presentation results 2013 - alliander.com · this presentation has been prepared with due regard to...
TRANSCRIPT
21 February 2014
Presentation
Results 2013
Disclaimer
‘We’, ‘Alliander’, ‘the company’, ‘the Alliander group’ or similar expressions are used in this presentation as synonyms for
Alliander N.V. and its subsidiaries, Liander refers to the grid manager Liander N.V. and its subsidiaries. The name Endinet refers
to the Endinet group, including grid manager Endinet B.V. Stam refers to Stam Heerhugowaard Holding B.V. and its subsidiaries
and Liandon refers to Liandon B.V. Alliander N.V. is the sole shareholder of Liander N.V., Endinet Groep B.V., Liandon B.V.,
Alliander Telecom N.V., Alliander Participaties B.V., Verlian B.V., Stam Heerhugowaard Holding B.V., CDMA Utilities B.V. en
Alliander AG.
Parts of this presentation contain forward-looking information. These parts may –without limitation– include statements on
government measures, including regulatory measures, on Alliander’s share and the share of its subsidiaries and joint ventures in
existing and new markets, on industrial and macroeconomic trends and on the impact of these expectations on Alliander’s
operating results. Such statements are preceded by, followed by or contain words such as ‘believes’, ‘expects’, ‘thinks’,
‘anticipates’ or similar expressions. These prospective statements are based on the current assumptions and are subject to
known and unknown factors and other uncertainties, many of which are beyond Alliander’s control, so that future actual results
may differ materially from these statements.
This presentation has been prepared with due regard to the accounting policies applied in the 2013 financial statements of
Alliander N.V., which can be found on www.alliander.com.
All financial information shown in this presentation has not been audited and is made available for the purpose of discussing the
current and future financial position of Alliander. No party can rely upon this presentation unless explicitly confirmed otherwise in
writing by the company.
This presentation has not been audited
Alliander results 2013 2
Content
1. Highlights
2. Alliander at a glance
3. Results 2013
4. Appendices
Alliander results 2013 3
Highlights 2013 YTD
• Reported results 2013: € 288 million (2012: € 224 million). Comparable results 2013: € 287 million (2012: € 228 million)
• Higher revenue due to increase in regulated tariffs
• Stable CAPEX and OPEX
• Credit ratings
• S&P rating upgrade to AA-/A-1+ from A+/A-1 with stable outlook (Aug-13)
• Moody’s rating unchanged at Aa3/P-1 with stable outlook
• Early redemption of € 500 million perpetual subordinated bond loan
• New issue of € 500 million perpetual subordinated bond loan
• Early Termination of three cross-border lease transactions
• RCF: € 600 million extended until July 2018
Financial results and position
• Method decisions new regulatory period 2014-2016 have been published indicating tariff decreases due to lower WACC, decrease in average sector cost and regulation of metering.
• The EU Court of Justice ruled that Netherlands’ activities to unbundle the distribution of electricity and gas are compatible with EU treaties if overriding reasons exist that are in the public interest. The Dutch Supreme Court has now to decide on unbundling
• Dutch Government abandoned partial privatization plans of Gasunie and TenneT
• Cost investigation by ACM
• Successful introduction of new market model.
Regulatory developments
• 12-month average electricity outage falls from 24.5 (Dec-12) to 24.0 minutes (Dec-13).
