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Presentation half-year results 2011 22 August 2011 - - PowerPoint PPT Presentation

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Presentation half-year results 2011 22 August 2011 www.alliander.com Disclaimer This presentation for the first half of 2011 is a translation of the Dutch presentation on the consolidated results for the first half 2011 of Alliander N.V.

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Presentation half-year results 2011

22 August 2011

www.alliander.com

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Alliander half-year results 2011 2

Disclaimer

This presentation for the first half of 2011 is a translation of the Dutch presentation on the consolidated results for the first half 2011

  • f 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., 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

  • 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 preparation of the 2010 financial statements of Alliander N.V., which can be found on www.alliander.com. All financial information shown throughout this presentation has not been audited.

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Alliander half-year results 2011 3

Content

  • 1. Highlights
  • 2. Alliander at a glance
  • 3. Half-year results 2011
  • 4. Appendices
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Alliander half-year results 2011 4

Highlights first half 2011

  • Half-year result 2011: € 119 million
  • Higher revenue due to increase in tariffs
  • Slightly increased OPEX
  • Higher CAPEX
  • Credit rating changes:

− S&P rating upgrade from A/A-1/stable outlook to A+/A-1/positive outlook − Moody’s rating unchanged at Aa3/P-1/stable outlook

  • Extension of maturity date RCF: € 600 million to 15 July 2016
  • Supreme Court is likely to overturn Court decision on Unbundling Act
  • Regulatory developments
  • Dutch Upper House passed Bills involving the introduction of the smart meter
  • Gradual introduction of new market model
  • X-factors for new regulatory period (2011 – 2013) allowing tariff increases

Financial results and position 2011 Regulatory developments

  • Decrease of average electricity outage
  • Stable customer satisfaction
  • Increase of external staff
  • Start of digitisation of distribution substations by implementing SASensors and GSM
  • utage alarms
  • Participations in Locamation and Plugwise through Alliander Participaties B.V.
  • Merger of Alliander N.V. and Alliander Finance B.V.

Strategic and

  • perational

developments

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Alliander half-year results 2011 5

Content

  • 1. Highlights
  • 2. Alliander at a glance
  • 3. Half-year results 2011
  • 4. Appendices
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Alliander half-year results 2011 6

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 acquired as per 1 July 2010

Amsterdam Noord-Holland Gelderland Endinet (2) Friesland

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

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Alliander half-year results 2011 7

Number of connections (x1,000)

1.899 1.869 452 186 137 2.861 2.610 1.949 51 101 148 2.137 206 54 54 32 106 148 133 105 191 392 558 5.556 4.657 3.818 1.000 2.000 3.000 4.000 5.000 6.000 Alliander Enexis Stedin Endinet Delta Cogas Intergas Rendo Westland

Electricity connections Gas connections

Market positions

  • Alliander and Endinet

together have 3 million electricity customers and 2.6 million gas customers in the Netherlands

  • Alliander has combined

market position of 38%

Source: EnergieNed “Energy in the Netherlands” 2010 publication

Endinet Acquisition

Intergas acquisition by Enexis

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Alliander half-year results 2011 8

2 5 6 1 7 3 1 4 1 1

8

Overview Dutch energy networks

Source: EnergieNed “Energy in the Netherlands” 2010 publication, adjusted for Endinet acquisition by Alliander and Intergas acquisition by Enexis

Electricity Networks Gas Networks

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)

12 1 2 6 7 3 5 8 7 3 4 1 5 6 2 1 1 2 2

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Alliander half-year results 2011 9

Position in Dutch energy value chain

Supply Production and trade Distribution Transmission Regulated Regulated

Dutch energy value chain has been partially liberalised over the years

Liberalised Liberalised

Vattenfall/Nuon RWE/Essent Tennet Gas Transport Services (GTS)

Alliander

Enexis Vattenfall/Nuon RWE/Essent

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Alliander half-year results 2011 10

  • 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

  • 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

  • f regional electricity and gas grids
  • Electricity & gas metering business
  • Regulated assets
  • Low risk profile due to regulatory

environment

Alliander’s businesses: stable cash flow profile

190

  • 2

14 178 Operating profit

€ million

7,382

  • 2,854

3,977 534 5,725 Total assets 626

  • 138

201 40 523 Total operating expenses Operating expenses 816

  • 138

199 54 701 Total operating income

  • 138

133

  • 5

Internal income 816

  • 66

54 696 External income Operating income Total Eliminations Other (1) Network company Endinet Grid manager Liander 2011 Half-year results

(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%

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Alliander half-year results 2011 11 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 (0.4) Enexis B.V. 8.1 (3.4) Stedin B.V. 4.2 (2.8)

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)

  • For the 2011-2013 period the WACC (in pre tax real terms) is

set at 6.2%

  • x-factors(1) as determined by the regulator for the 2011-2013

period will allow increases in tariffs

  • There is a difference between regulatory costs and

commercial costs with respect to the asset value.

