Ready to accelerate

Activity Report 2019 Grid Map Elia Grid Map 50Hertz

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     LEGEND

Switching stations (most with links Line 380 kV   : to distribution system operators) Our customers are regional distribution system Line planned/under construction 380 kV operators as well as power plants, pumped-storage 380 kV Line 220 kV plants, wind farms and major industries connected to the transmission system. 220 kV HGÜ/Gleichstromverbindung 300/320/400/525 kV Transformation 380/220 kV HGÜ/Gleichstromverbindung Conventional power plant planned/under construction 300/320/400/525 kV (lignite-«red or coal-«red power plant) Transformation 380/150 kV Other companies 380/220 kV Pumped-storage plant Planned/under construction HVDC/back-to-back converter 380/150 kV Other companies Phasenschiebertransformator planned/under construction Onshore/o›shore wind farm HVDC/DC link 400 kV HVDC/DC link 320/525 kV Onshore wind farm planned/under construction O›shore wind farm planned/under construction 1 New construction largely along existing routes planned/under construction Grid connection o›shore 150/220 kV Grid connection o›shore 150/220 kV planned/under construction

      For a successful energy Content About this report 2 We connect generation and distribution 4 transition in Interview with Chris Peeters and Bernard Gustin* 6 The context of the Energy Transition* 10 Our story* 12 A stable and secure grid around the clock: a sustainable interview with Stefan Kapferer, CEO 50Hertz 14 Sustainable actions in the interest of society* 16 2019 in numbers 18 Elia Group in 2019 20 world Fifth anniversary for Elia Grid International: interview with Didier Wiot, CEO EGI 24 We create and deliver the infrastructure of the future and Our Strategy* 26 provide innovative services that enable a reliable and sus- Building Block I: tainable power system, with the interest of society at the We ensure a secure, reliable and efficient grid* 30 heart of every decision. We keep the lights on and make Building Block II: We deliver the transmission system oft he future* 42 the energy transition happen by serving our customers in Building Block III: a responsible, highly efficient and non-discriminatory way, We develop the electricity system and the markets* 60 while protecting the safety of our personnel, subcontrac- Building Block IV: tors, and anyone in contact with our infrastructure. We cooperate to create value for society* 72 Buidling Block V: We align culture with strategy* 86 Building Block VI: We have our eyes wide open for innovation & growth 102 opportunities* Corporate bodies 114 Corporate governance declaration* 116 Legal structure 148 The Elia Share in 2019 150 Management Discussion* 153

* These chapters from the annual report cf. article 3:32 of the Belgian companies and associations. 2 About this report Elia Group Activity Report 2019 3 About this report

The Annual Report 2019 consists of three parts: the Activity Report, the Sustainability Report and the Financial Report where we inform our stakeholders about our company, corporate social responsibility, and financial results. You are currently reading the Activity Report.

Please visit www.eliagroup.eu/publications to consult parts two and three.

Activity Report 2019 GRI Standards: Core option

This report explains who we are and what we do, This report has been prepared in accordance the context in which we operate, and includes the with the GRI Standards, the first global standards risks and opportunities. It outlines our strategy for sustainability reporting. The applicable GRI- and the progress we have made towards achieving Standards performance indicators are highlighted our goals. It also covers our approach to corporate in the report wherever Elia Group has reported on governance and provides an introductory analysis economic, environmental or social impacts. Consult of our 2019 results. The Activity Report concerns the GRI Index on page 73 of the Sustainability regulated information, published on 14 April 2020 Report for a full overview. The online references in after trading hours. this report provide more in-depth information on a subject by way of video, brochure or webpage. 4 We connect generation and distribution Elia Group Activity Report 2019 5 Ready to accelerate… … to realise the next phase of the energy transition in a timely and secure way bringing maximum welfare to society

GRI 102-40, GRI 102-9

We connect generation and distribution

Regulatory authorities Suppliers Public & partners Authorities

Shareholders and investors Transmission Press & general Generation public Distribution Renewable energies classic energies

Energy suppliers Local Communities

Consumers

European Distribution system system operators operators 3 Activities

Managing Balancing Facilitating the infrastructure the electricity system the market

Industrial clients and European consumers Industrial clients Production Employees Watch the video http://bit.ly/GuardiansOfTheGrid and get to know the energy players of the energy landscape. Academics NGOs & & energy federations professionals 6 Ready to accelerate Elia Group Activity Report 2019 7

The transition of Europe’s energy system is, without a doubt, one of the greatest challenges faced by society this century. The shift to a low-carbon society is sure to happen all the faster given the ambitious course set by the European Green Deal, which aims to make Europe the world’s first climate-neutral continent by 2050. The energy transition is Elia Group’s number-one priority. With our retooled strategy, updated development plans, new corporate structure and additional

capital, we are ready to accelerate.

The Green Deal was not the only defining feature of 2019. The climate marches and yellow-vest protests shaped the year too. How is Elia Group dealing with these We are increasingly carrying out our activities issues? “ in an international context, and it’s important Bernard: “Until recently, calls for cli- that we adapt to reflect this. mate action were mainly the preserve Chris Peeters of non-governmental organisations and lobby groups. But political players are gradually starting to take the lead too: there are more and more climate ministers, and ambitious plans are being Bernard: “Today, the electricity grid is believes in your strategy. The capital drawn up. At the same time, though, the focus of the energy transition. For increase showed us that our current there are concerns about the cost. We the next two years, Elia and 50Hertz will shareholders have a lot of faith in us, don’t want to burden future genera- be investing a staggering € 1.1 billion per but it was a huge success on the market tions with the consequences of climate annum in the integration of renewable too. Our share price hit an all-time high, change, but we don’t want to saddle energy, development of an offshore reflecting our ambitions and showing them with a mountain of debt either.” high-voltage grid and in the construc- that the market believes our strategy is tion of interconnectors to facilitate the intelligent.” Chris: “That’s why it’s important to know integration of the European energy mar- which path to pursue when it comes Chris: “We’ve noticed that we’re attract- ket. On top of that, we want to harness to adopting climate measures. Some ing a new kind of investor. Our share is digitalisation and innovation to open up decisions will have a greater impact increasingly being viewed as an attrac- our grid to new players, different indus- on the current situation than their cost tive tool for investment. Institutional tries and new technologies. While this would suggest, whereas it may take time investors want to be part of our growth approach creates certain expectations for the effects of other decisions to be journey. They don't just look at us as a and puts us under a lot of pressure, we felt. As grid operators, we need to take bond share anymore. That is an impor- can see that it really appeals to young extremely complex decisions at an early tant observation.” stage, facing all kinds of NIMBY (not in people. We’re attracting new profiles. Young engineers who, until recently, Won’t you need to launch anoth- my back yard) backlash in the process. er capital increase quite quickly if And yet in the context of the energy tran- wanted to work for the Googles of this world are now choosing to come to us you put your growth strategy into sition, we are the ones whose actions will action? cost consumers the least and will make instead. Here, they will find a mix of the biggest difference in terms of CO2 technical complexity and digitalisation, Bernard: “It’s important to strike a Ready to reduction. We strive for the best possible as well as the chance to contribute to balance between adjusting our plans social and environmental solutions. That fighting global warming.” to the market and achieving our own is why the interaction with our various Elia successfully carried out a capi- goals. Both the Board of Directors and stakeholders is so important. We want to tal increase worth €434.8 million in the management team are willing to be a transparent and reliable advisor to 2019. Looking back, what are your look out for opportunities, and if they’re positive for the group, we’ll seize them. policy makers. In addition, when plan- thoughts on the transaction? accelerate ning new infrastructure, all stakeholders There’s been a new dynamic within the are involved at a very early stage of the Bernard: “A capital increase is like a group since we acquired the additional project. Their input is integrated in the health check for a company – it tells you stake in 50Hertz. Our teams are ready for Interview with Chris Peeters and Bernard Gustin, GRI 102-14 various planning phases.“ whether the market understands and action.” CEO and Chairman Elia Group GRI 102-15 8 Ready to accelerate Elia Group Activity Report 2019 9

Chris: “If the authorities need to speed Another major highlight of 2019 Elia Group wants to be a leading Our German partner KfW helps up the energy transition, additional was the launch of Elia’s first off- European energy company. How “ us to make better decisions. investments will be required, so capital shore projects in . The sea did this aim manifest itself in 2019? It has a better insight into the increase for organic growth can be post- sounds like a risky place for an elec- Chris: “Our international position means local context. poned. However, the major unknown is tricity system operator to work. that we examine complex problems from non-organic growth.” Chris: “That’s why we took so much care multiple angles. We have strong teams Bernard Gustin In 2019, the corporate structure was over the projects. Both the Nemo Link in both countries, and they don’t always adjusted and Elia Group became cable (interconnector with the United agree. Working together yields construc- a holding company. What was the Kingdom) and the Modular Offshore Grid tive solutions: our first joint study on the rationale behind the change? (switching platform 40 km off the coast, future of the European electricity system Last but not least, who would you for connecting offshore wind farms to (Future-proofing the European energy Chris: “We are increasingly carrying out like to thank? the mainland) were delivered on time system towards 2030) is proof of that. We our activities in an international context, and on budget, and both met the re- are thinking ahead, rather than simply Chris: “From a CEO’s point of view, there and it’s important that we adapt to re- quired quality standards. Nemo Link was responding to developments as they are a number of critical relationships flect this. We have just as many activities the first interconnector to manage that. happen.” that are vital for success. One of those is abroad as we do in Belgium. Under the The MOG was a stupendous achieve- the relationship between the CEO and new corporate structure, our German Bernard: “The fact that we have activities ment too. Just two and a half years ago, the CFO. These are two complementary subsidiary 50Hertz is a business unit with in two countries makes us somewhat the project hadn’t even been set down in roles that balance and challenge each equal standing. The change has enabled atypical for our sector. But that is pre- law. Today, the first offshore wind farms other. Just as critical is the relationship us to strike the right balance between cisely what gives us a broad outlook. Our are already connected to it. I am excep- between the CEO and the Board of group dynamics and local identity.” in-house change process was instigated tionally proud of what our teams have Directors, which largely comes down to by a German who speaks perfect French Bernard: “We’re on the lookout for syn- achieved.” the CEO’s relationship with the Chair- and understands Dutch. Our operational ergies in strategy, finance, innovation, man of the Board. With that in mind, Bernard: “50Hertz has more experi- activities are managed, at group level, His Majesty the King visited the Modular Offshore Grid safety, and more within the group. And (MOG) at its inauguration on Tuesday 10 September 2019. I’d like to thank Catherine Vandenborre ence with offshore projects, so we were by a committee with equal numbers we’re also prioritising a local approach. and Bernard Gustin for our excellent able to put their skills to good use. Our of Belgian and German members. By It was a conscious decision to give pref- partnership. I’d also like to say a special combined experience is a key driver for looking around ourselves, we can iden- erence to a German minority shareholder word of thanks to all the employees who our future growth. Most reports place tify new needs faster and take action in 2018. Our relationship with German have worked so hard to get Elia Group offshore wind potential at 400 GW, with to address them – digitalisation being development bank KfW is going really where it is today. Our achievements are about half coming from the North Sea. just one example. We’re actively seeking well because everyone involved feels the result of major efforts by a great We’re currently sitting at 25 GW, so a partnerships, too. I’d also like to mention The energy transition means an What do you need to focus on in that it’s a good deal. That much is clear many people at Elia and 50Hertz. And massive increase is needed. Moreover, Elia Grid International. Their consultancy increase in electrification. To what 2020? from KfW’s extremely active involvement then there are all the departments that the grid is to be connected at European position enables them to provide inter- extent has there already been con- in our management bodies. KfW helps Bernard: “We’ve created a lot of ex- constantly strive to ensure that the lights level, and we’re ahead of the pack there esting leads for the group. They are an vergence with sectors like transport us to make better decisions because pectations regarding integration and stay on and the grid, system and market too. With its Combined Grid Solution pro- important part of the puzzle.” and heating? they have a better insight into the local synergies with 50Hertz. Now it’s time for are ready for the future. Finally, I’d like to ject, 50Hertz is currently working on the context.” Chris: “Then there’s technical leadership Chris: “Since we’re a regulated monopoly, us to deliver. We’ve set up some excit- thank the authorities and the regulators. first hybrid interconnector between Dan- too. The 50Hertz grid has one of the we have a specific role. We’re also not ing initiatives centred on digitalisation, Our discussions with them have been Will the future internationalisation ish and German offshore wind farms.” highest proportions of renewable energy the only system operator. That said, I’d to name but one example. At the same constructive, which has enabled us to of the group affect the make-up of (60% in 2019). You can’t really tell at first like to highlight the IO.Energy project in time, we’re also thinking about our next implement the projects that are needed the Board of Directors? glance, but there is a great deal happen- Belgium – it’s a project that was devised big project. I firmly believe that compa- for the future.” Bernard: “Until now, we’ve been bound ing behind the scenes to keep the grid within Elia and aims to get consumers nies grow by undertaking projects and Bernard: “It’s great to see how well our by the Belgian Electricity Act. But the stable without impacting consumption actively involved in the electricity market. setting ambitious goals. The last two teams in both countries are coming on. holding company is a non-regulated behaviour. The SuedOstLink will be the Following analysis, together with Belgian years have been fantastic for us. Now we A lot of that is down to Chris. He takes company, so we can adapt the make-up first time that underground cables with DSOs, we launched a call for cooperation need to make sure that we can keep on a real interest in the field. The manage- of our management bodies to reflect our a voltage level of 525 kV have been used, in late 2018, and we’re currently testing growing.” ment team also sat on all the working actual situation. Since half of our activi- while the Combined Grid Solution will be the first projects on smart buildings and Chris: “We’re standing on the thresh- groups with the Board of Directors, ties are located in Germany, it seems only the first project in the world to connect local energy communities.” old of something new and exciting. contributing in a very natural, open way. logical, in the long run, to have board two offshore wind farms.” Bernard: “We’re not trying to do anyone The good news is that the various focal That kind of transparency is important, members who have a firm grasp of the else’s job – not the distribution sector’s, points underpinning our strategy have and fosters trust. Then there are the local situation and can advise us on it.” and not the commercial market’s. If we shown us the best way to move forward. regulators and the authorities, who fully all work together, we can come up with Digitalisation will become increasingly understood our aims and gave us all the best solutions for the customer. relevant at European level, and we have the support we needed. When we were Thanks to this approach, our work is truly opportunities to achieve more organic expanding our German management consumer-centric.” growth. We’ve laid the foundations. Now team, we were able to draw on the assis- it’s time for us to build on them. For tance and advice of our German partner instance, we’re about to see a new wave KfW, with whom we have a very positive of offshore projects. We need to make relationship. Finally, I’d like to thank our the most of the opportunities we have shareholders, who made our capital in- We don’t want to burden future generations with the now so that we can take further steps in crease such a success and thus demon- “ consequences of climate change, but we don’t want to the future.” strated their faith in us.” saddle them with a mountain of debt either.

Bernard Gustin 10 The context of the energy transition Elia Group Activity Report 2019 11 The context of the Supranational coordination energy transition The increasing share of renewables and the trend GRI 102-15, towards more decentralised generation with a much larger number of players is making the behaviour of the power system more variable and As transmission system operators, Elia and 50Hertz lead the way in the energy complex. In addition, all over Europe we are see- transition. Our grids have a crucial role to play in the decarbonisation of the ing grid development lag behind rapidly evolving renewable generation. This is causing congestion energy sector and society in general. problems and considerable redispatching costs in some European countries. Given the already high degree of interconnectedness and integration of the Besides the rise of renewable generation, the ener- As a result, new market players and technologies European power system and markets, responding gy transition is also bringing other changes: increas- appear such as electric vehicles, battery storage, to these challenges often requires a supranational ing decentralised generation, more supranational Power-To-X technologies, etc. In a future, decar- approach. coordination and the emergence of innovations bonised and progressively digital world, managing such as the Internet of Things (loT), artificial intelli- the power system becomes increasingly complex. gence (AI) and blockchain that are contributing to Not only will electricity generation become ever the fast-paced digitalisation of our society. more weather-dependent, it will also be produced by millions of assets connected everywhere in the European grid. Both transmission and distribution system operators will need more flexibility to keep the system in balance and to manage congestions and voltage issues. Decentralisation Following the trend of decarbonisation, we believe that the move towards more dispersed, smaller and local generation sources, which mainly connect Current trends to lower voltage grids, is also likely to continue. “Prosumer” numbers will rise and they will move to and evolutions the forefront of the electricity system even more, empowered by technologies that allow them to Digitalisation play a much more active role. New technologies, The fourth trend, which is being introduced at a Increasing shares increasing electrification and sector integration also rapid pace, will accelerate the speed of the decar- stimulate the emergence of new players such as bonisation and the decentralisation of production. of renewables service providers targeting end-consumers. For ex- Elia Group expects to see massive amounts of The decarbonisation of the energy sector based on ample, balancing service providers are exploring the renewables coming online at all levels of the grid, increasing shares of renewables will remain the most potential of delivering flexibility to different players electrification powering activities such as mobility important driver of change in Europe. This trend is along the value chain. and heat & cooling, more international cooperation, propelled by the political objective to counter climate and millions of people producing and storing their change and build a sustainable energy future, but is own electricity. To respond to this, the Group be- also supported by the rapid development and declining lieves that a new way of managing the future power costs of renewable technologies themselves. In addi- system is required in order to maximise the benefits tion, the current design of electricity markets is driving of the energy transition. This will be possible thanks the decarbonisation trend because of the zero marginal to the digitalisation of the power system connecting costs of renewables. We expect to see this trend pick all electrical devices and various players in the sys- up speed, which has important direct repercussions on tem. The emergence of new digital technologies will grid development needs and on system operation, but allow new capabilities for improving the gathering, also indirect consequences, such as increasing societal transfer, processing, and visualisation of data, as and political expectations that companies should be well as the automation of decisions and actions in playing their role in combating climate change. managing the power system. Some of these digital technologies include (but are not limited to) the In- ternet of Things, cloud computing, big data, artificial

intelligence and blockchain. w 12 Our story Elia Group Activity Report 2019 13 Our Our core tasks story GRI 102-2

GRID TRUSTEESHIP* In the interest of OWNERSHIP We transparently integrate renewable energies into the society We deliver the infrastructure of market Based on mutual respect and empathy, we realise the grid of the future The German legislator has transferred the future through proactive dialogue with a variety of stake- We develop, build and maintain our the responsibility for coordinating and holders to enable us to achieve the best societal and environ- A European transmission infrastructure according processing legal levy systems to pro- mental solutions. By building interconnectors and integrating to long-term needs. We heavily invest in mote environmentally friendly technolo- renewable energy generation, Elia Group promotes both the top 5 TSO the integration of renewable energy, the gies to the transmission system opera- integration of the European energy market and the decarbon- development of an offshore high-voltage tors. 50Hertz collects these levies as a isation of our society. In Germany, we are already integrating GRI 102-1 grid and the construction of intercon- trustee, administrates them and coordi- more than 60% of renewable energy safely into the grid. We nectors to make the energy transition nates their distribution to the recipients. also ensure that we deliver investments on time and within Elia Group is active in electricity transmission. We happen and to facilitate the integration If the electricity from renewables is not budget, while having a maximum focus on safety. We proac- ensure that production and consumption are bal- of the European energy market. marketed directly, we sell on the power tively involve stakeholders very early on in the development anced around the clock, supplying 30 million end exchange. process. We also believe that our technical knowledge and users with electricity. With subsidiaries in Belgium analyses support policymaking and contribute to the public (Elia) and northeast Germany (50Hertz), we operate *Only for 50Hertz debate on the future of the European energy system. 19,271 km of high-voltage connections. As such, Elia Group is one of Europe‘s top 5 TSOs.

