Half-year results 2013 26 July 2013 Disclaimer We, Alliander, the - - PowerPoint PPT Presentation

26 July 2013

Presentation Half-year 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

• perating 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 2012 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.

Alliander half-year results 2013 2

Content

• 1. Highlights
• 2. Alliander at a glance
• 3. Half-year results 2013
• 4. Appendices

Alliander half-year results 2013 3

Highlights 2013 YTD

• Reported results 2013H1: € 129 million (2012H1: € 82 million). Comparable results 2013H1: € 131

million (2012H1: € 100 million)

• Higher revenue due to increase in regulated tariffs
• Stable CAPEX
• Stable OPEX
• Early Termination of 3 cross-border lease transactions
• RCF: € 600 million extended until July 2018

Financial results and position

• Draft 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. Final method decisions is expected by Oct-2013

• The Advocate General to the European Court of Justice has presented legal opinion that considers

Unbundling not contradictory to Treaty on the Functioning of the European Union

• Cost investigation by ACM (former NMa)
• Final phase of introduction of new market model planned on 1 August, 2013

Regulatory developments

• 12-month average electricity outage falls from 24.5 (Dec-12) to 21.9 minutes (Jun-13).
• Customer satisfaction remains at high level
• Second year of roll-out smart meters
• Start of efficiency program in Operations
• Acquisition of CDMA data communication network for €18 million
• Start of new business activities in the field of sustainable area development, mobility services and

sustainable living

Strategic and

• perational

developments

Alliander half-year results 2013 4

Content

• 1. Highlights
• 2. Alliander at a glance
• 3. Half-year results 2013
• 4. Appendices

Alliander half-year results 2013 5

Other 24% Gelderland 45% Friesland 13% Noord-Holland 9% Amsterdam 9%

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)

Alliander half-year results 2013 6

Amsterdam Noord-Holland Gelderland Endinet (2) Friesland

Number of connections (x1,000)

2.056 1.946 3.057 2.631 2.054 2.630 52 187 138 102 207 32 53 55 4.000 4.687 5.687 394 191 134 107 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)

Alliander half-year results 2013 7

Overview Dutch energy networks

Electricity networks Gas networks

Alliander half-year results 2013 8

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 half-year 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

(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.)

Regulated business >90%

Alliander half-year results 2013 10

2013 Half-year results Network

• perator

Liander Network company Endinet Other 1 Eliminations Total € million

Operating income External income

812 57 41

• 910

Internal income

3

• 154
• 157
• Total operating income

815 57 195

• 157

910

Operating expenses

Total operating expenses 599 44 207

• 157

693 Operating profit 216 13

• 12
• 217

Total assets 6,228 525 2,825

• 2,162

7,409

Regulatory environment

Regulation model

• Based on output steering
• Regulation aims for a balance between efficiency, quality and

sustainability

• Total cost recovery for the industry is one of the basic regulatory
• principles. The efficient cost level is calculated as the average

cost level in the network sector. This allows individual companies with an average performance to cover their full costs (including the WACC as set by the ACM, applied on the standardized asset value) Regulatory period

• Current :

1 Jan 2011 - 31 Dec 2013

• Next :

1 Jan 2014 - 31 Dec 2016 WACC (in pre tax real terms)

• Current

6.2%

• Next

3.6% (based on draft method decision)

• Decrease is due to lower equity beta, risk free rates and risk

premiums (WACC is CAPM based) X-factors

• Current:

allow for an increase of allowed revenue up to a maximum level (= negative x-factors)

• Next:

Draft Method decision indicates a minimum decrease in allowed revenue (=positive x-factors)

Source: Energiekamer, Alliander

Alliander half-year results 2013 11 Electricity

X-Factor 2008–2010 2011–2013 Liander N.V. 3.6 (6.4) Endinet B.V. 4.6 (6.2) Delta Netwerkbedrijf B.V. 5.8 (5.2) Enexis B.V. 6.3 (7.7) Stedin B.V. 5.0 (6.1)