Source: Energiekamer, Alliander

Electricity

X-Factor 2008–2010 2011–2013 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)

Constructive regulatory framework which does not allow for privatisation

(1) See page 35 for further explanation

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Alliander half-year results 2011 12

Regulatory developments

Smart meter

  • In February 2011, the Dutch Upper House passed the Bills involving the introduction of Smart Meters. With this legal

barriers have been removed for a large scale introduction. In line with these Bills, Alliander intends to have 80% of the conventional meters replaced by smart meters by 2020. Metering Tariff

  • Outlook for metering tariffs based on the ministerial ruling of November 2010 by the Dutch Ministry of Economic

Affairs, Agriculture & Innovation: 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

  • Act “Voorrang voor Duurzaam” (Priority for Sustainability), an addition to and change of the Electricity Act 1988 and

the Gas Act, passed the Dutch Senate in November 2010. 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 1-1-2014)

  • Transportation cost (charged by Tennet) will be classified as non-influenceable and will no longer be part of

the benchmark (as of 1-1-2014)

  • Innovative exceptional investments may be exempt from the benchmark (as of 1-7-2011)

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 on a step-by-step basis

  • 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.

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Alliander half-year results 2011 13

Content

  • 1. Highlights
  • 2. Alliander at a glance
  • 3. Half-year results 2011
  • 4. Appendices
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Alliander half-year results 2011 14

Key figures first half 2011

€ mln, or otherwise as stated

(1) Comparable: reported excluding incidental items and fair value movements (2) Ratios according to the principles of Alliander’s financial policy

First half First half 2010 2011

Financial key figures Revenue reported 679 763 Operating profit reported 129 199 Operating profit comparable (1) 148 190 Profit after tax comparable (1) 70 111 Investments in property, plant and equipment 157 201 Ratios 31 Dec 2010 30 Jun 2011 Net debt position (2) 1,425 1,445 Solvency (2) 44.3% 45.2% FFO / Net Debt (2) 31.9% 35.0% Outage Electricity (in minutes) 31.2 26.3

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Alliander half-year results 2011 15

Incidental items and fair value movements

€ mln First half First half 2010 2011 Result on cross-border lease-related investments

  • 19

9 Total impact on operating profit

  • 19

9 Interest and foreign exchange results financial instruments 9 1 Total impact on profit before tax

  • 10

10 Tax effect of incidental items 2

  • 2

Total impact on profit after tax

  • 8

8

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Alliander half-year results 2011 16

70 111 59%

2010 2011

526 540 3%

2010 2011

679 763 12%

2010 2011 Profit after tax

Financial highlights

(1) first half 2011

€ mln 51 53 4%

2010 2011

148 190 28%

2010 2011 Revenue Purchasing costs, costs sub-contracted work and operating expenses (1) Excluding incidental items and fair value movements Operating profit Other income

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Alliander half-year results 2011 17

Revenue

(1) first half 2011

€ mln

Gas Electricity Metering services Other products 83 72 384 434 13% 141 178 26% 71 79 11%

  • 13%

763 679 12% 2010 2011 (1) Excluding incidental items and fair value movements

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Alliander half-year results 2011 18

Purchasing costs, costs of sub-contracted work and

  • perating expenses

(1) first half 2011

€ mln Employee benefit expenses Purchasing costs and costs of sub-contracted work External personnel expenses Other operating expenses (1) Excluding incidental items and fair value movements 86 88 3% 213 207 8% 192 177

  • 16%

47 56 2% 3% 526 540 2010 2011

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Alliander half-year results 2011 19

Cash flows and Capex first half 2011

€ mln

163 243

2010 2011

77 33

2010 2011 121 162 36 39 157 201 2010 2011 Free cash flow (1) Cash flow from operating activities Total investment in PP&E

(1) Free cash flow = Cash flow from operating activities – Gross investment in non-current assets + Contributions received from third parties Contributions received from third parties Net investment in property, plant and equipment

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Alliander half-year results 2011 20

Financial position

30 June 2010, € million Maturity profile

1,445 Net debt according to IFRS 247 50% of subordinated perpetual bond 1,692 Net debt according to financial policy 832 Total Cash and Cash Equivalents 125 CBL Investment 122 Other Investments 585 Cash 2,277 Gross Debt

Location of debt

4 506 4 753 5 6 306 10 524 1 200 400 600 800 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Credit facility (€ 600) (2)

First and second call option of subordinated perpetual bond

>2021 60

Capitalization Gross and net debt

Equity 2,445 Euro Medium Term Notes 2,050 Shareholder loans 105 Finance lease 119 Other 9 Subordinated debt 500