In addition to our activities as TSO, Elia Group pro- vides various consulting services to international customers through our subsidiary Elia Grid Interna- tional (EGI). Elia is also part of the Nemo Link consor- MARKET SYSTEM Innovation & tium that is operating the first subsea interconnec- FACILITATION tor between Belgium and the UK. CONTROL collaboration We are part of the European We maintain the balance integrated market We keep the lights on and make the energy transition happen Operating the electricity system is an in- in a responsible, highly efficient and non-discriminatory way, Elia Group makes its infrastructure creasingly complex task due to the sharp while protecting the safety of our personnel and subcontrac- available to all market players in a rise in renewable generation sources, tors. We integrate new technologies and keep up with the transparent, non-discriminatory way. the continuous arrival of new players and latest developments in the energy sector. We encourage our Digitalisation and the latest technologies technologies and the development of employees to be frontrunners in the energy transition, both offer market players new opportunities supranational coordination. To ensure a with ideas and practical applications. We count on our own to optimise their electricity management reliable supply and the efficient oper- expertise but are also keen to learn from outside the Group by selling their surplus energy or tempo- ational management of our grids, Elia through collaboration and open innovation. Furthermore, we rarily reducing consumption. We develop Group monitors the electricity system in continue to contribute our knowledge and expertise publicly services and mechanisms allowing the real time. This requires specialist knowl- by providing independent, objective and factual analysis to key market to trade on different platforms, edge as well as sophisticated tools and actors in the energy landscape. which promotes economic competitive- processes. ness and the wellbeing of society.

Watch http://bit.ly/AboutEliaGroup and get to know more about Germany our Why, What and How. Belgium 14 Interview Elia Group Activity Report 2019 15

INTERVIEW WITH STEFAN KAPFERER, CEO 50HERTZ Major challenges of the energy transition according to Stefan Kapferer

• To secure and technically implement • To work cost-efficiently and grid optimisation, grid reinforcement transparently so that the financial and grid expansion with the required burden on end consumers is kept A stable and secure capital. within reasonable limits. • To ensure system stability in an • To invite the people that live close to increasingly decentralised digital infrastructure projects to engage in energy world. dialogue to generate understanding. grid around the clock Without civil society, the energy transition will not work the way GRI 201-2 politicians and the industry wants it to.

As transmission system operators, we are just as committed to the goals of the Paris Agreement as other players in politics and business. We see ourselves as a service provider to ensure a stable and secure electrical system around the clock while the share of renewable energies in the energy supply increases steadily. This is a responsible task. Public The mere fact that our headquarters are located in Berlin authorities and society in general count on our expertise. They see us as “ and speaks for itself. No other TSO in Europe has this presence in two capitals. their trusted advisor. Stefan Kapferer

How can 50Hertz support the What are currently the biggest Why is there a need for grid in ambitions of the European Green challenges? times were generation becomes Deal? more decentralised? What else is needed to make this Stefan: “The German government has huge task a success? Stefan: “The strength of Elia Group now decided on a clear timetable to Stefan: “The energy transition will lies in the variety of different market phase out coal-fired power generation only be succesful if we all collaborate Stefan: “Grid expansion alone is not designs we have to deal with, different by 2038 at the latest and then to secure and use all the available potential. enough. We urgently need innovations perspectives we can share and of the electricity supply mainly through And we as TSOs and DSOs have a key in hardware - from cables to substations €4.2 course, the different cultures which renewable energies and flexible gas role to play: it won't work without us. - and also in software, in other words in we can learn from. The mere fact that power plants. This is an enormous task. Incidentally, a scientific association the markets. Before we build a new line, billion our headquarters are located in Berlin So far no one can reliably say where recently recorded this with a clarity I we need to better utilise and optimise and Brussels speaks for itself. No other all the electricity needed for private wouldn’t have expected. ‘Without the the existing grid. We are doing this using 50HERTZ HAS LAUNCHED AN INVESTMENT TSO in Europe has this presence in two households, for industry and increasingly grid expansion, the energy transition the latest technology, but there is still PROGRAMME OF €4.2 BILLION FOR THE a lot of research and field testing to be NEXT FIVE YEARS capitals. As far as 50Hertz operational also for heating and transport sectors will fail,’ says the German scientific contribution is concerned: no other TSO will come from. For us as a transmission elite in a recently published paper. done. And in times of nuclear and coal has such a large share of fluctuating system operator, this poses several major And that's why we deliver. 50Hertz has phase-out, we need new equipment electricity volumes from wind and solar challenges. launched an investment programme such as phase shifters, reactive power power in its grid. In 2019, we had around of €4.2 billion for the next five years. compensation systems and intelligent 60% of our electricity consumption It includes onshore projects such as data management. The topic of ‘energy coming from renewables, which is one the SuedOstLink and the Berlin cable storage’ will also gain momentum, both of the world’s highest shares. In our grid diagonal, as well as the important in the smart home context and at the area, we expect to achieve the German offshore grid connections Ostwind Power-to-X level - I am convinced of that. federal government's 2030 target of 65% In our grid area, we expect 2 & 3 and the HansaPower Bridge Intensive, trusting cooperation between renewables within two years.” “ to achieve the German interconnector to Sweden. Offshore will grid operators at various levels and federal government's 2030 become increasingly important because large industrial electricity consumers is target of 65% renewables wind turbines at sea have higher full- essential.” within two years. load hours and are perceived by the public as less disruptive. This investment Stefan Kapferer programme naturally also requires an Stefan Kapferer (54) has been 50Hertz CEO since December 2019. Prior adequate and responsible regulatory to this, he was Chief Executive Officer of the Federal Association of the framework.” Energy and Water Industries (BDEW), Deputy Secretary-General of the Organisation for Economic Cooperation and Development (OECD) in Paris (2014 to 2016) and from 2011 to 2014 he was State Secretary in the Federal Ministry of Economics and Energy. Stefan Kapferer was born in Karlsruhe and studied administrative sciences in Constance. 16 Sustainable actions Elia Group Activity Report 2019 17

One of the greatest challenges for society is climate change. “ Since we are enabling and facilitating the energy transition through grid development, providing the appropriate market design, supporting electrification of mobility, etc. sustainability Sustainable actions in is already at the core of our strategy. At the same time, we are setting up objectives and concrete actions to make our own busi- ness sustainable: limitation of direct CO2 emissions, introducing the interest of society concepts of circularity and eco-design in our assets, enhancing biodiversity surrounding our installations, introducing concrete GRI 102-15, GRI 201-2, GRI 103-1, GRI 103-2, GRI 103-3 safety targets, a safety culture and working on diversity targets.

Ilse Tant, Our planet and all mankind face the serious challenge of finding Chief Community Relations Officer Elia answers to the problems of climate change. Industry plays an important role in this and is called upon worldwide to follow the guiding principles of the United Nations. The Sustainable Development Goals, to which the Elia Group is also committed, Sustainable development goals In 2015, the international community of states represented by the United represent a globally crosslinked strategy to meet these Nations has agreed 17 goals for sustainable development. Within the challenges on an economic, social and ecological level. context of Agenda 2030, these global goals, which apply equally to all states, are intended to reduce inequalities, promote equal opportuni- ties and stimulate sustainable economic growth. All - governments and A carbon-neutral economy is an essential to make our core business even more In 2018, the Elia Group had decided to companies alike - are called upon to meet this challenge, but also to part of this global strategy. The Elia sustainable. The Elia Group is committed widen its view on sustainable business focus on opportunities and risks and tap the potential of sustainability.

Group makes a significant contribution to reduce its direct CO2 emissions, to management and to integrate the to this by enabling the integration increase biodiversity around its assets Sustainable Development Goals (SDG) Opportunities: of renewable energies and thus the and its lines, and to continuously into a sustainability framework. In a first energy transition. To this purpose, we improve its occupational safety and step, 11 of the 17 internationally valid develop the transmission grid to meet diversity objectives. In the future, we will sustainability goals were identified and demand and enable transparent and increasingly work on concepts for the clustered from top and high to medium non-discriminatory market integration circularity of our materials used and the priority. for all parties. In addition, we have set eco-design of our assets. ourselves specific targets and measures In order to better understand the risks Risks: and opportunities that SDGs present for their own business activities, 50Hertz and Elia launched a quantitative assess- ment along the value chain in the 2019 reporting year. This allowed the 2018 per- spective, which only took into account The Elia Group has a strong, positive influence on SDG 7 their own operations, to be fundamen- "Affordable and Clean Energy" with its business model of in- tally expanded. The science-based creasingly integrating sustainable energies into the grids. At approach of the S&P Global consulting the same time, this also creates positive influences that lead subsidiary Trucost was assigned for the to sustainable cities and communities (SDG 11). The Group analysis. The internal prioritisation was contributes to a good employment situation and stable completely confirmed by the analysis growth in the various regions of its grid areas, thus strength- (for the highest priority) and also largely ening SDG 8 "Decent Work and Economic Growth". Overall, confirmed for the high priority. Elia Group's business activities and revenues contribute 100% positively to SDGs. Our vision already states: we as a transmission system This positive influence is offset by both opportunities and operator are committed to sustainable development in the “ risks, the alignment of which with the corporate strategy is interest of society. It is therefore natural for us to focus on Please visit carefully examined. These include, for example, more inten- our contribution to the global development goals of the www.eliagroup.eu/en/publications sive investigation of the effects of climate change and United Nations. This results in opportunities for us and for to consult the full 2019 Elia Group other related risks on the Group's own business activities Sustainaility Report. society, which we want to actively manage. And of course and those of the supply chain. we always keep an eye on the risks.

Marco Nix, Chief Financial Officer 50Hertz (

18 2019 in numbers Elia Group Activity Report 2019 19

Financial 2019 GRI 201-1 in numbers € 9.1 billion GRI 102-44 REGULATORY ASSET BASE (ELIA GROUP)

€ 306.2 mio ADJUSTED NET PROFIT (ELIA GROUP) Operational € 1.69 GROSS DIVIDEND PER SHARE (ELIA GROUP) 30 mio END USERS (ELIA GROUP)

19,271 km OF HIGH VOLTAGE LINES AND CA- BLES (ELIA GROUP) Environmental Social 99.99% 267 NEW HIRES RELIABILITY OF THE GRID (ELIA) 2,584 (ELIA GROUP) INSPECTIONS WERE CARRIED OUT ON CONSTRUCTION SITES (ELIA GROUP) 2,544 EMPLOYEES 60% (ELIA GROUP) PERCENTAGE OF RENEWABLE ENERGY INTEGRATION (50HERTZ) 24 NATIONALITIES 337.59 km (ELIA GROUP) OF BIRDMARKERS INSTALLED UNTIL 31/12/2019 (ELIA GROUP) 20 Elia Group Elia Group Activity Report 2019 21

Chancellor Merkel inaugurates Arkona wind farm Elia Group The new Arkona offshore wind farm was officially inaugurated on Tuesday 16 April in a ceremony attended by the German Chancellor Angela Merkel. The 50Hertz grid connection pro- ject Ostwind 1 connects the Arkona and Wikinger wind farms in 2019 to the onshore transmission grid. Renewable energy from two off-shore wind farms is now flowing via three 90 kilometres long submarine cables to the Lubmin substation and from there to the consumer. 50Hertz is using a 220-kV three-phase cable for the first time. The work in the German Baltic Sea took three years and was delivered ten percent below the €1.5 billion investment budget. Elia named a Top Employer for the second consecutive year For the second year in succession, Elia can count itself among the best Belgian employers. The Top Employer certifica- tion is awarded in more than 115 coun- tries to companies that are providing an excellent working environment and con- sider this a top priority. Over the past year, Elia has invested heavily in interna- tionalisation and training. The award is an important accolade and an additional advantage when it comes to attracting new talent in an increasingly competitive labour market.

Nemo Link launched successfully Capacity on the subsea interconnector between Great Britain and Belgium has been available for purchase by implicit day-ahead auction since 30 January 2019. Successful capital increase We traded about 18,559 MWh of power of €434.8 million on the first day of operations. Nemo Link The new shares created by Elia's recent capital increase were is a joint venture between Elia and British first listed on Euronext on 18 June 2019. To mark the occasion, system operator National Grid. The cable the day's trading began with a bell ceremony. By the close has a capacity of 1,000 MW and is Elia’s King Philippe inaugurates Elia’s first of the subscription period for shareholders with preferential first subsea interconnector in Belgium. plug-at-sea rights, no less than 92.17% of the new shares had been taken It is also the country’s first high-voltage up. Any preferential rights that had not been exercised were His Majesty the King visited the Modular Offshore direct-current (HVDC) project. offered to Belgian and international institutional investors. This Grid (MOG), Elia’s first power hub in the North Sea, second offering was fully completed in one hour. Demand out- Stefan Kapferer becomes the new CEO of 50Hertz upon its inauguration on Tuesday 10 September. The stripped supply by five to one. Stefan Kapferer has taken up his role as CEO of Elia Group’s inauguration of the MOG is a true milestone in the German subsidiary 50Hertz. Kapferer brings a wealth of expe- development of wind power of Belgium’s North Sea rience and expertise to the job. Prior to this, he headed up coast. By the end of 2020, it will combine electricity the German Association of the Energy and Water Industries generated by four offshore wind farms for onward

(BDEW), and also has international experience and a strong transmission to the mainland. w network thanks to previous positions as Deputy Secretary- General of the OECD in Paris and State Secretary at the German Federal Minis-try of Economics and Energy. 22 Elia Group Elia Group Activity Report 2019 23

Catherine Vandenborre wins Trends-Tendances ‘CFO of the Year 2019’ award Trends-Tendances named Elia's Chief Financial Officer Catherine Vandenborre 'CFO of the Year 2019'. Catherine and her team received this recognition for the key role they played in the transac- tion that gave Elia full control over the German company 50Hertz. The deal was all the more remarkable as Elia partly financed the acquisition with hybrid debt instruments, thus leaving Elia's creditworthiness intact.

‘Good Practice of the Year’ award for Combined Grid Solution The joint project Combined Grid Solution between 50Hertz and the Danish Sustainalytics classifies Elia Transmission Energinet won the 'Good Practice of the Year' award. The Combined Grid Belgium and 50Hertz as an “outperformer” Solution is the first grid connection that links offshore wind farms of two Elia Transmission Belgium, Eurogrid and its subsidi- European countries. Free capacity of the interconnector can be used for elec- ary 50Hertz have once again improved their sustaina- tricity trading between the two countries. This maximum use of offshore infra- bility rating. In the latest edition of the Sustainalytics structure was particularly highlighted by the Renewables Grid Initiative during Environment, Social and Governance report, they the award ceremony. scored respectively 74 points (Elia) and 79 points (50Hertz) out of 100 earning them 'outperformer' status.

Elia and 50Hertz sign Elia Group's new corporate Marine Grid Declaration structure implemented On Tuesday 19 March, Ilse Tant and Olivier Feix The internal reorganisation was completed on 31 December 2019, meaning that the attended the signing ceremony of the Elia Group is now a holding company and Elia's regulated activities in Belgium have Renewables Grid Initiative's Marine Grid been separated and ring-fenced from its non-regulated and regulated activities out- Declaration. The declaration contains specific side Belgium. This change to the Elia Group's corporate structure will also mean that recommendations for the establishment of offshore its existing and future Belgian and European activities can be developed in line with grids. Special attention is given to promoting com- the envisaged growth strategy. munication with stakeholders from the start of the project. The protection of the marine environment is also a key focus. Additionally, the declaration com- mits the signatories to exchanging more best prac-

tices with each other.

w 24 Interview Elia Group Activity Report 2019 25

INTERVIEW WITH DIDIER WIOT, CEO OF ELIA GRID INTERNATIONAL EGI supports Ukrenergo with RES integration Elia Grid International is helping the Ukrainian Transmission System Operator (TSO) Ukrenergo to identify the gaps in the Ukrainian power sector to enable it to carry out the necessary system Fifth anniversary for transformation for the effective integration of variable renewable energy sources (vRES). Experts from Elia Group shared best practices and key lessons learnt from the Elia and 50Hertz experi- Elia Grid International ence regarding RES integration. GRI 201-2 EGI launches new practice on “Market and Regulation” Elia Grid International (EGI) offers consultancy and engineering services on the international Elia Grid International assists clients in making a real difference by leveraging the experiences developed by Elia Group over the last 20 years. Practices include market products development, energy market and develops power system projects for third parties. As a wholly owned studies and implementation processes related to market set-up, data management, regional subsidiary (50/50) of Elia and 50Hertz, EGI combines the quality and expertise of two large market coupling, interconnectors and advice in balancing market design and implementation. European system operators, each with a solid track record and many decades of experience.

