Presentation Results 2011

Transcription

1 Presentation Results February

2 Disclaimer This presentation is a translation of the Dutch presentation on the consolidated results for 2011 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 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. 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 preparation of the 2010 financial statements of Alliander N.V., which can be found on All financial information shown throughout this presentation has not been audited. Alliander results

3 Content 1. Highlights 2. Alliander at a glance 3. Results Appendices Alliander results

4 Highlights 2011 Financial results and position 2011 Strategic and operational developments Regulatory developments Result 2011: 251 million (2011: 222 million) Higher revenue due to increase in regulated tariffs and consolidation Endinet Increased OPEX Higher CAPEX Credit rating: S&P rating upgrade to A+/A-1/positive outlook from A/A-1/stable outlook Moody s rating unchanged at Aa3/P-1/stable outlook Extension of maturity date RCF: 600 million to 15 July 2016 Bond buy-back of 250 million Reduction of average electricity outage Stable customer satisfaction Increase of staff Start of digitisation of substations by implementing SASensors Implementation of GSM outage alarms in transformer stations Taking part in national network of rapid charging points for electrical vehicles Transfer of public lighting activities Endinet to Ziut B.V. Participation in New Motion, Locamation and Plugwise by Alliander Participaties B.V. Alliander Finance B.V. merged into Alliander N.V. No Supreme Court decision yet on Court decision on Unbundling Act Dutch Upper House passed Bills involving the introduction of the smart meter Cost investigation announced by NMa Gradual introduction of new market model X-factors for new regulatory period ( ) allowing tariff increases Alliander results

5 Content 1. Highlights 2. Alliander at a glance 3. Results Appendices Alliander results

6 Stable public shareholder base Alliander Shareholders: Provinces & Municipalities Alliander s grid coverage regions largely coincide with the shareholders base Amsterdam 9% Other (1) 24% Gelderland 45% Friesland Noord-Holland Amsterdam Noord-Holland 9% Friesland 13% Endinet (2) Gelderland 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 acquired as per 1 July 2010 Alliander results

7 Market positions Number of connections (x1,000) Alliander has 3 million electricity connections and 2.6 million gas connections in the Netherlands Electricity connections Gas connections Alliander has a market position of 37% Alliander Enexis Stedin Delta Cogas Rendo Westland Source: EnergieNed Energy in the Netherlands 2011 publication Notes: 1) Alliander includes Endinet with 451,000 gas connections en 106,000 electricity connections 2) Enexis includes Intergas with 148,000 gas connections Alliander results

8 Overview Dutch energy networks Electricity Networks Gas Networks Liander and Endinet (1) ENEXIS and Intergas (2) Stedin (3) Delta Netwerkbedrijf BV (4) RENDO Netbeheer BV (5) COGAS (6) Westland Energie Infrastructuur BV (7) Source: EnergieNed Energy in the Netherlands 2011 publication, adjusted for Endinet acquisition by Alliander and Intergas acquisition by Enexis Alliander results

9 Position in Dutch energy value chain Production and trade Transmission Distribution Supply Liberalised Regulated Regulated Liberalised Vattenfall/Nuon RWE/Essent Tennet Gasunie Alliander Enexis Vattenfall/Nuon RWE/Essent Dutch energy value chain has been partially liberalised over the years Alliander results

10 Alliander s businesses: stable cash flow profile Regional Grid Manager: Management of regional electricity and gas grids Electricity & gas metering business Regulated assets Low risk profile due to regulatory environment Regional Grid Manager in Eindhoven and Oost-Brabant region. 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 2011 Results Network operator Liander Network company Endinet Other (1) Eliminations Total million Operating income External income Internal income Total operating income 1, , ,695-1,695 Operating expenses Total operating expenses Operating profit 1, , Total assets 5, ,799-2,855 7,318 Regulated business >90% (1) Comprises other activities within the Alliander Group including the activities of Liandon, Stam, Alliander A.G., Corporate departments and service units (both part of Alliander N.V.) Alliander results

