annual report 2002 - ku leuven2)eng.pdf · elia annual report 2002 6 shareholders’...

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e n e r g y o n t h e r i g h t t r a c k

TABLE OF CONTENTS

2 Directors’ Report

4 Members of the Board, Management and Auditors

5 Corporate Governance

10 Special tasks of the auditors during the year

10 Shareholder structure

11 Major events occurring after year-end

12 Consolidated annual accounts

12 Consolidated annual accounts

13 Notes to the annual accounts16 Balance sheet18 Income statement19 Cash flow statement20 Comments on the consolidated accounts 35 Auditors’ report

37 Elia System Operator SA annual accounts (abridged financial statement)

Annual ReportAnnual Report

A n n u a l R e p o r t 2 0 0 2

2E l i a A n n u a l R e p o r t 2 0 0 2

Directors’ Report

The composition of the Boards of Directors of Elia System Operator and Elia Asset changed significantly on 31 May 2002. The Directors’ Report should be viewed in the light of these changes.

In fact, during the first few months of 2002, the Boards of Directors focused mainly onpreparing for the appointment of Elia as electricity transmission system operator. In thiscontext, several matters required special attention by the Boards of Directors including inparticular setting up what is referred to as the ‘dual structure’ of Elia System Operatorand Elia Asset, Publi-T’s purchase of a shareholding in Elia System Operator, the changein the ratio of equity to borrowed funds, and the changes made to the royal decree of 27 June 2001 establishing a Grid Code in respect of operation of and access to the electri-city transmission system.

On 25 January 2002, the Federal Council of Ministers approved the dual structure, provided certain conditions were met. This included an agreement between Electrabel,SPE, Publi-T, CREG and the federal government on the regulator’s monitoring of the system operator.

In 2002, the Elia Board of Directors decided to launch an appeal before the Council ofState against the royal decree of 27 June 2001 establishing a Grid Code in respect of operation of and access to the electricity transmission system. The appeal was motivatedby the decree’s potential legal repercussions on Elia’s operations. In order to conclude thismatter prior to appointment, consultations were launched between Elia and the office ofthe State Secretary for Energy and Sustainable Development. Thanks to the involvementof independent experts, an agreement acceptable to all parties was reached and the royaldecree was replaced by a new decree dated 19 December 2002, which was published inthe Belgian Official Journal on 28 December 2002 and entered into force the same day.

The matter of the ratio of equity to borrowed funds stemmed from the CREG guideline on the remuneration of the system operator’s capital: according to these guidelines it must consist of a 33/67 proportional split between equity and borrowed funds. Since EliaSystem Operator’s liabilities consisted wholly of equity on the date of its creation, theBoard of Directors looked at how this situation could be brought into line with the CREGguideline.

Publi-T’s purchase of a shareholding in Elia System Operator was finalised on 31 May2002. A general meeting was held the same day to approve a number of changes to theArticles of Association, specifically with regard to the company’s object, the division ofshares into different categories and the approval of a funding agreement. The generalmeeting also selected a new Board of Directors.A general meeting was held at the same time by Elia Asset to take similar decisions. Shareholders’ representatives took office immediately.

Directors’ Report

E l i a A n n u a l R e p o r t 2 0 0 23

The Elia Boards of Directors learned of Elia System Operator’s appointment as federalelectricity transmission system operator on 13 September 2002 (effective on 17 September2002). Through the federal appointment Elia also became the local transmission systemoperator in Wallonia, in accordance with the Walloon electricity decree. The federalappointment came just a few days after the Flemish regulator VREG appointed Elia distribution system operator in Flanders on 5 September 2002.

Following Elia’s appointment as transmission system operator, the independent directorstook office. Only two of the twelve current directors were members of the former Board ofDirectors.

In view of the new legal structure and major changes in the composition of the Boards of Directors, the latter spent considerable time focusing on their internal organisation. Three Committees were set up within the Boards of Directors: • the Corporate Governance Committee; • the Audit Committee;• the Remuneration Committee.

The drafting of internal rules of procedure on the operation of these committees and howthey would report to the Boards of Directors also began in 2002. Finally, the procedure for setting up a Management Committee was set in motion, together with discussions onthe divisions of responsibilities between the Boards of Directors and the ManagementCommittee. Time was also spent on matters to be submitted to the Corporate GovernanceCommittee.

One of the key issues tackled by the Boards of Directors during the second half of the yearwas tariffs. A total of three applications were submitted to CREG: the first on distributiontariffs for 2002, the second on distribution tariffs for 2003, and the third on transmissiontariffs for 2003.

Discussions on tariff proposals led to important exchanges of views within the Boards of Directors on the possible long-term funding options for the company. In fact, theBoards of Directors noted an imbalance between the foreseen level of investment anddepreciation authorised by CREG. The Boards of Directors met with CREG to expresstheir concerns in this matter.

By the end of 2002, CREG had not yet taken a decision on transmission tariffs. On theother hand, CREG rejected Elia’s proposal on distribution tariffs on the ground that thesenetworks are actually used for electricity transmission.

The Boards of Directors will certainly closely monitor these issues in 2003.


Members of the Board

Board of Directors

Chairman Ronnie BelmansVice-chairmen Francis Vermeiren Thierry WillemarckMembers of the Willy Bosmans Claude GrégoireBoard Jan Coene Pierre Meyers

Clement de Meersman Etienne SnyersJohan De Roo Luc Van NevelHilde Laga

Secretary to the Board Jozef Dermaut

Corporate Governance Committee

Thierry Willemarck (Chairman)Hilde LagaLuc Van Nevel

Audit Committee

Clement de Meersman (Chairman)Johan De RooPierre Meyers

Remuneration Committee

Jan Coene (Chairman)Willy BosmansPierre Meyers

Auditors

KPMG, represented by Erik Clinck.Ernst & Young, represented by Jacques Vandernoot (as from 13 February 2003).

Management Committee

Daniel Dobbeni René SlegersJacques Fraix Frank VandenbergheRoel Goethals Jacques VandermeirenYvan Hella

Members of the Board, Management and Auditors

(situation as at 31 December 2002)

Corporate Governance


Corporate Governance

Boards of Directors

The Boards of Directors are made up of 12 memberswho do not hold any management position withinthe company or any of its subsidiaries. Half the mem-bers are independent directors appointed by thegeneral meeting.

Composition2002 was characterised by three distinct periods interms of the composition of the Boards of Directors.

Until 31 May:• the Board of Directors of Elia System Operator

comprised 12 directors representing managementand shareholders, i.e.

Willy Bosmans (Chairman), Baron Emmanuel de Bethune (Vice-Chairman),Julien Bulcke, Jean de Garcia de la Vega, Christiaan De Groof, Daniel Dobbeni, Yvan Hella, Alfred Hofman, Etienne Snyers, Michel Vermout, Jacques Vandebosch and Xavier Votron;

• the Board of Directors of Elia (later Elia Asset)comprised 12 directors representing managementand shareholders, i.e.

Willy Bosmans (Chairman), Julien Bulcke, Jean de Garcia de la Vega, Christiaan De Groof, Daniel Dobbeni, Roel Goethals, Yvan Hella, Alfred Hofman, Etienne Snyers (Vice-Chairman), Frank Vandenberghe, Michel Vermout and Xavier Votron.

