Presentation Results 2013 21 February 2014
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 Financial results • S&P rating upgrade to AA-/A-1+ from A+/A-1 with stable outlook (Aug-13) and position • 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 • 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 Strategic and • Acquisition of CDMA data communication network for € 18 million operational • New business activities: sustainable area development, mobility services and sustainable living developments • 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 • 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 Regulatory Court has now to decide on unbundling developments • Dutch Government abandoned partial privatization plans of Gasunie and TenneT • Cost investigation by ACM • Successful introduction of new market model. Alliander results 2013 4
Content 1. Highlights 2. Alliander at a glance 3. Results 2013 4. Appendices Alliander results 2013 5
Stable public shareholder base Alliander’s grid coverage regions largely coincide with Alliander Shareholders: Provinces & Municipalities the shareholders base (1) Friesland Other 24% Gelderland 45% Noord-Holland Amsterdam Amsterdam 9% Gelderland Noord-Holland 9% Friesland Endinet (2) 13% 100% owned by Dutch provinces and municipalities and privatisation is not allowed by law (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 Alliander results 2013 6
Market position Number of connections (x1,000) • Alliander has 3.1 million electricity connections and 2.6 million gas 6.000 (1) 5.687 connections in the Netherlands (2) 5.000 4.687 • Electricity connections Alliander has a market position of 37% Gas connections 4.000 3.057 4.000 2.631 3.000 2.054 2.000 2.630 2.056 1.000 1.946 394 191 134 107 207 32 53 52 138 102 55 187 0 Alliander Enexis Stedin Delta Cogas Rendo Westland Source: ECN/EnergieNed/Netbeheer Nederland “Energy Trends” 2012 publication Notes: (1) Alliander includes Endinet (2) Enexis includes Intergas Alliander results 2013 7
Overview Dutch energy networks Gas networks Electricity networks 2 12 2 1 5 5 6 2 1 6 1 3 3 1 7 7 6 7 5 3 2 2 1 4 8 1 1 4 1 2 Liander and Endinet (1) RENDO Netbeheer BV (5) ENEXIS and Intergas (2) COGAS (6) Westland Energie Infrastructuur BV (7) Stedin (3) Delta Netwerkbedrijf BV (4) Source: EnergieNed “Energy in the Netherlands” 2011 publication, adjusted for Endinet acquisition by Alliander and Intergas acquisition by Enexis Alliander results 2013 8
Position in the Dutch energy value chain Production and trade Transmission Distribution Supply Liberalised Regulated Regulated Liberalised Vattenfall/Nuon Vattenfall/Nuon Tennet Alliander RWE/Essent RWE/Essent Gasunie Enexis Eneco Eneco Stedin The Dutch energy value chain has been partially liberalised over the years. Regional distribution and transmission are regulated Alliander results 2013 9
Alliander’s businesses: stable cash flow profile • • Regional Grid Manager: Management of regional electricity and gas grids Service, maintenance and • automation of complex energy Electricity & gas metering business infrastructures, including for • Regulated assets TenneT • Low risk profile due to regulatory environment • Clients are in the stable and regulated network sector • Stable and predictable cash flow Network operator Network company Results 2013 Other¹ Eliminations Total Liander Endinet € 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 Regulated business >90% (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.) Alliander results 2013 10
Regulation - Regulatory framework Basic Philosophy Benchmark competition • Incentive based regulation Benchmark is the average total cost of the network sector, • Output steering including a normalised rate of return (WACC), as well as the extrapolation of the development of the frontier shift. Regulation model • Stimulating competition by benchmark regulation Network operators are encouraged to beat the benchmark (or • Creating incentives for operators to operate as efficiently as efficient cost level). By beating the benchmark it is justifiable to possible lower the benchmark for the next regulation period. At first the • Level playing field (equal performance leads to equal profits remain at the network operators. When the new lowered allowed revenue) benchmark becomes effective consumers will also benefit. • Rate of return in accordance with risk (WACC). Part of the regulated cost base Tariff levels are set in advance for at least 3 years. To estimate • Small regulator (at a distance from operations) these levels the regulator uses the recent historical performance of the benchmark. As a result the tariffs follow the Regulatory scope realised cost with a time-lag. Transport and connection service of electricity and gas. The metering market is currently regulated on a cost-plus basis. 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 11
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