• Customer satisfaction decreases slightly
• Start of efficiency program in operation
• Acquisition of CDMA data communication network for €18 million
• New business activities: sustainable area development, mobility services and sustainable living
• Management Board extended to 3 members with appointment of Mrs Thijssen
• Reorientation of strategic direction Alliander in relation to 1) the pace of network digitisation and 2) the assessment of the value and necessity of increasing scale in combination with geographic orientation
Strategic and operational
developments
Alliander results 2013 4
Content
1. Highlights
2. Alliander at a glance
3. Results 2013
4. Appendices
Alliander results 2013 5
Other24%
Gelderland45%
Friesland13%
Noord-Holland9%
Amsterdam9%
Stable public shareholder base
Alliander Shareholders: Provinces & Municipalities
100% owned by Dutch provinces and municipalities and privatisation is not allowed by law
Alliander’s grid coverage regions largely coincide with
the shareholders base
(1) Includes province of Flevoland, and various municipalities located in the provinces of Gelderland, Friesland, Flevoland, Zuid-Holland and Noord-Holland
(2) Endinet shares acquired by Alliander as per 1 July 2010
(1)
Alliander results 2013 6
Amsterdam
Noord-Holland
Gelderland
Endinet (2)
Friesland
Number of connections (x1,000)
2.056 1.946
3.057
2.631
2.054
2.630
52187 138 102207 3253
55
4.000
4.687
5.687
394191
134 107
0
1.000
2.000
3.000
4.000
5.000
6.000
Alliander Enexis Stedin Delta Cogas Rendo Westland
Electricity connections
Gas connections
Market position
• Alliander has 3.1 million electricity connections and 2.6 million gas connections in the Netherlands
• Alliander has a market position of 37%
Source: ECN/EnergieNed/Netbeheer Nederland “Energy Trends” 2012 publication
Notes: (1) Alliander includes Endinet
(2) Enexis includes Intergas
(2)
(1)
Alliander results 2013 7
Overview Dutch energy networks
Electricity networks Gas networks
Alliander results 2013 8
Source: EnergieNed “Energy in the Netherlands” 2011 publication, adjusted for Endinet acquisition by Alliander and Intergas acquisition by Enexis
12
1
2
6 7
3
5
8
7 3
4
1
5
6
2
1 1
2
2
5
6
1 7
3
1 4
1
1
2
2
COGAS (6)
Westland Energie Infrastructuur BV (7)
RENDO Netbeheer BV (5) Liander and Endinet (1)
Stedin (3)
Delta Netwerkbedrijf BV (4)
ENEXIS and Intergas (2)
9 Alliander results 2013
Position in the Dutch energy value chain
Supply
Production and trade Distribution Transmission
Regulated Regulated
The Dutch energy value chain has been partially liberalised over the years. Regional distribution and
transmission are regulated
Liberalised Liberalised
Vattenfall/Nuon
RWE/Essent
Eneco
Tennet
Gasunie
Alliander
Enexis
Stedin
Vattenfall/Nuon
RWE/Essent
Eneco
• Regional Grid Manager: Management of regional electricity and gas grids
• Electricity & gas metering business
• Regulated assets
• Low risk profile due to regulatory environment
• Service, maintenance and
automation of complex energy
infrastructures, including for
TenneT
• Clients are in the stable and
regulated network sector
• Stable and predictable cash flow
Alliander’s businesses: stable cash flow profile
Regulated business >90%
Alliander results 2013 10
Results 2013Network operator
Liander
Network company
EndinetOther¹ Eliminations Total
€ million
Operating income
External income 1,642 117 87 - 1,846
Internal income 3 - 315 -318 -
Total income 1,645 117 402 -318 1,846
Operating expenses
Total operating expenses 1,185 90 421 -318 1,378
Operating profit reported 460 27 -19 - 468
Total current assets 6,260 518 2,645 -1,876 7,548
(1) Comprises other activities within the Alliander-group including the activities of Liandon, Stam, Alliander AG, Corporate departments and service units (both part of
Alliander N.V.)
Regulation - Regulatory framework
11
Basic Philosophy
• Incentive based regulation
• Output steering
Regulation model
• Stimulating competition by benchmark regulation
• Creating incentives for operators to operate as efficiently as
possible
• Level playing field (equal performance leads to equal
allowed revenue)
• Rate of return in accordance with risk (WACC). Part of the
regulated cost base
• Small regulator (at a distance from operations)
Regulatory scope
Transport and connection service of electricity and gas. The
metering market is currently regulated on a cost-plus basis.
Benchmark competition
Benchmark is the average total cost of the network sector,
including a normalised rate of return (WACC), as well as the
extrapolation of the development of the frontier shift.
Network operators are encouraged to beat the benchmark (or
efficient cost level). By beating the benchmark it is justifiable to
lower the benchmark for the next regulation period. At first the
profits remain at the network operators. When the new lowered
benchmark becomes effective consumers will also benefit.