11 Regulatory environment Regulation aims for a balance between quality and sustainability, whilst providing an incentive for efficiency Total cost recovery for the industry remains one of the basic principles, which allows individual companies with an average performance to cover their full costs (including the WACC as set by the Energiekamer, applied on the standardised asset value) Electricity X-Factor Liander N.V. 3.6 (7.0) Endinet B.V. 4.6 (5.5) Delta Netwerkbedrijf 5.8 (6.6) Stedin B.V. 6.3 (7.9) Enexis B.V. 5.0 (6.2) For the period the WACC (in pre tax real terms) is set at 6.2% x-factors (1) as determined by the regulator for the period will allow increases in tariffs There is a difference between regulatory costs and commercial costs with respect to the asset value. Gas X-Factor Liander N.V. 6.1 (2.7) Endinet B.V. 7.2 (1.6) Delta Netwerkbedrijf B.V. 6.6 (0.4) Enexis B.V. 8.1 (3.4) Stedin B.V. 4.2 (2.8) Source: Energiekamer, Alliander (1) See page 37 for further explanation Constructive regulatory framework which does not allow for privatisation Alliander results

12 Regulatory developments Smart meter In February 2011, the Dutch Upper House passed the Bills involving the introduction of Smart Meters. Alliander intends to have 80% of the conventional meters replaced by smart meters by Small-scale rollout (pilot) in period Metering Tariff Outlook: Metering tariffs will become regulated. Basic principle is that the tariffs enable the sector to cover the costs of metering activities including regulatory return. New Act: Voorrang voor Duurzaam This addition to and change of the Electricity and Gas Acts, passed the Dutch Senate in November The act encompasses the following main changes in relation to allowed revenue set by the regulator: Regulator has been given the option to adjust allowed revenue at once at the beginning of a new regulatory period (as of ) Transportation cost (charged by Tennet) will be classified as non-influenceable and will no longer be part of the benchmark (as of ) Innovative exceptional investments may be exempt from the benchmark (as of ) Market model The new market model consists of a number of measures devised to simplify administrative processes between energy suppliers and customers and between energy suppliers and will be implemented by law step-by-step Of importance is the reallocation of responsibilities: separation of the operational management of the meter by the network operator and the administrative processing of the metering data by the energy suppliers. Project Stroom Preparation of new Bills based on evaluation of the existing Electricity Act Aimed at providing more clarity on cost coverage of investments in tariff setting Based on sector input Bills will take effect at the start of the new regulatory period Alliander results

13 Content 1. Highlights 2. Alliander at a glance 3. Results Appendices Alliander results

14 Key figures 2011 (1) million, or otherwise as stated Movement '10-'11 Financial key figures Revenue reported 1,432 1,586 11% Operating profit reported / comparable (2) % Profit after tax reported % Profit after tax comparable (2) % Investments in property, plant and equipment % Ratios 31 Dec Dec 2011 Net debt position (3) 1,632 1,593 Solvency (3) 44.3% 47.5% FFO / Net Debt (3) 32.7% 34.1% Outage Electricity (in minutes) (1) The figures for 2010 have been restated to reflect a change in presentation whereby all fair value movements on financial instruments are recognised in finance income and expense with effect from 2011 (2) Comparable: reported excluding incidental items and fair value movements (3) Ratios according to the principles of Alliander s financial policy Alliander results

15 Incidental items and fair value movements million Impact on operating profit - - Finance income and expense Total impact on profit before tax Tax Total impact on profit after tax (1) The figures for 2010 have been restated to reflect a change in presentation whereby all fair value movements on financial instruments are recognised in finance income and expense with effect from 2011 Alliander results

16 Financial highlights (1) 2011 million Revenue Purchasing costs, costs sub-contracted work and operating expenses 11% 6% 1,432 1,586 1,071 1, (2) Operating profit Profit after taxation 18% % (1) Excluding incidental items and fair value movements (2) The figures for 2010 have been restated to reflect a change in presentation whereby all fair value movements on financial instruments are recognised in finance income and expense with effect from 2011 Alliander results

