EirGrid plc Annual Report 2011

EirGrid plc Annual Report & Accounts 2011
Financial Review
Key Financial Highlights €’m
Revenue
Direct costs
Other operating costs
Operating profit
2011
470.7
362.9
77.5
30.3
2010
443.8
346.9
81.2
15.7
EirGrid’s revenue for the year to 30 September
2011 was €470.7m, compared to €443.8m for the
previous year.
The operating profit of €30.3m for the year to
30 September 2011 compares to an operating profit
of €15.7m for the year to 30 September 2010.
The operating profit figure has increased due to
enhanced profitability at SONI and SEMO, and
lower than expected Ancillary Service payments
during the financial year.
The operating profit as reported for EirGrid includes
a significant over-recovery on regulated tariffs.
This was due to a number of uncertainties that
are an inherent aspect of operating in a regulated
environment, and the associated accounting
treatment of these matters. In accordance with
normal regulatory practice, this over-recovery will
be corrected for in future tariffs. The operating
profit for 2011 was €30.3m, however, excluding
those over-recoveries management’s estimate of
the underlying operating profit for 2011 was €15m,
subject to regulatory uncertainties.
The Group’s revenue is primarily derived from
regulated tariffs, specifically the Transmission Use
of System (TUoS) tariff, a charge payable by all users
of the transmission systems, and market operator
tarriffs.
Direct costs primarily consist of:
• The regulated charge payable to ESB and NIE as
owners of the transmission system in Ireland and
Northern Ireland respectively;
• The cost of purchasing from generators a range
of services required for the secure operation of
the system;
• Constraint costs payable when the secure
operations of the system requires changes to
be imposed on the market based schedules of
generators; and
• The costs of implementing a range of energy
demand initiatives.
Other operating costs include employee costs,
professional fees, IT costs, depreciation and other
corporate costs.
Regulation
The Group’s TSO activities in Ireland and Northern
Ireland are regulated by the Commission for
Energy Regulation (CER) and the Utility Regulator
of Northern Ireland (URegNI) respectively. In its
role as Market Operator for the SEM, the Group is
regulated by the SEM Committee, which comprises
CER, URegNI, an independent member and a deputy
independent member. The Group also holds two
licences as Interconnector Operator, one from CER
and one from Ofgem.
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