Tariff levels are set in advance for at least 3 years. To estimate
these levels the regulator uses the recent historical
performance of the benchmark. As a result the tariffs follow the
realised cost with a time-lag.
In the long run the sector as a whole is able to cover its total
cost including capital cost.
Constructive regulatory framework which does not allow for privatization
Alliander results 2013
Regulation – Calculation of allowed revenue
Calculation
• Output steering implemented in the energy Acts by the
formula:
• ARt = (1 + (cpi ± x + q)/100 ) * ARt-1 , by which:
− ARt = allowed revenue in year t based on
output volume V and an average sector cost
level C
− cpi = consumer price index
− x = efficiency reduction (x factor)
− q = quality performance
− V = output in a determined historical year
− C= average sector cost level in a determined
historical year
12
Notes
• Average sector cost level consists of three components
1. Average sector OPEX per year
2. Average sector Depreciation per year
3. Average sector Regulated Asset Value per year x
Regulated WACC
• Sector averages are calculated by dividing total sector cost by
the total number of standardized units of output in the sector
• WACC is the normalised rate of return on capital based on
CAPM. Risk free rate is based on 3yr average of 10y bunds
and 10y Dutch state. Risk premium based on 3y average risk
premium on European utilities. A transaction fee premium is
also included. Equity beta based on long run average for
selected stock market listed TSOs and DSOs.
• x factors are set to adjust allowed revenues over time
• Method to determine x, q, V and C is presented in a Method
Decision and is legally binding
• Duration of a Method Decision can be between 3 and 5 years
though is in practice set at 3 years
• Regulator has certain degrees of freedom at developing the
method Decision, however:
− Obligation to consult network operators and
representative organizations in advance
− Method should be based on benchmark competition
− Applying benchmark competition after reaching a level
playing field (comparable tariffs except for differences
due to objectifiable regional differences)
Alliander results 2013
Regulation – x factors
Current regulatory period
• Period: 1 Jan 2014 - 31 Dec 2016 • Positive x factors have been set that require a decrease of
allowed revenue • Regulator has decided to use an x factor reduction and a one-off
reduction in allowed revenue in 2014 and x factor reductions in 2015 and 2016.
• x factors are partly based on WACC of 3.6% (real, after tax) • Decrease in WACC is due to lower equity beta, risk free rates and
risk premiums (WACC is CAPM based) • Revenue impact in 2014 is less than sum of one-off and x factor
due to positive recalculations effect of previous years • Revenue impact for regulatory period is on average €50 million
per year accumulating (excluding any recalculation effects for 2015 and 2016)
• Tariff levels in 2017 are expected to increase again
Previous regulatory period
• Period: 1 Jan 2011 - 31 Dec 2013 • Negative x factors allowed for an increase of maximum allowed
revenue • x factors were partly based on WACC of 6.2% (real, after tax)
Source: ACM, Alliander
Alliander results 2013 13
Gas
2014–2016 2011–2013 2008–2010
Liander N.V. 6.4 (2.7) 6.1
Endinet B.V. 7.0 (1.6) 7.2
Delta Netwerkbedrijf B.V. 6.9 (0.5) 6.6
Enexis B.V. 6.9 (3.4) 8.1
Stedin B.V. 6.6 (2.8) 4.2
x factor (%)
Electricity
2011–2013 2008–2010
x factor (%)
one-off
(in € mln)
Liander N.V. 4.6 73 (6.4) 3.6
Endinet B.V. 5.3 5 (6.2) 4.6
Delta Netwerkbedrijf 4.7 6 (5.2) 5.8
Stedin B.V. 4.6 72 (7.7) 6.3
Enexis B.V. 4.9 102 (6.1) 5.0
2014–2016
x factor (%)
Regulation – Recent developments
Metering Tariffs
The setting of allowed revenue for metering service consumer market is in a transitory phase:
• Up to 2014 actual metering costs are included in allowed revenue
• From 2014 to 2020 this level set at the 2012 cost level and indexed to CPI
• From 2020 onward the cost will be included in the benchmark
Smart Meter • Alliander needs to have 80% of the conventional meters replaced by smart meters by 2020
• Small-scale rollout (pilot) in period 2012-2014
Project ‘Stroom’
• Preparation of new Bills based on evaluation of the existing Electricity and Gas Acts
− Streamlining the Electricity and Gas Acts
− Aimed at reducing the regulatory burden and administrative cost
