Result first half 2019

Statnett’s interim financial statements for 2019 have been approved by the Board. The interim report is highlighting the significant investment level and the extensive construction projects ongoing in Statnett. The investments will ensure the necessary upgrade of the Norwegian transmission grid, secure power supply as well as facilitating for further electrification of Norway.

Solid financial performance in the first half 2019

The Statnett Group achieved an underlying profit after tax of NOK 1 194 million (NOK 1 063 million) during the first half of 2019. The increase in the underlying result is mainly attributable to higher permitted revenue in 2019 on the back of higher activities and asset base in the Group.

Statnett's operating revenues predominantly 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 4 276 million for the first half of 2018 to NOK 4 543 million for the first half of 2019. In the first half of 2019, 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 53 million for the first half of 2019 (lower revenue of NOK 36 million for the first half of 2018). Remaining accumulated higher revenue including interest was NOK 6 million at the end of the first half of 2019. Higher/lower revenues are not recognized in the balance sheet.

Consolidated reported profit after tax for the period came in at NOK 1 152 million (NOK 1 033 million). The increase in the reported profit was driven by higher tariff income, which was partly offset by higher system operating costs and an increase in salary and personnel costs as a result of higher Group activities.

The consolidated operating revenue ended at NOK 4 764 million (NOK 4 472 million) in the first half of 2019. The increase in operating revenue is primarily driven by an increase in fixed tariff components as a result of a change in the tariff rate for retail customers following a rise in Statnett’s permitted income. This was partly offset by reduced tariff income from energy components due to lower marginal loss rates from higher imports and lower production. Congestion revenues were lower than the same period last year due to lower price differences and periods of reduced capacities.

The Groups operating expenses came in at NOK 3 036 million (NOK 2 913 million) during the first half of 2019. The increase is primarily driven by an increase in depreciation following the growth in asset base. Other operational costs declined compared with same period last year, primarily driven by positive results from the efficiency program.

Wet and mild first six months in 2019

Statnett considered the power situation to be normal throughout the first six months of 2019. At the beinning of the year, the hydrological balance was in deficit by 17 TWh. Precipitation above normal levels during the period, strengthened the hydrological balance, which ended at a deficit of 6 TWh at the end of the period.

The operational situation was satisfactory throughout the period with stable system -and infrastructure operation. At the same time there has been a number of planned operational outages, including the Western Corridor and Snilldal – Surna projects.

Continued high investment levels and extensive construction projects

In 2018 Statnett recorded the highest investment level in the Group's history. The high activity level continues into 2019 and Statnett recorded investments of NOK 4.3 billion during the first half of 2019 and the expectations is to end at NOK 11 billion at year end 2019.

The Western Corridor project commissioned several power lines and further strengthened security of supply in the region. The new 420 kV Snilldal – Surna power line has been completed. The power line is part of the Namsos – Surna project, which will facilitate Europe’s largest onshore wind farm. Balsfjord – Skaidi is more than 60 per cent complete. NordLink is entering its final phase with the subsea cable expected to be completed in the third quarter 2019. The cable is due to enter test operation at the end of 2020. North Sea Link (NSL) has entered the second phase of cable laying and construction of the convertor stations in Kvilldal and Blyth (UK) is ongoing.

The power industry's common data hub (Elhub) for gathering meter data from end consumers was commissioned in February. This is an important step towards complete digitisation of the power industry.

In June both Statnett and Svenska kraftnät approved the investment decision for a new Nordic balancing model (NBM). The new system is required to cater for a power system increasingly characterised by less adjustable electricity production and expanding transfer capacity between the Nordic region and adjoining areas.

Statnett has also started a collaboration with Cognite AS, as part of the Group's focus on digitization and streamlining of core processes.

Sickness absence for the first half of 2019 was 2.8 per cent – a significant improvement compared with 2018

The Group has a vision of zero accidents and has set itself the goal of becoming a leading transmission system operator (TSO) in HSE in Europe. In the first half of 2019, HSE work at Statnett focused on implementing measures from previous strategic initiatives. At strategic level, work has been performed to evaluate the initiatives and prepare an ongoing HSE strategy for the company based on experiences from recent years’ programmes.

The Group’s overall 12-month rolling sickness absence rate for the first half of 2019 closed on 2.8 per cent (3.4 per cent), which is considered compared with other comparable businesses.

Outlook

Statnett’s long-term strategy is to construct a smarter grid, which facilitates increased renewable power production, new power-intensive business activities and electrification in order to reduce CO2 emissions. Developments over the last year have confirmed the appropriateness and importance of this strategy. Statnett is seeing clear signs of a more ambitious climate policy in both Norway and the rest of Europe. This will reinforce the need for a stronger and smarter grid.

Statnett is currently in a phase of historically high investments. The purpose of the investments has primarily been to expand and increase the capacity of the transmission grid and characterized by a large number of so-called megaprojects. Extensive digital projects within market-, system- and asset operations has also been successfully commissioned. After 2021, the scope of investment will be more focused on preparing for increased power production and consumption, as well as renewal- and reinvestment projects.

One of Statnetts main strategic ambitions is to maintain the position as one of the 25 percent most cost efficient TSOs in Europe. Through the 15 per cent programme, Statnett improved its efficiency with 15 per cent for the period 2013-2018.The company is currently establishing a new programme to generate further efficiency gains in the period leading up to 2022.