(1)

Alliander N.V € 2,151 Liandon Liander €137 (3) Endinet Alliander N.V Liandon Liander €126

(4)

Endinet Liandon

(3) Effective 1 January 2011 Alliander Finance B.V. merged into Alliander N.V (4) Including € 119 million finance lease obligations (1) Program size of € 3,000 million of which € 2,050 million is used (2) Committed credit facility (including € 200 million L/C back-up facility), maturity 15 july 2016 and option to extend maturity by 1+1

(3)

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Alliander half-year results 2011 21

Net debt

€ million

30 June 2010 31 December 2010

(1) including available for sale assets (2) according to the principles of Alliander’s financial policy the subordinated perpetual bond loan is treated as 50% equity

Net debt IFRS

30 June 2011

50% perpetual(2) Gross debt Unrestricted cash(1) Investments for CBL liabilities Net debt financial policy

2,277 2,312 2,353 1,692 247 247 1,672 150 1,425 138 1,344 125 1,445 707 859 749

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Alliander half-year results 2011 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% (1)

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
  • Comply with regulatory criteria for the grid operators

Financial Framework General Principles

(1) Solvency: Equity/Total assets net of deferred income

Strong financial profile with clear and well defined financial policy

Financial Policy

Liquidity Credit Rating/ Debt providers Shareholders’ equity

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Alliander half-year results 2011 23

39.3 37.4 39.0 30 Jun 2010 31 Dec 2010 30 Jun 2011

Ratios financial policy (1)

35.0 24.6 31.9 30 Jun 2010 31 Dec 2010 30 Jun 2011 6.0 4.4 5.5 30 Jun 2010 31 Dec 2010 30 Jun 2011 45.2 42.4 44.3 30 Jun 2010 31 Dec 2010 30 Jun 2011

  • min. 3.5x
  • min. 20%
  • min. 30%
  • max. 60%

Interest cover (2) FFO(3) / Net debt Solvency (4)) Net debt/capitalisation (5)

(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 tax adjusted for deferred tax movements and incidental items and fair value movements plus depreciation and net finance income and expense, divided by net finance income and expense adjusted for incidental items and fair value movements (3) Funds From Operations: 12-months profit after tax adjusted for deferred tax movements and incidental items and fair value movements plus depreciation of PP&E and intangible assets net of accrued income (4) Solvency: equity including the profit for the 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

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Alliander half-year results 2011 24

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, 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

  • 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 2011-2013 regulatory period

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

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

Source:Moody’s Investors Service as of March 11th, October 27th and December 29th, 2010 and Standard and Poor’s as of August 6th, October 28th, 2010, April 13th and August 30th 2011

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Alliander half-year results 2011 25

Outlook for 2011

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 2011.

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Alliander half-year results 2011 26

Content

  • 1. Highlights
  • 2. Alliander at a glance
  • 3. Half-year results 2011
  • 4. Appendices
  • Half-year results 2011
  • Other
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Alliander half-year results 2011 27

Results first half 2011

€ mln

H1 '10 H1 '11 Incid. excl Incid. excl Mov. H1 '10 items incid. H1 '11 items incid. '10 - '11 Revenue 679

  • 679

763

  • 763

Other income 51

  • 51

53

  • 53

Total income 730

  • 730

816

  • 816

12% Purchase costs and costs of subcontracted work 207

  • 207

213

  • 213

Employee benefits 177

  • 177

192

  • 192

Contract staff costs 56

  • 56

47

  • 47

Other operating expenses 105 19 86 79

  • 9

88 Depreciation and impairments 110

  • 110

150

  • 150

Less: Own work capitalised

  • 54
  • 54
  • 64
  • 64

Total operating expenses 601 19 582 617

  • 9

626 8% Operating profit (EBIT) 129

  • 19

148 199 9 190 28% Finance income and expense

  • 49

9

  • 58
  • 55

1

  • 56

Share in result of associates and joint ventures after tax 3

  • 3

4

  • 4

Profit before tax 83

  • 10

93 148 10 138 48% Tax

  • 21

2

  • 23
  • 29
  • 2
  • 27

Profit after tax 62

  • 8

70 119 8 111 59%

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Alliander half-year results 2011 28

Consolidated balance sheet

€ mln

Assets

Non-current assets 5,701 6,448 6,473 Current assets 360 451 419 Cash and cash equivalents 695 501 490 Total assets 6,756 7,400 7,382