− Based on EU regulation
− Based on sector input
Market model
• In August the introduction of new market model was completed. It consists of a number of
measures devised to simplify administrative processes between energy suppliers and
customers and between energy suppliers themselves
• Of importance is the reallocation of responsibilities: supplier is the single point of contact for
consumers. Operational management of meter is done by the network operator and metering
data are managed by the energy supplier
Alliander results 2013
Method Decisions • Method decisions new regulatory period 2014-2016 have been published indicating tariff
decreases due to lower WACC from 6.2% to 3.6% and a decrease in overall sector cost and regulation of metering services
Unbundling • The EU Court of Justice ruled that Netherlands’ activities to unbundle the distribution of
electricity and gas are compatible with EU treaties if overriding reasons exist that are in the public interest. It is now up to the Dutch Supreme Court to decide on unbundling
14
Content
1. Highlights
2. Alliander at a glance
3. Results 2013
4. Appendices
Alliander results 2013 15
Key figures
16 Alliander results 2013
1) With effect from 2013 the interest bearing receivables are excluded in the net debt position. The 2012 figures have been restated accordingly for comparison purposes. Net
debt is defined as interest-bearing debt less interest bearing receivables, cash and cash equivalents and investments that are not restricted.
2) Ratios according to the principles of Alliander’s financial policy.
Key figures
€ million 2013 2012
Movement
compared to
2012
Financial key figures
Revenue reported 1,744 1,674 4%
Operating profit reported 457 394 16%
Operating profit comparable 468 409 14%
Profit after tax reported 288 224 29%
Profit after tax comparable 287 228 26%
Investments in property, plant and equipment 570 578 -1%
Ratios
Net debt position¹ 1,718 1,785
Solvency² 51.1% 49.5%
FFO / Net Debt² 38.7% 30.1%
Outage Electricity (in minutes) 24.0 24.5
Incidental items and fair value movements
Alliander results 2013 17
€ million 2013 2012
Total purchase costs, costs of subcontracted work -11 -15
Impact on operating profit -11 -15
Finance income/(expense) 13 -50
Result from associates and joint ventures - -12
Total impact on profit before tax 2 -77
Tax -1 73
Total impact on profit after tax 1 -4
Incidental items and fair value movements
Financial highlights 1
Alliander results 2013 18
1) Excluding incidental items and fair value movements
18
Revenue 1
Alliander results 2013 19
1) Excluding incidental items and fair value movements
19
Purchasing costs, costs of sub-contracted work
and operating expenses 1
Alliander results 2013 20
1) Excluding incidental items and fair value movements
20
Cash flows and Capex
Alliander results 2013 21 21
1) Free cash flow = Cash flow from operating activities – Gross investment in non-current assets + Contributions received from third parties
Financial position As of 31 Dec 2013
Capitalisation (€ million) Gross and Net debt (€ million)
Maturity profile (€ million) 1 Location of debt (€ million)
Credit Facility (€ 600 million) 2
3) including € 127 million finance lease obligations Liander 1) excluding € 127 million finance lease obligations Liander
2) including € 200 million L/C back-up facility
First call option of subordinated perpetual bond
Gross Debt (including CBL related financial
lease obligations) 2,022
Cash 155
Other Investments 236
CBL Investment 161
Total Cash and Cash Equivalents 552
Net debt according to IFRS 1,470
50% of subordinated perpetual bond 248
Net debt according to financial policy 1,718
Alliander N.V
€ 1,886
Liander € 133
3 Endinet Liandon
Alliander results 2013 22
Capital Market Programs
EMTN 3,000 million
ECP 1,500 million
Backup credit facility
RCF 600 million
Net debt
23 Alliander results 2013
Alliander results 2013 24
• Stable dividend
• Pay-out: 45% of after-tax profit, adjusted for incidental items, unless CAPEX from regulatory obligations or financial criteria require
higher retained earnings
• Minimum solvency of 30%
Alliander’s Financial Policy
• Part of overall policy and strategy
• Balance between protection of debt providers’ and
shareholder returns
• Financial strength and discipline
• Maintain cushion relative to regulatory criteria
• Flexibility to grow and invest