From 31 May to 17 September: following a decisionby the extraordinary general meeting of Elia SystemOperator and Elia Asset, the previous directors resigned and 12 new directors were appointed.

These directors were:• shareholders’ representatives, i.e.

Ronnie Belmans (Chairman), Willy Bosmans, Johan De Roo, Claude Grégoire, Etienne Snyers and Francis Vermeiren (Vice-Chairman);

• the independent directors, i.e. Jan Coene, Hilde Laga, Clement de Meersman, Pierre Meyers, Luc Van Nevel and Thierry Willemarck (Vice-Chairman).

The independent directors were appointed subject to and with effect from the date of the entry into forceof Elia System Operator’s appointment as nationalelectricity transmission system operator.

From 17 September onwards: following the appoint-ment of Elia System Operator as national electricitytransmission system operator, the six independentdirectors took up their offices in accordance with theArticles of Association.


Shareholders’ representatives (CPTE)

Member of the Tractebel General Management Committee.Director of Electrabel and member of the ManagementCommittee, Chairman of the Synatom Board of Directors,Director at Distrigas, Fluxys, Scandic Energy and N-Allo.Director of CPTE.

Shareholders’ representatives (Publi-T)

Ronnie BelmansChairman

Directorship ends 2005

Main positions outside EliaLecturer at the Catholic University of Leuven (KUL). Head of the Department of Electrical Engineering (ESAT).Chairman of the Management Board of the Electrotechni-cal Committee of the Flemish Engineers’ Association KVIV(Koninklijk Vlaamse Ingenieursvereniging), and Interna-tional Secretary of ICEM (International Conference onElectrical Machines).

Elia System Operator/Elia Asset: List of directors

Willy BosmansDirector


Member of the

Remuneration Committee

Member of the Tractebel General Management Committee,Chief Executive Officer of Electrabel and Distrigas. Director of Tractebel. Member of the Management Committee and Director of Electrabel, Distrigas andFluxys. Chairman of CPTE.

Etienne SnyersDirector


Member of the Flemish Parliament and mayor of Zaventem (VLD). Chairman of the Board of Directors of Gemeentelijke Holding.

Member of the Flemish Parliament and mayor of Maldegem (CD&V).

Chief Executive Officer of SPE and Socofe. Various directorships in companies and organisations in the energy sector, including Fluxys and Distrigas.

Johan De RooDirector


Member of the

Audit Committee

Claude GrégoireDirector


Francis VermeirenVice-Chairman



Independent Directors

Jan CoeneDirector


Member of the Remuneration

Committee (Chairman)

Clement de MeersmanDirector


Member of the Audit Committee

(Chairman)

Hilde LagaDirector


Member of the Corporate

Governance Committee

Head Lecturer in company law at KUL andKULAK (Catholic University of Leuven, Kortrijk Campus). Lawyer in Kortrijk.

Main positions outside Elia

Chairman and CEO of Picanol. Director of Domo and Brantano.

Chief Executive Officer of Deceuninck NV.

Pierre MeyersDirector


Member of the Audit Committee

and Remuneration Committe

Luc Van NevelDirector



Governance Committee

Thierry WillemarckVice-Chairman



Governance Committee (Chairman)

Chief Executive Officer of the Touring Club.

Chief Executive Officer of Euremis Holding.

Chairman and CEO of the Samsonite Corporation. Director of the Flemish public broadcaster VRT and Picanol. Honorary Chairman of Fabrimetal Flanders.


Operation and meetings The Boards of Directors were extremely active in2002, meeting 11 times.

All industrial and financial aspects of companymanagement were discussed at these meetings.

Decision-makingIn accordance with the Articles of Association, theBoards of Directors meet to deliberate and seek toachieve a consensus. In the event that no consensuscan be reached, decisions are taken by a simple majority of the members present or represented.The Boards of Directors may only be duly empower-ed to deliberate and take decisions if at least half oftheir members are present or represented. If the Boardis called to meet a second time, it may rule regardlessof the number of members present or represented.

Some decisions such as the appointment and dismiss-al of members of the Management Committee, or aproposal to the general meeting that an independentdirector be dismissed, may only be taken if approvedby specific majorities.

EmolumentsThe extraordinary general meeting held on 6 Decem-ber 2002 set the remuneration for directors of EliaSystem Operator and Elia Asset.

The total annual remuneration is € 180,000 (indexed)for each company. In 2002, remuneration was paid ona pro rata basis.

Directors are not entitled to any other benefits inkind, or any equity options, credits or loans.

Committees within the Boards

of Directors

At the meeting held on 3 October 2002, three commit-tees were set up within the Boards of Directors of Elia System Operator and Elia Asset: a CorporateGovernance Committee, an Audit Committee and aRemuneration Committee.In accordance with the Articles of Association, eachcommittee worked together with the Board of Direc-tors to begin drafting the rules of internal procedure,which set out, among other things, regulations concerning its operation and the method of reportingto the Board. These regulations must be submitted to CREG for approval within six months followingthe company’s appointment as transmission systemoperator, i.e. by 17 March 2003.

Corporate Governance CommitteeThe Corporate Governance Committee comprisesthree independent directors:

- Mr Thierry Willemarck (Chairman), - Mrs Hilde Laga,- Mr Luc Van Nevel.

The Corporate Governance Committee is responsiblefor various tasks and reports to the Board of Directors. These tasks include the following:• presenting candidates for independent director-

ships to the annual general meeting;• when so requested by any independent director,

the Chairman of the Management Committee, theCommission for Electricity and Gas Regulation(CREG), or any other authorised regulatory autho-rity, investigating any cases of conflict of interestsbetween the transmission system operator and acontrolling shareholder (under Article 14.2 of theArticles of Association of Elia System Operator andArticle 13.2 of the Articles of Association of EliaAsset) or a company associated with or linked to acontrolling shareholder;


• ruling on instances of incompatibility within themeaning of the Articles of Association and laws,decrees and regulations pertaining to members ofthe Management Committee and staff;

• ensuring that the provisions of the royal decree of 3 May 1999 on the operation of the national electricity transmission system are applied, andevaluating the efficiency of said provisions in con-nection with the objective of operating the trans-mission system in an independent and impartialmanner, and submitting an annual report on thesubject to CREG or to any other competent regula-tory authority;

• ruling on all matters detailed in Article 18 of theFlemish government decree of 15 June 2001 on electricity distribution system operators (verifica-tion of accounts, budget monitoring and so forth).

Audit CommitteeThe Audit Committee comprises three non-executivedirectors, of whom two are independent directors:

- Mr Clement de Meersman (Chairman), - Mr Johan De Roo,- Mr Pierre Meyers.

As part of its role of assisting the Board of Directors,the Audit Committee is responsible for the followingtasks and reports on these tasks to the Board of Directors:• examining the accounts and monitoring the budget;• monitoring internal and external audits;• evaluating the reliability of financial information; • organising and overseeing internal monitoring.

The Audit Committee met to discuss, amongst othermatters, the appointment of a second auditor and thepossibility of setting up an internal audit department.

