Half-Year Results 2017 - alliander-com-acc.kaliber.io · Corporate profile Alliander half-year...

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

proceeds from asset swap). Profit after tax excluding incidental items and fair value movements

increased by € 30M compared to 2016H1

• 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

• 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

• Large scale offering of smart meter on schedule

• Roll-out of fiber-optical and mobile (CDMA) network completed

• Electricity outage duration falls to 21.1 minutes over past 12 months (30-juni-16: 23.4)

2

Financial

results and

position

Strategic

developments

Operational

developments

Regulatory

framework

Corporate profile

Corporate profile 4

Update on regulatory framework 11

Half-year results 2017 13

Financing and policy 17

Miscellaneous 22

Corporate profile

Alliander half-year results 2017

• Alliander is the largest regional energy network company in the Netherlands

• Distributes electricity and gas to more than 3 million customers

• 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’

• Carbon footprint of 746kton (past 12 months)

Network # Customer

connections

Grid

length

Transported

volumes

Electricity 3,109,000 90,000 km 29.990 GWh

Gas 2,510,000 42,000 km 6,367 million m3

Other24%

Province of Gelderland

45%

Province of Friesland

13%

Province of Noord-Holland

9%

Amsterdam9%

Alliander shareholders: provinces & municipalities

Service areas

• Alliander shares are owned by provinces and municipalities

• Province of Gelderland is the largest shareholder and owns 45% of all

shares

• The four largest shareholders together own 76% of all shares

• Privatization is not allowed by law

4

Electricity and gas

Electricity

How to achieve Paris Climate goals:

Roughly three things to do

All homes and buildings with

energy label B

Solar panels on

all roofs

Wind turbines on 10% of

continental shelf

Heating without natural gas

(District-heating, biogas,

electrification)

All cars to

become

electric

Source: McKinsey, Alliander

Key initiatives

2

1. Saving energy

2. Switching energy type

3. Sustainable generation of

electricity

5Alliander half-year results 2017


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

customers in

making choices

Investing in new

open networks

Digitisation of

networks

Excellent

network

management

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)


…. as well as achieving economies of scale through cooperation within sector

Asset swap

Smart meter procurement

Telecom

• Asset swap between Alliander and Enexis

concluded on 1 January 2016

• Better fit with existing service areas

• Cooperation between Stedin, Enduris and

Westland in the field of data traffic

• Commissioning of jointly owned mobile network

based on CDMA technology

• Joint procurement of smart meters by Stedin,

Enduris and Westland

Market facilitation processes

• EDSN performs central market facilitation

processes on behalf of all DSO’s and TSO’s


Scale &

Standards

Energy transition in our service areas

• Installed solar capacity: 785 MW

• 40% growth in past 12 months• Installed wind capacity: 1,301 MW

• No growth in past 12 months

• Installed combined heat and power capacity:

1,116 MW

• No growth in past 12 months

• Limited scale

• Current bio-gas feed-in on gas networks is

about 5 million m3

• 23% growth in past 12 months

• 3,174 public charging poles in our service areas

• 17% growth in past 12 months

Total transported volumes in our

service areas (2016)

Electricity 29,990 GWh per year

82,164 MWh per day

Gas 6,367 million m3 per year

Our service areas show high

growth in solar capacity and stable

wind and CHP capacity.

Overall impact still limited


Installed wind capacity Installed CHP capacity Installed solar capacity

Biogas feed in on our networks Number of charging poles

Update on regulatory framework

Corporate profile 4




Miscellaneous 22

• As of 1 January 2017 the new regulatory period has started.

Key changes compared to previous regulatory period:

- 5-year price control period

- Gradually decreasing WACC

- Allowed revenues will be set at the efficient cost level at the

start of the new period

• 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

• 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

• 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

no gas network will be installed if provisions are made for district heating or other heat supplies

• In the designated areas the regional network operator will be exempt from the legal obligation to

connect homes to the gas network

Update on regulatory framework

4.0%3.8% 3.5% 3.3% 3.0%

2017 2018 2019 2020 2021

Regulated WACC

11

New

regulatory

period

Legislation VEt

Limitation on

mandatory provision

of gas connection

Sufferance tax

Half-year results 2017

Corporate profile 4




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 movements13

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).