• Transparent reporting
• No structural subordination
Dividend
Policy
• FFO/Net debt: Minimum 20%
• FFO Interest cover: Minimum 3.5
• Net debt/capitalization: Maximum 60%
• Solid A rating profile (on stand alone basis)
• Comply with regulatory criteria for the network operators 1
Financial
Framework
General
Principles
1) See page 39
Strong financial profile with clear and well defined financial policy, supported by regulated financial
ratios and proven commitment to stay within financial policy framework
Financial
Policy
Liquidity
Credit Rating/
Debt providers Shareholders’ equity
Ratios financial policy 1
25
1) According to the principles of Alliander’s financial policy the subordinated perpetual bond loan is treated as 50% equity
2) Interest cover: profit after taxation adjusted for deferred tax asset movements and incidental items and fair value movements plus depreciation and net finance income
and expenses, divided by net finance income and expenses adjusted for incidental items and fair value movements
3) Funds From Operations: 12-months profit after taxation adjusted for deferred tax asset movements and incidental items and fair value movements plus depreciation
of PP&E and intangible assets
4) Solvency: equity including result period divided by total assets less the expected dividend distribution for the current year less deferred income
5) Net debt/capitalisation: net debt divided by the sum of net debt and equity
6) With effect from 2013 the interest bearing receivables are excluded in the net debt position. The 2012 figures have been restated accordingly for comparison purposes.
Strong credit ratings
Rationale
• Counts as a Government Related Issuers (GRI) under Moody's methodology
• Fully owned by Dutch provinces and municipalities – Moody’s assigns two notches of uplift to reflect their expectation of the likelihood of extraordinary support, if necessary
• Low business risk, with operations primarily in distribution networks that are price regulated under a stable and transparent system of regulation
• Low financial risk relative to European peers evident in stable and modest leverage
• Reducing regulatory revenues, reflecting lower cost of capital set by the regulator over the period 2014-2016, which we consider challenging but achievable given the lower market cost of debt
• The stable outlook reflects Moody’s expectation that Alliander will remain an electricity and gas distribution network operator that derives its revenues and cash flow from regulated activities. Furthermore, Moody’s expects Alliander to continue to follow its conservative financial policy
• Moody’s has assigned a A3 issue rating to Alliander’s subordinated perpetual bond and 50% equity weight (20-Nov-2013)
Rationale
• Ratings have not changed after application of new criteria
• Rating was last upgraded on August 15th, 2013 to AA-/A-1+ from A+/A-1
• Rating action reflects S&P’s view that the adjusted FFO to debt will remain at around 25% on a sustainable basis
• Strategic importance to the provinces and municipality owners as the monopoly provider of gas and electricity distribution services in its licence areas
• Rating reflects S&P’s view on Alliander’s low-risk regulated electricity and gas distribution network businesses, stable and predictable operating cash flow, high quality network assets and stable operating performance
• Stable outlook reflects the view that Alliander will be able to sustain adjusted FFO to debt of about 25% and is based on the assumption that the business profile will continue to be assessed as excellent and that the final determination for the 2014-2016 tariffs will not be materially different from the draft determination that ACM published on May 1, 2013
• S&P’s has assigned an A issue rating to Alliander’s subordinated perpetual bond and 50% equity weight (19-Nov-13)
AA-/Stable
A-1+
Aa3/Stable
P-1
Source: Moody’s Investors Service as of November 20th, 2013 and February 7th,2014. Standard and Poor’s as of August 15th , November 19th and 20th, 2013.
Alliander results 2013 26
Outlook
Results 2014
Given that the majority of Alliander's operations are regulated and in the light of the current regulation
methodology and the changes in the regulated tariffs in 2014, we expect, barring unforeseen and non-recurring
developments, a lower operating profit in 2014 than in 2013.