Remuneration CommitteeThe Remuneration Committee comprises three non-executive directors, of whom two are independentdirectors:

- Mr Jan Coene (Chairman), - Mr Willy Bosmans, - Mr Pierre Meyers.

The Remuneration Committee is responsible for formulating recommendations to the Board of Directors regarding remuneration for members of the Management Committee.The Remuneration Committee ensures that the company offers a competitive overall package in linewith market standards in order to attract and retainindividuals with the required skills and qualities.

Management Committee

Decisions to appoint and dismiss the future Chairman of the Management Committee are subjectto prior approval of the Corporate Governance Committee, and to the favourable opinion of theCommission for Electricity and Gas Regulation. Other members of the Management Committee areappointed and dismissed by the Board of Directorsfollowing a favourable opinion from the Commission.

Special tasks


Elia System Operator asked auditors KPMG (located at Avenue du Bourget 40, 1130 Brussels) to prepare the implementation of the dual structure including, amongstother things, the ‘quasi-contribution’, changes to the company object and so on.

Two invoices were paid in this connection.

The first, dated 11 February 2002 for a sum of € 47,000, covers the following costs: € 32,350 for the quasi-contribution and € 14,650 for the various meetings, opinions andcorrespondence involved in setting up the dual structure.

The second, dated 24 June 2002 for a sum of € 43,000, covers costs arising from contribu-tions in kind and the quasi-contribution, changing the company object, and various meetings with representatives of Publi-T.

Electrabel SPE

91.5% 8.5%

69.99% 30%

99.99%

CPTE Publi-T

Electrabel

SPE

Electrabel

Publi-T

Elia Asset

Elia SystemOperator

HGRTElia RE

24.50%99.99%

1 share

1 share

1 share

1 share

Shareholder structure

Special tasks of the auditors during the period

Shareholder structure

Major events


Decision by CREG concerning 2002 tariffs

On 25 March 2003, CREG informed Elia System Operator of its decision to approve thetransmission tariffs proposed on 22 November 2002 for the period from 1 October 2002 to 31 March 2003. Considering some tariff particularities, the correlative increase in the turnover could not be quantified at this date.

Equipment program

Under the 1995-2005 equipment program, plans had been made to build several high-voltage lines, including the Fleurus-Courcelles line (380 kV) and the Vinalmont-Fleurusline (380 kV).

Capital expenditure (orders for cables and pylons, studies to calculate the proportions of pylons, topographical maps etc.) had been undertaken with a view to building andinstalling these lines.

In preparing the development program to be submitted for approval to the Ministry forEnergy and Sustainable Development in 2003, Elia Asset decided to abandon the construction of these two lines.

As a result, the relevant disposals were booked during March 2003 totalling € 6.35 million.

Major events occurring after year-end


Consolidated annualaccountsConsolidated annual accounts

Notes to the annual accounts

Balance sheet

Income statement

Cash flow statement

Comments on the annual accounts

Auditors’ report

M.

VAN

DEN

EECKH

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DT


Consolidated balance sheet

IntroductionElia System Operator SA was established on 20 December 2001.

The financial situation refers to the group’s first financial period, running from 20 December 2001 to31 December 2002.

Fixed assetsTangible assets include:• high-voltage substations and transformers

(€ 861.8 million);• grid lines and cables for voltages of between 30 kV

and 380 kV (€ 660.5 million);• land on which substations, lines or cables are

located (€ 45.5 million);• facilities used for network operation

(€ 37.8 million);• administrative buildings, furnishings and vehicles

(€ 36.5 million).• a positive consolidation difference allocated to

tangible assets (€ 1,700 million).

Financial assets include:• the stake in Elia Re, a company consolidated accord-

ing to the equity method. Elia Re is a reinsurancecompany established to manage, in a most efficientway, certain risks associated with the activities ofthe system operator that cannot adequately becovered by or are more costly for the insurance orreinsurance market. At year end, Elia Re had madeneither a profit nor a loss;

• the shareholding in HGRT is not consolidated.HGRT is a holding company owned by transmis-sion system operators that has a shareholding inPowernext, the French power exchange;

• guarantees.

Current assets and liabilitiesTotal inventories amount to € 15.7 million and mainlycomprise spare parts for the electricity grid and contracts in progress.

Short-term trade debtors mainly consist of outstand-ing invoices or invoices to be made up in connectionwith “grid access” activities.

The net working capital requirement includes allinventories, commercial debtors and other amountsreceivable, deferred charges and accrued income onthe asset side less trade and other debts, and accruedcharges and deferred income on the liability side.This requirement totals € 6,6 million.

Trade debts amount to € 78.5 million. The contractualpayment terms from suppliers are usually 120 days.

Capital and reservesAt 31 December 2002, the issued capital of Elia System Operator amounts to € 1,049.5 million. Thiscapital is represented by 10,494,910 shares.

At that date, there are no warrants or convertiblebonds likely to increase the number of shares.

Since Elia System Operator holds 99.99% of Elia Assetshares, the minority interest amount is not reported in the annual accounts in thousands of euros.

ProvisionsThe provisions cover the following risks:• rehabilitation of polluted sites (€ 10.8 million);• company restructuring and early retirement of staff

(€ 10.2 million);• some litigations (€ 1.1 million);• future expenditure for grid adaptation in order

to reduce the risk of congestion resulting from unidentified energy flows (€ 35.4 million).Transmission system capacity at the Belgian-Dutchborder is auctioned off. Income resulting from theauctioning totals € 35.4 million. The draft Europeanregulation of November 20021 stipulates thatincome must be used for specific purposes, includ-ing guaranteeing the availability of the capacityallocated. Congestion must be managed to avoidjeopardizing the availability of the grid. A study

Notes to the annual accountsNotes to the annual accounts

1 Article 6 “Amended proposal for a Regulation of the European Parliament and of the Council on conditions for access to the

network for cross-border exchanges in electricity”, Council of the European Union, Brussels, 26 November 2002.


also showed that congestion could be controlled by installing phase shifter transformers (also calledphase shifters). The installation of those phase shifters is planned to start in 2004. However theywill not increase the transmission capacity of thegrid and are therefore considered as future costs.For the purposes of calculating tax charges, thisprovision is considered tax deductible. The com-pany has contacted the tax authorities in order toobtain a confirmation for this treatment. The officialposition of the tax authorities was not communicat-ed at year-end.

Besides, the group’s policy is to take out an insurancepolicy where insurance is the best solution from afinancial point of view for transferring a risk and inparticular for covering “disasters risks”.

Financial debtsLong-term and short-term financial debts amount to € 2,264.7 million, which represents about two thirdsof the company’s sources of financing, in compliancewith the recommendations set out in CREG guide-lines.

The cash position (cash and short-term investments)amounts to € 47.5 million.

As a result, the group’s net financial debt at year-endstood at € 2,217.2 million.

Long- and short-term financial debts and investmentsare exclusively denominated in euro.

At year-end, the weighted average maturity of long-term debts was 11 years.

Several short-term lines of credit (in euro) – confir-med or unconfirmed – were negotiated in 2002 inorder to cover the potential current and future shortterm financial requirements. At year-end these linesof credit had not been used.