How do you look back at the For which types of customers does end of 2019 has reached 5 GW while market also means that we have to battle first 5 years? EGI usually work? the initial plan only targeted 800 MW. against a large number of players. The At first, they thought RES integration competition can be fierce but EGI has Didier: “We have managed to develop a our activities. Our business plan has Didier: “Our clients are mainly would be technically impossible. EGI developed a strong brand recognition new international activity from scratch been reviewed in 2019 and is aiming Transmission System Operators, but we helped to convince decision makers that and winning tenders against big and successfully delivered projects in towards ambitious growth targets are also supporting regulators, single the system would remain stable and names is starting to become “normal”. four continents. We are focusing our with a doubling of the company size. buyers, ministries, public authorities Vietnam is now moving forward with At the same time, it is important for activities in three key target markets: Today, we have around 50 people on and private developers. We are larger ambitions. EGI is also supporting us to stay connected with our mother Europe, the Middle East and South East board from 22 nationalities. It reflects looking more and more into the global other system operators on many companies Elia and 50hertz. EGI also Asia. Over the years we also delivered our international spirit. We have ecosystem of the energy landscape. The other challenges: connecting Ukraine delivers owners’ engineering activities in projects in Africa, Central Asia and even headquarters in Brussels and Berlin key challenges we are working on are to the European system, developing Germany for the construction of 400kV Australia. Drawing on our first years of and local representatives in Dubai, mainly renewable integration, market capabilities in Georgia, advising Malaysia substations as well as other services in existence, we are now ready to move Doha and Singapore. In 2020, we will development and the implementation in their unbundling journey.” various domains like Grid Planning or things up a gear and further develop also have an entity opening in Saudi of new interconnectors. The regions system operation.” Arabia.” where EGI is active are willing to play a EGI is backed by two TSOs. Does strategic role in the energy landscape that help in setting up your At this very moment, do you have of the future. Major transformations are business? any idea in which country your happening at an unprecedented pace employees are? and operators are seeking for excellence. Didier: “Being backed by two TSOs This is where the support of EGI can is a major unique selling proposition! Didier: “Yes, we have a tool for that. We are talking to the TSO’s and to the make a difference.” This is what makes us different from Just over the last two weeks we had “ ministries as peer companies. While classical consulting companies. We are many colleagues delivering projects in sharing experiences, we also learn from Europe has its Green Deal. But talking to system operators and their Saudi Arabia, but we also had people them. there is clearly something moving stakeholders as peer companies. While in Georgia, Ukraine, Poland, Vietnam, on a global scale? sharing experiences, we also learn from Malaysia and Singapore… a classical week Didier Wiot them. This creates a unique relationship somehow.” Didier: “Most of our clients are targeting that few competitors can achieve. Our big CO2-reduction ambitions to ambition is to make a real difference. fulfill their commitment to the Paris When we finish a project, our client Agreement. Vietnam is a great example. should be in a better position than In a few years’ time, they managed before it started. You can only do that to create the conditions to develop if you enter the strategic level of the Visit https://www.eliagrid-int.com/ and connect large scale solar plants organization and this is what we do with to learn more about EGI’s On 19 September 2019, EGI’s Board of Directors appointed throughout the country. Starting from the support of the mother companies. projects. Didier Wiot as the company’s new CEO with immediate nothing, the installed capacity at the However being active on a competitive effect. He was previously the COO of EGI and had been its acting CEO since June 2018. In this role, he demonstrated his ability to manage EGI’s activities effectively. 26 Our strategy Elia Group Activity Report 2019 27

Our three strategic pillars We empower the customer through digitalisation of the electricity sector We increase group relevance while delivering societal value We provide the digital tools to the European market to accelerate innovation in the energy sector, to create In the context of further European consolidation, energy services and to initiate sector convergence by we actively shape growth opportunities that lowering the barriers of our sector. will leverage on our expertise built in the energy transition or develop new, key competences Our required for a successful energy transition. P OU E R HIL EM G W P strategy E E G C O S C IN U W A N R E S E LU T E E A A O R R V IV V P M T U C E L L RO ILE E L E A E H G H M N W P T E I E D R E E G C O NEW OPPORTUNITIES E S C IN U W R I A N R E S E LU T E C E A A O R R V IV V From a traditional to a digital TSO and M T O C E L L L E A E H S N capturing new growth opportunities I E D T R E

NEW OPPORTUNITIES E R I C Elia Group is actively enabling a carbon-free society P O S E by building the grid, systems and markets. This is R O R our highest priority. However, the fast-changing U P V E energy landscape is bringing new and bigger T R I R D C O U challenges that we have to prepare for as well. E U V I T T R D C The energy transition is making our traditional H T E U D E S T R A S H T tasks more complex due to the intermittency and I N R D E S G EE NF S N A S increasing decentralisation of the production. I DED I E IG E FR S T N I EDED IN E In addition, society expects us to deliver reliable A I TA N LI S L SI services at affordable costs and at accelerating ZA BU IZ U TI R ATI R B speed. ON OF OU ON OF OU

One of the solutions to support our traditional business and at the same time cope with the We provide the needed infrastructure

increasing complexity is the transformation from in an efficient way CORE BUSINESS

a traditional into a digital TSO. At the same time, CORE BUSINESS we should not be blind to potential disrupting We build the infrastructure of the future in Belgium and Germany and evolutions that could hamper our relevance and transform our core business to become a digital transmission system further growth. Therefore, in 2019 we added two operator. This enables the energy transition in our home markets. additional dimensions to our strategy. These This strategic pillar represents our core business and is structured new strategic guidelines allow us to investigate along six building blocks. opportunities and the value they might bring to the 1. We ensure a secure, reliable and efficient grid Group. 2. We deliver the transmission infrastructure of the future 3. We develop the electricity system and the markets 4. We cooperate to create value for society 5. We align culture with strategy 6. We have our eyes wide open for innovation 28 Our strategy Elia Group Activity Report 2019 29

INTERVIEW WITH ALEXANDRE TORREELE, ELIA GROUP HEAD OF STRATEGY

Digitalisation will make it easier for new entrants to get “ on-board. It will help us to keep the system in balance and the customer can make money out of it, which contributes to affordability. Meeting expectations Alexandre Torreele by responding to new trends and evolutions The second strategic pillar is about The third strategic pillar is about the increasing the relevance of the Group. Is its digitalisation of the energy sector itself and relevance in danger? empowering the customer. How do you see Elia Group is evolving from a traditional this in practical terms? TSO into a digital TSO. What’s driving this Alexandre: “ The Group’s organic growth is transformation? promising. It remains our first priority. Yet, we Alexandre: “ The energy sector is extremely cannot ignore the potential societal, technological complex. Our biggest risk as a system operator is Alexandre: “ In 2016, we developed the six building and regulatory evolutions that could reverse our that we have to keep the balance without having blocks of our strategy. They are still relevant organic growth. In the last years, we have been access to flexible sources. Compare it to a firefighter today. The energy transition demands lots of new looking at new growth opportunities that are who has to work without water in his tank. We infrastructure. It will remain the case for the next relevant for our business. Taking our specific want to make sure there is a level playing field

10 to 15 years. However, the fast-changing energy know-how and experiences as well as our identity where every actor is equal. By empowering all kinds landscape makes our daily work more complex and as a system operator as a starting point, can the of customers, no one can keep the flexibility for consumers expect us to deliver reliable services developments at the edge of our grid represent an themselves. That’s why Elia Group is setting up ‚re. at affordable costs and at accelerating speed. opportunity? As a central player in Europe with a alto‘. With this digital European energy market place Our digital transformation will enable us to better unique set of skills, Elia Group is in a good position of Application Programming Interfaces (API), we respond to new trends and evolutions and better to turn some ongoing developments into new want to facilitate the exchange and valorisation of meet expectations. It is the biggest transformation growth opportunities. In particular, I am thinking data and digital services. This will bring value to the our organisation has ever faced. We are currently about the offshore grid and interconnectors that European energy ecosystem. ” putting the required cultural and organisational will need to be built and operated to increase the transformation processes in place. ” renewable penetration in Europe. ” In what sense?

Can you give some examples where What value do the inorganic ambitions bring Alexandre: “ Digitalisation will make it easier for digitalisation is beneficial? to society? new entrants to get on-board. Our European market platform will lower the barriers by facilitating the Alexandre: “ There are benefits in various areas. By Alexandre: “ A regulated company that performs exchange between all market parties in Europe and using smart sensors and automation, the lifespan of well will generate positive returns for the society it provide simplification; including actors from other our existing assets for instance will extend and it will serves, for industry as well as for private individuals. sectors such as mobility. New business models will make the power system more resilient. Additionally, I think of strong ratings, better tariffs thanks to a emerge more easily and freely. As observed in other digital tools will help us to manage a more complex favourable financial framework characterised by sectors (banking, travelling, mobility, etc.), many system closer to real-time. As a digital TSO, we can lower interest rates, diverse talent management, of the new business ideas will become concrete also provide the interfaces needed to implement a opportunities for local suppliers, etc. ” through digital solutions: new platform, new mobile true digital architecture where market parties and applications, etc. It will help us to keep the system in consumers can participate and contribute to the balance and the customer can make money out of balancing of the system. ” it, which contributes to affordability. ”

Digitalisation enables us at Elia Group not only to handle “ the ever increasing complexity and meet quick reaction Watch the video demands of our daily business, it also opens up new http://bit.ly/Digital_TSO to discover the technologies opportunities and helps us to further accelerate. that make up Elia Group’s digital backbone. Nadja Ballauf, Our digital transformation is the biggest Head of Corporate Development 50Hertz transformation our organisation has ever faced. “ Alexandre Torreele 30 We ensure a secure, reliable and efficient grid Elia Group Activity Report 2019 31

We ensure a secure, reliable and # efficient grid 1 GRI 203-1, GRI 203-2

AMBITION CHALLENGE APPROACH As a system operator, we aim to As we integrate more and more Our investment projects anticipate the further integration of renewable maximise the availability of our electricity renewable energy into the grid, we energy in an efficient and secure way as well as the emergence of system and keep the lights on at all operate closer to its limits more often. innovative technologies. We constantly optimise our critical and strategic 99.99 % times to support the welfare of society. Maintaining the balance and ensuring a processes in order to minimise costs and operational risks. highly reliable electricity grid becomes a

RELIABILITY LEVEL particularly challenging task. OF THE GRID (ELIA) 32 We ensure a secure, reliable and efficient grid Elia Group Activity Report 2019 33

System security

INTERVIEW WITH FILIP CARTON (HEAD OF ELIA’S NATIONAL CONTROL CENTER) AND ANDREAS JOHN (HEAD OF SYSTEM OPERATIONS 50HERTZ) We maintain the balance

GRI 203-1, G4 - EUS – DMA DEMAND-SIDE MANAGEMENT PROGRAMMES finally cannot be ensured in real time. Or, Is there a way to solve these issues Elia Group ensures system stability and provides a safe and reliable power supply. we may allocate too little capacity to the for both Belgium and Germany Thanks to new technologies and methods monitoring large volumes of data, we market, which may cause a problem with other than expanding the grid? are able to balance generation and consumption the whole year round. security of supply. ” Filip: “ One of the solutions offered by Andreas: “ Redispatch measures cost our joint study (Future-Proofing the money and are passed on to customers. What are the biggest challenges in - at a time when we are phasing out EU Energy System towards 2030) is to That is why it is very important to us

maintaining the balance today? both nuclear and coal-fired power, ensure that grid operators don't have

to keep the volume of redispatching to make a choice in advance about the question of the future provision of as low as possible and to make the Filip: “ Compared to 10 years ago, the system services is also a major issue. the direction we think the market management of all available measures as grid is being operated closer to its limits In particular, measures to maintain may head in. We can give the market efficient as possible. ” more often. Our challenge is mainly the voltage stability are needed to ensure coupling the freedom to do that. We predictability. If you know of a problem call them Flexibility Hubs. It may sound system security in the event of higher And what about the problem of well in advance you can prepare for it complicated but it means that the grid load caused by missing or outdated loop flows? and coordinate with neighbouring grid infrastructure. ” freedom we have as grid operator to optimise the grid in a particular way, operators. Volatility is increasing due Filip: “ Loop flows are nothing new. can be passed on to the market players to more and more renewable energy Predictability being of the According to the laws of physics, energy so they decide the direction to go in sources and international flows. These utmost importance, what are the takes the shortest path. Unfortunately, during the market coupling itself and make accurate prediction difficult. ” consequences if you get it wrong? energy flows from Northern Germany the market can then go where it wants via Belgium to Southern Germany. Andreas: “ We therefore have to Filip: “ Looking at the way we calculate to go. ” The quantities can be considerable. operate our grid today in a completely capacity today, we have to make a choice Sometimes averaging 1,500 or 2,000 different way than in the past. We have two days in advance assessing where Andreas: “ It is important to ensure that megawatt, which is quite significant to intervene more often in system the market is going. Then we optimise a precondition is met: we must expand compared with our grid. ” operations in an active and forward- the grid accordingly. If our prediction the grid according to demand. Only with a minimum grid infrastructure in place, looking manner by implementing is wrong, we may allocate too much Andreas: “ We must use more active we can tackle optimisation but not vice redispatching measures. In Germany capacity to market coupling, which network components in order to avoid versa. ” loop flows and to meet the demands of society, new generation patterns and energy markets. ”

Only with a minimum grid infrastructure “ in place, we can tackle optimisation but not vice versa.

Andreas John

Compared to 10 years ago, the grid is being operated closer to its limits more often. Our challenge is mainly the predictability. “ Filip Carton 34 We ensure a secure, reliable and efficient grid Elia Group Activity Report 2019 35

Future-proofing the system In November 2019, Elia Group published a study Effects observed in the interconnected about Future-Proofing the EU Energy System towards 2030. We see increasing challenges on both European electricity system the hardware (grid infrastructure) and the software (market design) of the European, interconnected electricity system. We want to raise awareness on the need for improvements to pave the way for the Redispatch & Loop-flows / unplanned Divergence between Grid congestion increasing integration of variable, renewable energy RES curtailment energy flows market and physics Watch our video on the path to 2030 and beyond. http://bit.ly/Future-proofing and learn more about our analysis on how to bring the European energy system closer together. & &

AI forecast model reduces

To keep physical electricity flows within operational boundaries, system operators regularly have to perform compensation cost for grid losses redispatching measures to adjust the pattern of generation and demand in the grid to avoid or resolve grid congestions. In some cases they even have to curtail renewable production. These measures are expensive When operating Alternative Current (AC) grids, grid digital calculation is based on data about wind for consumers. The Bundesnetzagentur (German regulatory office for electricity) reported an amount of losses are inevitable. The longer the distance the and photovoltaic supply as well as on wind rise, € 1.4 billion for Germany in 2018. electricity is transported, the higher the grid losses. solar radiation and temperature at 70 locations. System operators balance those losses as they buy The model compares its forecasts with the actual and feed-in additional electricity. grid losses and adjusts its algorithms automatically Grid congestions Redispatch based on the differences. are a result of the discrepancy between the refers to a costly measure by which the TSO alters To predict those losses more precisely and to development and construction times of renewable the power generation and/or load pattern in procure the electric energy for the compensation 50Hertz developed the grid loss model in generation compared to the longer lead-times order to change the physical power flows in the more cheaply on the electricity market, 50Hertz cooperation with the Fraunhofer Institute for for building grid infrastructure. In Germany in grid to relieve a physical congestion. Redispatch developed an artificial intelligence (AI) model. This Optronics, System Technology and Image particular, getting the large-scale wind energy usually consists of two or more actions (upward has been operational since the end of 2019. The Evaluation (IOSB) in Karlsruhe, Germany. production efficiently from the north to the or downward change of power generation or consumption centres in the south, is a considerable load) at the opposite sides of a congestion. In the challenge. simulations performed in this study, redispatch is applied after the market to secure the grid.

Loop flows RES curtailment are cross-border power flows that originate from is the reduction of renewable generation, when the an exchange of energy between generation and grid is at risk of overload. It is usually a last resort consumption within a bidding zone. Loop flows are option for the TSO, when other redispatch measures inherent to a zonal market design. Their size should are not sufficient. The market itself can also however be kept under control, as they can limit the curtail renewables, e.g. when market participants cross-zonal capacities available to the market for face negative prices and therefore choose not to neighbouring bidding zones (potentially negatively produce. affecting market welfare and security of supply). 36 We ensure a secure, reliable and efficient grid Elia Group Activity Report 2019 37 2019 in numbers Over 16,000 38% 17% 60% megawatts

Renewable generation (offshore/onshore 50Hertz is a frontrunner in the integra- Renewable energy production (offshore/ wind and solar power only) increased by tion of renewable energies into the entire onshore wind and solar only) increased Over 16,000 megawatts of wind 17% in absolute terms compared to 2018 electrical system: In 2019, around 60% by 38% in absolute terms compared to (11.52 TWh in 2019 as against 9.82 TWh in of gross electricity consumption in the power safely integrated into 2018 (5.46 TWh in 2019 compared to 2018). 50Hertz balancing zone was derived 50Hertz’ grid area. Cyclone Florenz 3.95 TWh in 2018). Relatively high solar from wind or photovoltaic power as brought 50Hertz a new wind power generation in the summer months and well as biomass, hydropower and other feed-in record. On January 13, higher wind generation in the win- renewable energies. 2020, at 8.45 pm, the system con- ter months constitute the main part of trol centre of the transmission sys- renewable generation. tem operator for north-eastern € 723.5 Germany registered over 16,000 megawatts for the first time ever. mio The annual peak load in the 50 Hertz grid area is also around Elia continued to step up its investment 16,000 megawatts. During this programme, reaching a record € 723.5 time, the grid area of 50Hertz could million in Belgium mainly intended to have been completely supplied incorporate renewable energy in the grid with wind power and would have and facilitate the further integration of even exported energy. the European energy market through €488.6 interconnections. mio

To meet grid users' require- 38,794 ments, 50Hertz Transmission GWh invested €488.6 million in 2019, maintaining its high investment level from the 38,794 gigawatt-hours (GWh) of wind power previous year (€491.5 million). were generated in Germany in 2019 versus 32,870 GWh in 2018. The generation of solar power amounted to 11,177 GWh in 2019, versus 10,796 GWh in 2018. €33 mio

The BOOST project was launched in 2014 with the aim o f opti- mising cost management. It was rolled out in three successive waves: underground engineering, IT activities, and overhead lines and substations. Thanks to this initiative, Elia saved more than €33 million over the first three years of the 2016-2019 tar- 1.8 TWh iff period.