Investment
Gross capital expenditure, mainly on replacement and expansion of the networks but also including energy-
transition investments in SASensors and telecommunications networks, will amount to a total of approximately
€500 million. The pace of development of decentralised power generation and feed-in to the network is taken into
account in determining the level of our medium-term investment. Also planned in 2014 are investments for
activities in Germany and for activities connected with charging points for electric vehicles and with sustainable
area development projects as well as investments in alterations to premises in Duiven and Arnhem. The
combined capital expenditure involved is estimated at more than €100 million.
One specific, and major, investment project that will increase our regular network investment programme is the
phased roll-out of smart meters. Based on current projections, Alliander will be investing around €60 million, rising
to more than €100 million, a year in smart meters over the period 2014–2020.
Financing
Alliander's financial policy aims to preserve financial strength and flexibility and secure good access to the capital
market at all times by maintaining a solid A rating profile and by such means as ensuring a balanced repayment
schedule, having a balanced investment plan, controlling operating costs, having access to committed credit
facilities and maintaining adequate reserves of cash and cash equivalents.
.
Alliander Resultaten 2013 27
1. Highlights
2. Alliander at a glance
3 Results 2013
4. Appendices
– Detailed results 2013
– Other
Content
Alliander results 2013 28
Results
Alliander results 2013 29
Consolidated income statement
€ million
Revenue reported 1,744 1,674
Other Income 102 98
Total income 1,846 1,772
Operating expenses
Purchase costs and costs of subcontracted work -416 -449
Employee benefit expenses -453 -433
External personnel expenses -107 -121
Other operating expenses -247 -219
Total purchase costs, costs of subcontracted work and operating expenses -1,223 -1,222
Depreciation and impairment of property, plant and equipment -357 -337
Less: Own work capitalised 191 181
Total operating expenses -1,389 -1,378
Operating profit reported 457 394
Finance income 43 64
Finance expense -112 -209
Result from associates and joint ventures after tax 2 -15
Profit before tax 390 234
Tax -102 -10
Profit after tax reported 288 224
2013 2012
Consolidated balance sheet
30 Alliander results 2013
Consolidated balance sheet
€ million
Assets
Property, plant and equipment 6,012 5,821
Intangible assets 323 320
Investments in associates and joint ventures 32 28
Available-for-sale financial assets 297 314
Derivatives - 11
Other financial assets 25 46
Deferred tax assets 244 335
Total fixed assets 6,933 6,875
Inventories 37 36
Trade and other receivables 282 316
Derivatives 19 5
Tax assets - 7
Other financial assets 100 75
Cash and cash equivalents 155 100
Total current assets 593 539
Assets held for sale 22 -
Total current assets 7,548 7,414
Equity & liabilities
Equity
Share capital 684 684
Share premium 671 671
Subordinated perpetual bond 496 494
Hedge reserve - -2
Revaluation reserve 24 28
Other reserves 1,212 1,104
Profit after tax 288 224
Total equity 3,375 3,203
Liabilities
Non-current liabilities
Interest-bearing debt 1,611 1,891
Derivatives 6 73
Finance lease liabilities 127 131
Deferred income 1,555 1,530
Provisions for employee benefits 53 59
Other provisions 124 74
Total non-current liabilities 3,476 3,758
Short-term liabilities
Trade and other payables 76 88
Tax liabilities 85 78
Interest-bearing debt 284 5
Provisions for employee benefits 65 63
Accruals 187 219
Total short-term liabilities 697 453
Total liabilities 4,173 4,211
Total equity and liabilities 7,548 7,414
2013 2012
Cash flow statement
31 Alliander results 2013
Consolidated cash flow statement
€ million
Cash flow from operations
Profit after tax reported 288 224
Adjustments for:
- Finance income and expense 69 145
- Tax 102 10
- Profit after tax from associates and joint ventures -2 15
- Depreciation and impairment less amortisation 296 278
Changes in working capital:
- Inventories -1 -8
- Trade and other receivables 40 -46
- Trade and other payables and accruals -35 31
Total changes in working capital 4 -23
Changes in deferred tax, provisions, derivatives and other -10 -14
Cash flow from operations 747 635
Net interest paid -77 -100
Net interest received 5 2
Dividends received from associates and joint ventures - 15
Corporate income tax paid (received) 8 -7
Total -64 -90
Cash flow from operations 683 545
Cash flow from investing activities
Investments in property, plant and equipment -5 -
Investments in property, plant and equipment -570 -578
Construction contributions received 82 85
Investments in financial assets (associates and joint ventures) - -5
Cash flow from investing activities -493 -498
Cash flow from financing activities