Consolidated results

Operating incomeBreakdown of operating income (in thousands ofeuros):

Grid access activities 668,894 96.1%

Other 27,159 3.9%

Total 696,053 100.0%

A significant proportion (96.1%) of the group’s operat-ing income is generated by “Grid access” activities.

Following Elia’s appointment as transmission systemoperator on 13 September 2002, taking effect on 17 September 2002, the grid access tariffs were subjectto approval by the regulator in accordance with theprovisions of the Royal Decree of 4 April 2001 on thegeneral tariff structure. These tariffs were not yetknown at year-end.

Other activities refer to maintenance work carried outfor third parties and the recuperation of charges.

Operating chargesServices and other goods include the following:• purchase of services to guarantee the safety, the

reliability and the efficiency of the grid; • facilities maintenance costs;• management costs for technical and corporate

departments.

Wages, social security costs and pensions can be broken down as follows (in thousands of euros):

Wages 68,125

Social security 21,009

Pensions and similar commitments 19,030

Other social security expenses 5,906

Total 114,070

In addition, the average headcount (FTE) is as follows:

Management 199.50

Supervisory staff 120.59

Employees 785.13

Total 1,105.22


Expressed as a percentage of the turnover, the grossmargin amounts to 45.7%. This margin is the ratio ofoperating income plus depreciation of fixed assetsand provisions to turnover.

Depreciation totals € 94.6 million. The consolidationdifference allocated to the assets is not subject todepreciation but to write-down in the event of chang-ing circumstances prevailing at the time of booking.

Provisions for contingent liabilities (€ 36.3 million)include an allocation for provisions for litigationsunder way and a provision for expenditure to avoidunidentified flows, as well as the use and withdraw-als of provisions for polluted sites, early retirement of staff and career breaks.

Amounts were written down for all bad trade debtorsby € 2.4 million.

Other operating charges include a depreciation of € 12.0 million on the realisation of assets. This depre-ciation was the result of the disposal of fixed assets,associated study costs and costs for purchasingequipment for building high-voltage lines (380 kV)set out in the 1995-2005 equipment plan, but forwhich the responsible authorities did not issue therequired permits.

Moreover, the costs associated with these disposalswere charged to CPTE, the contributor of the electri-city grid.

The financial statements for the subsidiary Elia Assetinclude other capital expenditure set out in the 1995-2005 equipment plan. A decision must be made as towhether to keep up this expenditure. In 2003 EliaAsset will therefore examine the status of these lines.In case of disposal, a specific charge of € 8.3 millionwould have to be booked.

Moreover, the company is currently working to drawup and reconcile the book-value inventories with thetangible fixed assets on hand. This work is expectedto be completed in 2004.

Financial results Financial results refer primarily to interest receivedon temporary cash surpluses invested with financialinstitution.

Financial charges mainly refer to interest to be paidon long- and short-term debts. The average weightedinterest rate over the period amounts to 3.7%. In 2002, interest rates on loans were mainly at floatingrate. This means that the group could benefit fromparticularly low interest rates. At the end of the year,hedging transactions have been completed in order to reduce the interest rate risk (for more details seeAnnex XV).

Exceptional incomeExceptional income of € 2.8 million solely comprisesthe use and write-back of provisions set up in 2001under the Transform 2003 restructuring program.

TaxesThe average tax rate is 40.62%. This rate is more orless equal to the corporate tax rate since the group hasvery little tax-free income.

Appropriation of profit

The consolidated accounts are established after the proposed appropriation of profit of Elia SystemOperator SA.




On 31 December 2002 (in thousands of euros)

ASSETS

FIXED ASSETS 3,345,189

TANGIBLE ASSETS 3,342,651

Land and buildings 62,729

Plant, machinery and equipment 2,963,049

Furniture and vehicles 6,844

Leasing and other similar rights 234

Other tangible assets 2,147

Construction in progress and advance payments 307,648

FINANCIAL ASSETS 2,538

Investments accounted for by the equity method 2,000

Shares 2,000

Other companies 538

Shares 466

Accounts receivable 72

CURRENT ASSETS 215,640

INVENTORIES AND ORDERS IN PROGRESS 15,688

Inventories 11,305

Raw materials and consumables 11,305

Orders in progress 4,383

AMOUNTS RECEIVABLE WITHIN ONE YEAR 129,553

Trade receivables 101,171

Other amounts receivable 28,382

SHORT TERM INVESTMENTS 44,900

Other short term investments 44,900

CASH 2,580

DEFERRED CHARGES AND ACCRUED INCOME 22,919

TOTAL ASSETS 3,560,829


LIABILITIES

CAPITAL AND RESERVES 1,063,718

CAPITAL 1,049,491

Issued capital stock 1,049,491

CONSOLIDATED RESERVES (+) (-) 14,227

PROVISIONS AND DEFERRED TAXES 57,660

PROVISIONS FOR LIABILITIES AND CHARGES 57,660

Other liabilities and charges 57,660

DEBTS 2,439,451

LONG TERM LIABILITIES 1,348,207

Financial debts 1,348,207

Subordinated debentures 111,552

Other debts 1,236,655

CURRENT LIABILITIES 1,085,985

Current portion of long term debts 13,862

Financial debts 902,654

Credit institutions 902,654

Trade debts 78,554

Suppliers 78,554

Advances received on orders in progress 769

Taxes, wages payable and social security 36,140

Taxes 19,170

Wages payable and social security 16,970

Other liabilities 54,006

ACCRUED CHARGES AND DEFERRED INCOME 5,259

TOTAL LIABILITIES 3,560,829


OPERATING INCOME 696,053

Turnover 668,894

Increase (+); Decrease (-) in work in progress,

finished goods and orders in progress (1,266)

Fixed assets – own construction 5,322

Other operating revenues 23,103

OPERATING CHARGES (-) (508,832)

Raw materials, consumables and goods for resale 3,562

Purchases 5,086

Increase (-); Decrease (+) in inventories (1,524)

Miscellaneous goods and services 234,113

Wages, social security costs and pensions 114,070

Depreciation of and other amounts written off

formation expenses, intangible and tangible

fixed assets 94,686

Increase (+); decrease (-) in amounts written

of inventories, orders in progress and trade debtors 1,941

Increase (+); decrease (-) in provisions for

liabilities and charges 36,273

Other operating charges 24,187

OPERATING PROFIT (+) 187,221

OPERATING LOSS (-)

FINANCIAL INCOME 2,449

Income from current assets 2,440

Other financial income 9

FINANCIAL CHARGES (-) (85,422)

Interests and other debt charges 85,000

Other financial charges 422

PROFIT EXCLUDING EXCEPTIONAL ITEMS

BEFORE TAXES (+) 104,248

EXCEPTIONAL CHARGES (-) 2,753

Provisions for exceptional liabilities and charges

(increase+, decrease-) (2,753)

INCOME BEFORE TAXES (+) 107,001

INCOME TAXES (-) (+) (43,463)

Income taxes (-) (43,463)

INCOME AFTER TAXES (+) 63,538

NET INCOME (+) 63,538

Group share (+) (-) 63,538

Income statementIncome statement

(statement of operating results by nature)



Cash flow statementCash flow statement

(in thousands of euros)

I. CASH FLOW FROM OPERATING ACTIVITIES 134,774

Cash flow 191,744

Change in net working capital 6,568

Profit to be distributed (63,538)

II. CASH FLOW FROM INVESTING ACTIVITIES (3,439,875)

Acquisitions of (3,456,477)

Tangible assets (3,453,936)

Financial assets (2,541)

Disposal of tangible and intangible assets 16,602

III. CASH FLOW FROM FINANCING ACTIVITIES 3,352,581

Capital increase 1,063,718

New financial debts 2,264,723

Provisions for risks and charges 24,140

IV. CASH FLOW VARIATION ( I + II + III ) 47,480

Change in investments and liquidities 47,480


CommentsComments on the consolidated accounts

I. CONSOLIDATION CRITERIA

The consolidation scope includes all subsidiaries effectively controlled by Elia SystemOperator, either because it holds more than 50% of the voting rights at the general meeting, or because it is entitled to appoint more than half of the directors.