Belgium exported more electricity in 2019 than it imported. This is a turnaround compared to 2018, when the country imported significant quantities of electricity. This reversal turned Belgium from an overall net importer in 2018 (17.5 TWh imported/20% of the energy mix) into an overall net exporter in 2019 (1.8 TWh exported/2.1% of the energy mix). Belgium had not been a net exporter of electricity for almost 10 years, the last time being in 2009 and 2010, when total net exports represented 2.8% and 0.2% respectively of Belgium's energy mix. 38 We ensure a secure, reliable and efficient grid Elia Group Activity Report 2019 39

Asset Management Asset management AN INTERVIEW WITH FRÉDÉRIC DUNON, CHIEF ASSETS OFFICER ELIA project From time-based A special protection to condition-based system for Stevin What are the advantages of condition-based maintenance? Most of the existing safeguard systems traditionally protect a specific asset like a transformer or a cable. A Special Protection System (SPS) maintenance protects the grid against instability on a large scale like a blackout in the Frédéric: “ It improves the efficiency of our maintenance programmes. It whole of Belgian or a brownout on a European scale. There are currently

facilitates reduction in the maintenance very few protections of this type in the world. Elia is therefore one of the costs of our assets over their entire pioneers in this field at European and even global level. lifetime and increases the availability We continue to invest in the development and use of new technologies of our network. With the information that help us optimise the maintenance and replacement of our we get from our data sources, we can The specifics assets. We highly value our maintenance activities seeing that they determine whether a particular asset The SPS installed on Stevin's 380 kV connection consists of 11 cabinets. These will collect data from the various posts along the connection and contribute significantly to our common goal of continuously delivering needs maintenance or replacement. We base our maintenance programmes take the necessary decisions to ensure the stability of the grid depending an outstanding service to all our customers. Elia Group uses a range of on the real wear and tear of our assets on events such as the failure of a primary installation, a lightning strike on methods to digitalise work in the field, including connected equipment and no longer on the theoretical time the lines, a fallen mast, etc. The SPS continuously processes approximately (PCs, smartphones and smart devices), new mobile applications and the intervals that we have used in the past. 15,000 data, of which 3,000 are exchanged with the other stations, dis- patching, switch fields, distributed control system and the fault recorders overhaul of current processes. Predictive maintenance even goes a step further, as it estimates when service of the substations. Some data are recorded on highly secure servers and malfunctions or failures may occur in can be consulted remotely. This also allows us to refine our understanding advance. Risk-based maintenance, of the Stevin connection. These decisions are then sent to all the high-volt- age substations concerned. Everything happens at lightning speed: in What is the biggest shift that digitalisation on the other hand, closely links the 20 ms, data is collected, decisions are made and orders sent. This is as fast will bring in asset management? maintenance of assets with the need of the network. The criticality of an as the fastest local safety devices currently installed on the Belgian grid. Frédéric: “ When it comes to asset management asset differs depending on location and and maintenance, digitalisation helps us to take impact. ” better-informed decisions. We gather data from internet of Things (IoT) devices, from feedback after What are the challenges you face incidents and from the mobile devices that our to makes these shifts happen? technicians use in the field. This enables us to move Frédéric: “ The changes we have in from time-based maintenance to condition-based mind will affect our teams; there is no maintenance. In the future, we will even shift to doubt about that. In my opinion, it is not predictive and risk-based management. ” only a question of feasibility regarding technologies and tools. It is mainly a question of human transformation. This is not only about hiring new people with the required skills, it is about Condition-based maintenance facilitates a transforming the way our current “ reduction in the maintenance costs of our employees are working and thinking as assets over their entire lifetime. well. It is about co-developing the future with all our employees, whether they are Frédéric Dunon existing staff or new employees joining us in the years to come. ” 40 We ensure a secure, reliable and efficient grid Elia Group Activity Report 2019 41

INTERVIEW WITH DR DIRK KUNZE, ELIA GROUP ASSET MANAGEMENT OFFICER

Fitness tracker for our assets

Traditional maintenance at time-dependent intervals will soon be history. Elia Group has been breaking new ground in asset maintenance since 2016. In the Asset Management Excellence Program (AMEX), the aim is to optimise the maintenance of transformers, overhead lines, etc. according to their state of health (Health Index) and importance for the gird. Elia has finished the AMEX program in 2019. At 50Hertz the implementation started in 2018.

Safety always comes first – of our people and, of course, of our grid. “ Dirk Kunze Have you equipped all our trans- How does this work? formers with fitness trackers within the AMEX 2019 program? Dirk: “ We look at each individual asset group and define criteria for the Health Dirk: “ No, our 'sportsmen' made of Index and in the future also how im- steel and copper have been technically portant the respective assets are in the Up to now, we have maintained So, a permanent fitness-check for checked for their fitness on a regular overall context of the grid (Criticality our assets on a time-based basis, maintenance only when necessary? basis for a long time, but the results of Index). In other words: a scratch on the i.e. with a yearly check-up. That’s a How does this work in practice? AMEX will enable us to better evaluate knee is okay, but the asset won't work thing of the past? the information and thus make better with a broken leg. In addition we weigh Dirk: “ The best planning doesn't help diagnoses. The data comes for example up whether a device in Hamburg, Berlin Dirk: “ Not in general. For some asset if there are no work shutdowns. Safety from our mobile maintenance software. or at any other site must be exchanged groups this may still be the model of always comes first – of our people and, of It is like your doctor knowing before first. We want to take future decisions choice. In the coming years, we expect course, of our grid. Furthermore, AMEX autumn when you will get a cold. Our based on condition and risk. Elia has our asset fleet to grow in terms of both also means changes in our organisation. aim is to ensure that the individual asset finished the AMEX project in 2019 and the number of assets and a variety After all, the activities should be sustain- is treated in a targeted manner and thus, started the transition to regular asset of new technologies. If we wanted to able. As a result, our employees got to preferably, does not get a 'cold' at all. ” management operations. At 50Hertz maintain these on a time-dependent know their Belgian and German col- we can use Elia's experience and now basis, this would not be possible with our leagues better and thus could broaden benefit from it. Our focus in 2019 was on existing organisation. Here, an improved their horizons. This is particularly impor- overhead lines, transformers and chokes. database is needed to make the right tant to me. ” Further asset groups will be added next condition and risk-based decisions for year. ” maintenance or asset replacement. ”

In the coming years, we expect our asset “ fleet to grow in terms of both the number of assets and a variety of new technologies.

Dirk Kunze 42 We deliverensure athe secure, transmission reliable systemand efficient of the grid future Elia Group Activity Report 2019 43 We deliver the transmission system of #2 the future GRI 201-2

AMBITION CHALLENGE APPROACH Elia Group is committed to realise the We want to close the gap between For the next two years, Elia and 50Hertz next phase of the energy transition in the fast development of renewable will be investing a staggering a timely, secure and efficient way with generation compared to the longer lead- € 1.1 billion per annum in the integration € 1.1 billion maximum welfare for society. We do to times for building grid infrastructure. In of renewable energy, development of the utmost to accelerate the delivery of addition, Elia Group is investing strongly an offshore high-voltage grid and in ELIA GROUP WILL BE INVESTING critical grid infrastructure and to migitate in the optimisation of existing assets by the construction of interconnectors to A STAGGERING € 1.1 BILLION PER ANNUM any risk of delays in close collaboration integrating new technologies and more facilitate the integration of the European FOR THE NEXT TWO YEARS with the competent authorities. advanced system operation concepts. energy market. 44 We deliver the transmission system of the future Elia Group Activity Report 2019 45 Facilitating Offshore Energy

INTERVIEW WITH HENRICH QUICK (HEAD OF PROJECTS OFFSHORE 50HERTZ) AND TOM PIETERCIL (PROJECT MANAGER MOG AND HEAD OF INFRASTRUCTURE EXPERTISE) A Sea of opportunities

2019 was a successful year in terms of offshore goals for both Belgium and Germany. In Belgium, the Modular Offshore Grid (MOG) was commissioned and Nemo Link became operational. In Germany, 50Hertz Chancellor Angela Merkel attended the inauguration of the celebrated the inauguration of the Arkona wind farm in the Baltic Sea, new Arkona offshore wind farm on Tuesday 16 April 2019. which marked th the completion of the Ostwind 1 project.

Why is offshore wind becoming International Energy Agency (IEA), closely together and have organised increasingly important in realising offshore energy is the next hot item in internships between countries to share the energy transition? the energy sector. Offshore wind will be best practices. That spirit goes to both the technology that grows like mush- of our teams. They often call each other Henrich: “ Offshore development is rooms over the next 10 to 15 years. It is for advice. This is something we really becoming an important building block cheap, reliable and it provides highly encourage. ” of reliable supply in a new energy world. efficient energy. It will become an Offshore wind is cheap, reliable It is competitive in terms of market important part of Elia Group‘s business. ” In what sense are offshore grid “ and it provides highly efficient prices, reliable in terms of the technology projects more challenging than energy. It will become an and in terms of grid development. We Offshore is at the forefront of onshore projects? important part of Elia Group‘s are getting used to integrating more international cooperation, do you business. and more renewables into our system have many exchanges with other Tom: “ The foremost reason is that it is operations. Wind Europe published European TSOs? highly if not entirely dependent on the Tom Pietercil a report stating that 450 GW is the weather. The sea is a very dangerous offshore potential within Europe by 2050, Henrich: “ Because the offshore business environment to work in. When of which 212 GW can be found in the is so complex, there is a lot of solidarity something goes wrong, it has a huge North Sea and 83 GW in the Baltic Sea. ” among the TSOs as we all face the same impact on safety and costs. That‘s why challenges. There is a group of large a good planning and a smooth organi- Tom: “ Without offshore energy, Europe offshore project managers from Norway, sation are so vital. In order to ensure this, will not be able to reach its ambitious the UK, Denmark, Germany, Belgium, we need our people to be in the field climate targets. According to the , Italy and Spain. We all work 24/7. This means working in shifts to make sure the right expertise is available at all times. ”

Offshore development is becoming an “ important building block of reliable supply in a new energy world.

Henrich Quick 46 We deliver the transmission system of the future Elia Group Activity Report 2019 47

Tom: “ Besides sharing best practices, we are looking into collaborating on purchasing orders for materials and services we both will use for our projects. Purchasing jointly helps us to leverage our market power and to ensure we use the same quality materials within the Group. This also brings together the know-how on how to operate the installations, which is a huge advantage as well. ”

Henrich: “ Working together on purchasing orders would be especially interesting for cable manufacturing. In this market, price is not the only driver. It Sharing experiences helps to calculate is also availability of the supplier. Joining the risks better and saves millions in costs. Purchasing jointly helps us to leverage our market “ “ power and to ensure we use the same quality forces mean we are able to win more Henrich Quick materials within the Group. offers. Of course, we have to take into consideration the different regulations Tom Pietercil per country and the small technical adjustments to match the requirements for the North Sea and the Baltic Sea. ” Tom: “ In Belgium, we currently exploit Henrich: “ The sea is an expensive Do you already experience the How do you see offshore wind 0.5% of the North Sea. There might 450 working environment. If you are advantages of collaboration further evolve? be room for additional projects in the chartering a vessel, it can go over a between Elia and 50Hertz? future. However, developing a higher GW € 100,000 per day. If you happen to Henrich: “ Further offshore development percentage, means moving further suffer from bad weather, you run the risk Henrich: “ Sharing experiences helps is needed to generate more megawatts away from the coastline, deeper into IS THE OFFSHORE POTENTIAL WITHIN EUROPE of having it stuck in the harbour for three to calculate the risks better and if we want to achieve our European the sea. This makes matters more weeks. The stakes are very high when saves millions in costs. By organising 2050 goals. This also means growth complicated and risky, as we will need making the wrong decision. So planning workshops and standardising opportunities for Elia Group. What is to longer cables to bring the energy ashore. puts extremely high pressure on us and procedures, we align our way of be seen is whether we continue to grow In the long run, TSOs will have to look on our suppliers. ” working which makes it easier for Elia in our domestic markets or whether further than their current borders and and 50Hertz to work with partners in the Baltic Sea and North Sea will be work intensively together to enable the Belgium and Germany. For the next exhausted by projects in the coming development of the offshore renewable offshore wave, for example, 50Hertz will years. If that is the case, we might look energy of tomorrow. In the end, it comes collaborate with the Belgian company to export our experience in the field to down to finding the most efficient Parkwind, and easily apply the best other countries that might jump on the solutions that yield the most benefit for practices from the MOG project. ” offshore train at a later time. ” all parties. ” 48 We deliver the transmission system of the future Elia Group Activity Report 2019 49

INTERVIEW WITH DR FRANK GOLLETZ, 50HERTZ CHIEF TECHNICAL OFFICER

Combined Optimal use of Grid Solution interconnection capacities

What is so special about the Com- ity trading. So we combine assets with bined Grid Solution? the market. The project has been a joint WINNER OF GOOD PRACTICE project of 50Hertz and Energinet in OF THE YEAR AWARD Frank: “ With the Combined Grid Solu- Denmark from the beginning, where we tion, we are interconnecting two wind both learn how such a combination can farms from different countries. One wind work. The Combined Grid Solution is ad- farm in Denmark and one wind farm in vancing the energy transition in Europe Germany. We utilise the capacities of by better integrating renewable energies With the Combined Grid Solution (CGS) project, Watch the video the cable connections very efficiently. and increasing the safety of the electrical 50Hertz and the Danish grid operator Energinet are http://bit.ly/CGSolution If the transmission capacity of the wind system in Germany and Denmark. ” realising a worlds’ first, connecting the electricity to learn more about the farm connection is not fully utilised, we project. grids of two countries via offshore wind farms. In can use the interconnector for electric- Now that Ostwind 1 has been final- 2019, submarine cables were installed between ised and Combined Grid Solution On 23 May 2019, the interconnector received the offshore substation of the German wind farm is almost completed, what are the the ‘Good Practice of the Year Award’ from the Baltic 2 and the Danish wind farm Kriegers Flak. The further plans for offshore develop- Renewable Grid Initiative (RGI). RGI is a platform for installations will soon be ready for operation. ment? dialogue between non-governmental organisations The renewable energy generated by the wind and transmission system operators in Europe. The Frank: “ First of all, there is one project turbines will always have priority and will flow to approach of connecting the electricity grids of two that is practically a mirror image: our Germany and Denmark as required. Free capacity countries via offshore wind farms and using this grid connection project Ostwind 2. Here from the connecting line can be used for electricity connection as efficiently as possible was particularly we are once again connecting two wind trading between the two countries. appreciated. farms with each other. Baltic Eagle by Iberdrola and Arcadis Ost by Parkwind. There are also plans for a Modular Off- shore Grid 2 (MOG 2) in Belgium and for a DC link between Germany and Sweden, the Hansa Power Bridge. Offshore will Back-To-Back converter continue to be one of the biggest growth drivers for Elia Group in the coming To build the CGS interconnector, the planners at 50Hertz and Energinet years. ” had to master a challenge: the German and Danish alternating current grids are not synchronous and therefore cannot be connected directly with each other. Although the grid frequency of both countries is identi- cal, it has a slightly shifted cycle (phase). The engineers and technicians solved this problem with a so-called double converter on the German side The Combined Grid Solution is advancing the energy transition in Europe. in Bentwisch near Rostock. This facility converts alternating current into “ direct current following the Nordic phase and then directly into alternating Dr Frank Golletz current following the Continental European phase. The entire system will be controlled by a newly developed, innovative Master Controller for Inter- connector Operation (MIO) using the latest digital technologies. 50 We deliver the transmission system of the future Elia Group Activity Report 2019 51

±725 MW

Ostwind 2: THE CAPACITY On schedule OF THE TWO WIND FARMS

The Ostwind 2 offshore grid connection project is In addition to the Arcadis Ost 1 wind farm, the progressing according to schedule. The corridor for Ostwind 2 grid connection project will connect the the submarine cables has been explored and the Baltic Eagle offshore wind farm to the 50Hertz grid. clean-up of contaminated sites has been completed. Baltic Eagle, a project of the Spanish energy group Iberdrola, is located in the Arkona Sea cluster in 50Hertz and Parkwind, the Belgian offshore wind the Baltic Sea. Both areas are located between 20 farm operator of the Arcadis Ost, reached the next and 30 kilometres northeast of the island of Rügen. stage of their cooperation in October 2019 with Together, the two wind farms will have a capacity the signing of a Memorandum of Understanding of about 725 MW. 50Hertz is building three 220-kV (MoU). Key aspects of the MoU include specific submarine cable systems from the wind parks arrangements for the development, procurement, to the grid connection point at the substation in construction and operation of the joint offshore Lubmin. platform, including basic technical details and the principles for sharing construction costs. This Ostwind 1: platform will be used by the wind farm operator and Arkona comissioned the transmission system operator.

Since April 2019, the Arkona offshore wind farm, off For the first time in the Baltic Sea, a grid connection the island of Rügen in Germany in the Baltic Sea, was constructed using 220 kV AC technology has been feeding into the grid. 50Hertz connected which enables a higher power transmission. the wind farm to its transmission grid on time for Previous connections of offshore wind farms commissioning on 16 April 2019 and even at a lower in the German Baltic Sea were using 150 kV AC cost for consumers than originally calculated. After cable systems. In the Lubmin substation 50Hertz a construction period of three years and a total switches the electricity to 380 kV and feeds it into its €1.3 investment of around €1.3 billion, wind energy is transmission grid. billion flowing via three 90 kilometre submarine cables to the Lubmin substation and from there to the OSTWIND 1 TOTAL INVESTMENT consumers. AFTER A CONSTRUCTION PERIOD OF THREE YEARS

Ishoj

Denemark Sweden

Bjæverskov

CGS Kriegers Flak WESTLICH OWF Baltic 2 System 265 Adlergrund OWF Wikinger

Exclusive economic zone (EEZ) System 282 OWF Arkona- 12-seamile-zone/costal waters Becken Südost Cable routes (schematic): System 281 150-kV grid connection in operation OWF Baltic 1 System 261 Planned 150-kV grid connection Planned 220-kV grid connection 150-kV substation in operation Rügen 220-kV substation in operation 380-kV substation in operation 400-kV substation in operation Lüdershagen 150-kV offshore substation in operation Planned 220-kV offshore substation AC/DC-converter Offshore wind farm under construction Bentwisch Lubmin Offshore wind farm in operation Mecklenburg-Western Pomerania Planned offshore wind farm Siedenbrünzow Usedom Güstrow 52 We deliver the transmission system of the future Elia Group Activity Report 2019 53

INTERVIEW WITH MARKUS BERGER, CHIEF INFRASTRUCTURE OFFICER ELIA

Modular Expanding from land to sea, Offshore Grid a new adventure

The commissioning of the Modular Offshore Grid How did you start working on a pro- an agreement in principle with the team: a group of driven, highly skilled (MOG) is a true milestone in the development ject of this scale and complexity? various authorities and wind farms. The employees. Elia looked beyond Bel- of North Sea wind power off the Belgian coast. investment decision was made in April gium’s borders to find the right people Markus: “ We built the MOG in stages, The switching platform is 40 km off the coast 2017. We installed the offshore jacket in for the project, adding a number of as you have to prepare it from a techni- and combines the electricity generated by four August 2018, and the topside was laid enthusiastic Elia employees to complete cal, legal and regulatory point of view. offshore wind farms (Rentel, Seastar, Mermaid and on it in April 2019. Shortly after that, the the team. The combination of internal All that takes time and the schedule Northwester 2) for onward transmission to the subsea cables were installed and con- employees and external experience in which it needs to be done is very mainland, making it possible to efficiently integrate nected. ” was a real success story for the project. demanding. You don’t just snap your renewable power into the Belgian electricity grid. Gradually a team spirit develops, which fingers and you are suddenly offshore. What was the key to success? It is connected by 130 km of 220-kV cables to Elia's The first wind farm was connected to the Modular enables you to move mountains, as they It has been a long road, building up the high-voltage substation in Zeebrugge (Stevin Offshore Grid in September 2019 and the MOG say, because everyone believed in this know-how, starting from nothing to Markus: “ This ambitious project was substation), from where the power is transmitted has been operational since then. The MOG has project. ” then achieve a fantastic result in a very completed on time and within budget, to consumers via the transmission and distribution been successfully completed thanks to the many short time. In March 2016, we reached primarily due to the efforts of the project system. The MOG is a switching platform only, not a Belgian and international stakeholders involved. transformer platform, making it unique in Europe. The platform was built in the while the cable was produced in Greece. The cable-laying work was done by Belgian marine engineering group DEME. His Majesty the King visited Elia’s first power hub in the North Sea, upon its inauguration It has been a long road, building up the on Tuesday 10 September. Watch the video “ know-how, starting from nothing to then http://bit.ly/Inauguration_MOG achieve a fantastic result in a very short time. for an overview of the ceremony. Markus Berger

