Half-Year Results 2017 26 July 2017
Highlights 2017 YTD • Profit after tax decreased to € 93M (2016H1: € 232M, including € 176M in non-recurring net sales Financial proceeds from asset swap). Profit after tax excluding incidental items and fair value movements results and increased by € 30M compared to 2016H1 position • Revenue rose to € 838M (2016H1: € 783M) as a result of one -off tariff compensation for sufferance tax charges over past few years • Operational expenses slightly higher at € 762M (2016H1: € 740M) • Investments remain high in the coming years due to continuing the roll-out of small meters • New € 300M EIB term loan with max. tenor of 14 years and available in multiple tranches (jul-17) • New 5-year regulatory period has started • Proposed VEt legislation will be put on the agenda again once a new government has been installed Regulatory • framework Proposal by Minister of Economic Affairs to limit mandatory provision of gas connection for network operators • Parliament voted in favour of the phase out of sufferance tax by 2022 • Sector consolidation largely completed • 80% of conversations with municipalities on energy transition completed Strategic developments • Large scale offering of smart meter on schedule • Operational Roll-out of fiber-optical and mobile (CDMA) network completed • developments Electricity outage duration falls to 21.1 minutes over past 12 months (30-juni-16: 23.4) 2
Corporate profile Corporate profile 4 Update on regulatory framework 11 Half-year results 2017 13 Financing and policy 17 Miscellaneous 22
Corporate profile • Service areas Alliander is the largest regional energy network company in the Netherlands Electricity and gas • Distributes electricity and gas to more than 3 million customers Electricity • Electricity outage duration of about 21 minutes per year is among the lowest in Europe • Revenue of about € 1.7bn of which >85% is regulated • Fixed assets of about € 7bn • Annual CAPEX of € 600 -700M • S&P and Moody’s credit ratings at AA-/AA level with ‘stable outlook’ Network # Customer Grid Transported connections length volumes • Electricity 3,109,000 90,000 km 29.990 GWh Carbon footprint of 746kton (past 12 months) 6,367 million m 3 Gas 2,510,000 42,000 km • Alliander shareholders: provinces & municipalities Alliander shares are owned by provinces and municipalities • Other Province of Gelderland is the largest shareholder and owns 45% of all 24% Province of shares Gelderland 45% • The four largest shareholders together own 76% of all shares Amsterdam 9% • Privatization is not allowed by law Province of Noord-Holland 9% Province of Friesland 13% Alliander half-year results 2017 4
How to achieve Paris Climate goals: Roughly three things to do Key initiatives All homes and buildings with energy label B Heating without natural gas 1. Saving energy (District-heating, biogas, 2 electrification) 2. Switching energy type All cars to become electric 3. Sustainable generation of electricity Wind turbines on 10% of continental shelf Source: McKinsey, Alliander Solar panels on all roofs Alliander half-year results 2017 5
Mission and Strategy Alliander empowers customers to make the right energy choices. For themselves and for the energy system as a whole. In order to ensure that everyone has equal access to reliable, affordable and renewable energy Supporting Excellent Digitisation of customers in Investing in new network networks making choices open networks management Alliander half-year results 2017 6
Innovation is essential … Through its businesses and projects Alliander is actively and innovatively facilitating energy saving, energy switching and sustainable generation of electricity With these activities Alliander focuses on four target groups : • Retail customers • Business customers • Collectives • Municipalities (acting both as intermediary and customer) Alliander half-year results 2017 7
…. as well as achieving economies of scale through cooperation within sector Scale & Smart meter procurement Standards • Joint procurement of smart meters by Stedin, Enduris and Westland Telecom • Cooperation between Stedin, Enduris and Westland in the field of data traffic • Commissioning of jointly owned mobile network based on CDMA technology Asset swap • Asset swap between Alliander and Enexis concluded on 1 January 2016 • Better fit with existing service areas Market facilitation processes • EDSN performs central market facilitation processes on behalf of all DSO’s and TSO’s Alliander half-year results 2017 8
Energy transition in our service areas Installed wind capacity Installed CHP capacity Installed solar capacity • • • Installed wind capacity: 1,301 MW Installed combined heat and power capacity: Installed solar capacity: 785 MW • • 40% growth in past 12 months No growth in past 12 months 1,116 MW • No growth in past 12 months Biogas feed in on our networks Number of charging poles Total transported volumes in our service areas (2016) Electricity 29,990 GWh per year 82,164 MWh per day 6,367 million m 3 per year Gas Our service areas show high growth in solar capacity and stable • • 3,174 public charging poles in our service areas Limited scale wind and CHP capacity. • • Current bio-gas feed-in on gas networks is 17% growth in past 12 months Overall impact still limited about 5 million m 3 • 23% growth in past 12 months Alliander half-year results 2017 9
Update on regulatory framework Corporate profile 4 Update on regulatory framework 11 Half-year results 2017 13 Financing and policy 17 Miscellaneous 22
Update on regulatory framework • As of 1 January 2017 the new regulatory period has started. Regulated WACC New regulatory Key changes compared to previous regulatory period: 4.0% 3.8% 3.5% - 3.3% period 5-year price control period 3.0% - Gradually decreasing WACC - Allowed revenues will be set at the efficient cost level at the start of the new period 2017 2018 2019 2020 2021 • The basics of the regulatory framework are unchanged • Streamlining of the existing Electricity and Gas Acts • Proposed new Energy Acts (STROOM) were rejected by Parliament in December 2015 Legislation VEt • In December 2016 the Minister of Economic Affairs presented some parts of STROOM as the Energy Transition Bill (VEt) to Parliament • VEt will be put on the agenda again once a new government has been installed • In February 2017 parliament voted in favour of the phase out of sufferance tax. A five year transitional period will be observed, allowing municipalities to levy sufferance tax up to 1 Jan-2022 Sufferance tax • The sufferance costs will be fully recovered in tariffs, partly in advance and partly afterwards. • Bill proposed by Minister of Economic Affairs to allow municipalities to designate urban areas were Limitation on no gas network will be installed if provisions are made for district heating or other heat supplies mandatory provision • In the designated areas the regional network operator will be exempt from the legal obligation to of gas connection connect homes to the gas network 11
Half-year results 2017 Corporate profile 4 Update on regulatory framework 11 Half-year results 2017 13 Financing and policy 17 Miscellaneous 22
Lower profit due to non-recurring asset swap sale proceeds in 2016 • Revenue is € 55M higher due to higher tariffs in first year of the new regulatory period. Tariffs rose to cover for a one -off compensation of sufferance tax charges in past years • Total purchase costs, costs of subcontracted work and operating expenses increased by € 24M as a result of higher staff costs (+ € 18M) and higher grid losses (+ € 8M) • Net financial expenses € 7M lower caused by lower interest rates on refinancing by Green Bond and negative interest rates on ECP issued • Profit after tax decreases by € 139M, mainly due to € 176M in non -recurring sales proceeds from the asset swap in 2016H1 • Excluding incidental items and fair value movements the profit after tax has increased by € 30M • No material incidental items and fair value movements 13
Investments remain stable • Investments are € 12M lower than last year • Investment level remains high due to smart meter offering • € 47M difference between gross and net investments is caused by third part contributions (2016H1: € 46M) • Out of € 191M (2016H1: € 193M) in gross investments in electricity and gas networks € 105M (2016H1: € 109M) was for expansion and € 86M for replacement purposes (2016H1: € 85M). Alliander half-year results 2017 14
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