17 Revenue (1) 2011 million 1,586 1,432 11% 174-3% % 13% 357 Other products % 900 Metering services Gas Electricity (1) Excluding incidental items and fair value movements Alliander results

18 Purchasing costs, costs of sub-contracted work and operating expenses (1) 2011 million 1,071 6% 1, % % % 385 Other costs Contract staff costs 5% Employee benefits (2) Purchasing costs and costs of sub-contracted work 1) Excluding incidental items and fair value movements 2) The figures for 2010 have been restated to reflect a change in presentation whereby all fair value movements on financial instruments are recognised in finance income and expense with effect from 2011 Alliander results

19 Cash flows and Capex 2011 million Cash flow from operations Investments in PP&E Free cash flow (1) Contributions received from third parties Net investments in property, plant and equipment (1) Free cash flow is defined as the cash flow from operating activities less the net investment in property, plant and equipment (gross investment in property, plant and equipment less divestments, construction contributions, investment grants and government subsidies), acquisitions, investments in intangible assets and investments in non-current financial assets (associates and joint ventures). Alliander results

20 Financial Position 31 December 2011, million Finance lease 133 Capitalization Other 38 Gross Debt Gross and Net debt 2,064 Cash 106 Euro Medium Term Notes 1.792(1) Equity Other Investments CBL Investment Total Cash and Cash Equivalents Shareholder loans 101 Net debt according to IFRS 50% of subordinated perpetual bond 1, Subordinated perpetual debt 494 Net debt according to financial policy 1,593 Maturity profile (2) Location of debt Alliander N.V 125 1, Credit facility ( 600 million) (3) >2020 Liander Endinet Endinet (4) (3) Liandon Liandon First and second call option of subordinated perpetual bond (1) program size of 3,000 million of which 1,800 million is used (2) excluding 133 million finance lease obligations Liander (3) including 200 million L/C back-up facility (4) including 133 million finance lease obligations Liander Alliander results

21 Net debt million ,312 1,385 1, , ,408 1,655 2,064 1,346 1, December June December 2011 Gross debt Unrestricted cash (1) Investments for CBL liabilities Net debt IFRS 50% perpetual (2) Net debt financial policy (1) including assets available for sale (2) according to the principles of Alliander s financial policy the subordinated perpetual bond loan is treated as 50% equity Alliander results

22 Alliander s financial policy Liquidity Financial Policy Credit Rating/ Debt providers Shareholders equity Financial Framework FFO/Net debt: Minimum 20% FFO Interest cover: Minimum 3.5 Net debt/capitalization: Maximum 60% Solid A rating profile Comply with regulatory criteria for the grid operators Dividend Policy 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% (1) General Principles 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 Strong financial profile with clear and well defined financial policy (1) Solvency: Equity/Total assets net of deferred income Alliander results

23 Ratios financial policy (1) Interest cover (2) FFO(3) / Net debt min. 3.5x min. 20% 31 Dec Jun Dec Dec Jun Dec 2011 Solvency (4)) Net debt/capitalisation (5) max. 60% min. 30% Dec Jun Dec Dec Jun Dec 2011 (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 Alliander results

24 Strong credit ratings Rationale Aa3/Stable P-1 Counts as a Government Related Issuers (GRI) under Moody's methodology 100% ownership by a number of Dutch regional and local governments provides comfort for expected systemic support in distressed situations Strong liquidity position supported by solid cash flow generation, favourable debt maturity profile and reasonable dividend policy Compliance with all covenants with comfortable headroom Moody s expects Alliander not to materially divert below its minimum credit metric, set within its financial policy: FFO interest coverage at or above 3.5x and FFO/Net Debt above 20% on a sustainable basis Moody s has assigned a A3 issue rating to Alliander s subordinated perpetual bond and 50% equity weight Rationale A+/Positive A-1 Rating upgrade (30 August 2011) from A to A+ follows from adjusted credit measures that have strengthened due to higher tariffs and recent hybrid issuance. 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 Positive outlook reflects the view that Alliander will continue to report robust cash flow-based debt coverage ratios over the medium term, supported by healthy tariff increases in the regulatory period S&P s has assigned a BBB+ issue rating to Alliander s subordinated perpetual bond and 50% equity weight Source: Moody s Investors Service as of March 11 th, October 27 th and December 29 th, 2010, March 20 th, 2011 and February 9 tth, Standard and Poor s as of August 6 th, October 28 th, 2010 and April 13 th, August 30 th and October 18 th, Alliander results

