The reduction in underlying profit is mainly due to lower pension costs in the first half of 2015 as a result of a non-recurring effect caused by the transition from defined benefit to a defined contribution pension scheme, somewhat offset by higher permitted revenue in 2016, primarily as a result of an increased asset base.
The underlying result is based on the regulated permitted revenue, whereas the recorded result will depend on stipulated tariffs and congestion revenues. The difference, referred to as higher or lower revenue, will level out over time through adjustment of tariffs, ensuring that Statnett's accumulated revenue corresponds with the regulated permitted revenue. The recorded profit after tax for the Group was NOK 463 million in the first half of 2016 (NOK 607 million).
The Group's operating revenues for the first half of 2016 amounted to NOK 3 225 million, compared to NOK 2 874 million for the same period in 2015. The increase in operating revenues is mainly due to increased tariff revenues and higher congestion revenues. Tariff revenues from fixed tariff components have increased for consumers following an increase in Statnett's permitted revenue, whereas tariff revenues from energy components have increased due to higher energy prices. Congestion revenues have grown as a result of price differences within Norway as well as high prices in Sweden in the second quarter due to modification of nuclear power plants. The increase is somewhat offset by low price differences against the Netherlands.
The Group's operating costs totaled NOK 2 423 million in the first half of 2016 (NOK 1 864 million). The increase in the first half of 2016 was caused by a one-off reduction in personnel costs in 2015 following a change from a defined benefit pension plan to a defined contribution pension plan, as well as higher costs in the first half of 2016 related to system services, transmission losses, depreciation and other operating costs.
The Statnett Group invested NOK 3 123 million in the first half of 2016, compared to NOK 2 644 million in the first half of 2015. The Statnett Group expects to invest a total of NOK 8 billion in 2016.
Statnett's higher/lower revenue
Statnett's operating revenues mainly derive from grid operations regulated by the Norwegian Water Resources and Energy Directorate (NVE), which stipulates a cap (permitted revenue) for Statnett's revenues. Permitted revenue increased from NOK
3 130 million for the first half of 2015 to NOK 3 448 million for the first half of 2015. In the first half of 2016, revenues from grid operations were lower than the permitted revenue, resulting in a lower revenue for the period. Statnett's lower revenue amounted to NOK 314 million for the first half of 2016 (lower revenue of NOK 329 million for the first half of 2015). Remaining accumulated higher revenue including interest was NOK 1 035 million at the end of the first half of 2016. The reduction is in line with the plans to reduce accumulated higher revenue over several years.
Statnett is currently in a period with a historically high investment level, and the upcoming five-year period is expected to be the most extensive development of the next generation power system leading up to 2030. This includes initiated major investments such as international interconnectors to Germany and the UK, which are important for development and integration of the power system in Northern Europe, the upgrade of the Western Corridor, a new power line northwards from Ofoten, and the wind power-driven development between Namsos and Surna.
The development of new grid facilities will contribute to increased capacity in the power system, but the magnitude of the scope also means that some important reinvestments in existing plants will have to be postponed. To help strengthen HSE and the capacity to complete Statnett’s development projects after two fatal accidents in the first half of 2016, project portfolio initiatives are considered which include further reduction of the annual reinvestment scope as well as postponement of some new projects. Furthermore, Statnett has suspended for one year the ongoing work to take over the remaining part of the main grid (the EU third Energy Market Package).
Statnett is focusing on maintaining its position as one of the most cost-efficient TSOs in Europe. In 2013, the enterprise established an objective to increase efficiency by 15 per cent-by the end of 2018. The results so far have been good.
Transition from external financial reporting quarterly to twice a year
From 2016, Statnett will conduct external financial reporting twice a year, instead of quarterly. The decision was made based on an assessment of the nature of the enterprise, which changes very little from one quarter to the next, and that the financial information to the market will be reported satisfactorily. The change is part of Statnett's efficiency improvement programme.
Chief Financial Officer
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