Financial framework conditions
As Statnett's grid activities are monopoly-based, the company’s revenues are regulated and controlled by the Norwegian Resources and Energy Directorate (NVE).
Statnett's reported revenues consist of fixed grid tariffs from the main grid customers and congestion revenues. Congestion revenues arise when electricity is transmitted from areas with low electricity prices to areas with high electricity prices in the Nordic region and between Norway and the Netherlands. Grid tariffs are established prior to each calendar year.
The revenues are adjusted and controlled by the authorities through the Norwegian Water Resources and Energy Directorate (NVE) and it is annually established a permitted revenue. The permitted revenue will cover the costs of grid developments and maintenance, and provide a reasonable return on the grid assets. This is based on the assumption that the transmission grid is operated, utilised and developed in an efficient way.
If the actual revenues diverge from the permitted revenue, higher or lower revenue will occur. In accordance with regulations from NVE, 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 results, some key figures are presented adjusted for higher/lower revenue.
Revenue and result development
Since 2008, Statnett has had significant higher/lower revenue. This has resulted in major fluctuations in Statnett's recognised operating revenues and profit/loss. Revenues and profit or loss adjusted for higher/lower revenue shows that the underlying activities are much more stable than the accounts including higher/lower revenue. Statnett's underlying revenues and profit for 2012 were on the same level as for 2011.
Higher/lower revenue development
In recent years, Statnett's has predominantly had higher revenue. Accumulated higher revenue including interest was NOK 3 455 million at the end of 2012. Several factors have contributed to the accumulation of higher revenue.
2008: Statnett had a higher revenue, mainly due to higher congestion revenues than expected from NorNed during its first year of operation.
2009: Congestion revenues were low this year due to damage to the NorNed cable, and Statnett had a lower revenue of NOK 1 061 million.
2010: To cover the lower revenue, grid tariffs were increased in 2010 compared with 2009. Moreover, congestion revenues were higher in 2010 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 however 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. The higher revenue for this year was due to higher congestion revenues than assumed, as well as somewhat lower permitted revenue due to lower interest rates and thus lower return on grid assets. In 2012, Statnett's higher revenue amounted to NOK 838 million, after having taken into account the decision by NVE to change the revenue cap for previous years of NOK 272 million. Accumulated higher revenue including interest was NOK 3 455 million at the end of 2012.
Repayment of higher revenue
Statnett has outlined a price strategy which sets the framework 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.
Investments influences revenues and balance sheet
Completed investments are included as basis for Statnett's permitted revenue, while investments recorded as plant under construction are not included. In 2008 the NorNed link was completed and the reserve power plants were installed. Consequently, investments were reduced in 2009, but have increased steadily in subsequent years. Tangible fixed assets have not increased correspondingly as major projects are being developed, and a large part of the increase is still recorded as Plants under construction. Net interest-bearing debt has therefore increased.
Statnett's equity reported in the financial accounts includes accumulated higher/lower revenue. To show Statnett's real equity, it is adjusted for accumulated higher/lower revenue after tax. As investments have increased in recent years, the adjusted equity ratio has been reduced.