Smart meter offering is on schedule

• In 2017 according to plan the smart meter will be offered to

more than 500,000 customers

• In the first six months of 2017, in line with the schedule, the

meter was offered to over 250,000 customers

• By the end of 2020 the smart meter has to be offered to all of

our 3.1 million customers

• By the end of June 2017 the smart meter was offered to in total

40% of all customers. In the first six months of 2017 the meter

was offered to 8% of all customers. Target for end of 2017 is

to be at 48%

• The overall project runs according to schedule

• Total CAPEX for smart meters in the period 2008-2020

amounts to approximately € 800 m

Niet langer beschikbaar


Progress large scale offering of smart meter in 2017 (number of customers)

Progress large scale offering of smart meter in 2015-2020 (% of total number of customers)

2017

2015-2020

Financing and policy

Corporate profile 4




Miscellaneous 22

Increase in financing need

• € 46M increase in cash flow from operating activities due to lower corporate taxes paid (- € 21M) and lower

interest charges(- € 16M)

• Cash flow from investment activities € 340M lower compared to 1H2016, due to one-off positive effect of €

359M in net sales proceeds from asset swap in that period

• Dividend payment over 2016 is € 19M higher than over 2015 due to higher distributable profit

• A total of € 231M financing is attracted (1H2017: - € 126M) to finance the funding deficit resulting from the

sum of cash flows from operations and investments and dividend paid

• On balance € 34M is added to cash and cash equivalents


Financial position

Capitalisation (in €M) Gross and net debt (in €M)

Maturity profile (in €M) 2 Location of debt (in €M)

Capital Market Programs

EMTN 3,000

ECP 1,500

Available committed

credit lines:

• Term loan (up to 14yrs)

EIB 300

• Back-up credit facility

RCF 600

Gross Debt (including CBL related financial

lease obligations) 1,916

Cash 82

Other Investment 3

CBL Investment 210

Total Cash and Cash Equivalents 295

Net Debt according to IFRS 1,621

50% of subordinated perpetual bond loan 248

Net Debt according to financial policy 1,869

1 Including € 156 m financial lease obligations Liander

2 Excluding € 156 m financial lease obligations Liander

3 Including € 156 m financial lease obligations Liander

Alliander N.V

€ 1,758

Liander

€ 1583

Liandon

1

18

Financial policy

Dividend

policy

• FFO/Net debt: Minimum 20%

• FFO Interest cover: Minimum 3.5x

• Net debt/capitalization: Maximum 60%

• Solid A rating profile (on a stand alone basis)

• Comply with regulatory criteria for the network operators

Financial

framework

General

principles

Financial

policyCredit Rating/Debt providers Shareholders' equity

Liquidity


• 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

• 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%

Financial ratios well within financial policy framework1

1. According to the principles of Alliander’s financial policy the subordinated perpetual bond loan is treated as 50% equity

2. Interest cover: 12-months 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, intangible assets and deferred income.

4. Solvency: equity including period result less the expected dividend distribution of current financial year divided by balance sheet total less the expected dividend distribution

for the current year and deferred income

5. Net debt/capitalisation: net debt divided by the sum of net debt and equity

64

20

5

2 3

4 5

Miscellaneous

Corporate profile 4




Miscellaneous 22

Lower carbon footprint

• Greening in past 12 months

increased to 41kiloton

• 746 kiloton net-emissions in past

12 months

• Target is to be carbon neutral in

2023, i.e. no net carbon

emissions by our network

operations, offices and transport

• Carbon footprint is largely caused by technical grid losses. This is energy loss (through heat) caused by resistance during

electricity transport

• Alliander carbon policy is based on trias energetica: reducing energy consumption (e.g. through more energy-efficient

assets, climate neutral buildings like Duiven and Bellevue), greening of energy consumption (newly added renewable

capacity in NL) and economical residual energy consumption

Carbon footprint own operations (last 12 months)


Cross border leases update

CBL related risks

• Obligation to pay contractual termination value in

case of Event of default and/or Event of loss

• Credit risk on investments

• General and tax indemnities

• Posting additional L/C’s in case of Alliander

downgrade

Risk summary

Contractual termination value

• 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.

(1)

Contractual termination value

Equity strip risk

Equity investments

Debt investments

1

Contractual termination values CBL’s (in $ bn)


DisclaimerThis presentation is a translation of the Dutch presentation on the consolidated half-year results 2017 of Alliander N.V. Although

this translation has been prepared with the utmost care, deviations form the Dutch presentation might nevertheless occur. In such

cases, the Dutch presentation prevails.

‘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 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., Liandon B.V. and 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 2016 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.


http://www.alliander.com/

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