Share in the Finnish State Nuclear Waste Management Fund
Under the Nuclear Energy Act in Finland, TVO has a legal obligation to fully fund the legal liability for nuclear waste including the decommissioning of the power plant through the Finnish State Nuclear Waste Management Fund (=nuclear waste management obligation).
TVO contributes funds to the Finnish State Nuclear Waste Management Fund to cover future obligations based on the legal liability calculated according to the Nuclear Energy Act. The carrying value of the fund in TVO's balance sheet is calculated according to the interpretation in IFRIC 5 "Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds".
Provision related to the nuclear waste management obligation
The provision is related to future obligations for decommissioning of the power plant, management of spent fuel and operating waste. The fair value of the provision is calculated according to IAS 37 based on discounted future cash flows which are based on estimated future expenses. The cost estimate is based on a nuclear waste management plan covering the management of spent nuclear fuel and operating waste and decommissioning of the nuclear power plant. The new total cost estimate based on a new nuclear waste management technical plan and schedule is updated every third year. The technical plans, timing and cost estimates are approved by governmental authorities.
At the end of the year, the balance sheet contains the following assets and liabilities concerning the nuclear waste management obligation:
| EUR 1 000 | 2018 | 2017 |
| The carrying value of TVO`s share in the Finnish State Nuclear Waste Management Fund (non-current assets) | 952 020 | 953 136 |
Provision related to nuclear waste management (non-current liabilities) |
|
|
| Beginning of the year | 953 136 | 954 631 |
| Increase/decrease in provision | -13 484 | -11 360 |
| Used provision | -32 108 | -29 728 |
| Changes due to discounting | 44 476 | 39 593 |
| End of the year | 952 020 | 953 136 |
The discount rate, % |
5,5 |
5,5 |
TVO's legal liability as stated in the Nuclear Energy Act and the Company's share in the Finnish State Nuclear Waste Management Fund
EUR 1 000 |
2018 |
2017 |
| Liability for nuclear waste management according to the Nuclear Energy Act | 1 505 800 | 1 481 600 |
| TVO's funding target obligation 2019 (2018) to the Finnish State Nuclear Waste Management Fund | 1 505 800 | 1 470 800 |
| TVO's share in the Finnish State Nuclear Waste Management Fund 31.12.2018 (31.12.2017) | 1 480 000 | 1 436 600 |
| Difference between the liability and TVO's share of the fund 31.12.2018 (31.12.2017) | 25 800 | 45 000 |
The legal liability calculated according to the Nuclear Energy Act in Finland and decided by the supervising authority (Ministry of Employment and the Economy) is EUR 1,505.8 (1,481.6) million on 31 December 2018 (31 December 2017). The carrying value of the liability in the balance sheet calculated according to IAS 37 is EUR 952.0 (953.1) million on 31 December 2018. The main reason for the difference between the carrying value of the provision and the legal liability is the fact that the legal liability is not discounted to net present value. Since the future cash flow is spread over 100 years, the difference between non-discounted legal liability and the discounted provisions are remarkable.
TVO's share in the Finnish State Nuclear Waste Management Fund is EUR 1,480.0 (1,436.6) million on 31 December 2018. The carrying value of the TVO's share in the fund in the balance sheet is EUR 952.0 (953.1) million. The difference is due to the fact that IFRIC 5 limits the carrying amount of TVO's interest in the Finnish State Nuclear Waste Management Fund to the amount of the related liability since TVO does not have control over the Finnish State Nuclear Waste Management Fund. As long as the Fund is overfunded from an IFRS perspective, the effects to operating profit from this adjustment will be positive if the provision increase more than the Fund, and negative if actual value of the fund increases more than the provision.
The difference between the funding target and the share in the Finnish State Nuclear Waste Management Fund at the end of each year is due to the funding target being completed by paying the nuclear waste management fee only during the first quarter of the following year.
TVO has issued to the State the shareholders' guarantees as security for the unfunded legal liability. The security also covers unexpected events as determined in the Nuclear Energy Act. The guarantees are included in the nuclear waste management obligations, see note 25 Obligations and other commitments.
Finnish participants in the State Nuclear Waste Management Fund are allowed to borrow from the Fund according to defined rules. TVO utilizes the right to borrow funds back and has pledged the receivables from the shareholders as security for the loans. The loans are renewed yearly. The loans are included in the interest-bearing liabilities, see note 22 Interest-bearing liabilities.
