Gasum Annual Report 2010

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acquisition and sales. Sales were at a good level in 2010, particularly in the ﬁrst and last months of the year. Rapid changes in consumption situations resulted in customers using plenty of short-term products, with their improved sales margin contributing to the improved proﬁt level in energy trade. Launched at the beginning of the year, the new M2010 Natural Gas Pricing System aimed to increase energy trade ﬂexibility. Customers actively grabbed opportunities including monthly capacity reviews. Pricing of the energy sales of natural gas is based on the natural gas supply contract between Gasum and Russian Gazprom’s subsidiary Gazprom export. The current supply contract, valid until the end of 2026, is based on the special structure of Finland’s natural gas market, which is reﬂected in the fact that the price of natural gas follows not just changes in oil prices but also ﬂuctuations in the price of coal and domestic market energy prices. In 2010 the sales price of natural gas went up by around 20% from January to September but took a slight downturn towards the end of the year. The energy charge component of the natural gas price reﬂects the six-month averages of oil, coal and electricity prices. In 2010 the price of heavy fuel oil per tonne increased from €325 to almost €370 and then went down to €340 at the end of the year. The fall in oil price was not reﬂected in natural gas price until the last quarter of the year. On the other hand the price of coal was increasing steadily and went up by almost 40% in 2010. Gasum offers its customers services for natural gas price risk management. In 2010 Gasum’s hedging services were sold for a total exceeding 3.5 TWh of gas, equalling almost 9% of the total volume of gas supplied in Finland. The year 2010 for energy trade did not see any new agreements, major new customer acquisitions or major customer losses. Some current customers underwent restructurings related to issues including changes in municipal structure or reorganisations of largescale industrial companies, but these did not affect the use of natural gas by our customers. The letter of intent between Gasum and Turun Seudun Maakaasu ja Energiantuotanto Oy regarding the delivery of natural gas to Turku expired at the turn of the year and is no longer in force in 2011. However, Gasum retains the option of launching pipeline construction in the Turku economic zone if natural gas is included as an alternative in the region’s power plant solutions. Natural gas sales by Gasum Paikallisjakelu Oy totalled 52.5 million m³ and by Gaasienergia AS 3.29 million m³. of new, bio-based energy gases. Gasum’s activities are supervised by the Energy Market Authority (EMV), which has appointed Gasum to assume system responsibility of the natural gas network in Finland. The EMV approves the terms and conditions imposed by Gasum to implement system responsibility. The EMV also supervises the reasonableness of Gasum’s transmission pricing, the operative costs that can be affected and the quality level of natural gas supply. These are examined over periods of four years. A new four-year period of monitoring started at the beginning of 2010 and ends at the end of 2013. Transmission services account for 24% of Gasum’s net sales. The quality targets set for transmission activity were met in 2010. The amount of energy not delivered because of disruptions was 0.005% of the energy transmitted via the network. In June 2010 the Finnish Government granted Gasum a permit for the expropriation of land areas required for the construction of the Mäntsälä-Siuntio natural gas pipeline, and Gasum launched construction the same month.The pipeline is due to be operational in late autumn 2011. Following an appeal against the permit submitted to the Supreme Administrative Court, the Court rendered an interlocutory judgement in January 2011 that resulted in the discontinuation of the construction of the Mäntsälä-Siuntio natural gas pipeline in Hyvinkää until further notice.The case was still pending at the Supreme Administrative Court in February 2011. A 2,000 cubic metre product storage facility was constructed in conjunction with the Gasum natural gas liquefaction plant in Kilpilahti, Porvoo, and will provide liqueﬁed natural gas (LNG) for use as a reserve fuel. In 2010 several measures were launched to enable the injection of biogas into the natural gas network, including biogas balance settlement and determination of gas quality in various network sections. Gasum commissioned studies and theses on the topic and targeted R&D efforts at research into bio-based gas sources. Gasum Paikallisjakelu Oy constructed a total of 13 km of new pipeline in 2010, so it now has a total of 510 km of distribution pipelines in eight areas around the country. New distribution areas constructed included those in Kausala, Iitti, and Vantaa. The year 2010 saw Gasum Paikallisjakelu launch a project that will enable the remote metering of gas consumption at delivery points. Gaasienergia AS owns 60 km of distribution pipeline. Due to changes in the Estonian gas market, Gaasienergia’s future business focus will be on natural gas transmission at the local level. Network operations The Gasum Group’s network operations mean the transmission services provided by Gasum Oy and used by natural gas wholesale customers (transmission services) as well as services provided by local distribution networks owned and maintained by Gasum Paikallisjakelu Oy and Helsingin Kaupunkikaasu Oy and used by Gasum Paikallisjakelu Oy in its retail operations. The bulk of the Gasum Group’s balance sheet consists of the natural gas transmission network.Transmission network maintenance and development also plays a key role in Gasum’s strategy, including in the expansion of the natural gas market area and the utilisation Other operations The Gasum Group’s other business refers to natural gas as a transport fuel, business ventures related to liqueﬁed natural gas (LNG) and biogas (energy gases) as well as energy services such as heat sales, natural gas-based energy solutions and appliance and service sales. The development of these business activities plays a key role in the achievement of Gasum’s strategic objectives. They accounted for 13% of Gasum’s net sales in 2010. The most important projects in 2010 were the commissioning of the new natural gas liquefaction plant in Porvoo in June, the acquisition of a site for the expansion of the LNG business in 31

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