THE MOG 130 IN NUMBERS Km • The topside rises 41 m above sea level and weighs OF 220-KV CABLES CONNECT 2,000 tonnes. THE MOG TO ELIA'S HIGH-VOLTAGE • The foundation is anchored to the seabed by four piles SUBSTATION IN ZEEBRUGGE at a depth of 60 m. • 220-kV subsea cables connect the platform to the Ste- vin high-voltage substation in Zeebrugge. • At 28 cm in diameter, the MOG cables are the thickest cables ever installed in the North Sea. • For safety reasons, all of the subsea cables are buried at a depth of 1 to 3 m. • At the peak of the project, Elia's core team had 50 staff. • More than 40 different vessels were deployed during the MOG installation process. • Developing the MOG required over 1 million man-hours. The MOG's core team on the platform at sea upon its inauguration on Tuesday 10 September. 54 We deliver the transmission system of the future Elia Group Activity Report 2019 55

ALEGrO: progressing Towards a more inter- according to schedule

connected European grid Good progress is being made on the first In 2019, the main work on the Belgian electricity interconnector between Bel- side was completed. The DC cable link Besides preparing their grid for the energy transition, Elia and 50Hertz are also committed to gium and Germany. The ALEGrO HVDC was fully installed and successfully developing an integrated, European-wide electricity market. To ensure that this is as efficient interconnector is a joint venture between tested over its length (49 km), including Elia and Amprion, on of the four German the tunnel underneath the as possible, the company believes that interconnectivity should be further increased between system operators. and the River . Also the AC cables the different markets. That is why 50Hertz is investing in major projects such as Combined between the existing Lixhe substation Grid Solution and Hansa PowerBridge. Elia is using the benefits of its geographical location at The underground connection runs over and the newly built Alegro converter sta- a distance of 90 km (49 km in Belgium) the centre of the European energy system to bolster security of supply and to strengthen the tion were pulled, successfully tested and between the converter stations in Lixhe energised. Finally, the converter station development of interconnections with neighbouring countries such as Nemo Link (UK) and (Belgium) and Oberzier (Germany) and was built and all technical equipment ALEGrO (Germany). comprises two cables. Both cables, was installed and tested. which measure 12 cm in diameter, will be buried along the entire route. The On the German side, further progress connection’s transmission capacity will was made on the cable, with work be 1,000 MW, equivalent to a tenth of expected to be completed by the third Belgium’s average power consumption. quarter of 2020. Elia expects ALEGrO to Nemo Link: operational go into operation by end 2020.

Stretching 140 km from Bruges coast Nemo Link's commercial exploitation to Richborough, Nemo Link is a joint started on 30 January 2019. With a ca- venture between National Grid and the pacity of 1,000 megawatts, Nemo Link 18,559 Belgian transmission system operators, was the first subsea HVDC project in Elia. The link started operations on Janu- the world to use cross linked polyethyl- MWh ary 31, 2019, offering a range of products ene (XLPE) technology to increase the that enable energy traders to move strength and conductivity of the cable. EXCHANGED ON THE FIRST DAY OF NEMO electricity back and forth between the LINK'S COMMERCIAL EXPLOITATION two countries. The interconnector facilitates the transition to a sustainable and afforda- In its first operational year, the subsea ble electrical system and improves the cable has been available to import or guarantees for security of supply. It offers export power more than 96% of the time, additional possibilities for Belgium and Hansa PowerBridge: in progress making it one of the highest performing positions it even more like a real Europe- assets of its kind in the world. Electricity an electrical hub flows have been primarily in the direction The planning and investigations for the In September, planners visited five of the UK: 5889.4 GWh were imported 300-kilometre-long HVDC connection stations along the 70-kilometre-long cor- by the UK, while 175.9GWh was imported between Germany and Sweden could ridor of the Hansa PowerBridge with the by Belgium. be further advanced. The application for 50Hertz DialogMobil, 50Hertz’s mobile planning permits for both the land and information office. The 50Hertz col- sea routes of the Hansa PowerBridge leagues informed residents and owners NEMO LINK IS THE FIRST CHANNEL INTERCONNECTOR are to be submitted to the responsible about the route. Many technical topics TO OFFER HOURLY NOMINATION GATES authorities in Mecklenburg-Western were discussed. Pomerania in 2020. Since 14 November 2019 it is also possible to trade electricity between Belgium The Hansa PowerBridge will have an out- “ and the UK within the day. Intraday market trading is a very important option put of around 700 MW and is due to start for electricity market participants. With rapidly growing intermittent renewable operations in 2025 and 2026 respectively. production, it is becoming an increasing challenge for market participants to The investment costs amount to € 600 remain in balance after the closing of the day-ahead market.The capability Visit million. Half of this sum will be borne to balance the grid closer to real time operations is beneficial for market by each of the two partners. Svenska participants as it allows them to take unexpected changes in consumption and https://www.nemolink.co.uk/ €600 kraftnät is also working on the approval production into account. The new explicit intraday capacity product on Nemo to consult the auction calendar mio documents for the project. Link, with its hourly nomination gates, brings additional options and provides a level of flexibility welcomed by market players that trade both renewable and conventional energy. INVESTMENT COSTS HANSA POWERBRIDGE Bert Maes, Business Director Nemo Link 56 We deliver the transmission system of the future Elia Group Activity Report 2019 57

The works on the SuedOstLink are progressing Shaping the onshore grid The planned - mainly underground – HVDC con- In October 2019, 50Hertz received the first partial nection will transport renewable energy electricity permit for section B, a 100 km long and one km wide GRI 201-2 from Saxony Anhalt to Bavaria. The SuedOstLink will corridor, which mainly covers Thuringia and Saxony. connect Wolmirstedt near Magdeburg with the Isar This route is the core of the planning approval proce- In addition to the substantial work on the offshore grid and power plant site near Landshut. 50Hertz is responsi- dure that has now begun. The plan is to commission ble for the northern part of the project, while TenneT interconnectors, Elia and 50Hertz are also further expanding and the line in the year 2025. 50Hertz is now determining is responsible for the southern, Bavarian part. the possible course of the underground cable route. optimising the onshore grid. Many projects are currently underway To provide further detail for the plans, 50Hertz is ex- to respond to demand and accommodate local renewable energy Underground cables for the SuedOstLink will be laid ploring the underground in the corridors. Exploration on the vast majority of the route using the open- generation. boreholes are planned at those points where roads, cut method. For this purpose, trenches will be dug. railway lines or watercourses are to be undercrossed District, highways or federal roads and railway lines, in closed condition and where challenging soil condi- certain waters and particularly sensitive areas will be tions are expected. Initially, around 20 crossing points Brabo II crossed using the closed method. will be drilled in Thuringia and Saxony. With the Brabo project, Elia aims to strengthen the high-voltage grid and consolidate security of supply in and around the Port of . The project is being rolled out in three phases between 2016 and 2023.

Petrol-Zurenborg Elia is laying a double underground cable connection between Antwerp’s Petrol and Zurenborg high-voltage substations. By replacing and dou- bling the capacity of the current cable, Elia reduces the risk of grid disrup- tions, improving the reliability of the power grid in and around Antwerp. Mercator – Avelin Work on this project is scheduled to Elia is upgrading the end in February 2020. Perleberg - Wolmirstedt 380 kV Mercator-Avelin The first section of the overhead line, which is 110 km long 380 kV from Perleberg and passes through 25 municipalities Pulgar - Vieselbach to Wolmirstedt overhead in and before The planning for the first construction line is under construction. At the continuing into France. The massive project that follows the Grid Expansion beginning of May 2019, overhead project is divided into three parts: Mercator- Acceleration Act (NABEG) is progressing. line fitters began the replace- Horta, Horta-Avelgem and Avelgem-Avelin. In July, the Bundesnetzagentur (Federal ment construction of the 380 The new 380-kV Mercato-Horta high-voltage line Grid Agency 'BNetZA') defined the route kV overhead line between the corridor for the middle section of the was commissioned on 14 August 2019. Stendal West and the Wolmirst- Boucle de l’Est II 105-kilometre line from Pulgar to edt substations. The 86 pylons Elia started Stage 2 of the East Loop Vieselbach. At the same time, the federal will initially be erected starting project that involves replacing and technical planning for this section has been from the Stendal West substation. upgrading the overhead line connect- completed. The planning permission procedure Several construction companies ing the Bévercé (Malmedy), Bronrome, is now being carried out. During a roadshow are working along the route at Massenhoven-Van Eyck Trois-Ponts and Brume sites. The work is across neighbouring towns and municipalities the same time to ensure rapid Elia is set to upgrade the existing scheduled to run until 2022. in November, 50Hertz provided information on construction progress and to overhead line between the Massen- the design of the route in the middle section minimise the impact on local hoven and Van Eyck high-voltage between Geußnitz and Bad Sulza. Interested residents and nature. substations. The connection is approx- citizens informed themselves about the project imately 92 kilometres long and spans and the current planning status. As a result, 15 municipalities in the provinces of 50Hertz collected the feedback and comments Antwerp and . The project is about the plans. The objective of grid reinforce- playing a vital role in enabling more ment is to increase the transmission capacity Visit Visit renewable energy to be transmitted of the 380 kV overhead line by 40%. Once the http://bit.ly/EliaProjects http://bit.ly/50HertzProjects via the Belgian grid and to facilitate new overhead line has been commissioned, the for an overview of our for an overview of our the exchange of electricity between infrastructure projects in existing line will be dismantled. infrastructure projects in Belgium and the Netherlands. Works Belgium. Germany. are planned to start in 2021. 58 We deliver the transmission system of the future Elia Group Activity Report 2019 59

Grid development Grid development plan Germany plan Belgium One of the biggest challenges 50Hertz faces in Germany is the To keep the authorities and the electricity market implementation of the grid development plan and the accept- players abreast of developments, every four years, ance of the grid infrastructure. Together with the Ministry of Elia submits development plans identifying the in- Economy, the other three German TSOs and the federal and re- vestments needed to meet the requirements of the gional approval authorities, 50Hertz has developed a milestone Belgian electricity system for the next 10 years. plan that includes dates for permit approvals, start of construc- tion and commissioning of the individual projects. Authorities In 2019, Federal Energy Minister Marie Christine Mar- and TSOs have committed themselves to execute this plan ghem approved Elia’s Federal Development Plan, accordingly. The first permit for the SuedOstLink was planned giving the green light to proceed with concrete for October 2019 and has been received on time. investments for enabling the energy transition to a sustainable electricity system in the short and medi- um term. Among other things, the plan provides Consult Elia’s Federal for the construction of two new electricity corridors Development Plan via (Ventilus and Boucle du Hainaut) and improves the https://bit.ly/Eila_FedDevPlan integration of offshore wind power, the capacity of For 50Hertz, the next years will be dedicated to the approval and above all which will expand to 4 GW (MOG II) by 2030. “ the implementation of projects to increase the capacity of the grid. Our focus in this context will be, among other things, on eliminating grid bottlenecks caused by the increasing integration of renewables in the north and electricity transport in direction south. In addition to the replacement of 220kV lines with 380kV lines in the same track as on the Wolmirstedt - Güstrow line, we are looking for the optimal technical and economic solution for each line, which also minimises the impact on nature and the environment. Sometimes these are even smaller solutions, such as the installation of measurement technology to enable temporarily higher current load capacity of the lines. When it comes to developing the power grid of the future, Elke Kwapis, Head of Projects Overhead Lines & Cables Elia group is committed to three principles:

Visit 50Hertz’s http://bit.ly/Grid_Development webpage to learn more about Germany’s Network Development Plan.

01 Minimising the construction of new 02 Open dialogue with all the stake- 03 Respect for people and the environ- infrastructure by giving priority to holders during the entire develop- ment when building and operating optimising and im­proving existing ment process from a very early stage. our infrastructure. infrastructure.

The DialogMobil, 50Hertz’s mobile information office to inform stakeholders. 60 We develop the electricity system and the markets Elia Group Activity Report 2019 61 #3 We develop the electricity system and the markets G4 - EUS – DMA DEMAND-SIDE MANAGEMENT PROGRAMMES

AMBITION CHALLENGE APPROACH We facilitate and redesign the energy The growing intermittency of renewables By opening up our system to new players market to encompass all kind of drives the need for more short term and technologies, Elia Group wants technologies and to empower all kind trading and balancing to maintain a to create a more competitive energy 30 mio of customers. We lower the barriers by constant balance between supply and market while maintaining security of providing the digital tools to accelerate demand. In the years to come, new supply at all times. To achieve this, Elia END USERS (ELIA GROUP) innovation in the European energy market players will appear to develop Group ensures that every market player sector. business opportunities linked to has transparent, non-discriminatory decentralisation and electrification of the access to the grid. energy system. 62 We develop the electricity system and the markets Elia Group Activity Report 2019 63 Towards a single European energy market

INTERVIEW WITH DIRK BIERMANN (CHIEF MARKETS & SYSTEM OPERATIONS OFFICER 50HERTZ) AND PATRICK DE LEENER (CHIEF CUSTOMERS, MARKET & SYSTEM OPERATIONS OFFICER ELIA)

By setting up a real-time market design, we Digital metering “ are currently preparing to meet the needs of e-mobility. Together with digitalisation, the growth of e-mobility will increase even more as a game-changer the need to report flows closer to real-time.

Patrick De Leener We facilitate the markets by going ever further in market coupling and develop new products fit for emerging technologies. We innovate to realise the needed shift towards flexible loads following the ever more intermittent production, with the explicit aim to achieve a reliable, efficient and smooth transition of the power system. We provide non-discriminatory access for all market parties, strive for a level playing field and want to be a valuable contributor to the energy debate.

Elia and 50Hertz are evolving geographically very dispersed and highly based on big data. It starts with getting their needs and also enabling them to Dirk: “ There is a strong link between towards becoming digital TSOs. dependent on the availability of wind a full picture of the system in real time, align their consumption to the needs market design and system operation, How will this affect our daily and sun. At the same time, we expand supported with diagnostics, analytics, of the system. Prices will reflect the which is the core business of a TSO. This business? the operational limits of our grids as forecasting, etc. We also need tools for situation of the moment and households was illustrated during summer time in our complex infrastructure projects are recommendations in decision-making. can adapt the consumption of freezers, Germany, when we had big imbalances Dirk: “ Digitalisation will definitely help lagging behind the fast development Once actions are taken, automation kicks heath pumps or electrical vehicles. in the system. This was not caused by us a lot in all the domains of our system of renewables. Therefore, we have an in. ” Imagine that this becomes a reality on technical issues, but by a market design operations. Renewable generation is urgent need for new and better tools, a huge scale. Clearly, this would be a issue. The balancing energy prices did One of Elia Group’s strategic pillars big game-changer. However, we cannot not provide the right incentives for is to empower the customer. What set this up by ourselves. Therefore, we market players to avoid imbalances with does it mean? initiated IO.Energy (Internet of Energy), very serious impact on system security. an ecosystem that is currently testing It shows how important it is to consider Patrick: “ Digital metering up to several case studies brought up by the link between market and system. household level will bring us in a interested participants. The more we Our guiding principle is to leave as much new customer-centric world. One The growing intermittency of renewables can make the market to take on this to the market as possible, to get it right will have a close-to real-time view on “ has been driving the need for more short evolution, the better. ” on the market side. The TSO should only consumption and production of all term trading and balancing. We have intervene on the system side when this is relevant appliances. Customers will get reached great achievements with shortened not possible. ” lead times and 15 minutes product access to multiple services, meeting granularity.

Dirk Biermann 64 We develop the electricity system and the markets Elia Group Activity Report 2019 65

The continuous trading of electricity expanded to 21 countries, “ marking another important step towards expanding the single integrated European intraday market.