Gas

X-Factor 2008–2010 2011–2013 Liander N.V. 6.1 (2.7) Endinet B.V. 7.2 (1.6) Delta Netwerkbedrijf B.V. 6.6 (0.5) Enexis B.V. 8.1 (3.4) Stedin B.V. 4.2 (2.8)

Constructive regulatory framework which does not allow for privatisation

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

• Following its intended introduction in Aug 2013, the new market model will consists of a number
• f 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

Alliander half-year results 2013 12

Method Decisions

• Draft method decisions for new regulatory period 2014-2016 have been published indicating

tariff decreases due to lower WACC from 6.2% to 3.6%, decrease in overall sector cost and regulation of metering tariffs

• Final method decisions are expected in Oct-2013

Unbundling

• The Advocate General to the European Court of Justice General has presented legal opinion that

considers Unbundling not contradictory to Treaty on the Functioning of the European Union

Content

• 1. Highlights
• 2. Alliander at a glance
• 3. Half-year results 2013
• 4. Appendices

Alliander half-year results 2013 13

Key figures first half 2013

1) 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

14 Alliander half-year results 2013

Key figures

€ million, or otherwise as stated First half 2013 First half 2012 Movement '12 - '13 Financial key figures Revenue reported 860 819 5% Operating profit reported 212 183 16% Operating profit comparable 217 195 11% Profit after tax reported 129 82 57% Profit after tax comparable 131 100 31% Investments in property, plant and equipment 245 250

• 2%

Ratios 30 Jun 2013 31 Dec 2012 Net debt position 1 1,834 1,739 Solvency 2 50.4% 49.5% FFO / Net Debt 2 31.9% 30.9% Outage Electricity (in minutes) 21.9 24.5

Incidental items and fair value movements first half 2013

Alliander half-year results 2013 15

€ million First half 2013 First half 2012 Total purchase costs, costs of subcontracted work and operating expenses

• 5
• 12

Impact on operating profit

• 5
• 12

Finance income/(expense) 2

• 12

Total impact on profit before tax

• 3
• 24

Tax 1 6 Total impact on profit after tax

• 2
• 18

Incidental items and fair value movements

Financial highlights

1 first half 2013

1) Excluding incidental items and fair value movements

Alliander half-year results 2013 16

Revenue

1 first half 2013

Alliander half-year results 2013 17

1) Excluding incidental items and fair value movements

Purchasing costs, costs of sub-contracted work and operating expenses

1 first half 2013

Alliander half-year results 2013 18

1) Excluding incidental items and fair value movements

Cash flows and Capex first half 2013

1) Free cash flow = Cash flow from operating activities – Gross investment in non-current assets + Contributions received from third parties

Alliander half-year results 2013 19

424 6 306 7 7 409 400 41 5 6 1 283 200 400 600 800 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 >2025

Financial position

As of 30 Jun 2013

Capitalisation (€ million) Gross and Net debt (€ million) Maturity profile (€ million) 1 Location of debt (€ million)

Credit Facility (€ 600 million) 2 3) including € 134 million finance lease obligations Liander

1

1) excluding € 134 million finance lease obligations Liander 2) including € 200 million L/C back-up facility First and second call option of subordinated perpetual bond

Gross Debt 2,029 Cash 80 Other Investments 198 CBL Investment 164 Total Cash and Cash Equivalents 442 Net debt according to IFRS 1,587 50% of subordinated perpetual bond 247 Net debt according to financial policy 1,834

Alliander N.V € 1,889 Liander €

140

3

Endinet Liandon

Alliander half-year results 2013 20

Capital Market Programs EMTN 3,000 million ECP 1,500 million Backup credit facility RCF 600 million

Total 5,261

Net debt

21 Alliander half-year results 2013

Alliander half-year results 2013 22

• 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 36

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

23

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

• f 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

Strong credit ratings

Rationale

• 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 and a manageable debt maturity profile

• The stable outlook reflects Moody’s expectation that

Alliander will remain a pure electricity and gas distribution network operator that derives most of its revenues and cash flow from regulated activities. Furthermore, Moody’s would expect 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 Rationale

• 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, if Alliander will

continue to report a robust cash flow-based FFO to debt ratio of about 25%, while maintaining an unchanged business profile.