The scope of consolidation excludes:• companies in which Elia System Operator holds more than 20% of the capital but whose

capital and reserves are less than € 1,000,000 or whose result is less than € 500,000 andwhose inclusion in consolidation would not make any significant difference to thegroup’s assets.

• companies whose object is not directly linked to the group’s main activity and whoseinclusion in consolidation would not make any significant difference to the group’sassets.

II. FULLY CONSOLIDATED COMPANIES

Name Registered office VAT number % direct and

Elia Asset SA Boulevard de l’Empereur, 20 BE–475.028.202 indirect interest

B-1000 Brussels 100%

III. COMPANIES INCLUDED IN PROPORTIONAL CONSOLIDATION

None

IV. COMPANIES ACCOUNTED FOR BY THE EQUITY METHOD


Elia Re SA Av. de la gare 65 - indirect interest

L–1161 Luxembourg 100%

Subsidiary whose current activities are so different that consolidation would conflict withthe principle of fairness. (Article 108, paragraph 2 of the royal decree of 30 January 2001on implementation of the Company Code)

V. NON CONSOLIDATED COMPANIES


H.G.R.T. Rue Henri Regnault 34-40 - indirect interest

F-92068 Paris La défense 24.50%

Cedex 08

At year-end, the participating interest in this company is negligible. Including it in consolidation would not have any significant effect on the amount of consolidated assets,the consolidated financial position or the consolidated results.


VI. SUMMARY OF ACCOUNTING PRINCIPLES (CONSOLIDATION)

Consolidation differenceConsolidation differences represent the differencebetween the book value of the shares held in the sub-sidiary and the share of the consolidated investee’sequity capital represented by those shares.

Consolidation differences are subdivided into consoli-dation differences arising on initial consolidation andchanges within the reporting period. The initial consolidation difference is calculated when the entityis first accounted for in the consolidated balancesheet. When an entity is consolidated, the differencebetween the cost of the investment and the share inthe consolidated entity’s equity is, insofar as possible,allocated to the asset or liability item from which the difference arises. All or part of any amounts that cannot be allocated to these headings are accountedfor as a “consolidation difference” in the consolidatedbalance sheet on the assets side where the acquisitioncost exceeds the share of equity value, and on the liabilities side where it does not.

A consolidation difference booked as an asset is written off following on the straight-line depreciationprinciple, which takes due and reasonable account ofthe economic situation and the objectives pursuedwhen the acquisition took place.

A positive consolidation difference arising from theparticipation of Elia System Operator in Elia Assets isbooked to the assets side. In view of the regulatoryenvironment and legal framework within which thegroup is developing, this difference is considered asintangible.

Under Belgian accounting principles, tangible assetswhose use is not limited in time are subject to beingwritten down in the event of a write-down or long-term depreciation.

As a result, the consolidation difference allocated tothe assets side is not written off. At each year-end, the intangible nature of this asset is re-assessed in thelight of the economic, regulatory and technologicalenvironment in which the company is operating. Ifthe circumstances prevailing at the time of bookinghave changed, then write-downs are booked.

Tangible assetsAcquisition cost

Tangible assets are carried at their purchase price, original cost or contribution value.

Accessory expenses

Accessory expenses are included in the acquisitioncost of the tangible assets to which they relate, andinclude in particular the non-deductible portion ofVAT levied on capital expenditure up to 30 June 1980.Accessory expenses are written down at the same rateas the facilities to which they relate.

Third-party contributions

Third-party contributions to the cost of tangible assetsare deducted from their acquisition cost. They are not deducted from the basis of depreciation, but nofurther depreciation allowance is made when the netbook value of the facilities, net of contributions, isequal to zero.

Depreciation

Depreciation recorded is calculated according to thestraight-line method.

Depreciation rates applied are the following:- Industrial buildings and civil engineering 4

- Administrative buildings 3

- Installations and machinery 4

- Lines and cables 2.5

- Dispatching and remote control 10

- Tools and office furniture 10

- Vehicles 20

- Residential buildings 3

- Other tangible assets 20

Financial assetsStock, shares and other participating interests

Stock, shares and other participating interests in non-consolidated companies are carried at theiracquisition cost or contribution value net of subsi-diary expenses and of any amounts still uncalled.

Receivables recorded as financial assets

Receivables treated as financial assets are carried attheir face value. Fixed-interest securities are recordedat their acquisition cost. If there is any doubt or riskthat all or any part of either receivables or fixed-interest securities will not be redeemed at maturity,the relevant amount is written off.


Amounts receivable after and within one yearReceivables are recorded at their face value and writ-ten-down if any doubt or risk arises that all or anypart will not be paid when due. In case of bankruptcyor composition, the unpaid receivables are automati-cally treated as bad debts and immediately written offfor their total net value (less VAT). Amounts may bewritten off other receivables if appropriate and on acase-by-case basis.

InventoriesRaw materials and goods

Raw materials and goods are carried as assets at theiracquisition value, including any accessory expenses.The stocks to which they relate are valued by theweighted average price method.Goods which are obsolete and unusable in the busi-ness, or whose estimated realisable value is lowerthan their book value are written down.

Orders in progress

Orders in progress are carried at cost as assets in thebalance sheet.

Short-term investments and cashInvestments are carried as assets at their acquisitionprice, excluding accessory expenses. At year-end,investments and cash are written down if the marketvalue is less than the book value. Investments that are only going to be realised in themedium to long term are written off where there is acapital loss or depreciation. Cash in foreign currenciesare valued on the basis of the exchange rate applica-ble on the last day of the company’s financial year.

Provisions and deferred taxesAt the end of each accounting year, the Board ofDirectors, acting prudently, fairly and in good faith,decides on the provisions to be made against foresee-able liabilities and contingent losses arising in thecurrent or previous accounting periods.

DebtsDebts are booked at their face value.

Deferrals and accrualsOn the assets side

The expenses that were made during the accountingyear but that are completely or partly chargeable to a later accounting year, are valued according to a proportional rule.The revenues or parts of revenues of which the collec-tion will take place during one or more followingaccounting years, but that have to be charged in theaccounting year concerned, are valued for the propor-tion that relates to the accounting year concerned.