Patrick De Leener

In November 2019, Elia and 50Hertz Dirk: “ But that does not mean that we Elia Group is trying to operate published a joint study on future- stop investing in grid infrastructure. On closer to real-time in all aspects proofing the EU energy system the contrary. Our study showed that of its business. What are the main towards 2030. One of the key the first and most important lever for achievements in 2019 in that messages was indeed the need for a successful energy transition towards regard? an improved market mechanism. 2030 is the timely completion of the Dirk: “ On a European level, we are planned new grid infrastructure. Our Meeting of the members of the Board of Directors Patrick: “ Just letting things run their simulations show serious welfare losses currently implementing cross-border of the Elia Group - Berlin (2019). course is not an option. If we want to if we don’t. In addition, this missing intraday market integration. The realise the next phase of the energy infrastructure also causes higher western European countries are already transition in a successful way, we volumes of RES curtailment. We are integrating renewables on a large scale need to finetune both the hardware therefore committed to doing the to make the energy transition happen. Patrick: “ Before, the day-ahead market What is the focus point in 2020? Dirk: “ E-mobility is indeed a focal point (infrastructure) and the software (market utmost to accelerate delivery of the The growing intermittency of renewables was the trend. Today, the importance in 2020. In the short term, I expect that Patrick: “ Another big trend that design) of the European interconnected planned new infrastructure in close has been driving the need for more of having a near to real-time intraday we will manage to find concrete use influences the market is e-mobility. energy system. We notice for instance collaboration with the competent short term trading and balancing. We market increases. This is indeed mainly cases where we work on what software I think that in a few years only electric an inconsistency between the physical authorities. At the same time, we have reached great achievements with due to the increase of renewables that and what mechanisms should be vehicles will benefit from the fiscal flows in the grid and the markets. We upgrade existing assets and we optimise shortened lead times and 15 minutes are unpredictable and intermittent. developed to integrate e-mobility. Today, support for company cars. This will have need to improve the software in such the operation of our assets. ” product granularity. However, I believe In November 2019, we launched the market processes are not designed a way that there is more convergence that there is potential for further second wave of the European single huge system implications mainly due for electric vehicles, which leaves between real-time flows and market coordination to efficiently deal with Intraday coupling; formerly known as to charging. When everyone charges room for significant improvements. transactions. On another level, we need the intermittencies and cross-border the XBID project. The continuous trading their electric vehicle at the same time, Take for instance electric charging at to optimise our software to prevent or exchanges. It is the right way forward to of electricity expanded to 21 countries, at the office or at home, we will see home that is linked with rooftop solar solve certain existing issues such as loop create an integrated European market. ” marking another important step huge peaks in consumption that we production and a smart domestic energy flows. Software optimisation requires towards expanding the single integrated have to predict and adjust. By setting management system. And by nature, effort, but it is easier and less costly than European intraday market. We expect a up a real-time market design, we are Elia Group running business cross- updating our hardware infrastructure. third wave by the end of 2020. ” currently preparing to meet the needs of border should thoroughly look into Constant optimisation of our software is e-mobility. Together with digitalisation, development of cross-border process for the key to keeping up with evolutions. ” the growth of e-mobility will increase the charging and settlement. Let us make need to report flows closer to real-time e-mobility a problem solver instead of even more. ” being an additional uncertainty. ” 66 We develop the electricity system and the markets Elia Group Activity Report 2019 67

Our expertise at Levers to realise the next phase of society’s service the energy transition with maximum welfare for society

INTERVIEW WITH JAN VOET, HEAD OF SYSTEM OF THE FUTURE Timely completion of Flex-In-Market design critical infrastructure Our simulations show welfare gains of € 300 to € 400 million per year in 2030 for the Flex-In-Mar- Our simulations show that not having the German ket design compared to the current market design north to south HVDC lines in place entails a yearly and a decrease of curtailed volumes of RES by 10% Future-proofing the EU energy welfare loss of around € 1 billion to € 1.5 billion by to 15%. The proposed market design improvements 2030. In addition, this missing infrastructure also could also significantly reduce the redispatch costs causes higher volumes of RES curtailment (ca. in parallel to the grid expansion coming up to speed system towards 2030 +40%). These numbers will further increase beyond over the next couple of years. Simulations show a 2030, as more renewables are due to be integrated potential reduction of German redispatch costs of into the grid on the road to full decarbonisation. more than 50% in anticipation of the HVDC lines, along with a 20% to 30% reduction of curtailed vol- In our role as transmission system operators, Elia Group publishes umes of RES. forward-looking studies to keep our finger on the pulse in the market. In 2019, Elia and 50Hertz published a joint study on future-proofing the EU energy system towards 2030. On the way to 2030, renewables will further increase, some conventional generation will disappear and there will be more cross-border exchanges as Europe has set ambitious targets regarding the further development of the internal energy market. From the perspective of two system operators, Elia Group wants to raise awareness about the increasing challenges on both the grid infrastructure (hardware) and the market design (software) of the European interconnected electricity system.

Presentation of the Elia Group study during Elia's annual Stakeholders' Day.

What challenges are we talking have to perform redispatch to keep the about? flows within operational boundaries. These congestions also create secondary What needs to be done? And on the software side? What are the next steps? Jan: “ The discrepancy between the effects, such as loop flows. On the development and construction times software side, we see an increasing Jan: “ In our joint study, we propose two Jan: “ As a second lever, we propose the Jan: “ Elia Group suggests that a of renewable generation compared to divergence between the electricity flows levers. The first and most important lever Flex-In-Market design. This improved broader coalition should be set up to the longer lead-times for realising grid optimised by the market mechanism is the timely completion of the planned market design gives the market access start discussions with representatives infrastructure creates congestions on and the physical flows in real-time. ” new grid infrastructure. Elia Group is to a toolbox of controllable devices to of system operators, market parties, the grid. System operators regularly therefore committed to doing its utmost better manage the flows in line with regulators and European authorities. to accelerate delivery of the planned new physical constraints. This enables a more We believe that our proposals could be infrastructure and to mitigate any risk efficient use of the grid and reduces the stepping- stones that bring currently of delays, working in close collaboration gap between markets and physics. ” opposing views closer together. ” with the competent authorities. We are also committed to upgrading and optimising existing assets. ”

We are also committed to upgrading Consult Elia Group’s study online via and optimising existing assets. http://bit.ly/EliaGroup_publications “ Jan Voet 68 We develop the electricity system and the markets Elia Group Activity Report 2019 69 Collaboration & Adequacy and flexibility study for Belgium 2020-2030 co-creation to manage

In line with the Belgian Electricity This accelerated coal exit also means increasing flexibility Act, Elia conducted an additional that additional capacity perhaps even analysis of the adequacy and flexibility exceeding 1 GW will be needed for 2022- requirements for 2020-2030. These 2025, requiring further measures to be With the increasing decarbonisation, power generation is shifting from conventional power plants are both crucial pillars for a smoothly taken. towards renewables. Germany, for example, has defined its 65% renewables goal for 2030. Battery operating electricity system. The new report confirms and reinforces the Elia is calling on the federal government storage, Power-to-X technology as well as different renewable energy technologies will play an conclusions of previous Elia studies from to continue working on its development important role in the coming years and decades. Additionally, “demand response” like detachable of the planned capacity remuneration 2016 and 2017. loads and new flexibilities from small-scale devices will be needed for a secure and efficient mechanism (CRM) so that Belgium has a Elia notes that the need for replacement robust safety net in place to maintain its system operation. capacity to cope with the nuclear exit security of supply. laid down by law is now becoming even greater than before. Because neighbouring countries bring forward their coal exit, it is set to make it harder IO.Energy: putting for Belgium to import electricity when it experiences shortages. consumers at the centre In specific terms, the replacement Second major meeting of the IO.Energy project where nearly capacity Belgium requires to cope of the energy system 150 people came to close the ideation phase, in Flagey, on with the nuclear exit in 2025 is now up June 24, 2019. from 3.6 GW (figure given in the Elia study in late 2017) to around 3.9 GW. Digitalisation and the rise of more In February 2019, the Belgian System Meanwhile, system operators will have flexible assets in the system like operators (Elia, Fluvius, ORES, Sibelga new possibilities enabling them to better electrical vehicles and heath pumps and Resa) launched IO.Energy (Internet operate the Belgian grid at its various bring opportunities to get society of Energy), a unique and innovative voltage levels, making our energy more involved. We see opportunities ecosystem to give consumers access system more efficient and sustainable. for consumers to benefit from better to new services as a result of data services and to optimise their energy exchange. IO.Energy is being undertaken The IO.Energy Ecosystem bill by sharing their flexibility and data. in collaboration with business, research The journey towards a consumer- In Belgium, the system operators join institutes and public services. By centric energy system has delivered forces to co-create the energy services collaborating and introducing new its first results: eight consumer-centric of tomorrow within the context of the digital tools, new rules and automation, use cases from eight consortia are IO.Energy initiative. combined with real time communication currently in the sandboxing phase. capabilities, we can provide Energy-as-a- This will continue until April 2020. The Service (EaaS). outcome of this first sandboxing phase A win-win for both consumers and will lay a strong foundation for consumer the system centricity. Firstly, by paving the way for the demonstration of the current use This would enable consumers to cases under more realistic conditions, optimise their bills, increase their in preparation for industrialisation. The coal phase out in neighbouring countries is comfort and benefit from their Secondly, by accelerating the set-up “ making the Belgian capacity need even more technological investments. Market and delivery of a second round of pressing. As a result, between 2022 and 2025 parties, in turn, will be able to innovate ideation and sandboxing with a view Visit additional capacity of more than 1 GW will be Consult Elia’s Adequacy and develop new energy products and to addressing other consumer needs and Felxibility Study via https://www.ioenergy.eu/ needed, requiring further measures to be taken. http://bit.ly/Elia_Studies to learn more about the services tailored to consumers‘ needs. via innovative power and digital ecosystem. technologies. Chris Peeters 70 We develop the electricity system and the markets Elia Group Activity Report 2019 71

Reallabore Power To Gas

50Hertz participates in hydrogen projects

50Hertz contributes its know-how to The material use of hydrogen Both projects are designed to contribute research projects in Saxony-Anhalt, plays a decisive role in the project to system and supply security in the Saxony and Brandenburg for the 'GreenHydroChem Central German power grid. 50Hertz expects the projects Project REEAL development of promising energy Chemical Triangle'. For that, a 50 MW to make progress in the development technologies. These are so-called electrolyser at the Leuna site will divide of Power-to-X technologies, which will 'real laboratories' on an industrial water into hydrogen and oxygen using play an important role in the energy scale, funded by the Federal Ministry regenerative electricity. The hydrogen transition. of Economics and Energy, which are will then be converted into basic 50Hertz prepares for redispatch with intended to advance sector coupling and materials such as methanol in local hydrogen technology. chemical plants. renewable energy plants The real-world laboratory concept 'Reference Power Plant Lausitz' goes 50Hertz is preparing intensively for the With the new regulation, the number of 50Hertz already launched this extensive one step further: hydrogen will firstly be so-called redispatch with renewable relevant assets for redispatch measures project in 2018 to implement the new produced with green electricity in an energy plants. Redispatch means that in in Germany will increase tremendously. legal obligations. REEAL - standing for electrolyser, secondly be made available the event of congestion in the electricity In the 50Hertz grid area alone, the Redispatch with Renewable Energy for transport and industry and thirdly, grid, generation will be reduced on number of power plants will rise from Plants - involves employees from if required, will be reconverted into one side of the congestion while being several hundred to several tens of numerous areas of the company. electricity using the generated heat. increased on the other. The objective thousands. Because a large number The project coordinates the internal A hydrogen storage tank as well as a is to bring the traded electricity to the of these plants are connected to the adaptation of processes and systems, battery and a supercapacitor for storing consumers even if the transmission distribution grids, transmission and as well as 50Hertz's participation in electricity will supplement the plant. capacity of the grid is not (yet) sufficient. distribution system operators have to energy sector-wide initiatives. 50Hertz So far, such interventions have been align and collaborate even more closely. closely coordinates with other German limited to conventional power plants transmission system operators, with a capacity of more than 10 MW. distribution system operators, direct From October 2021, a new regulation marketers and the Federal Network (NABEG 2.0) will apply, which will Agency. also allow grid operators in Germany to implement redispatch measures with renewable plants and smaller conventional power plants. 72 We cooperate to create value for society Elia Group Activity Report 2019 73

We cooperate to create value for society GRI 102-29, GRI 413-1 #4

AMBITION CHALLENGE APPROACH We stimulate participation from Elia Group’s activities have an economic, Building the infrastructure of the future our various stakeholders. We are a social and environmental impact in both involves all stakeholders at a very early transparent and trusted advisor to create Belgium and Germany. It is challenging stage of our projects to incorporate their value for society. to balance the different viewpoints when input in the various planning stages. building the grid infrastructure of the This results in the best societal and 549 hectares future. environmental solutions.

ELIA GROUP TAKES CARE OF NEARLY 549 HECTARES IN ECOLOGICAL AISLE MANAGEMENT. 74 We cooperate to create value for society Elia Group Activity Report 2019 75

INTERVIEW WITH ILSE TANT (CHIEF COMMUNITY RELATIONS OFFICER ELIA) AND OLIVIER FEIX (HEAD OF PERMITS 50HERTZ) Collaborating for a successful grid development GRI 102-43, GRI 102-44, G4 - EUS – DMA - STAKEHOLDER PARTICIPATION

Information market on the SuedOstLink project in Greiz on November 26, 2019. The energy transition is a real societal challenge for all of us. Decarbonisation is a European story which only works with a well-developed high-voltage grid. It is about connecting the wind and solar potentials in the North of Europe with those in the South to cannot cope with such an amount of in Belgium. And we apply the same process. This is of course challenging and new renewables. Even if many local standards in managing these complex can add complexity to our permission create the best possible mix. Elia Group is convinced that early involvement and dialogue citizens, associations and prosumers projects to ensure the timely delivery on processes. On the other hand, this can with all stakeholders is vital for the success of the energy transition. wish to contribute to investments linked budget and quality. ” be a source of knowledge that can be to this great societal project called‚ incorporated in our planning processes energy transition, this still makes it Ilse: “ Having the competence in-house to deliver a better outcome. We see a difficult to implement their ideas. ” is key. Alongside our engineering lot of debate on democracy in Europe competence, we need project- and have to find our way regarding the How can we contribute to the management capabilities in national new emerging approaches of engaging Why is timing so important when Olivier: “ Since the commissioning of the timely construction? and international environments. people. ” building the grid? Southwest Coupling Line in Germany, Furthermore, stakeholder management we have already saved more than €650 Olivier: “ The great advantage of and communication competencies Ilse: “ When grid development is lagging million in congestion management costs being a group of TSOs is that we share are essential for the success of our behind, it can generate substantial costs in four years. And we have calculated knowledge, experience and good projects. Working hand in hand with our for society because of bottlenecks in the that we will save 50% of redisptach practices to learn from each other. We stakeholders - authorities as well as civil grid and related redispatching costs. In cost annually through the projected identify measures to de-risk permission society and citizens – is crucial to obtain Germany, very concrete figures are given German DC links by 2030. This economic procedures or construction works that permits on time. We are inspiring allies for the consequences of a delay. Also benefit boosts welfare for society. are performed in Belgium that are who want to speed up the transition in Belgium we observe an increasing Secondly, there is also an ecological helpful in Germany and vice versa. This together with us. If you look at a project saturation of our network. Moreover, the price. Renewable energies that cannot helps us to speed up the delivery of team today, it is a mixture of technical, timely construction of the grid not only be integrated into the electricity system critical infrastructure projects such as legal, communication, environmental avoids bottlenecks and related costs but are replaced by production that emits SuedOstLink in Germany or Ventilus and many more experts. ” also enables the integration of renewable CO2 into the atmosphere. And thirdly, we

energies with the related CO2 reduction should consider the social cost as lots of Olivier: “ Stakeholders have become and a positive impact on the market decentralised potential and initiatives more demanding and want to actively price. ” cannot be unlocked in a system that 650 participate in the decision making mio €

SAVED IN CONGESTION MANAGEMENT COSTS IN FOUR YEARS WITH THE It is important that authorities at different SOUTHWEST-COUPLING-LINE “ levels also take responsibility for the realisation of the projects through positive communication on the importance and need We see a lot of debate on democracy and making available resources to move “ in Europe and have to find our way the process forward while guaranteeing to regarding the new emerging approaches citizens that their input is taken seriously. of engaging people.

Ilse Tant Olivier Feix 76 We cooperate to create value for society Elia Group Activity Report 2019 77

We have completely reviewed our “ planning and permission process towards an integrated approach systematically including external stakeholder input.

Olivier Feix

Stakeholders visit the Brabo site in Antwerp on 19 May 2019 during Open Site Day.

50Hertz organised an information market for the SuedOstLink project in Bernburg (Saxony-Anhalt) on 13 May 2019.

So, are we thinking of new ways of systematically including external stakeholder input. What do you expect from governments and stakeholder involvement? We are in the process of learning to use these new authorities? dynamics positively. ” Olivier: “ We have also learnt that critical Olivier: “ We firstly expect a cooperative approach stakeholders are often ready to make useful Ilse: “ As Elia Group we invest much more in and active involvement with a common project suggestions or to add new facts to identify and stakeholder engagement and communication mentality. What does that mean? The permission evaluate routing alternatives, technical options than three to four years ago. We do not only build phase is still too long, complex and uncertain. or ecological compensation measures. To get relations with governments and local authorities We can benefit a lot from working together. Very there, we have to interact early, in a focused and but also test innovative concepts involving concretely, who has which role at which stage of On November 22, Elia held its annual Stakeholders' Day. More than respectful manner. People are eager to be part of representatives of civil society and citizens. This the permission process and what do the parties 150 guests from the Belgian energy sector attended. the story. That’s the positive thing. However, that leads to concrete and long term collaboration with expect from each other? If this is clear and applied, also means that we have to consider many ideas farmers, environmental and economic associations interactions and processes become efficient. coming from mature and active citizens in our core in order to balance interests and impact and to find Secondly, political decision makers have to link the processes. It’s not only early information for the common solutions. For citizens stakeholder groups social debate on climate change with the energy sake of transparency. It’s a two-way interaction are set up to come to a common understanding transition. Elia Group as a European Group of TSOs The early dialogue with the public has over the entire project development cycle and that of problems and solutions for several topics. The plays an important role in making the energy “ been made part of our daily routine at interaction is driven by purpose. It has to lead to a development of long term relations with different transition a success. In Germany we are getting on 50Hertz. Particularly with our direct positive result in the interest of society. This is why stakeholders leading to a better reciprocal the right track. ” current project, which is planned as we have completely reviewed our planning and understanding and collaboration is essential for all an earth cable, the dialogue with the permission process towards an integrated approach our activities. ” Ilse: “ In Belgium the situation is complex taking into account the dispersed responsibilities on property owners plays an important need for grid and permitting. We are often in the role. Because topics such as soil investigations and soil protection Elia's key political stakeholders visit the MOG upon its inauguration on September 10, 2019. role of a facilitator to enable all the parties to pull in one direction. It is important that authorities concepts are important from the very at those different levels also take responsibility beginning. This is where 50Hertz relies for the realisation of the projets through positive on the owners' knowledge in order to communication on the importance and the need be able to further improve the planning and making available resources to move the process and subsequently also the construction forward while guaranteeing to citizens that their of the cable. input is taken seriously. ” Danuta Kneipp, Head of Public Participation Combined Grid Solution 50Hertz 78 We cooperate to create value for society Elia Group Activity Report 2019 79

AN INTERVIEW WITH PASCALE FONCK (CHIEF EXTERNAL RELATIONS OFFICER ELIA), KERSTIN MARIA RIPPEL (HEAD OF PUBLIC AFFAIRS AND COMMUNICATIONS 50HERTZ) AND EMELINE SPIRE (HEAD OF ELIA GROUP EU AFFAIRS) Stakeholder Engagement GRI 102-21, G4 - EUS – DMA - STAKEHOLDER PARTICIPATION

Elia Group is an advisor to public authorities at national and European level and aims to involve its stakeholders and regulators at an early stage of all developments. How do political decisions impact our activities? And why do new ways of proactive stakeholder management gain more and more importance? Why do we have this mandate?

