Business Review 2020
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BUSINESS REVIEW REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS GOVERNANCE REMUNERATION REPORT CORPORATE RESPONSIBILITY ANNUAL REPORT 2020 ANNUAL REPORT 2020 BUSINESS REVIEW 2020 Review by the President & CEO Operating environment and business model Strategy Fingrid’s reputation, customers and other stakeholders Business Review Finance and treasury Business operations Personnel Internal control and risk management Research and development Glossary 1 BUSINESS REVIEW REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS GOVERNANCE REMUNERATION REPORT CORPORATE RESPONSIBILITY 6. FINANCE AND TREASURY 17 Financial result for 2020 19 ANNUAL REPORT 2020 CONTENTS 7. BUSINESS OPERATIONS 22 Main grid 22 Power system 28 Electricity market 33 8. PERSONNEL 39 ”Fingrid is 9. INTERNAL CONTROL AND responsible for RISK MANAGEMENT 41 BUSINESS REVIEW 2020 Risk management at Fingrid 41 the functioning Risk management governance 41 Proactive risk management 42 Review by the President & CEO of Finland’s Continuity management 43 1. FINGRID 2020 3 Contingency planning 45 Operating environment Corporate safety & security 45 and business model power system, 2. REVIEW BY THE PRESIDENT & CEO 4 Risk controls 45 Strategy which makes it 3. OPERATING ENVIRONMENT 10. RESEARCH AND DEVELOPMENT 46 Fingrid’s reputation, customers AND BUSINESS MODEL 5 fundamentally a 11. GLOSSARY 49 and other stakeholders Climate change 5 Security of supply and Finance and treasury risk management electricity dependency 5 Business operations company.” Globalisation and responsibility 5 Digitalisation 6 Personnel REVIEW BY THE PRESIDENT & CEO P. 4 4. STRATEGY 7 Internal control and risk management Business model 8 Our vision 9 Research and development Our values 9 Our way of working 9 Glossary Implementation of the strategy 9 Value creation 12 5. FINGRID’S REPUTATION, CUSTOMERS AND OTHER STAKEHOLDERS 13 Reputation 13 Customers 13 Fingrid’s stakeholders 15 2 BUSINESS REVIEW REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS GOVERNANCE REMUNERATION REPORT CORPORATE RESPONSIBILITY 1. FINGRID 2020 ANNUAL REPORT 2020 Fingrid’s Annual Report for 2020 consists of six BUSINESS REVIEW REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS GOVERNANCE REMUNERATION REPORT CORPORATE RESPONSIBILITY ANNUAL REPORT 2020 sub-reports: the Business Review, Report of the ANNUAL REPORT 2020 ANNUAL REPORT 2020 Board of Directors, Consolidated Group and parent company’s Financial Statements and key figures, BUSINESS REVIEW 2020 Review by the President & CEO Operating environment Corporate Governance Statement, Remuneration and business model Strategy Fingrid’s reputation, customers Statement, and Corporate Responsibility Report. and other stakeholders Business Review Report of the board Finance and treasury Business operations BUSINESS REVIEW 2020 For the first time, the Financial Statements are Personnel of directors Internal control and risk management published in accordance with the European Single Research and development Glossary Electronic Format (ESEF) reporting requirements. Review by the President & CEO The format is Extensible Hypertext Markup Lan- guage (XHTML), and the document is available on 1 Operating environment www.fingrid.fi/en and business model Fingrid draws up the Consolidated Financial State- Strategy ANNUAL REPORT 2020 ANNUAL REPORT 2020 ments and the half-year report in accordance with Fingrid’s reputation, customers the international IFRS reporting standards accept- and other stakeholders ed by the European Union and in accordance with the Finnish Securities Market Act. The Consolidat- Corporate Governance Finance and treasury Financial statements ed Financial Statements include the parent com- Statement Business operations pany Fingrid Oyj and its wholly owned subsidiaries Finextra Oy and Fingrid Datahub Oy. The Group Personnel additionally has a 25.0% holding in one associated company, eSett Oy. The Report of the Board of Di- Internal control and risk management rectors and the financial statements of the Group’s parent company and its subsidiaries are prepared Research and development in accordance with the Finnish Accounting Act and the guidelines and statements of the Finnish Ac- ANNUAL REPORT 2020 ANNUAL REPORT 2020 Glossary counting Board. Corporate responsibility and See all annual report Remuneration Report sustainable development publications online FINGRID.FI/EN/ANNUALREPORT2020 3 BUSINESS REVIEW REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS GOVERNANCE REMUNERATION REPORT CORPORATE RESPONSIBILITY ANNUAL REPORT 2020 2. REVIEW BY THE PRESIDENT & CEO Finland and the entire world are experi- winds and high production of wind power, Focus on the future: Fingrid faces its encing a genuine boom in the