25 Outlook for 2012 The Management Board, in consultation with the Supervisory Board, has formulated the policy to not issue statements with regard to future expected results. Accordingly the Management Board publishes interim reports and does not issue statements on the expected results for the year Alliander results

26 Content 1. Highlights 2. Alliander at a glance 3. Results Appendices - Detailed results Other Alliander results

27 Results 2011 (1) million Incid. excl Incid. excl Mov items incid items incid. '10 - '11 Revenue 1,432-1,432 1,586-1,586 Other income Total income 1,525-1,525 1,695-1,695 11% Purchase costs and costs of subcontracted work Employee benefits Contract staff costs Other operating expenses Depreciation and impairments Less: Own work capitalised Total operating expenses 1,188-1,188 1,297-1,297 9% Operating profit (EBIT) % Finance income and expenses Share in result of associates and joint ventures Profit before tax % Tax Profit after tax % (1) The figures for 2010 have been restated to reflect a change in presentation whereby all fair value movements on financial instruments are recognised in finance income and expense with effect from 2011 Alliander results

28 Consolidated balance sheet million 31 December June December 2011 Assets Non-current assets 6,448 6,473 6,612 Current assets Cash and cash equivalents Total assets 7,400 7,382 7,318 Equity and liabilities Equity Share capital Perpetual loan Reserves 1,506 1,642 1,650 Profit after tax Total equity 2,906 2,939 3,079 Non-current liabilities Interest-bearing debt 2,280 1,769 1,555 Deferred income 1,474 1,485 1,505 Other non-current liabilities Total non-current liabilities 3,965 3,448 3,264 Current liabilities Interest-bearing debt Other current liabilties Total current liabilities Total equity and liabilities 7,400 7,382 7,318 Alliander results

29 Cash flow statement 2011 million Profit after tax Adjustments for: Finance income and expense Tax 8-34 Profit after tax from associates and joint ventures -8 5 Depreciation and impairment less amortisation Changes in working capital Changes in deferred tax, provisions, derivatives and other Cash flow from operations Net interest paid and received Dividends received from associates and joint ventures 5 1 Corporate income tax received (paid) 16 7 Cash flow from operating activities Acquisitions, less acquired cash and cash equivalents Investments in property, plant and equipment Construction contributions received Investments in non-current financial assets (associates and joint ventures) -3-4 Cash flow from investing activities New/repaid other current interest-bearing liabilities and current part of non-current debt New non-current debt Repaid non-current debt / new debt Change in current deposits Subordinated perpetual bond loan Interest coupon subordinatged perpetual bond loan Dividend paid Cash flow from financing activities Net cash flow Free cash flow (1) (1) Free cash flow is defined as the cash flow from operating activities less the net investment in property, plant and equipment (gross investment in property, plant and equipment less divestments, construction contributions, investment grants and government subsidies), acquisitions, investments in intangible assets and investments in non-current financial assets (associates and joint ventures). Alliander results

30 Content 1. Highlights 2. Alliander at a glance 3. Results Appendices - Detailed results Other Alliander results

31 Grid reliability Average outage electricity per customer (min) electricity outage decreased significantly in past 12 months, partly due to the application of new technologies and enhanced processes (1) (1) 48,1 including Helicopter accident in Tieler- en Bommelerwaard in December 2007 Alliander results