Redemption current interest-bearing liabilities and current part of long-term debt -6 -504
Long-term debt issued - 798
Early redemption long-term debt - -329
Redemption loans granted 21 -
Premium paid in connection with the early redemption of bonds - -44
Settlement interest rate swaps - -57
Change in current deposits -25 220
Redemption subordinated perpetual bond -494 -
Subordinated perpetual bond issued 496 -
Reimbursement subordinated perpetual bond -53 -24
Dividend paid -74 -113
Cash flow from financing activities -135 -53
Net cash flow 55 -6
Cash and cash equivalents as at 1 January 100 106
Net cash flow 55 -6
Cash and cash equivalents as at 31 December 155 100
2013 2012
Content
Alliander results 2013 32
1. Highlights
2. Alliander at a glance
3. Results 2013
4. Appendices
– Detailed results 2013
– Other
Grid reliability
Alliander results 2013 33
Our 12-month average electricity
outage duration as per 31 Dec
2013 is 24 minutes. This is 2
minutes above our objective of
max 22 minutes
20,024,5 24,0
27,4
24,0
31,2
0
10
20
30
40
2008 2009 2010 2011 2012 2013
Average outage electricity per customer (min)
Target
24 min 22 min
Alliander results 2013
Customer Satisfaction
34
Slightly lower
customer satisfaction
in consumer and
business market
Cross border leases Risks
• Obligation to pay contractual termination value in case of:
• Event of default
• Event of loss
• Credit risk on investments
• General and tax indemnities
• Posting additional L/C’s in case of Alliander downgrade
CBL related risks
Contractual termination values CBL’s Alliander (USD billion)
Debt investments
• Contractual termination value represents the amount
needed to safeguard the intended transaction return in
case of early contractual termination
• Equity strip risk varies over time depending on the mark-
to-market value of investments relative to contractual
termination value.
• During 2013 rising USD interest rate levels resulted in a
decrease of the mark-to-market value of investments and
a rise in equity strip risk which was partly compensated
by the decrease in strip risk due to the termination of the
three leases
Contractual termination value
(1)
(1)
Risk summary
(1)
(1)
35
Contractual termination value
Equity strip risk
Equity investments
Debt investments
Early termination • In the first half of 2013, 3 cross-border lease transactions were
early terminated
4 leases 7 leases
US leases (USD million) 31 dec 2013 31 dec 2012
Equity strip risk 278 268
MtM risk - 58
278 326
Overview Letters of Credit (USD million) 31 dec 2013 31 dec 2012
Issued 6 74
Additional L/C's at A3/A- 203 127
Additional L/C's at Baa1/BBB+ 23 23
Back-up faciliteit (EUR million) 31 dec 2013 31 dec 2012
Back-up L/C facility 200 200
Cross border leases Basic structure and rationale
• Net Present Value of tax deferral for US investor
• Increase in solvency for Alliander by sharing NPV
with US investor
Rationale
At transaction closing:
1. Alliander leases grids to US Trust (headlease)
2. US Trust leases grids back to Alliander (sublease)
3. US Trust prepays all finance obligations under
headlease to Alliander
4. US Trust finances these prepayments via equity
provided by US Investor and bank debt
5. Alliander invests prepayment proceeds in a
defeased structure (off balance):
• Deposits
• Bonds
During transaction:
6. Use of investment returns to fulfil financial lease
obligations (off balance) and to fund purchase price
at end of sublease
At end of sublease:
7. Alliander option to buy grids back against
predetermined purchase price
Basic structure in steps Basic structure scheme
1 3
US Trust
Alliander Financial
institutions
US Investor Banks
Equity Debt
Head le
ase
Sub le
ase
Pre
paym
ent
Deposits and bonds
Annual payment
of financial lease
obligations
4 4
5
6 2
Partly
pledged
Buy b
ack
7
36 Alliander results 2013
CSR transparency
• Alliander has based its Corporate Social Responsibility report on the Global Reporting Initiative (GRI) guidelines
− Reports since 2008
− Reporting over 2013 was at A+ level / GRI G3
− Target level for 2014 is at comprehensive / GRI G4
• ISO 26000 Alliander adopts this global guideline for its corporate social responsibility policy
− Since 2010
• Alliander participates in the Transparency Benchmark for large Dutch corporates performed by KPMG under aegis of the Dutch Ministery of Economic Affairs, Agriculture and Innovation
− Ranked 24th in 2013 (out of 460 companies), 14th (2012),12th (2011) and 42nd (2010)
− Participates since 2008
− Target level is at the forefront position
• In 2013 Alliander’s Prime rating by Oekom Research remained unchanged (overall grade B)
− Rating since 2011
− Target level is a Prime rating
• Alliander has been rated by Vigeo (since 2011) and EIRIS (2012). These ratings are not publicly available
• Alliander has been selected for the investment universe of Triodos Bank and included in the Ethibel EXCELLENCE Investment Registers since 20/12/2012.
