Presentation Results 2013 - alliander.com · This presentation has been prepared with due regard to...

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

http://www.alliander.com/

Content

1. Highlights

2. Alliander at a glance

3. Results 2013

4. Appendices


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


Content

1. Highlights


3. Results 2013

4. Appendices


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)


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)


Overview Dutch energy networks

Electricity networks Gas networks


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%


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)


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


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


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


3. Results 2013

4. Appendices


Key figures


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


€ 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


1) Excluding incidental items and fair value movements

18

Revenue 1



19

Purchasing costs, costs of sub-contracted work

and operating expenses 1



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


Capital Market Programs

EMTN 3,000 million

ECP 1,500 million

Backup credit facility

RCF 600 million

Net debt



• 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.


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


3 Results 2013

4. Appendices

– Detailed results 2013

– Other

Content


Results


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


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


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


1. Highlights


3. Results 2013

4. Appendices

– Detailed results 2013

– Other

Grid reliability


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


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


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.


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


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%


Presentation Results 2013 - alliander.com · This presentation has been prepared with due regard to...

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Transcript of Presentation Results 2013 - alliander.com · This presentation has been prepared with due regard to...