(24.03.2022)

Statnett SF - Annual Report 2021

On 24 March 2022, the Board of Directors of Statnett approved the Group's Annual Report for 2021. The Annual Report is enclosed and available on www.statnett.no.

The Statnett Group's underlying profit after tax amounted to NOK 1 474 million in 2021 (NOK 2 079 million in 2020). The reduction in the underlying profit is mainly due to increased system operating expenses as a result of higher power prices. The increased cost for system services in 2021 will contribute to increased permitted revenue in 2023.

The underlying result is based on the regulated permitted revenue, whereas the recorded result will depend on stipulated tariffs and congestion revenue. The difference, referred to as higher or lower revenue, will level out over time through adjustment of tariffs, ensuring that Statnett's revenue corresponds with the regulated permitted revenue. The recorded profit after tax for the Group was NOK 3 307 million in 2021 (NOK 2 697 million). The increase in profit is mainly due to higher operating revenues.

The Group's operating revenues for 2021 amounted to NOK 14 412 million, compared to NOK 10 761 million in 2020. The increase is mainly due to significantly higher congestion revenues (NOK 5 658 million in 2021 versus 2 408 in 2020). The increase is due to large price differences relative to Sweden and Europe, as well as within Norway. The trial operation of the North Sea Link from the third quarter of 2021 has also contributed to increased congestion revenues.

The Group's operating costs totaled NOK 9 566 million in 2021 (NOK 6 893 million). The increase is mainly due to higher costs for system services and transmission losses. Costs for system services increased by NOK 905 million compared with last year.      Transmission losses increased by NOK 1,493 million compared with the year before, due to substantially higher electricity prices.

The Group invested NOK 6 121 million in 2021, compared to NOK 7 299 million in 2020. The investments included both completed and ongoing grid infrastructure projects, interconnectors, purchase of grid assets and digital development. Investments in new grid capacity have been reduced from NOK 6,754 million to NOK 4,355 million as a result of the planned completion of major grid investments such as Balsfjord-Skaidi, the Western Corridor and NSL. Investments related to digital development, especially within the systems and market area but also facilities management, show an increase of approximately NOK 250 million to NOK 960 million compared with 2020. Commissioned facilities amounted to NOK 9,534 million in 2021 (NOK 8,670 million), of which the largest is NSL, which was put into trial operation in October. At the end of 2021, the value of facilities under construction was NOK 6,197 million (NOK 10,103 million).

Statnett's higher/lower revenue

Statnett's operating revenues mainly derive from grid operations regulated by the Norwegian Energy Regulatory Authority (RME), which stipulates a cap (permitted revenue) for Statnett's revenues. Permitted revenue increased from NOK 9 285 million in 2020 to NOK 11 275 million in 2021. In 2021 revenue from grid operations were higher than the permitted revenue, resulting in a higher revenue of NOK 2 350 million (lower revenue of NOK 792 million) for the period. This was caused by record breaking congestion revenues. At the end of 2021, the accumulated higher revenue, including interest, amounted to NOK 2 410 million.

Adjusted tariff

Statnett emphasizes the need for even and predictable tariffs over time. In 2021 Statnett reduced tariffs to help grid customers during the Covid-19 pandemic. However, extraordinarily high revenues from congestion charges in 2021 and further into 2022 has led to regulated income exceeding permitted income. As a result, Statnett will be setting the transmission component of the consumption tariff to zero from 1 April 2022 until the end of the year.  

Outlook

The war in Ukraine has put Europe in a new and challenging security situation. This is causing uncertainty about the energy supply situation in Europe, which is affecting gas and electricity prices. This in turn affects the power market and the energy situation in Norway. We assume that Europe's need to transition to renewable energy will be affected by this, and with the current focus on reducing dependence on Russian gas, we will see even stronger emphasis on increasing investments in renewable energy. Statnett is closely monitoring the situation.

Norway is now experiencing a significant shift in the electrification of society and the transition is moving ever faster on the road to the zero-emission society. In December, Statnett published Short-Term Market Analysis 2021-2026. With the consumption growth we are currently observing, we expect that already around the middle of this decade, the Norwegian power surplus will be fully utilized. To meet this future outlook, a large number of measures are needed such as increased consumption flexibility, energy efficiency, routing of consumption to places in the power system that have good capacity, etc. However, the primary measure must be a broad-based and significant increase in new power production. The government has decided to give Statnett the responsibility for the Planning role also at sea. Statnett will facilitate a comprehensive and long-term development where the connection of offshore wind, consumption and grid needs are seen in context.

The power system is already closely interconnected across countries and regions. Following the commissioning of NSL, Norway is directly connected to seven other countries. This contributes significantly to Norwegian security of supply and value creation. Norway is therefore dependent on close international cooperation. The green transition further reinforces this need in terms of physical infrastructure, market solutions and the legal and political framework. 

In the years to come, power prices will fluctuate significantly more in the short term than we are used to. Increased variation in trading volume, power production and consumption reinforces the need for automated and digitized operations. Automated system operations will be essential for maintaining security of supply in a power system characterized by higher fluctuations and finer time resolution. Digital solutions and increased data exchange will also facilitate quicker processing of connection requests and open the way for new markets and new business models.

Contact:
Knut Hundhammer
Chief Financial Officer
Mobile: +47 901 65 299

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