Equity and liabilities

Equity Share capital 684 684 684 Perpetual loan

  • 494

494 Reserves 1,501 1,506 1,642 Profit after tax 62 222 119 Total equity 2,247 2,906 2,939 Non-current liabilities Interest-bearing debt 2,288 2,280 1,769 Deferred income 1,451 1,474 1,485 Other non-current liabilities 220 211 194 Total non-current liabilities 3,959 3,965 3,448 Current liabilities Interest-bearing debt 65 32 508 Other current liabilties 485 497 487 Total current liabilities 550 529 995 Total equity and liabilities 6,756 7,400 7,382 30 June 2010 30 June 2011 31 December 2010

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Alliander half-year results 2011 29

Cash flow statement first half 2011

€ mln

(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 divestment, construction contributions, investment grants and government subsidies), investments in intangible assets and investments in associates and joint ventures. First First half of half of 2010 2011 Profit after tax 62 119 Adjustments for: Finance income and expense 49 55 Tax 21 29 Profit after tax from associates and joint ventures

  • 3
  • 4

Depreciation and impairment less amortisation 90 122 Changes in working capital

  • 29

Changes in deferred tax, provisions, derivatives and other 32 1 Cash flow from operations 251 293 Net interest paid and received

  • 61
  • 58

Dividends received from associates and joint ventures 5 1 Corporate income tax received (paid)

  • 32

7 Cash flow from operating activities 163 243 Investments in property, plant and equipment

  • 157
  • 201

Investements in associates

  • 9
  • Construction contributions received

36 39 Investments in non-current financial assets

  • 4

Cash flow from investing activities

  • 130
  • 166

New/repaid other current interest-bearing liabilities and current part of non-current debt 50

  • 24

New non-current debt 3

  • Repaid non-current debt / new debt
  • 58

1 Change in current deposits 270 30 Subordinated perpetual bond loan

  • Interest coupon subordinatged perpetual bond loan
  • 15

Dividend paid

  • 54
  • 80

Cash flow from financing activities 211

  • 88

Net cash flow 244

  • 11

Free cash flow (1) 33 77

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Alliander half-year results 2011 30

Content

  • 1. Highlights
  • 2. Alliander at a glance
  • 3. Half-year results 2011
  • 4. Appendices
  • Half-year results 2011
  • Other
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Alliander half-year results 2011 31

(1) 48,1 including Helicopter accident in Tieler- en Bommelerwaard in December 2007

Grid reliability

24.0 27.4 31.2 26.3 29.7 24.3 23.5

10 20 30 40

2005 2006 2007 2008 2009 2010 2011

Average (12 month) outage electricity per customer (min)

(1)

  • Significant decrease in electricity
  • utage in the first half year is caused

by implementation of an outage reduction program initiated at the end

  • f last year
  • Under the outage reduction program

various actions are initiated aimed at:

  • Prevention of outage
  • Limiting number of affected

connections

  • More rapid solving
  • Target for end-2011 is 24 minutes
  • Long term target is 20 minutes (by

2015)

  • The reliability of Liander’s electricity

grids are among the highest in Europe

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Alliander half-year results 2011 32

Customer Satisfaction Business Customers

87% 88% 87% 86% 74% 74% 79% 60% 70% 80% 90% 100% 2008 Q2 2008 Q4 2009 Q2 2009 Q4 2010 Q2 2010 Q4 2011 Q2

Customer satisfaction

  • High and stable customer satisfaction in

consumer and business market. Customer Satisfaction Consumer Market

87% 89% 93% 91% 92% 87% 88% 89% 60% 70% 80% 90% 100% 2008 Q2 2008 Q3 2008 Q4 2009 Q2 2009 Q4 2010 Q2 2010 Q4 2011 Q2

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Alliander half-year results 2011 33

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

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

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Alliander half-year results 2011 34

0,0 0,5 1,0 1,5 2,0 2,5 3,0 3,5 4,0 4,5 5,0

2 1 2 1 1 2 1 2 2 1 3 2 1 4 2 1 5 2 1 6 2 1 7 2 1 8 2 1 9 2 2 2 2 1 2 2 2 2 2 3 2 2 4 2 2 5 2 2 6 2 2 7 2 2 8

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)

Equity strip risk Contractual termination value Equity investments Debt investments

Risk summary

  • 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.

Contractual termination value

(1) (1)

7 US leases (USD mln) 31 Dec 2010 30 Jun 2011 Equity strip risk 465 452 MtM risk 136 140 601 592 Letters of Credit (USD mln) 31 Dec 2010 30 Jun 2011 Issued 222 160 Additional LCs at A3/A- 232 233 Additional LCs at Baa1/BBB+ 18 18 Back-up facility (€ mln) 31 Dec 2010 30 Jun 2011 Back-up L/C Facility 200 200

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Alliander half-year results 2011 35

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: ARt = (1 + (cpi ± x + q)/100 ) * ARt-1 , by which:
  • ARt = 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.