• S&P’s has assigned a BBB+ issue rating to

Alliander’s subordinated perpetual bond and 50% equity weight A+/Positive A-1 Aa3/Stable P-1

Source: Moody’s Investors Service as of February 9th, 2012 and February 8th, 2013. Standard and Poor’s as of May 24th and November 2nd 2012 and May 29th 2013.

Alliander half-year results 2013 24

• 1. Highlights
• 2. Alliander at a glance

3 Half-year results 2013

• 4. Appendices

– Detailed half-year results – Other

Content

Alliander half-year results 2013 25

Results first half 2013

Alliander half-year results 2013 26 Consolidated income statement

€ million Revenue 860 819 Other income 50 49 Total income 910 868 Operating expenses Purchase costs and costs of subcontracted work

• 225
• 206

Employee benefits expenses

• 226
• 222

External personnel expenses

• 52
• 63

Other operating expenses

• 117
• 107

Total purchase costs, costs of subcontracted work and operating expenses

• 620
• 598

Depreciation and impairment of property, plant and equipment

• 173
• 165

Less: Own work capitalised 95 78 Total operating expenses

• 698
• 685

Operating profit (EBIT) 212 183 Finance income 11 36 Finance expense

• 49
• 96

Result from associates and joint ventures after tax

• 6

Profit before tax 174 117 Tax

• 45
• 35

Profit after tax 129 82 First half 2013 First half 2012

Consolidated balance sheet

27 Alliander half-year results 2013

Consolidated balance sheet

€ million Assets Non-current assets Property, plant and equipment 5,908 5,821 Intangible assets 323 320 Investments in associates and joint ventures 30 28 Available-for-sale financial assets 307 314 Derivatives 12 11 Other financial assets 55 46 Deferred tax assets 301 335 6,936 6,875 Current assets Inventories 34 36 Trade and other receivables 352 316 Derivatives

• 5

Tax assets 7 7 Other financial assets

• 75

Cash and cash equivalents 80 100 473 539 Total assets 7,409 7,414 Equity & liabilities Equity Share capital 684 684 Share premium 671 671 Subordinated perpetual bond 494 494 Hedge reserve

• 1
• 2

Revaluation reserve 19 28 Other reserves 1,236 1104 Profit after tax 129 224 Total equity 3,232 3,203 Liabilities Non-current liabilities Interest-bearing debt 1,887 1,891 Derivatives 54 73 Finance lease liabilities 134 131 Deferred income 1,542 1,530 Deferred tax liabilities 1

• Provisions for employee benefits

55 59 Other provisions 88 74 3,761 3,758 Short-term liabilities Trade and other payables 68 88 Tax liabilities 75 78 Interest-bearing debt 8 5 Derivatives 2

• Provisions for employee benefits

64 63 Accruals 199 219 416 453 Total liabilities 4,177 4,211 Total equity and liabilities 7,409 7,414 30 June 2013 31 December 2012

Cash flow statement first half 2013

28 Alliander half-year results 2013

Consolidated cash flow statement

€ million Cash flow from operating activities Profit after tax 129 82 Adjustments for:

• Finance income and expense

38 60

• Tax

45 35

• Profit after tax from associates and joint ventures
• 6
• Depreciation and impairment less amortisation

143 136 Changes in working capital:

• Inventories

2

• 1
• Trade and other receivables
• 36
• 88
• Trade and other payables and accruals
• 41

11 Total changes in working capital

• 75
• 78

Changes in deferred tax, provisions, derivatives and other

• 18

20 Cash flow from operations 262 261 Net interest paid

• 28
• 63

Net interest received

• 2

Dividends received from associates and joint ventures

• 15

Corporate income tax paid (received)

• 7

Total

• 28
• 53

Cash flow from operating activities 234 208 Cash flow from investing activities Investments in property, plant and equipment

• 245
• 250

Construction contributions received 39 44 Investments in financial assets (associates and joint ventures)

• 18
• 3

Cash flow from investing activities

• 224
• 209

Cash flow from financing activities Redemption current interest-bearing liabilities and current part of long-term debt 3

