Energia
Fingrid Group – Management's Review 1.1.−31.3.2024
STOCK EXCHANGE RELEASE 25 APRIL 2024 AT 13.30 EET
FINGRID GROUP – MANAGEMENT'S REVIEW 1.1.−31.3.2024
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–March 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.
Key figures
Review by the President & CEO: Period of bitter cold underscores need to discuss demands of evolving power system
“2024 began with bitter cold weather that raised electricity consumption to its highest level for the winter of 2023–2024. The hourly average load rose to its peak of 14,993 megawatt on 3 January 2024. In the same week, the price of electricity also rose to a high level when the peak hourly price surged on 5 January 2024 to close to EUR 1,900 per megawatt hour and the average price for electricity for the day was EUR 890. Fluctuations in the power system and the price of electricity were large. Despite the challenging circumstances, there was enough electricity and the significant flexibility in electricity consumption contributed to ensuring an adequate supply.
The prolonged period of below-zero weather made the adequacy of electricity generation and possible means for ensuring it a hot topic. In addition to rising electricity consumption, the power system was tested by disturbances in the availability of individual electricity generation facilities. Fingrid highlighted the need to quickly launch the planning and preparation of a well-defined and proportionate capacity mechanism or other arrangement supporting the adequacy of electricity supply.
Fingrid continued to implement the sizeable investment programme revealed last year and made new investment decisions based on customer needs to enable the connection of production and consumption and to maintain high system security. One major new investment that was decided was the construction of a 210-kilometre-long, 400-kilovolt transmission line from Rovaniemi to Vaala. The connection will increase transmission capacity from the north to the south.
Fingrid updated the electricity production and consumption forecasts used for planning the main grid. In the big picture, forecasts remain intact and we are prepared for significant growth in both production and consumption by 2030. The number of new grid connection enquiries that Fingrid receives from electricity producers and electricity-intensive industries has continued to grow. The enquiries, which mostly concern electricity-intensive industrial and electric heating projects, come to more than 25 gigawatts, while the enquiries number of wind and solar power projects equal approximately 350 gigawatts. In addition, the number of projects related to grid energy storage has increased rapidly to roughly 8 gigawatts. Naturally, there are uncertainties with regard to the schedules and implementation of the projects.
The continued efforts to improve corporate culture were recognised when Fingrid placed second in the list of Finland's Most Inspiring Workplaces in the mid-sized companies category. This year, the goal of Fingrid's entire personnel is to build an even more unified safety culture through an occupational safety promise made by each team and unit.
After the publication of the company's reasonable return regulatory model , which changed at the start of 2024, Fitch Ratings confirmed Fingrid's long-term company rating as 'A+' and changed the rating's outlook from stable to negative. S&P Global Ratings reduced Fingrid's long-term and short-term credit ratings to “A+/A-1” from “AA-/A-1+”. The outlook for the ratings is stable. Carrying out the sizeable investment programme requires a level of financing that matches the needs of the programme. Fingrid's Green Finance Framework and green commercial paper programme allow the company to implement its debt financing entirely by means of green financing. In March, the company issued a EUR 500 million green bond.”
Main business events
Legal proceedings and proceedings by authorities
On 14 September 2022, the EU Agency for the Cooperation of Energy Regulators (ACER) 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.
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 has appealed 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 the Energy Authority's decision on the terms and conditions of balance service at the Market Court. 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 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 at the Market Court. 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 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 at the Market Court. 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 states in its decision on 11 January 2024 that Fingrid fulfilled its development, connection and transmission obligations in accordance with the Electricity Market Act. The Energy Authority also found the 1,300 MW power limit specified in Fingrid's connection terms 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 grid load limitation falls under Fingrid's responsibility based on a transmission system operator's special protection system 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.
HiQ Finland Oy (name changed on 6 February 2024 to Frends Technology Oy) presented a claim for a revised decision and filed an appeal with the Market Court on Fingrid's procurement decision related to the procurement of the user license for an integration platform on 6 February 2024. On 16 February 2024, Fingrid revoked its procurement decision and reported on 19 February 2024 to the Market Court that the procurement decision had been revoked. Following the revoking of the procurement decision, the Market Court will decide on the claim for legal costs presented by HiQ Finland Oy. Fingrid considers the claim for legal costs to be excessive.
Events after the review period
In line with the decision given by the Energy Authority on 11 January 2024, Fingrid initiated on 4 April 2024 a hearing on the terms of Olkiluoto 3's grid load limitation and the determination principles for fees linked to the grid load limitation.
Fingrid has released a new contract notice on the procurement of user licenses for an integration platform on 5 April 2024.
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
2321 Rosecrans Avenue. Suite 2200
90245 El Segundo Stati Uniti