construc- led to very low electricity market prices in biggest challenge ever tion of a clean power system. In addition the Nordic countries and large regional We recognise our central role in the to the connection of the Olkiluoto 3 nucle- price disparities. Finland imported elec- implementation of the national ‘Cli- ar power plant, we are currently process- tricity from Sweden, using the full trans- mate-neutral Finland 2035’ vision. We ing enquiries related to additional wind mission capacity between the countries, will do everything in our power to ena- BUSINESS REVIEW 2020 power construction amounting to tens of but the existing transmission capacity did ble the ambitious objectives of the gov- thousands of megawatts. Clean electrici- not meet the actual market needs. Our ernment programme through our oper- ty requires well-functioning transmission cross-border transmission connections ations, which provide society with highly Review by the President & CEO connections. We built transmission lines functioned well, however, and we suc- impactful electricity market and grid ser- Operating environment and substations at dozens of worksites in ceeded in making all the existing capacity vices. Along with our grid investments, and business model 2020; in terms of number of investment available to the markets. we continue developing an electricity projects, it was a record year. The high market that balances out the supply and Strategy tempo of investments will continue at Due to the decrease in electricity con- demand of electricity at each moment in least throughout this decade. sumption, our grid service revenue fell time and creates flexibility in the power Fingrid’s reputation, customers and other stakeholders year-on-year. The market conditions also system on market terms. Managing the Despite the exceptional situation caused resulted in a decrease in the cross-bor- power system will in the future require Finance and treasury by the coronavirus pandemic, the invest- der transmission income for the capaci- shorter and shorter reaction times and ments progressed as planned. Even in ty imported from Russia. The exception- the capability to manage vast amounts of Business operations these unusual circumstances, Finland’s ally intensive spring floods increased data. Our response to these challenges Personnel main grid operated reliably, with excel- the prices for the reserves required for is to increase the degree of automation the day, our actions always speaks loud- lent transmission reliability. As a company balancing consumption and production in the processes linked with operating er than words. Along with maintaining Internal control and critical for the security of supply, we are for several weeks, resulting in increased the power system. our reputation, we have developed our risk management well prepared for a wide range of excep- costs for us. Due to the weather condi- corporate responsibility management tional circumstances and we actively par- tions, our result was significantly lower We fully understand that we cannot ac- and reporting. Achieving excellence in Research and development ticipate in Finland’s National Emergency than planned. Through cost-effective complish our crucial mission without our mission of key societal importance Glossary Supply Organisation. operations, we have managed to keep support from society and our stakehold- requires a high level of quality in all ar- our transmission tariffs at an affordable ers. The support we can expect from our eas of corporate responsibility and the Weather played the leading role in the level regardless of the intensive invest- stakeholders is directly dependent on ability to evolve along with the changing Nordic electricity market. An exception- ment tempo. We have been able to lower our reputation. On the other hand, the operating environment. ally mild winter and the resulting substan- our grid service fees by more than 10 per higher the trust in us, the better we are tial decrease in electricity consumption, cent since 2017, and they will remain un- equipped to serve Finnish society. We heavy rains and the consequent good changed also in 2021. have continued our efforts to build and Jukka Ruusunen availability of hydropower, as well as hard maintain a good reputation. At the end of the President & CEO 4 BUSINESS REVIEW REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS GOVERNANCE REMUNERATION REPORT CORPORATE RESPONSIBILITY 3. OPERATING ENVIRONMENT AND BUSINESS MODEL ANNUAL REPORT 2020 CLIMATE CHANGE er system on market terms. We closely Renewable GLOBALISATION AND Finland’s goal is to be a climate-neutral collaborate with the market parties, our RESPONSIBILITY society in 2035. A key path to this goal customers, the authorities, and policy- energy will play Globalisation brings opportunities