Kerstin: “ The operation of critical infrastructure is of general interest to society as we ensure system security and thereby support the security of the Can you explain the intense relationship electricity supply to consumers. This is of particular between our activities and the public interest to public authorities. They are intrinsically authorities? motivated and highly interested in how we optimise and build the grid to integrate renewables on time Pascale: “ The different governments at federal and in budget and how we operate the system. and regional level give us our licence to operate. We do it with a high technical and economical With this regulated monopoly, we have a duty expertise and we do it in a transparent manner, with to accomplish our tasks in the interest of society a keen focus on encouraging open dialogue. Being complying with all regulations pertaining to the efficient and innovative, we constantly improve operation of the transmission system. Secondly, the services we deliver to society. This will be even thanks to our wide portfolio of activities, we are the more relevant in the future while moving towards only player at national level with a global view on the a successful energy transition and the recently electricity system. This puts us in a unique position announced EU ‘New Green Deal'. Infrastructure is to provide analysis, advice and recommendations to key to decarbonise the energy sector. Our political public authorities, so that informed decisions can be stakeholders and the public authorities know that. ” taken. ”

The Green Deal confirms the need “ to make the energy transition a reality, and we are willing to take our role in making this possible. Infrastructure is key to decarbonise the energy sector Pascale Fonck “ and our political stakeholders and the public authorities know that.

Kerstin Maria Rippel 80 We cooperate to create value for society Elia Group Activity Report 2019 81

How are our activities steered reliable relationships, and regularly invite evolutions in the past five years looking by political frameworks and stakeholders for dialogue and open, at the network codes and the clean how do we see our stakeholder transparent discussions. We always put energy package. Now, we are talking engagement? ourselves in the shoes of our partners about a new Green Deal. It confirms the and stakeholders, combining their needs need to make the energy transition a Kerstin: “ In Germany we have a new with our ideas and positions. ” reality, and we are willing to take our role legislation on renewable energies in making this possible. ” literally every year. The grid development How does European legislation plan has – due to legal provisions - to impact your activities? How do you Kerstin: “ It is the same in Germany. be updated every two years. These manage both levels? Finally, the European level is one of cases show how political decisions the most decisive ones. Therefore, we have a direct impact on our activities. Pascale: “ Belgium is a highly established a dedicated Elia Group EU Consequently, it is of great importance interconnected country and therefore Affairs function in February 2019, which to be in regular contact and trustful it is extremely important to us. We acts as an interface between Elia and dialogue with public authorities and know that more and more decisions 50Hertz. We now collaborate, exchange 50Hertz expert panel during the 10th edition of the Renewable tend to be shifted to the European and thus consolidate constantly our decisionmakers to provide holistic Energy Conference in Berlin on 30 October 2019. advice on future developments of the level and will consequently impact the national views with a European one. This system facilitating the energy transition. national legislation. We strongly believe is a major achievement of Elia Group‘s Our first principle within that process: in the interconnected character of the efforts in 2019. ” stakeholder management is always European energy system and are willing Emeline: “ Looking at the impact of How do you see the stakeholder based on trust. We establish solid and to optimise the use of interconnectors EU legislation in the longer-term, management with authorities at and to build new ones. We can see huge electricity systems play a major role European level? in delivering the `Green Deal’ climate neutrality objective by 2050. Renewable Emeline: “ Our role is to support electricity becomes the new primary European policy makers in delivering the energy, and the most efficient way European Union´s climate and energy of using renewable electricity is to ambitions. We are in the business of transport it and use it as electricity. The making it happen. We also support Commission scenarios foresee up to 53% European authorities by anticipating electrification - twice as much as today. implications of political objectives. We This gives us a special responsibility. raise issues that need to be addressed Whenever we manage to integrate if we want to succeed. We propose more renewables in the power system, solutions based on our complementary whenever we make the power system expertise in Germany and Belgium. We smarter to accommodate electric have a concrete and recent example: our mobility, etc., society can decarbonise study “Future-Proofing the European faster and more efficiently. Hence Energy Transition towards 2030”. our ambition is to accelerate both the Steering these topics at Group level delivery of the future infrastructure as allows us to showcase a new degree of well as the digitalisation of our activities compromise building and to speak with and the power system. ” a stronger voice. This is very helpful and once again the unique selling point of being a Group of two national TSOs. ”

Steering European topics at Group level allows “ us to showcase a new degree of compromise building and to speak with a stronger voice.

Emeline Spire

On 13 and 14 February, Elia took part in the Salon des Mandataires in Marche-en-Famenne. This event, which attracts nearly 15,000 visitors every year, brings together all the stakeholders in Wallonia: public administrations, local and regional political authorities. 82 We cooperate to create value for society Elia Group Activity Report 2019 83

Stakeholders‘ Day 2019

Elia held its annual Stakeholders' Day on 22 November. Over 250 guests from the Belgian energy sector were treated to a varied programme centred around the theme 'Accelerating the Energy Transition'. Particular highlights were the inspiring

speeches on climate change and CO2 reduction delivered by Belgian climate expert Jean-Pascal van Ypersele (from the Université Catholique de Louvain (UCLouvain)) and US environmental activist Paul Hawken respectively. Many topics relating to both the Belgian and European electricity systems were also discussed.

Watch Kadri Simson’s (EU 50Hertz engagement Commissioner for Energy) message as shown during the event via with public authorities http://bit.ly/VideoSpeech

50Hertz organised numerous networking events In August 50Hertz hosted the now 11th System with various interest groups in 2019. In the political Security Conference on the topic of higher grid arena, these are regular, diverse dialogue formats utilisation, followed by the annual EEG conference in which stakeholders from public authorities, on redispatch with renewable energy plants. parliaments, NGOs, associations and industry Elia Group organises meet to discuss current energy policy issues. In In addition, around 100 meetings are held annually February e.g., representatives of all democratic with international, national and local political European evening parties attended a Parliamentary Breakfast at players, business representatives* and NGOs to the 50Hertz headquarters in Berlin to discuss the provide transparent information on selected energy effects of the Network Expansion Acceleration Act industry or energy policy issues. One highlight in in Brussels (NABEG). In January and September, energy policy 2019 was the commissioning of the Arkona wind network evenings took place, during which the farm and the 50Hertz grid connection Ostwind 1, More than 120 guests from the European energy participants exchanged views with 50Hertz experts which was attended by German Chancellor sector met on 12 December at the first joint on the necessity of higher utilisation of the grid and Angela Merkel. In her speech she emphasised the stakeholder event between Elia and 50Hertz. the challenges of offshore grid expansion. In May importance of the Baltic Sea in terms of offshore Amidst current themes such as the Green Deal 50Hertz hosted the annual public and regulatory wind. and the COP25 in Madrid, Elia Group presented affairs day. Distribution system operators, large its new study 'Future-proofing the EU Energy consumers, renewables producers, conventional System towards 2030'. There were several guest power plant operators - all situated in our grid speakers and video statements. German Energy area - discussed with 50Hertz-representatives Minister Peter Altmaier praised the Belgo-German the decisions of the so-called "Coal Commission”, cooperation within Elia Group. Kadri Simson, the upcoming developments in incentive regulation 100 new European Commissioner for Energy, pointed and the development of electricity prices. This out the measures needed to realise the ambitions exchange is characterised by tough discussions and of the Green Deal: accelerating decarbonisation, 50HERTZ HOLDS ABOUT 100 MEETINGS mutual respect for the different points of view. PER YEAR WITH STAKEHOLDERS improving energy efficiency and integrating more renewable energy. 84 We cooperate to create value for society Elia Group Activity Report 2019 85 Environmental Actions Ecopooling GRI 304-1, GRI 304-2, GRI 304-3, G4-EN12 According to the law, there is an The aim of the biotope system is to implement nature-conserving activities obligation to avoid or minimise any create species-rich and flowering in connection with infrastructure preventable negative impact on nature habitats for animals and plants in areas projects that would otherwise be Elia Group is committed to creating a sustainable future for all of its internal and external and landscape. Where interventions that have become rare today. The difficult or even impossible to realise. are unavoidable, 50Hertz takes Foundation contracts local farmers stakeholders. This means that the company takes its corporate social responsibility very seriously, compensatory measures. These are, for for the management of the biotope 50Hertz has already been paying into which includes an active commitment to environmental and climate protection. Elia Group example, planting, forestry, hydraulic network, thus offering smaller farms the project-related eco-account since respects flora, fauna and biodiversity, uses natural resources conservatively and keeps the energy engineering measures, species in particular an additional source of 2017 and receives eco-points in return. These can be used for future necessary consumption and emissions of its activities as low as possible. protection, restoration and other actions. revenue. However, it is becoming increasingly compensation measures, for example difficult to find suitable areas for such This cooperation shows that economy for the nature conservation related compensation measures at the time and environment are not contradictory. compensation of SuedOstLink. of the intervention. Eco-accounting With smart planning, it is possible to Biodiversity and rehabilitation aims to counter this problem. Eco- accounting means that compensation measures are carried out ahead of time of natural habitats and without specific impact and that they are recognised and booked into an eco-account. To ensure our security of supply, characterise the evolution of habitats Setting an example for Europe safety distances around the electrical and populations of animal and plant In 2019, the Stiftung Kulturlandschaft One of the aims of the LIFE project is to conductors of our high-voltage lines species in order to highlight the effects Sachsen-Anhalt and 50Hertz established set an example for all other European must be respected. Instead of cutting of developments and changes in the basis for a sustainable biotope transmission system operators (TSOs) down trees and shredding vegetation, management practices resulting from ecosystem in the Sülze valley southwest and establish the first ecological network Elia set up the LIFE project in 2011 in LIFE. of Magdeburg. Its aim is to create a collaboration with RTE, and funded of its kind along the EU's 300,000 km The success of the seven different comprehensive ecosystem by upgrading by the European Commission and the of power lines. Contact was made with actions carried out during the LIFE and preserving biologically valuable Walloon Region. With LIFE we aimed the TSOs in 14 EU Member States that project (i.e. borders - orchards - areas. The Stiftung Kulturlandschaft to find solutions that ensure safety have shown the greatest interest in the restoration of natural habitats - Sachsen-Anhalt has set up an eco- distances, whilst preserving biodiversity. project and its implementation in their excavation of ponds - control of invasive account for this purpose. Since this seven-year project was own country. A 'guide to best practices' species - installation of mowing or concluded, Ecofirst carried out biological describes various ways of managing grazing - installation of flowering inventories during the summers of the aforementioned green corridors meadows) was evaluated. As it was 2018 and 2019. These inventories aim to and highlights their financial benefits not possible to carry out complete drawn up as part of the project. This is inventories on 429 ha with the existing used within Elia and distributed to the means, Ecofirst focused on a selection of other European TSOs, among other 52 sites considered representative of the ways via international associations like diversity of the actions carried out during the European Network of Transmission the LIFE project. In total, approximately System Operators for Electricity IMPACT LIFE PROJECT 130 ha were evaluated. (ENTSO-E) and the International Council on Large Electronic Systems (CIGRE). • Only 2% (1 out of 52) of the evaluated sites didn’t have any results Of course, we also actively protect and strengthen • 71% (37 out of 52) of the evaluated sites “ biodiversity. We pay attention to birds, amphibians and reached the intended goal natural habitats and develop substantial ecological projects • 19% (10 out of 52) of the evaluated sites with external partners to enrich biodiversity. The way we surpassed the intended goal operate our system and our grids is also sustainable. We • 8% (4 out of 52) of the evaluated sites also run our public participation dialogues in a socially showed positive progress in terms of sustainable manner. Our professional handling of negative biodiversity without interference from and positive opinions and the resulting better understanding the LIFE project and social consensus that grids need to be reinforced to For an overview of all compensation measures taken integrate rapidly growing amounts of variable renewables by Elia and 50Hertz please consult the Elia Group Together with these expected, and Sustainability Report 2019 via meanwhile proven, positive results, Elia also contributes to a better and more sustainable societal http://bit.ly/EliaGroup_publications Visit decided to launch a five-year follow-up interaction. Or visit our http://www.life-elia.eu/en/ project, LIFE 2, but this time without any https://www.elia.be/ and https://www.50hertz.com/ to learn more about this Olivier Feix, external funding. sustainable initiative. Head of permits 50Hertz for more information on mitigating environmental impact & promoting ecological diversity. 86 We align culture with strategy Elia Group Activity Report 2019 87

We align culture with strategy #5

AMBITION CHALLENGE APPROACH We want to implement an Elia Group We operate in a fast changing and Three guiding principles and six culture that puts safety and the interest international sector. This means that behaviors build the foundation of of society at the centre of our activities our employees need to cope with evolving our Group culture. Based on while respecting local identities. intercultural differences, working in that, we improve collaboration between distributed teams, using new digital our employees in Germany and Belgium 2,544 tools and adapting to new processes. and empower people to take initiative and Make A Difference (MAD) in every action they take. TOTAL NUMBER OF EMPLOYEES (ELIA GROUP) 88 We align culture with strategy Elia Group Activity Report 2019 89

INTERVIEW WITH PETER MICHIELS (CHIEF ALIGNMENT OFFICER ELIA GROUP) AND SYLVIA BORCHERDING (CHIEF HUMAN RESOURCES OFFICER 50HERTZ)

The long-term success of the Elia Group clearly depends “ on our way of collaboration. We are working on a common Group culture by implementing these six behaviours in Creating a strong both countries.

Group culture Sylvia Borcherding

Elia Group is operating in a fast changing environment and constantly seeking to improve its services to society. With its two strong national TSOs 50Hertz and Elia and their exceptional knowledge and experience, Elia Group managed to implement its vision of installing two headquarters, with central offices perfectly located in Brussels and Berlin. To realise the ambition of taking a leading role in the energy transition in Europe, Sylvia: “ For the first time we organised more and more feel the Group coming we established group functions in those areas where we can create an added value for a joint Elia Group Innovation Week, alive with the presence of Elia colleagues society. which showcased the progress in in Berlin, 50Hertz colleagues in Brussels, digital activities and implementing new as well as the increasing participation at technologies into our core business. each other’s yearly employee parties. We Our new common Elia Group safety also have our first Belgian Group Head guidelines leaflet reinforces safety being working as an expat out of Berlin. And our top priority across the Group. We also finally, I am very happy to see a change joined forces in talent management and in mindset – people start proactively We further aligned and developed the What were the major achievements developed an approach to implement thinking about the best possible Elia Group strategy and derived the that helped Elia become a stronger skill-based workforce management. As outcome for the Group. ” national business plans from it. We Group in 2019? a Group, we are also creating a stronger created common standards for CAPEX image in the recruiting market. We Peter: “ Since we established 15 Management of critical infrastructure managed to find two important profiles Elia Group functions beginning of projects and jointly commissioned under difficult circumstances -a strong 2019, we progressed a lot. Elia and and inaugurated the grid connection German CEO for 50Hertz and a Chief 50Hertz published a joint study on the of the Arkona wind park in the Baltic Digital Officer for Elia Group, who will horizontal vision showing two main Sea and the Modular Offshore Grid in lead the digital transformation of our levers for successfully implementing Belgium. We also leveraged synergies in companies. Looking at collaboration, I the next phase of the European energy purchasing through common technical transition. We organised our first Elia specifications for capacitor banks Group European Stakeholder‘s Day and steel in certain projects, giving us and published a joint annual report. stronger negotiation power. ”

Having shared values, beliefs and behaviours will be an important factor in The Supervisory Board of 50Hertz appointed Sylvia Borcherding “ as Chief Human Resources Officer in January 2019. The female forming and driving the Elia Group. quota of the 50Hertz Executive Board now counts 20%. Sylvia Peter Michiels Borcherding previously held leading positions in the Metro Group, at healthcare provider IAS and at outsourcing specialist Capita. She was also active as a organisational consultant. 90 We align culture with strategy Elia Group Activity Report 2019 91

Which key challenges do you face? Sylvia: “ It is not only a matter of How do you plan to implement becoming more agile and innovative, we these behaviours withing Elia Peter: “ The digital transformation also encounter challenges when dealing Group? constantly increases in speed and with intercultural differences, working requires the overhaul of proven business across different locations or adopting Peter: “ In Belgium, we started working models with digital strategies. To secure new structures, responsibilities and on the two behaviours ‘feedback' and our long-term future, we need to be processes. It is undeniable that people 'one voice' across all levels and teams. innovative, flexible and efficient. The associate themselves very strongly with Next on the agenda are 'simplification' It is not only a major challenge now is to effectively the national company whether it is Elia and 'impact'. In Germany, we are defining “ matter of becoming seize the opportunities of the digital or 50Hertz, but being a strong Group our priorities now. Although important, more agile and transformation for the Group and also requires one common culture. This it is clear that it will be more than just innovative, we also enable our people and organisation to does not mean ignoring the differences communication campaigns, training encounter challenges actively contribute to it. To achieve this, between Elia and 50Hertz or Belgians courses and workshops to explain to we need highly motivated and agile our employees what the six behaviours when dealing and Germans, but to speak one language employees. Teams will increasingly work mean. Our leaders and managers have with intercultural with respect to the culture we want to together horizontally across functions have and to adopt common behaviors. to be role models and show the way. differences. Sylvia: “ The long-term success of the and independent from hierarchies. This A common culture will help us to What kind of culture is required to People should feel able to test and try Sylvia Borcherding requires a massive change in mindset strengthen the foundation and realise achieve Elia Group`s ambitions? Elia Group clearly depends on our way new things, without being afraid of and culture. ” our ambitious strategy. ” of collaboration. We are working on a making mistakes. Additionally, we will Peter: “ Having shared values, beliefs and common group culture by implementing have to audit our business processes, behaviours will be an important factor these six behaviours in both countries. detect where we see barriers for these in forming and driving the Elia Group. To To me the two behaviours 'feedback' and six behaviours and eliminate them. ” succeed in the future, we launched the 'simplification' are particularly important. cultural programme 'Make A Difference'. A good feedback culture is crucial. It It promotes six behaviours, which further is important to manage expectations build on our strengths, but also foster for continuous improvement, but also an agile mindset and an efficient way of to show personal appreciation more working needed to adapt to the rapidly regularly. After all, a good mood and high changing world around us. These six motivation help achieve success. With behaviours enable us to speak with one regards to simplification, we have a lot voice, to simplify and reduce complexity, of seemingly small things to change. For 20% to give and ask for feedback, to have example, by reducing the high number an impact with every action we take, to of signatures in many approval processes FEMALE QUOTA 50HERTZ EXECUTIVE make choices in the interest of the entire we could decrease complexity and thus, COMMITTEE Group and to actively co-create the significantly increase efficiency in our future. ” daily work. ”

Senior managers of Elia and 50Hertz during the Elia Group Management Days in on September 30, 2019. 92 We align culture with strategy Elia Group Activity Report 2019 93 Cultural guiding principles Our aspirational values GRI 102-16

and behaviours WE ARE ENTREPRENEURIAL: Our staff work proactively and GRI 404-1 take initiatives with a view to improving how they work and they are encouraged to explore new ways of doing things. Elia Group has started a joint project to intensify the collaboration between Elia and 50Hertz. WE COLLABORATE: Elia Group values collaboration, both The company is developing a common, integrated way of working that will transform us into within the company and with external partners. Our staff one, multinational Group with more than 2,500 employees. To successfully realise our strategy share their expertise and their information and question each and accomplish our mission in this dynamic context, a strong Group culture is needed. Therefore, other, thus enabling their ideas to mature. They seek fruitful collaborations and win-win partnerships. we defined cultural guiding principles and six cultural behaviours. These are the basis for the Elia Group culture and the starting point for all our (business) activities. These guiding principles WE ARE ACCOUNTABLE: All of our staff take full and behaviours should be reflected in the priorities and the decisions made by all Elia Group responsibility for their projects and tasks. They achieve their motivating, ambitious targets and work hard on their projects employees. until they are completed.