32 Customer Satisfaction Customer Satisfaction Consumer Market 100% 90% 88% 87% 89% 87% 89% 93% 91% 92% 92% High customer satisfaction in consumer and business market. 80% 70% 60% 2008 Q Q Q Q Q Q Q Q Q4 Customer Satisfaction Business Customers 100% 90% 87% 88% 87% 86% 89% 80% 74% 74% 79% 70% 60% 2008 Q Q Q Q Q Q Q Q4 Alliander results

33 Cross border leases Basic structure and rationale Basic structure in steps 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 Head lease 1 3 Prepayment Equity Alliander Rationale US Investor Sub lease Buy back 7 5 US Trust Deposits and bonds Banks Debt Annual payment of financial lease obligations Financial institutions Net Present Value of tax deferral for US investor Increase in solvency for Alliander by sharing NPV with US investor 6 Partly pledged Alliander results

34 Cross border leases Risks Risk summary 7 US leases (USD mln) 31 Dec 2010 (1) 31 Dec 2011 Equity strip risk MtM risk Letters of Credit (USD mln) 31 Dec 2010 (1) 31 Dec 2011 Contractual termination values CBL s Alliander (USD billion) 5,0 Contractual termination value 4,5 Equity strip risk 4,0 3,5 Equity investments (1) 3,0 Issued Additional LCs at A3/A Additional LCs at Baa1/BBB Back-up facility ( mln) 31 Dec Dec 2011 Back-up L/C Facility CBL related 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 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. Alliander results ,5 2,0 1,5 1,0 0,5 0, Debt investments (1) 2011 values are calculated based on the yield curve of 31 December 2011 whereas values are calculated based on yield curve at the moment of inception.

35 CSR transparency Alliander has based its Corporate Social Responsibility report on the Global Reporting Initiative (GRI) guidelines Reports since 2008 Currently at B+ level (2011) Target level for 2012 is A+ ISO 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. Participates since 2008 Ranked 12 th position in 2011 (out of 470 companies), 42 nd position in 2010 Target level is at the forefront position Oekom Research has rated Alliander as Prime (overall grade B) Rating sinds 2011 Target level is a Prime rating Alliander results

36 Risk management Alliander considers risk management as an integrated part of managing the organisation and guarantee business continuity within controlled levels of uncertainty. The chosen risk framework is based on three principles which are; applying COSO-principles for Enterprise Wide Risk Management, being compliant with the applied Code for Corporate Governance, the Dutch regulators and form follows function. The two main components are risk management infrastructure and the risk management process. The risk management infrastructure contains the following parts; risk policy, risk language, roles and responsibilities, risk reporting and risk technology. The risk management process is a continuing process which contains seven steps; determine goals, identify risks, risk assessment; determine mitigations efforts; design and testing control activities, monitoring control activities and evaluate and improvement of the risk process. Roles and responsibilities for managing risk are defined the Governance Structure for Risk Management according to the Three lines of defense model. 1 The first line of defense is line management. Line management within Alliander is primarily responsible for managing risks and executing the control activities The staff department risk management forms the second line of defense. They are responsible for developing and implementing the Alliander Risk policy including the risk framework, supporting the business units in implementing the risk management strategy and monitoring the effectiveness of the control activities. The risk management department reports directly to the CFO. Risk management closely cooperates with the staff unit Business Control Framework (BCF) in order to embed the monitoring of the progress in control activities. 1 3 The third line of defense is the staff department Internal Audit. They provide the Board of Directors of Alliander with an independent assurance on risk mitigation. Alliander results

37 Financial definitions Alliander financial policy Net debt: Interest bearing debt less cash and cash equivalents 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 X-factor in the regulated allowed revenue formula X-factor: The x-factor symbolizes the efficiency gains which the grid managers can achieve during the regulatory period. Regional grid managers who reduce their cost per unit of output by more than the average grid manager, realize a relatively higher profit. This is an incentive for grid managers to operate as efficiently as possible Outputsteering implemented in the energy Acts by the formula: AR t = (1 + (cpi ± x + q)/100 ) * AR t-1, by which: AR t = allowed revenue cpi = consumer price index x = efficiency reduction q = quality performance 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. Alliander results