Presentation Results 2017 22 February 2018
Key credit highlights • Largest regional energy network company in the Netherlands Leading network • 3.1 million electricity and 2.5 million gas connections company in the • Natural monopoly status in its license areas Netherlands • Strong and stable shareholder base with 100% of the shares held by provinces and local municipalities Stable public • Geographically , network coverage regions largely coincide with the shareholders’ base shareholder base • Privatization not allowed by law • Low risk profile due to stable and proven regulatory environment Mature and • Well defined, mature and constructive regulation with 5 year regulatory period constructive • Total cost recovery for the industry is one of the basic regulatory principles regulatory regime • Current regulatory period (2017-2021) just commenced providing high degree of cash flow predictability • 85% regulated revenue from regional electricity and gas distribution Stable cash • Remaining 15% of revenue largely related to services offered to customers with regulated network flow profile activities • Strong financial profile with well-defined and disciplined financial policy • Alliander well above the ratios defined in the financial policy Robust capital • Proven commitment to stay within financial policy framework structure • Strong liquidity position with significant volume of undrawn facilities available • Current ratings of Aa2/P- 1/stable outlook by Moody’s and AA -/A-1+/stable outlook by S&P • High quality assets; reliable grid with one of the lowest annual outage duration in Europe Proven operational • Focused capex program will ensure grid quality is maintained expertise • Smart meter offering on schedule • Highest oekom rating amongst utility peer group at Prime B+ Sustainability 2 leadership
Highlights 2017 YTD • Profit after tax decreased to € 203M (2016: € 282M, 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 € 74M compared to 2016 position • Revenue rose to € 1,697M (2016: € 1,584M) as a result of one-off tariff compensation for sufferance tax charges over past few years • Operational expenses slightly higher at € 1,535M (2016H1: € 1,516M) • Investments remain high in the coming years due to continuing the roll-out of smart meters • Refinancing of € 500M subordinated perpetual bonds at 1,625% coupon (jan-18) • New € 300M EIB term loan at 1,4% interest and expiring in 2031 (jul-17) • New 5-year regulatory period has started • Regulatory Status of proposed legislation: − Proposed VEt legislation (including limitation on mandatory gas connection) is currently in framework Parliament − Parliament voted in favor of the phase out of sufferance tax by 2022 • Ingrid Thijssen appointed as CEO • Conversations with municipalities on energy transition completed Strategic • developments Sales process Allego started • Sector consolidation largely completed • Heat transition plan put into action with municipalities • Operational Realization of workload is challenged by shortage of technically skilled employees • developments Large scale offering of smart meter on schedule • 3 Roll-out of fiber-optical and mobile (CDMA) network completed • Electricity outage duration falls to 21 minutes over past 12 months (2016: 23.3)
Corporate profile Corporate profile 5 Update on regulatory framework 14 Results 2017 16 Financing and policy 20 Miscellaneous 27
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 - /Aa2 level with ‘stable outlook’ Network # Customer Grid Transported connections length volumes • Electricity 3,135,000 90,000 km 29.960 GWh Carbon footprint of 632kton (past 12 months) 6,228 million m 3 Gas 2,520,000 42,000 km Alliander shareholders: provinces • Alliander shares are owned by provinces and municipalities & municipalities • Province of Gelderland is the largest shareholder and owns 45% of all Other shares 24% Province of Gelderland • 45% The four largest shareholders together own 76% of all shares Amsterdam • Privatization is not allowed by law 9% Province of Noord-Holland 9% Province of Friesland 13% Alliander results 2017 5
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 results 2017 6
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 Digitization of customers in Investing in new network networks making choices open networks management Alliander results 2017 7
Heat transition plan put into action at local level… What do we see? The Netherlands have set their goal in being a society without harmful carbon emissions by 2050 at the latest: • 1,000 neighborhoods in 145 municipalities within our service areas need to abandon natural gas consumption • This heat transition takes place on a local level • High impact on living, neighborhoods, real estate and infrastructure • Various stakeholders with divergent interests • Too many individual choices stand in the way of the best collective solution Active cooperation • Alliander actively seeks cooperation with municipalities, housing corporations, residents and other stakeholders on how the transition from natural gas to other heating sources could take place in the best possible way and what choices are beneficial for society. • Management Board has visited municipalities and provinces in our service areas • Smart phase-out of natural gas by aligning plans and programs (urban programming) • Provide insight in new heat solutions that best fit local circumstances Alliander results 2017 8
…at the lowest possible social cost To facilitate the heat transition 1 Minimize social cost by To make sure that changes aligning heat transition and in the heat transition take by phasing out natural gas in an replacement need place with maximum efficient way where sustainable customer convenience alternatives exist Facilitate the application of 2 Develop Create or adapt Maximize the sustainable gases and new feed-in of green infrastructure infrastructures to enable gas further for green flexibility in the energy applications of the gas networks gases supply Economic and effective 3 Improve insight Improve insight in Innovation of operation of remaining gas in remaining network utilization products and AGE techniques to useful life of to minimize costs of networks minimize cost of network operation and operation and components investment replacement Prepare for the role of district 4 Develop district Create awareness in the heating operator heating market about Liander capabilities being the most logical district heating network operator Alliander results 2017 9
Energy transition in our service areas Capacity growth in decentralized electricity generation Installed wind capacity Installed combined heat and power Installed solar capacity capacity (CHP) • • • Installed solar capacity: 873 MW Installed wind capacity: 1,295 MW Installed combined heat and power capacity: • • 34% growth in past 12 months No growth in past 12 months 1,108 MW • No growth in past 12 months Green gas feed-in on our networks Number of charging poles Total transported volumes in our service areas (2017) Electricity 29,960 GWh per year 82,082 MWh per day Gas 6,228 million m 3 per year Our service areas show high growth in solar capacity and stable • • Limited scale 3,574 public charging poles in our service areas wind and CHP capacity. • • Current green gas feed-in on gas networks is 21% growth in past 12 months Overall impact still limited about 9 million m 3 • 56% growth in past 12 months Alliander results 2017 10
Energy transition in our service areas Volume growth of decentralized electricity feed-in • • Throughout the last 5 years monthly feed-in % Actual feed-in of decentral generated electricity in the Liander service varied between 4 to16% of total monthly areas is at 8 to 10% and shows annual growth transported electricity volume • • Observed volatility is mainly caused by wind Main contributor is wind which accounts for 3/4 of all decentral generated electricity Roughly 8 to 10% percent of the total transported electricity volume in our service areas is decentral generated. The overall impact on our networks is still limited Alliander results 2017 11
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