EirGrid plc Annual Report 2012

EIRGRID PLC ANNUAL REPORT & ACCOUNTS 2012Financial ReviewKey Financial Highlights €’m 20122011RevenueDirect costsOther operating costsOperating profitTotal non-current assetsNet borrowings542.2438.880.123.3610.1288.7470.7362.977.530.3373.9184.7EirGrid’s revenue for the year to 30 September 2012 was €542.2m, compared to€470.7m for the previous year. The main driver for this significant increase in revenuewas the increase in the Imperfections tariff collected by SEMO in respect of an underrecoveryof constraint costs in the previous regulatory period.The operating profit of €23.3m for the year to 30 September 2012 compares to anoperating profit of €30.3m for the year to 30 September 2011. The operating profitfigure has decreased due to a regulatory adjustment of SONI profits in the previousperiod and reduced profitability in the SEMO business for 2012.The operating profit for the Group includes a level of over-recovery on regulatedtariffs. This was due to a number of uncertainties that are inherent in operating withina regulated environment, along with the associated accounting treatment of thesematters. In accordance with normal regulatory practice, this over-recovery will becorrected for in future tariffs. The operating profit for 2012 was €23.3m, but excludingthose over-recoveries, management’s estimate of the underlying operating profit for2012 was €18.8m, subject to regulatory uncertainties.The Group’s revenue is primarily derived from regulated tariffs, specifically theTransmission Use of System (TUoS) tariff, a charge payable by all users of thetransmission systems and the Market Operator tariff.Direct costs primarily consist of:• The regulated charge payable to ESB and NIE as owners of the transmission systemin Ireland and Northern Ireland respectively.• The cost of purchasing from generators a range of services required for the secureoperation of the system.• Constraint costs payable when the secure operations of the system requires changesto be imposed on the market-based schedules of generators; and• The costs of implementing a range of energy demand initiatives.Further operating costs include employee costs, professional fees, IT costs, depreciationand other corporate costs.12