assessment of impacts in preparing the regulatory model decision
has been deficient and there are still issues open to
interpretation related to the presented decision. Fingrid’s goal is
a solution that would also enable the future development of the
grid, allowing the hundreds of billions in green transition
investments in Finland to be implemented as planned.
On 15 February 2024, Fingrid appealed to the Market Court
against the decision given by the Energy Authority on 11 January
2024 on the scope of the national transmission system operator’s
systems responsibility regarding the grid connection of the OL3
nuclear power plant. Teollisuuden Voima Oyj (“TVO”) lodged a
request for an investigation with the Energy Authority on 25 May
2022 related to the claims by TVO that Fingrid has neglected its
obligation to develop the main grid as stated in the Finnish
Electricity Market Act and/or other applicable legislation, and
that, as a result, it has placed unlawful restrictions on
connecting the Olkiluoto 3 nuclear power plant to the grid, and
that Fingrid is in breach of its administrative obligations linked
to carrying out its public administrative task. The Energy
Authority stated in its decision of 11 January 2024 that Fingrid
fulfilled its development, connection and transmission obligations
in accordance with the Electricity Market Act. The Energy Authority
also deemed the 1300 MW power limit specified in Fingrid’s
connection terms to be justified and did not find Fingrid to have
restricted Olkiluoto 3’s access to the grid. In its decision, the
Energy Authority sees, however, that Olkiluoto 3’s system
protection scheme falls under Fingrid’s responsibility based on a
transmission system operator’s system protection scheme as intended
by legislation and that Fingrid is in breach of Article 9 of the
Commission Regulation (EU) 2017/1485 establishing a guideline on
electricity transmission system operation and its obligation in
line with Section 10, Subsection 1 of the Act on the Control of the
Electricity and Natural Gas Market (2013/590) to bring the
determination principles for fees it applies before the Energy
Authority for approval prior to their implementation. On 30 April
2024, Fingrid submitted, as per its obligation to the Energy
Authority, the determination principles for fees to said authority.
The processing of the determination principles by the Energy
Authority is pending. In Fingrid’s view, the system protection
scheme to be implemented exclusively for OL 3 that enables the use
of OL 3 above the 1300 MW power limit should not be included in the
system responsibility assigned to Fingrid. Fingrid also considers
that, on the aforementioned grounds, the costs arising from system
protection scheme are TVO’s responsibility, and should not be
compensated by Finland’s electricity consumers and covered by grid
service fees.
The company has not changed its earnings guidance from
what is stated in the Financial Statements Bulletin of 27 February
2024.
Further information:
Asta Sihvonen-Punkka, President & CEO
+358 30 395 5235 or +358 50 573 9053
Jukka Metsälä, Chief Financial Officer
+358 30 395 5213 or +358 40 563 3756
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
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