• 87

Long-term debt issued

• 400

Long-term loans granted

• 10
• 4

Change in current deposits 75

• 180

Interest coupon subordinated perpetual bond

• 24
• 24

Dividend paid

• 74
• 113

Cash flow from financing activities

• 30
• 8

Net cash flow

• 20
• 9

Cash and cash equivalents as at 1 January 100 106 Net cash flow

• 20
• 9

Cash and cash equivalents as at 30 June 80 97 First half 2013 First half 2012

Content

Alliander half-year results 2013 29

• 1. Highlights
• 2. Alliander at a glance
• 3. Half-year results 2013
• 4. Appendices

– Detailed half-year results – Other

Grid reliability

Alliander half-year results 2013 30

12-month average electricity

• utage duration as per 30 June

2013 is in line with our objective

• f 22 minutes

20,0 24,5 21,9 27,4 24,0 31,2

10 20 30 40

2008 2009 2010 2011 2012 2013 YTD

Average outage electricity per customer (min)

Target 24 min 22 min

Alliander half-year results 2013

Customer Satisfaction

31

High and stable 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 first half of 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

Contractual termination value

(1) (1)

Risk summary

(1) (1)

32

Contractual termination value Equity strip risk Equity investments Debt investments New position New position comparable Old position 4 leases 4 leases 7 leases US leases (USD million) 30 June 2013 31 Dec 2012 31 Dec 2012 Equity strip risk 268 198 268 MtM risk 39 58 58 307 256 326 Overview Letters of Credit (USD million) 30 June 2013 31 Dec 2012 31 Dec 2012 Issued 6 12 74 Additional L/C's at A3/A- 187 127 127 Additional L/C's at Baa1/BBB+ 23 23 23 Back-up facility (EUR million) 30 June 2013 31 Dec 2012 31 Dec 2012 Back-up L/C facility 200 200 200

Alliander half-year results 2013

Early termination

• In the first half of 2013, 3 cross-border lease transactions were

early terminated

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

• bligations (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 lease Sub lease Prepayment Deposits and bonds Annual payment

• f financial lease
• bligations

4 4 5 6 2 Partly pledged Buy back 7

Alliander half-year results 2013 33

CSR transparency

• Alliander has based its Corporate Social Responsibility report on the Global Reporting

Initiative (GRI) guidelines − Reports since 2008 − Currently at A+ level (2012) − Target level for 2013 is A+

• 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 14th position in 2012 (out of 472 companies), 12th in 2011 and 42nd in 2010 − Participates since 2008 − Target level is at the forefront position

• In 2012 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 half-year results 2013 34

German operations

Strategy

• Exploit Alliander network operating skills
• Closely monitoring and analysing new concessions coming to market

Operations (2012)

• Revenue: € 27 million
• Activities:

− Public Lighting activities in various cities (58% of revenue) − Network operations in various cities (42% of revenue)

• Balance sheet total: € 51 million
• 136 employees
• Number of electricity connections: 15,600 (Heinsberg)

Regulatory regime E and G

• Revenue cap regulation
• Regulatory period: 5 years

Acquisitions

• Negotiations with former concession holder on purchase price of newly

granted operating concessions:

− Hennigsdorf (e+g) − Osthavelland (e+g) − Mühlenbecker Land (e+g) − Heinsberg (g) − Eberswalde (g)

• Together the new networks represent 25,900 gas connections and

18,600 electricity connections.

• Total investment ~ € 85 million in 2013 and 2014

Berlin Cottbus Rüsselsheim Heinsberg Hagen Electricity and gas Public lighting

Alliander presence in Germany

Hennigsdorf Osthavelland Mühlenbecker Land 35 Eberswalde Traffic lights Gas Alliander half-year results 2013

Financial definitions

Alliander financial policy

• Net debt is defined as interest-bearing debt less interest bearing receivables, 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)

• r

− EBIT interest cover ≥ 1.7x − FFO interest cover ≥ 2.5x − FFO to total debt ≥ 11% − Debt to total Cap ≤ 60%

Alliander half-year results 2013 36