37 Alliander results 2013
Alliander activities in Germany
Strategy
• Exploit Alliander network operating skills
• Extend network activities by a) winning concessions and b) participation in existing networks
• Extending public lighting activities by winning tenders
Regulatory regime E and G
• Revenue cap regulation
• Regulatory period: 5 years
Existing activities (2013)
• Revenue of € 32 million and total assets of € 40 million
• Activities:
− Public Lighting activities in various cities (67% of revenue)
− Network operations in various cities (33% of revenue)
• 151 employees
• Number of electricity connections: 15,600 (Heinsberg)
• Number of light points: 62,000
New activities per 2014
• Gas network
− Heinsberg (4,100 connections)
• Public lighting
− Coesfeld (5.000 light points)
− Strausberg (3.000 light points)
− Wunstorf (6.000 light points)
Concessions won (not active yet)
• Negotiations with former concession holder on purchase price of network assets for newly granted operating concessions:
− Hennigsdorf (e+g)
− Osthavelland (e+g)
− Mühlenbecker Land (e+g)
− Eberswalde (g)
• Together the new networks represent 25,900 gas connections and 18,600 electricity connections.
• Total investment ~ € 76 million in 2013 and 2014
Alliander activities in Germany
Alliander results 2013 38
Berlin
Cottbus
Rüsselsheim
Heinsberg* Hagen
Electricity and gas (e+g)
Public lighting
Hennigsdorf
Osthavelland
Mühlenbecker Land Eberswalde
Traffic lights
Gas (g)
Düren*
Wickede
* Industrial electricity and gas
Coesfeld
Siegen
Strausberg
Wunstorf
Exis
tin
g
Sta
rtin
g 2
014
or
late
r
Financial definitions
Alliander financial policy
• Net debt is defined as interest-bearing debt less cash and cash equivalents and investments that are not restricted
• FFO: 12-months profit after taxation adjusted for deferred tax asset movements and incidental items and fair-value movements
plus depreciation of PP&E and intangible assets
• Interest cover: FFO and net financial income and expenses, divided by net financial income and expenses adjusted for incidental
items and fair value movements
• Net debt/capitalisation: net debt divided by the sum of net debt and equity
Other
• Solvency: Equity including result period divided by total assets less the expected dividend distribution less deferred income
• Deferred income (Equalisation accounts): These are the contributions and payments received from customers, property
developers and local and regional governmental bodies for the costs incurred for electricity or gas infrastructure of new housing
projects and industrial estates. The contributions and payments are recognised as deferred income on the balance sheet. Deferred
income is amortised over the expected useful lives of the assets involved. There is no legal obligation to refund any amount after
initial connection of the customer. The amounts of deferred income to be charged are laid down in the regulatory legislation.
• Financial requirements for regional network managers (by Decree of Ministry of Economic Affairs)
− investment grade rating (Min. BBB/Baa2)
or
− EBIT interest cover ≥ 1.7x
− FFO interest cover ≥ 2.5x
− FFO to total debt ≥ 11%
− Debt to total Cap ≤ 60%
Alliander results 2013 39