Financial framework conditions
Statnett's reported revenues consist of fixed grid tariffs from the main grid customers as well as congestion revenues. Congestion revenues arise as a result of transmission of power from low-price areas to high-price areas in the Nordic region and between Norway and the Netherlands. Grid tariffs are stipulated prior to each calendar year.
The revenues are adjusted and controlled by the authorities through the Norwegian Water Resources and Energy Directorate (NVE) and an annual permitted revenue is stipulated. The permitted revenue must cover the costs of grid developments and maintenance, and provide a fair return on grid investments. This is based on the assumption that the transmission grid is operated, utilised and developed in an efficient manner.
If the actual revenues diverge from the permitted revenue, higher or lower revenue will occur. In accordance with regulations from the Norwegian Water Resources and Energy Directorate, higher/lower revenue will even out over time through adjustment of future grid tariffs. Consequently, the higher/lower revenue represents temporary amounts in Statnett's accounts.
To better understand Statnett's underlying profit, some key figures are presented corrected for higher/lower revenue.
Revenue and result development
Since 2009, Statnett has had significant higher/lower revenue. This has resulted in major fluctuations in Statnett's recognised operating revenues and operating profit/loss. Revenues and profit or loss adjusted for higher/lower revenue show that underlying activities are much more stable than indicated by the accounting figures, including higher/lower revenue. The increase in underlying revenues and profit from 2013 was mainly due to a change of model for calculation of the NVE interest rate, which yielded higher return on grid capital. Revenues and profit also increased in 2013 and 2014 due to increased grid capital as a result of high investments and a higher number of commissioned facilities in these years.
EBIT adjusted for higher/lower revenue
Higher/lower revenue development
In 2014, Statnett had a lower revenue. This was due to a planned reduction in accumulated higher revenue through a downward adjustment of tariffs, combined with lower than predicted congestion revenues. At the end of 2014, the accumulated higher revenue including interest was NOK 1 790 million.
2010: To cover the lower revenue, grid tariffs were increased in 2010 compared with 2009. Moreover, congestion revenues were higher than assumed for a normal year. In total, this resulted in a higher revenue of NOK 2 187 million.
2011: Due to the accumulated higher revenue at the end of 2010 of NOK 1 554 million, somewhat lower tariffs were stipulated for 2011. Congestion revenues were also higher than expected in 2011, and the higher revenue totalled NOK 1 064 million. Accumulated higher revenue including interest was NOK 2 617 million at the end of 2011.
2012: On the basis of accumulated higher revenue, the tariffs were further reduced in 2012. With higher congestion revenues than assumed, Statnett's higher revenue amounted to NOK 838 million in 2012. Accumulated higher revenue including interest was NOK 3 455 million at the end of 2012.
2013: Due to the accumulated higher revenue at the end of 2012, significantly lower tariffs were stipulated in 2013. This, in addition to lower congestion revenues than assumed and a change associated with the setting of actuarial gains/losses on pensions to zero as of 1 January 2013, contributed to a lower revenue of NOK 1 042 million in 2013. At the end of 2013, the accumulated higher revenue including interest amounted to NOK 2 413 million.
2014: To further reduce the accumulated higher revenue, 2014 tariffs were also kept at a low level. Congestion revenues were somewhat lower than projected and contributed to a reduction in the accumulated higher revenue. In 2014, Statnett had a lower revenue of NOK 623 million. At year-end 2014, the accumulated higher revenue including interest amounted to NOK 1 790 million.
Repayment of higher revenue
Statnett has formulated a price strategy which sets guidelines for stipulation of the annual main grid tariff. In accordance with the guidelines from the Norwegian Water Resources and Energy Directorate (NVE), Statnett emphasises consideration for stable and predictable grid tariffs over time. Consequently, repayment of higher revenue will take place over several years.
The investment level affects revenues and the balance sheet
Completed investments are part of Statnett's basis for regulated revenues, whereas plants under construction are not included. There has been a steady increase in investments since 2009, and in 2013, investments doubled compared with the previous year. Investments in 2014 were on a par with 2013, which confirms that Statnett has reached a new investment level. This is necessary to realise the company’s development plans. Some of the increase in investments is still recognised as plants under construction as it relates to projects that are being developed, and will vary in size over time. Net interest-bearing debt has increased in line with the investment level.
Statnett's equity reported in the financial accounts includes accumulated higher/lower revenue. To show Statnett's real equity, equity is adjusted for accumulated higher/lower revenue after tax. As investments have increased in recent years, the adjusted equity ratio has been reduced. In December 2013, it was decided to increase Statnett's equity by NOK 3 250 million, and in January 2014, Statnett received the new equity. The equity ratio adjusted for accumulated higher/lower revenue after tax was 28 percent at year-end 2014.