On the liability side

Charges completely or partly relating to the account-ing year but which will be paid during a later accounting year, are valued with the amount relatingto the accounting year.The revenues collected during the accounting yearbut that have to be charged completely or partly inanother accounting year, are also valued with theamount which must be considered as a revenue forthe next accounting year.

Rights and commitments not reflected in the balance sheetRights and commitments not reflected in the balancesheet are disclosed in the notes to the accounts byclass of transaction for the face value of the commit-ment shown in the contract, or failing that, at theirestimated value. Non-quantifiable rights and commit-ments are disclosed for reference only.

Financial instruments and derivativesWhere financial instruments clearly cover a specificasset or liability item, they are valued according to the symmetry rule. The object of this rule is to book the derivative financial instrument taking intoaccount the valuation rules of the hedged item.The same rule also applies where classes of assets orliabilities of the same kind are hedged. At the end of the financial year, the income fromfinancial transactions not specifically identified ashedging instruments is valued at the fair marketvalue for the open positions it generates. By virtue of the precautionary principle, possible unrealisedlosses are taken as charges.


VII. STATEMENT OF FORMATION EXPENSES

None

VIII. STATEMENT OF INTANGIBLE FIXED ASSETS

None


IX. STATEMENT OF TANGIBLE FIXED ASSETS, in thousands of euros

Land and Plant,

buildings machinery and

equipment

Acquisition cost

At end of previous year

Current year’s changes:

- Acquisitions, including fixed assets,

own construction 1,975 8,289

- Sales and disposals (-) (499) (23,603)

- Transfers (from one heading to another) (+)(-) 278 82,762

- Translation differences (+)(-)

- Other changes 74,208 4,624,410

At end of current year 75,962 4,691,858

Revaluation surpluses



- Registered

- Acquisitions from third parties

- Written-off (-)

- Transfers (from one heading to another) (+)(-)


- Other changes 18 158

At end of current year 18 158

Depreciation and write-downs



- Registered 892 90,448

- Write-backs for year (-)

- Acquisitions from third parties 4 4,047

- Written down after sales and disposals (-) (181) (7,769)

- Transfers (from one heading to another) (+)(-) 8 5,777


- Other changes 12,528 1,636,464

At end of current year 13,251 1,728,967

Net carrying value at end of current year 62,729 2,963,049

of which:

Land and buildings

Plant, machinery and equipment

Furnishings and vehicles


Furnishings Leasing Other Construction in TOTAL

and vehicles and other tangible progress and

similar rights fixed assets advance payments

1,288 127,441 138,993

(13,700) (31) (148) (37,981)

(83,040) 0

177,364 2,926 3,133 271,971 5,154,012

164,952 2,926 3,102 316,224 5,255,024

176

176

2,908 120 319 94,687

4,051

(13,417) (7) (9) (21,383)

(5,785) 0

168,617 2,572 643 14,370 1,835,194

158,108 2,692 955 8,576 1,912,549

6,844 234 2,147 307,648 3,342,651

233 233

1 1


Treatment of consolidation differences• On 1 July 2001, CPTE contributed the electricity transmission system, that it formerly

owned, to a newly-created separate legal entity, Elia.

This contribution is considered by law as a contribution of a business activity. It wastherefore carried out at the grid’s net book value of € 1,624.6 million and was entirelypaid through share issue. As a result, Elia’s financial structure was made up of almost100% equity.

• The “CREG guidelines on tariff policy1” (hereafter referred to as “Guidelines”) drawnup by the regulator establish that invested capital is remunerated according to a regula-tory asset base (RAB) of which, in compliance with the Guidelines, 33% is financed byequity and 67% through borrowed funds. At 31 December 1999, the RAB amounted to € 3,259.8 million.

• Elia’s financial structure was modified according to accounting and tax constraints tobring it into line with the agreed structure set out in the CREG Guidelines. To this end, a new legal entity named Elia System Operator was established. Elia System Operatorpurchased CPTE’s shares in Elia at their regulatory value, financing the purchase on the basis of approximately 1/3 equity and 2/3 borrowed funds.

• Subsequently, Elia System Operator was appointed federal transmission system opera-tor and Elia’s company name was changed to Elia Asset.

Elia System Operator’s appointment as federal transmission system operator is validfor a period of 20 years from 17 September 2002, barring any of the specific situationslisted under Article 10, paragraph 2 of the Law of 29 April 1999 on the organisation ofthe electricity market (hereafter referred to as the Electricity Law). As regards renewingthis appointment, Article 10, paragraph 1 of the Electricity Law stipulates that the sys-tem operator is appointed after being nominated by the grid owner(s) who control atleast 75% of the country transmission grid in at least two thirds of the territory of eachregion. To date, Elia has been the only company to meet these requirements.

• As a result of the measures outlined above, when the two entities are consolidated, itbrings out a positive consolidation difference between the value of the stake of Elia System Operator in Elia Asset and the proportion of Elia Asset’s equity represented bythe shares held by Elia System Operator. In terms of the financial structure of Elia Asset,the value of its equity is similar to the net book value of its assets. Consequently, theconsolidation difference is more or less equal to the difference between the value of thestake held by Elia System Operator in Elia Asset and the net book value of Elia Asset’sassets.

This difference is to be booked entirely to the assets side: the traditional book value ofthe transmission grid is replaced by the economic value determined at the time ofacquisition.

1 CREG, Guidelines on tariff policy and a fair profit margin in particular with regard to the national

electricity transmission system operator, June 2001


• Elia Asset’s economic value is generated by the RAB of the electricity grid it owns. ThisRAB is recalculated on an annual basis by Elia System Operator and is submitted to theregulator for approval. It serves as a basis for calculating the conventional remuneration(also regulated1) of the group’s equity. The value of the financial stake held by Elia System Operator in Elia Asset represents the value of the RAB booked on the date of the Elia Asset shares acquisition.

According to the principles currently agreed with the regulator, the RAB evolves annually as follows:

RAB t+1= RAB t+ investments t+1- disinvestments t+1- depreciation t+1+/- variation in the working-capital requirement

It is important to point out that it is the depreciation based on the grid assets’ bookvalue, and not the depreciation based on their regulated value that is deducted from the RAB t.As a result, although the consolidation difference is booked to the assets side and is atangible fixed asset, it is viewed as intangible.

• Under Belgian accounting principles, tangible fixed assets of which the use is not limited in time are subject to being written down in the event of capital loss or long-term depreciation

Therefore, the consolidation difference appropriated to the assets side is not written off; at each year-end, the intangible nature of this asset is re-assessed in the light of theeconomic, regulatory and technological environment within which the company isdeveloping. If necessary, appropriate write-downs are booked.

• Taking into account a 28 years lifetime (corresponding to the average lifetime of theassets at closing), the impact of depreciating this difference on the consolidatedaccounts would have been the following:

Impact on the consolidated income (in thousands of euros)Consolidated income before depreciation of consolidation difference 63,538

Depreciation of consolidation difference (60,716)

Consolidated income 2,822

Impact on equity (in thousands of euros)Capital 1,049,491

Consolidated reserves (46,489)

Equity 1,003,002

1 This regulated remuneration is calculated by applying the formula RAB x cost of equity. In accordance

with the Guidelines, the cost of equity is given by the Capital Asset Pricing Model, in which the condi-

tions for determining the risk-free rate and the risk premium of the security are fixed by the regulator.


