Group companies and related parties

6.1 Group companies and related parties

The Group has two Fingridi's wholly-owned subsidiaries, Finextra Oy and Fingrid Datahub Oy.

Finextra Oy is a subsidiary wholly-owned by Fingrid Oyj established to handle the statutory public service obligations not included in actual grid operations or transmission system responsibility. These tasks include peak load capacity services and guarantee-of-origin services for electricity. Through Finextra, the cost of public service tasks is separated from the cost of grid maintenance, which makes it possible to ensure the unequivocal transparency of the different operations. The Energy Authority oversees Finextra’s operations and reasonable returns from its services. The aim of Finextra is to carry out the assigned duties cost effectively, making use of joint resources. The allowable annual return on peak load capacity services is EUR 75,000. The allowed return on guarantee-of-origin services for the regulatory period ending on 31 December 2016 was approximately EUR 100,000. The realised return during the regulatory period consisted of a surplus of roughly EUR 200,000.

Fingrid Datahub Oy is a subsidiary wholly-owned by Fingrid Oyj established in 2016 to handle the operations linked to the Datahub. Key duties of the subsidiary is to offer and develop centralised electricity market information exchange services and other related services to the market parties and to govern the register information required by the electricity markets. The Datahub is a centralised information exchange system for retail markets that stores data from all of Finland’s 3.5 million places of electricity consumption. The information stored in the Datahub will be utilised by around 100 electricity sales companies and more than 80 distribution network operators to provide services to the consumers of electricity. Fingrid started the Datahub project during the spring of 2015.

The consolidated associated companies are Nord Pool AS (ownership 18.8%) and eSett Oy (ownership 33.3%). The Group has no joint ventures.

The investments in associated companies included in the balance sheet are composed of the following:

24. INVESTMENTS IN ASSOCIATED COMPANIES, € 1,000
  2016 2015
Interests in associated companies 10,158 9,888
Loan receivables from associated companies 4,000 2,500
Total 14,158 12,388
     

Receivable from an associated company consists of a loan receivable from eSett Oy. The main terms and conditions are as follows:

Associated company loan:

The loan capital is EUR 2.5 (2.5) million and the annual interest rate is 1.5 per cent, on top of the 12-month Euribor. The loan repayment is ten equal instalments every six months beginning one year from when eSett begins its operations. The amount of the loan capital is one third of the total loan that eSett’s owners have granted the company proportionate to their holdings. The terms of the loan are the same as the loan terms for eSett’s other owners.

Capital loan:

The loan capital is EUR 1.5 (0) million. The fixed annual interest rate is 3.0 per cent. The loan repayment is ten equal instalments every six months beginning one year from when eSett begins its operations. The loan repayment is three equal instalments once a year beginning one year from when eSett begins its operations. The repayment is subordinated to all of the company’s other liabilities and to the Limited Liability Companies Act’s terms to be applied to capital loans.

Financial summary of associated companies, €1,000
  Non-current Current assets Turnover Profit/loss Dividends received during the financial period Ownership (%)
2016 Assets Liabilities Assets Liabilities
                 
Nord Pool AS 2,465   121,162 94,420 26,965 7,103 560 18.80
eSett Oy 7,507 12,000 5,748 657   -2,392   33.30
                 
  Non-current Current assets Turnover Profit/loss Dividends received during the financial period Ownership (%)
2015 Assets Liabilities Assets Liabilities
                 
Nord Pool AS 3,489   66,698 40,194 25,851 6,422 551 18.80
eSett Oy 5,364 7,500 5,474 328   -2,141   33.30
                 
The Group’s associated companies indicated in the tables are treated in the consolidated financial statements using the equity method of accounting.
The Nordic Balance Settlement (NBS) will be introduced in Finland on 1 May 2017. When the NBS begins its operations, management of the balance settlement will transfer from Fingrid’s Balance Service Unit to eSett Oy.
The company has an equity investment in Norwegian kroner in an associated company, which results in exposure to translation risk. The translation risk is not significant and the company does not hedge against this risk.
Equity investments in associated companies, € 1,000
  2016 2015
Cost at 1 Jan 9,888 10,515
Decreases   -214
Share of profit 511 447
Translation reserve 318 -309
Dividends -560 -551
Carrying amount 31 Dec 10,158 9,888
Carrying amount of associated companies includes goodwill 31 Dec. 3,245 3,245
The subsidiaries, associated companies and parent company (Fingrid Oyj) described above are related parties of the Group. In addition, the shareholder entities mentioned in chapter 5.5 and the top management and its related parties are also considered related parties
The top management is composed of the Board of Directors, the President & CEO, and the executive management group. Other related party transactions include transactions concluded with entities in which the State of Finland has a holding in excess of 50 per cent.
The company has not lent money to the top management, and the company has no transactions with the top management.
Business with related parties is conducted at market prices.
Transactions with associated companies, € 1,000
  2016 2015
Sales 473 809
Expense adjustments 48 30
Purchases 39,625 39,659
Receivables 343 2,973
Liabilities 152 2
Loan receivables 4,000 2,500
Transactions with owners, € 1,000
  2016 2015
Owners:    
Purchases 5,095 6,303
Liabilities 1 0
     
Other related parties:    
Sales 31,613 28,759
Purchases 51,044 69,538
Receivables 2,457 845
Liabilities 2,526 2,279

Accounting principles

Subsidiaries

The subsidiaries encompass all companies over which the Group has control (including structured entities). The Group is considered to have control over a company if the Group’s holding results in exposure to variable returns or if the Group is entitled to variable returns and it can influence these returns by exercising its control over the company. The subsidiaries are consolidated into the consolidated financial statements starting from the day on which the Group gained control over the company. Consolidation is discontinued once the control ceases to exist.

Consolidation of operations is carried out using acquisition cost method.

Transactions, receivables and liabilities between Group companies and any unrealised profits from internal transactions are eliminated. Unrealised losses are also eliminated unless the transaction indicates an impairment of the disposed asset. If necessary, the financial statements of the subsidiaries have been adjusted to correspond to the accounting principles applied by the Group.

Associated companies

The associated companies include all companies over which the Group has significant influence but no control or joint control. This is generally based on a shareholding amounting to 20–50% of the votes. Investments in associated companies are initially recognised at the acquisition cost and subsequently handled using the equity method. According to the equity method, investments are initially recorded at the acquisition cost and this is subsequently adjusted by recognising the Group’s share of the profit or loss after the time of acquisition in the income statement and the Group’s share of any changes in the investment object’s other comprehensive income in other comprehensive income. Any dividends received or to be received from the associated companies and joint ventures are deducted from the investment’s carrying amount.

If the Group’s share of the losses of an investment recognised according to the equity method equals or exceeds the Group’s holding in the company in question, including any other non-current receivables without collaterals, the Group will not recognise any additional losses unless it has obligations or it has made payments on behalf of the company.

A share corresponding to the Group’s ownership interest is eliminated from the unrealised profits between the Group and its associated companies and joint ventures. Any unrealised losses are also eliminated unless the transaction indicates an impairment of the disposed asset. If necessary, the accounting principles applied by the investments to be recognised according to the equity method have been adjusted to correspond to the principles applied by the Group.