X. STATEMENT OF FINANCIAL FIXED ASSETS, in thousands of euros

Companies Other

consolidated companies

according to the

equity method

Participations

a) Acquisition cost

Value at end of previous year


- Acquisitions 5,000 466

- Sales and disposals (-)



At end of current year 5,000 466

b) Revaluation surpluses



- Registered


- Write-downs (-)



At end of current year

c) Amounts written down



- Registered

- Write-backs as superfluous (-)


- Write-downs after sales and disposals (-)



At end of current year

d) Uncalled amounts


Current year’s changes: (+)(-) 3,000

At end of current year 3,000


X. STATEMENT OF FINANCIAL FIXED ASSETS, in thousands of euros

Companies Other

consolidated companies

according to the

equity method

e) Movements in the equity of companies

consolidated according to the equity method (+)(-)

- Share in the result for the financial period

- Dividend payouts relating to the participation

- Other changes in equity

Net book value at end of current year

(a)+(b)-(c)-(d) +/- (e) 2,000 466

Amounts receivable

Net book value at end of current year


- Additions 12

- Reimbursements (-) (4)

- Amounts written down (-)

- Amounts written back


- Other (+)(-) 64

Net book value at end of current year 72

Cumulative write-downs at end of current year

XI. STATEMENT OF CONSOLIDATED RESERVES, in thousands of euros

Amounts

Consolidated reserves at end of previous financial year (+)(-)

Changes:

- Shares of the group in the consolidated income (+)(-) 63,538

- Other changes: (+)(-)

(breakdown of the meaningful amounts not approportioned

to the share of the group in the consolidated result)

Dividend payouts Elia System Operator statutory accounts (49,311)

Consolidated reserves at end of current financial year (+)(-) 14,227


XIII. STATEMENT OF DEBTS, in thousands of euros

Analysis by maturity

< 1 year within > 5 years

1 to 5 years

Breakdown of long term debts

according to their residual term

Financial debts 13,862 401,495 946,712

Subordinated loans 12,395 49,579 61,973

Unsubordinated debentures

Leasing and other similar obligations 1

Borrowings from credit institutions

Other loans 1,466 351,916 884,739

Trade debts

Suppliers

Bills of exchange payable

Advances received on orders in progress

Other debts

TOTAL 13,862 401,495 946,712

XII. STATEMENT OF CONSOLIDATION DIFFERENCES RESULTING FROMTHE APPLICATION OF THE EQUITY METHOD

None


XIV. INFORMATION ON RESULTS, in thousands of euros

2002

NET TURNOVER

2. Aggregate net turnover of the group in Belgium 668,894

(heading 70 of the income statement)

AVERAGE WORK FORCE in units AND EMPLOYEES CHARGES

Consolidated companies and fully consolidated companies

1. Average headcount 1,105

- Workers

- Employees 1,095

- Managers / Managerial staff 10

- Other staff

2. Employees charges

(heading 62 of the income statement)

- Wages and social charges 104,253

- Pensions 9,817

3. Average headcount employed in Belgium by

the companies concerned 1,105

EXCEPTIONAL INCOME

1. Analysis of the OTHER EXCEPTIONAL INCOME,

if it involves significant amounts

(heading 764/9)

2. Analysis of the OTHER EXCEPTIONAL CHARGES,

if it involves significant amounts

(heading 664/8)

“Transform 2003”, staff restructuring program (2,753)

INCOME TAXES

1. Difference between the taxes charged in the consolidated

income statement for the current years and the preceding

years and the amount of the taxes paid or payable

in respect of those periods, provided that this difference

is material for the purposes of future taxation.

2. Effect of exceptional income on the amount of income

taxes on the current year. (1,106)


Purchase commitments

The group has short-, medium-, and long-term commitments for a number of services thatare essential to its business.

Derivatives

Derivatives are used to hedge interest-rate risk.

Interest-rate risk management is performed and managed centrally by the financialdepartment, in compliance with the objectives and guidelines approved by the Board ofDirectors. It applies to the net financial indebtedness. The general policy does not allowthe use of financial instruments for speculative or trading purposes. Currently, more than40% of the group’s total net indebtedness is at fixed rate.

The group has entered into interest-rate swap agreements and forward rate agreements.These agreements aim at ensuring a perfect hedge with the hedged items. The costs ofthese agreements are posted under interest and other debt charges.

XV. OFF-BALANCE-SHEET RIGHTS AND COMMITMENTS,in thousands of euros

2002

A. 4. a) Major commitments of fixed assets acquisitions 116,056

b) Major commitments of fixed assets disposals

5. a) Rights from transactions relating to:

- interest rates

- exchange rates

- prices of raw materials or goods

- other similar transactions

b) Commitments from transactions relating to:

- interest rates 895,787

- exchange rates

- prices of raw materials or goods

- other similar transactions


B. Obligations arising from technical guarantees linked to sales and servicesalready realised and renderedNone

C. Litigations and other major commitmentsSeveral legal actions and proceedings are pending. They were brought both by andagainst the group’s companies. In light of the information available at the time the presentaccounts were drawn up, the group does not anticipate that these proceedings will havemajor adverse effects on the consolidated accounts.

D. Supplementary pension schemeBy virtue of a collective agreement of 2 May 1952, staff enjoy pension supplements underwhich, as retired persons, they are entitled (following a full career) to overall funds equalto 75% of their final annual income, in accordance with the relevant legal provisions.These supplements are partially revertible to the widow or widower and where necessary,can be supplemented by orphan benefit.If the individual dies while at work, the additional survivorship supplements are trans-ferred to the beneficiaries.

In accordance with the express terms of the above-mentioned collective agreement, thesebenefits meet the following three criteria:• individuals only become entitled to a pension supplement upon reaching retirement

age;• they are booked to operating charges in the same way as salaries; • the benefits granted are linked to the company’s operating result.

The same guarantees are granted to operating personnel hired since 1 January 1993, andall managerial/executive staff hired prior to 1 May 1999, but in a funded pension planprovisioned by individual and employer contributions as set out in legislation. After staffemployed prior to 1993 were given the option of signing up to the scheme, by 1997, morethan 90% of operating staff were involved in the funded pension plan.

Managerial and executive staff hired after 1 May 1999 and operating staff hired after 1 January 2002 enjoy a funded pension plan provisioned by both personal and employers’premiums that are three to four times the amount of personal premiums.

These contributions are paid respectively to the societies Elgabel, Pensiobel, Powerbel andEnerbel, and the insurance company Contassur. All of them act as the pension fund forthe electricity and gas sector. In the same perspective, a group insurance policy has beensubscribed for managerial staff.


XVII. FINANCIAL RELATIONSHIPS WITH DIRECTORS OR MANAGERS OF THE CONSOLIDATION COMPANY, in thousands of euros

2002

A. Total amount of remuneration granted in respect of their

responsibilities in the consolidating company, its subsidiary companies

and its affiliated companies, including the amounts in respect of

retirement pensions granted to former directors or managers 156

B. Total amount of advances and credits granted by the consolidating

company, by a subsidiary company or by an associated company

XVI. RELATIONSHIPS WITH AFFILIATED COMPANIES AND COMPANIESLINKED BY PARTICIPATING INTERESTS BUT NOT INCLUDED IN CONSOLIDATION, in thousands of euros

Affiliated Companies

companies linked with

participating

interests

2002 2002

Financial fixed assets

Participations and shares 466

Auditors’ report


Auditors’ report

Joint statutory Auditors’ report on the consolidated financial statement for the yearended 31 December 2002 to the shareholders’ meeting of the Company Elia System Operator

In accordance with legal requirements, we are pleased to report to you on the performance of the audit mandate which you have entrusted to us.

We have audited the consolidated financial statements as of 31 December 2002, whichhave been prepared under the responsibility of the board of directors of the Company andwhich show a balance sheet total of 3,560,828,676.06 euros and a consolidated profit forthe year of 63,538,132.45 euros. We have also examined the consolidated directors’ report.

Unqualified audit opinion on the consolidated financial statements with an emphasisof matter paragraph

We conducted our audit in accordance with the standards of the “Institut des Réviseursd’Entreprises/Instituut der Bedrijfsrevisoren”. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidatedfinancial statements are free of material misstatement, taking into account the legal andregulatory requirements applicable to consolidated financial statements in Belgium.

In accordance with those standards, we considered the group’s administrative andaccounting organisation, as well as its internal control procedures. We have obtained explanations and information required for our audit. An audit includes examining, on atest basis, evidence supporting the amounts and disclosures in the consolidated financialstatements. An audit also includes assessing accounting principles used, the basis for consolidation and significant accounting estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that ouraudit provides a reasonable basis for our opinion.

In our opinion the consolidated financial statements give a true and fair view of thegroup’s assets, liabilities, consolidated financial position as of 31 December 2002 and theconsolidated results of its operations for the year then ended, in accordance with the legaland regulatory requirements applicable in Belgium and the information given in the notesto the consolidated financial statements is adequate.

Without qualifying our opinion as expressed above, we draw the attention to the consoli-dated report of the board of directors in which the directors disclose the possible impact,but not measurable, on the 2002 financial statements, related to the implementation of theelectricity tariffs approved by the CREG on 25 March 2003.


Other certification and information

We supplement our report with the following certification and information which do notmodify our audit opinion on the consolidated financial statements:

• The consolidated directors’ report contains the information required by law, is consis-tent with the consolidated financial statements and discloses the justification of the nondepreciation in 2002 of the consolidation difference allocated to tangible assets and theimpact of this decision as well as the ongoing reconciliation process between accountingand physical inventories of tangible assets not yet finalised as of today.

• Without prejudice to certain formal aspects of minor importance, the consolidatedfinancial statements have been prepared in accordance with the legal and regulatoryrequirements applicable in Belgium.

Brussels 11 April 2003

ernst & young klynveld peat marwick goerdelerréviseurs d’entreprises scc (B160) réviseurs d’entreprises scrl (B001)Avenue Marcel Thiry 204 B Spoorweglaan 3 B1200 Bruxelles 2641 Wilrijk

Statutory Auditor represented by Statutory Auditor represented by

Jacques Vandernoot Erik ClinckPartner Partner

Annual accountsElia System Operator SA annual accounts (abridged financial statement)

Abridged balance sheet

Abridged income statement


M.

VAN

DEN

EECKH

OU

DT


Annual accountsElia System Operator SA annual accounts (abridged financial statement)

Bearing in mind the structure of the companies, the details of the statutory annualaccounts and the comments on the accounts by parent company Elia System Operator SAin this report would frequently be overlapped by the comments.

Consequently, in accordance with the Belgian Companies Code, the annual accounts ofElia System Operator SA are presented below in an abridged version.

In addition, the complete annual accounts version and the directors’ report of Elia SystemOperator SA, along with the auditor’s report, have been submitted to the National Bankof Belgium. These documents are available upon request from:

Elia System Operator SADepartment Accounting and FinanceBoulevard de l’Empereur 20B-1000 Brussels

The auditors gave their unqualified opinion with explanatory paragraph of Elia SystemOperator SA’s annual accounts.


Abridged balance sheetAbridged balance sheet


ASSETS

FIXED ASSETS

FINANCIAL ASSETS 3,304,177

CURRENT ASSETS

AMOUNTS RECEIVABLE WITHIN ONE YEAR 140,187

SHORT-TERM INVESTMENTS 44,100

CASH 1,001

DEFERRED CHARGES AND ACCRUED INCOME 22,047

TOTAL ASSETS 3,511,512

LIABILITIES

CAPITAL AND RESERVES

CAPITAL 1,049,491

LEGAL RESERVE 2,595

PROVISIONS AND DEFERRED TAXES

PROVISIONS FOR RISKS AND CHARGES 35,354

DEBTS

LONG TERM FINANCIAL DEBTS 1,339,700

SHORT TERM FINANCIAL DEBTS 915,049

TRADE DEBTS 116,265

OTHER DEBTS 51,423

ACCRUED CHARGES AND DEFERRED INCOME 1,634

TOTAL LIABILITIES 3,511,512


OPERATING INCOME 459,471

OPERATING CHARGES (288,851)

OPERATING PROFIT 170,620

FINANCIAL CHARGES AND INCOME (83,622)

PROFIT BEFORE TAXES 86,998

EXCEPTIONAL INCOME 0

INCOME BEFORE TAXES FOR THE CURRENT YEAR (+) 86,998

TAXES (35,092)

NET INCOME FOR THE CURRENT YEAR 51,906

INCOME FOR THE CURRENT YEAR TO BE APPROPRIATED 51,906

Abridged income statementAbridged income statement


Editorial staffElia Communication and Environment

Graphic design and coordinationFrank Andries

EditorJacques Vandermeiren

Head officeElia saBoulevard de l’Empereur 20B-1000 BrusselsBelgiumtel. + 32 2 546 70 11fax + 32 2 546 70 10

www.elia.be

ContactsWalter Aertsens, tel. + 32 2 546 73 74Lise Mulpas, tel. + 32 2 546 73 75

Dit document is eveneens beschikbaar in hetNederlandsCe document est également disponible en français

April 2003

List of abbreviations

IBGE : Brussels Institute for Environmental Management CCEG : Electricity and Gas Control Committee CREG : Commission for Electricity and Gas RegulationCWaPE : Commission Wallonne de Régulation Pour l'Energie

(Walloon Energy Regulation Commission)VREG : Vlaamse Reguleringsinstantie voor de Elektriciteits- en Gasmarkt

(Flemish Commission for Electricity and Gas Control)

ETSO : European Transmission System OperatorsUCTE : Union for the Co-ordination of Transmission of Electricity

ARP : access responsible partyEMF : electromagnetic fieldsRUE : rational use of energy

kWh : kilowatt hourMW : megawattMWh : megawatt hour (= 1,000 kWh)GWh : gigawatt hour(= 1,000 MWh)kV : kilovolt

e n e r g y o n t h e r i g h t t r a c k

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