WE ARE AGILE: In a world of constant change, our staff 2,544 embrace new developments, are proactive and persevere. employees

Six Behaviours WORK FOR ELIA GROUP

ONE VOICE: IMPACT: ONE COMPANY: we have an open and constructive we perform our tasks in the best our responsibility goes beyond our own debate before making a decision. Once possible way by focusing on the actions job or department. We look at results the decision is taken, everyone supports that make a difference and that have an transversely and support the choices we this and carries the same message. impact (on safety, the system, society, make as a company. the environment, our performance...).

SIMPLIFICATION: CO-CREATING THE FUTURE: FEEDBACK: we look at what could be simplified in we are not only aware of the radical we give and ask for feedback and our challenging environment and avoid changes in our sector, such as this is in multiple directions. Thus, we unnecessary complexity. digitalisation and decentralisation, but show appreciation and we strive for we shape them. continuous improvement.

We will continuously work on The six behaviours are our common standard. Of “ integrating and reinforcing “ course, there may be local differences, as well as these behaviors in our daily other priorities or concerns. The German colleagues way of working. Together are currently working out an approach for with the management teams, implementation. I'm sharing our best practices and we will set direction, define making sure there's coherence. Just as we did for priorities and actions to ensure a Elia, we start with the management and then roll it sustainable implementation in the out further throughout the organisation.

organisation. Barbara Verhaegen, Head of Internal Communication & Culture Elia Julia Persitzky, Head of Learning & Development 50Hertz 94 We align culture with strategy Elia Group Activity Report 2019 95

Growing our talents SYSTEM OF THE FUTURE The ambition of the System EU AFFAIRS “ of the Future Department is to answer the major As a trusted advisor, Elia The partnership between Elia in Belgium and 50Hertz in Germany is questions on the future “ Group will be acting in the electricity system beyond interest of European society. stronger than ever. Together, we are reaping the benefits that neither 2030 via in-depth qualitative We will ensure that the Group company could realise on its own, such as the creation of future and quantitative studies, speaks with one strong voice in close cooperation with and follows a coordinated development options or investments in activities delivering future internal and external approach with all the synergies. The combination of forces will help ensure a secure, reliable stakeholders. important stakeholders.

and efficient system, deliver the grid infrastructure of the future, evolve Jan Voet (Elia Group Head System Emeline Spire (Elia Group Head EU of the Future) Affairs) the market, align culture with strategy and adopt promising innovation and growth opportunities.

Group functions

We are convinced that a stronger cooperation between our two TSOs creates additional value and secures our longterm future. To realise our common ambition we established Group functions where we can create STRATEGY added value by intensified collaboration. Together we can ensure FINANCE : GROUP CONTROLLING, AUDIT AND RISK MANAGEMENT “ that the TSOs stay highly Fostering a common understanding of the value drivers of each TSO in its The Elia Group organisation is steered by the Elia Group Committee (EGC) relevant in a fast changing “ individual context on the one hand and identifying the value drivers of the the official gremium of the newly created Elia Group Holding structure. environment. Making the joint business on the other hand are the most important tasks for the new digital transformation happen Group Controlling. Based on this, the function can develop a framework Group functions have been created in several domains: is key for our company. for reporting and for support of decision-making that is action-oriented on mitigating key risks and seizing value-creating opportunities. Alexandre Torreele (Elia Group Head

Strategy) Daniel Baumgartner (Elia Group Head Controlling) ASSET MANAGEMENT As part of our ambition to reinforce the finance function, we Teaming up and managing our “ want to achieve strong and consistent risk management for the “ assets at Group level will lead to entire Group with harmonised processes to provide a relevant better decisions about our assets discussion about risk on the EGC. with significant benefits for both TSOs. Gwendolyne Verstraelen (Elia Group Officer Risk Management)

Dirk Kunze (Elia Group Officer Asset Management)

CORPORATE COMMUNICATION AND REPUTATION CAPEX MANAGEMENT Elia Group Communication and Reputation defines and Group-wide steering of the high “ steers the Group’s communication strategy to speak with “ priority projects and programmes one strong and coherent voice to increase awareness, impact will improve the transparency and our overall reputation as a leading group of TSOs in the and reduce the risk exposure European energy transition. with regards to time, cost, scope and quality. The experiences and Marleen Vanhecke (Elia Group Head Communication & Reputation) practices in both TSOs provide a good basis for a strong evolution.

Olivier Feix (Elia Group Officer Capex Management) 96 We align culture with strategy Elia Group Activity Report 2019 97

PROCUREMENT IT We have established Group Group-wide applications will enable “ functions servicing both TSOs for “ the delivery of common solutions those goods and services where for both TSOs, increasing our global we can generate the biggest efficiency and achieving the strategic benefits thanks to the group goals of the business. volume effect and where we can leverage our best practices. Marc Gilliard (Head of Elia Group IT Application Development and Maintenance (ADM)) Harald Van Outryve D’Ydewalle (Elia Group Head Procurement) TALENT MANAGEMENT Elia Group Talent “ Management will provide The Group IT Infrastructure, Datacom and guidance by translating “ Security synergies will lead to an increased the Group strategy into a resource mass permitting the move from common long-term Talent & generalist to specialist guaranteeing a Competency roadmap. The identification of critical skills better service delivery. INNOVATION and roles is crucial for our Pierre Loverius (Head of Elia Group IT Infrastructure, In our fast-paced changing energy system, Group business continuity. Datacom and Security (IDS)) Innovation is aiming to test and validate potential “ Sylvia Borcherding (Elia Group of new technologies to maximise efficiency, quality Officer Talent Management) and safety in our business while embedding innovative mindset in the group. We then leverage The CDO Office is supporting and steering on both companies challenges and test-bed “ a tremendous transformation that is to maximise the learnings and create valuable currently affecting the whole Elia Group: support to the long-term strategy of Elia Group. The Group IT integration between Elia and 50Hertz will harmonize and slim down Loïc Tilman (Elia Group Head Innovation) our processes and create synergies for both business and IT. At the same time we are making sure that priorities and capacities are well set for our Group vision of becoming a Digital TSO.

Antje Schlegel (Head of Elia Group CDO Office)

INTERNAL AUDIT Elia Group Internal Audit maximizes the added value in providing “ assurance at local and at Group level. It’s our ambition to increase positive impact on the effectiveness and the efficiency of the different business activities and to boost the transition process.

Erik De Schrijver, Head of Elia Group Internal Audit The official launch of the new Elia Group organisation on 14 February in Brussels.

Elia Group’s Change I have always enjoyed working in an international environment, “ because it gives me the opportunity to express my way of Agent Programme thinking and to develop myself personally. Collaborating within an international group sometimes seems quite a challenge, but in the The intensified collaboration between Elia and 50Hertz has a lot of benefits but also brings chal- long run I only see the many advantages such as an international lenges for our employees. To support the teams in their daily operations, 50 change agents have network, high-quality knowledge exchange or faster results that been nominated across Elia and 50Hertz. Change agents are leaders and employees from Group such collaboration brings. As a change agent, I think I can play an functions as well as from local functions, where the Eia Group activites have a change impact. important role in making our people and colleagues aware of our They will take on different roles to support their colleagues in dealing with intercultural differenc- differences and similarities, both culturally and in the way we work. es, working in distributed teams, transparency and communication, interfaces or clarification of roles and responsibilities. Evelyne Driane, Head of Talent Management Elia 98 We align culture with strategy Elia Group Activity Report 2019 99 Safety always comes first GRI 403-1

Safety is a critical part of our corporate culture. Elia Group applies the highest safety standards for its own employees, our contractors and everyone coming into contact with its infrastructure. We are committed to continously invest in the intrinsic safety of our installations, working methods and safety culture. Likewise, we expect all our employees to always work safely and securely, promote a safety-oriented attitude and responsible behaviour, and never compromise on safety. We are all safety leaders

Elia Group believes that the safety culture is not A safety leader is someone who truly understands about more procedures, but about aligning peoples’ the risks and respects the rules, is open and behaviour. Everyone needs to be a ‘safety leader’. collaborative in his or her interaction – regardless Right from day one, our employees are given of their position in the organisation – and inspires thorough safety training to ensure that they respect others to act safely. At Elia Group, we believe their own safety and that of their fellow workers and everyone can be and should be a safety leader. That the environment at all times. That is why in 2019, we is why we developed a toolkit for our employees introduced a third pillar to our safety programmes to help them to further develop their safety ‘We are all safety leaders’, next to ‘We go for Zero leadership skills and attitude. It creates a common accidents’ and ‘We build a safety culture’. understanding and framework for safe behaviour to ensure that we achieve our safety ambitions.

WE GO FOR ZERO ACCIDENTS WE ARE ALL SAFETY LEADERS Elia Group is committed to WE BUILD OUR making sure that everyone The safety culture Safety has always been a top priority at 50Hertz and Elia. It is SAFETY CULTURE returns home safely every day. transformation requires visible important for me to know that we also share the same safety This includes our employees, safety leadership at all levels of “ Reaching our goals requires contractors and also those values and objectives across the entire Group. With the Elia more than procedures and the Group. Safety leaders show working on or in the vicinity of Group Safety Toolkit, all employees in Germany and Belgium guidelines. We actively work exemplary safety behaviour and our installations. now hold this strong message in their hands. The leaflet towards a safety culture. inspire others to do the same. provides standardised tools and rules for everyone to contribute Everyone is personally involved Elia Group wants to actively develop safety leadership in all to safe working in the same manner across the Group. in ensuring their own safety and that of their colleagues. employees. Claudia Lüer, Occupational Safety Specialist 50Hertz 100 We align culture with strategy Elia Group Activity Report 2019 101

ELIA TROPHY 2019 Employee initiatives The Elia Trophy is an intense three-day teambuilding event for all Elia Group employees. Forty teams of four colleagues, took part in this adventurous, sporty and relaxing weekend near La Roche-en- 2019 was a very important and busy year for Elia Group. Together, we realised huge milestones in Ardenne. The teams took on different challenges order to make the energy transition in Belgium, Germany and Europe happen. These team efforts ranging from rock climbing, to running over mud need to be celebrated and rewarded, which is why we organised several events in 2019 to thank pools to kayaking. In large organisations such as ours, the event offers a relaxed way to get to know our employees for their contribution, trust and teamspirit. colleagues from other departments in both Belgium and Germany and to strengthen our team spirit.

FAMILYDAY AT THE BRABO PROJECT

Once again Elia took part in the Open Site Day, with the Brabo project in the port of Antwerp. During a full weekend, we invited the public to come and discover the project. Nearly 1,500 people enjoyed this enriching and pleasant event. Saturday 18 May was dedicated to the Elia staff and their families: they could visit the Brabo site and take part in leisure activities for young and old.

ELIA’S GOT TALENT

Elia’s annual New Year event was all about talent this year. We literally gave our employees the stage to share their talents with us outside of their expertise at work. Our colleagues treated us to an amazing show with dance, singing and instrumental performances. Thank you to the whole Elia Group team of 2019!

MARATHON OF VALENCIA

On December 1, twenty Elia colleagues successfully took part in the Valencia marathon. It was a spontaneous initiative, and for many employees the first marathon in which they participated. The 50HERTZ EMPLOYEE EVENT colleagues helped and stimulated each other to train. After the successful participation, the team of Meeting new and familiar colleagues in a relaxed atmosphere - this is runners are now looking forward to go to the Athens what the annual 50Hertz employee party in Berlin is about! In June 2019, marathon in 2020 and the Berlin marathon in 2021. many Elia Group colleagues from Belgium came to Berlin for the first time to celebrate together with their German colleagues - a great enrichment for both sides. In the middle of Berlin, at the former Tempelhof Airport, people discussed, laughed, danced, brought faces and projects together and made friends in four different languages. The motto "Together. Safe. Strong" - fostered the common culture that Elia Group continues to develop. For 2020, it is planned to further expand the exchange between colleagues from Elia and 50Hertz. 102 We keep our eyes wide open for innovation and growth opportunities Elia Group Activity Report 2019 103 We keep our eyes wide open for innovation and growth opportunities #6

AMBITION CHALLENGE APPROACH We want to create a culture of innovation The rapidly evolving energy landscape Besides continuing to integrate and entrepreneurship to accelerate brings about an accelerated need innovative technologies, we stay abreast the energy transition and build an for innovation and new technologies of the latest developments in the ecosystem to develop the tools and to better understand, anticipate and energy sector. Elia Group has a range methods that will enable a more digital, promptly adopt the changes required to of initiatives that foster and reward decentralised and sustainable energy make the energy transtion happen. innovative thinking, to ensure that our 83 system. employees remain at the forefront of new developments. 83 START-UPS FROM ALL OVER THE WORLD APPLIED FOR ELIA GROUP'S 3RD EDITION OF THE OPEN INNOVATION CHALLENGE 104 We keep our eyes wide open for innovation and growth opportunities Elia Group Activity Report 2019 105 We innovate to

Michael von Roeder is the Chief Digital Officer (CDO) of the Elia Group. co-create the future The former Vattenfall and Vodafone manager has been directing the Group's digital transformation since the beginning of November 2019 and is a member of the Elia Group Committee (EGC). He reports to Elia Group CEO Chris Peeters and manages the three Elia Group IT functions as well as the digital projects. Von Roeder holds a Master of INTERVIEW WITH LOÏC TILMAN (ELIA GROUP HEAD OF INNOVATION) AND Business and Engineering degree from the University of Stuttgart and MICHAEL VON ROEDER (ELIA GROUP CHIEF DIGITAL OFFICER) an MBA from the IMD Business School Lausanne. He founded several companies in recent years and was also employed as an interim manager.

The energy sector is transitioning towards a more complex paradigm. More renewable energy leads to more intermittency and uncertainty. At the same time, the role of centralised power plants is decreasing, and a much wider range of decentralised actors such as households and electric vehicles have to be integrated in the system. We are moving away from a system we have known for a long time. This brings new challenges in operating the system.

How does innovation help Elia real time. As an example, fast and regular Many innovations are digital and Group to reach its strategic updated forecasts are needed to achieve Elia Group will transform into a targets? a higher responsiveness in operating the digital TSO. What does this mean? system. On the asset side, we also need Loic: “ The paradigm shift imposes many to rethink the way we develop the grid Michael: “ Most people would say it’s new challenges on us. Luckily, the energy – not only on the wired side, but also on all about technology. I agree there is transition is backed by another evolution: the non-wired side –looking notably at definitely a technical side to it, but for the digitalisation of our sector. We need the flexibility coming from decentralised me the main transformation is taking Innovation is not only about technology, it is to leverage new innovative technologies assets (electric vehicles, households place in human aspects. So, it’s not “ also about psychology. It is about how to take such as artificial intelligence and and batteries) as an integral part of the only technology, it’s psychology. It is all employees along on this ride to deal with blockchain to better integrate the about how to take all employees along system development. Finally, artificial fundamental and exponential changes. decentralised players and to get closer to intelligence, sensors and drones will on this ride to deal with fundamental also bring more efficiency to our asset and exponential changes. However, our Michael von Roeder management business. ” transformation is enabled by digital technologies. Firstly, this can be internal enablers like tools. Secondly, there are digital tools to transform the business itself, such as Internet of Things, sensors, etc. Thirdly, it is about transforming our business models, and that’s the Digitalisation is not only decreasing the most difficult one to get our head entry barriers but also making them much around. It means we must open up our “ organisation. ” blurrier between the sectors.

Loïc Tilman 106 We keep our eyes wide open for innovation and growth opportunities Elia Group Activity Report 2019 107

How do you create such an What does digitalisation bring How do you facilitate innovation ecosystem? beyond our core business? and digitalisation within the Elia From a Group? Michael: “ Right now, our organisation Loic: “ Further electrification and is a nice castle with a castle gate. But digitalisation lead to new ways of doing Loic: “ With a dedicated Innovation traditional the organisation will have to become business – also in the energy sector. Team, we provide the framework for the company and its surroundings, Digitalisation is not only decreasing the ideation and lower the hurdles to try be it the society, suppliers or partners entry barriers but also making them out new things. We create examples to to a digital networking and co-creating in an much blurrier between the sectors. demonstrate the benefits of innovation ecosystem together with us instead Coupled with the electrification of as eye openers for the organisation. of developing everything on one's transport or heating for example, many We support the business in long-term TSO own. It is exponential, this is what we new players will start new business in the strategic innovation and in the ideation must understand and work on. In one energy space from car manufacturers to process for short-term innovations. We project, a specific company could be our tech companies. Collaboration between organise networking with start-ups supplier, in the next project it might be all members of this new ecosystem from and the outside ecosystem and thus our competitor. Let’s look at the German demonstrate the way to collaborate the energy value chain and beyond is Elia and 50Hertz colleagues attend the Innovation Fair at the Elia Monnoyer automotive companies. They have indispensable to succeed. In this regard, with external parties and this in turn site in Brussels on 2 December 2019. always been the fiercest competitors, it is important for Elia Group to be in encourages outside-the-box-thinking. now they suddenly joined engineering touch with these new stakeholders and And of course, we also provide the tools. forces to co-create autonomous driving. develop a network in both the corporates But innovation is not a team; it is a One alone would have had no chance to and start-up sectors that will enable the mindset and a culture, that needs to be succeed. They also recognised they will digital energy transition of the system. ” established as innovation is happening be quicker using third-party solutions. ” in the whole organisation. ” Elia Group´s biggest transformation ever

What kind of mindset and culture To tackle the innovative challenges of the next decade, Elia Group aims to become is that? a truly digital TSO, where digitalisation will be embedded in all our core activities. Michael: “ Everybody in the organisation Our responsibility as a leading energy provider is to deliver an energy future for needs to accept the fundamental everyone, using the very latest developments like AI, drones, and blockchain to and exponential changes in the world around us. This is a challenge and an prepare for the energy transition. As a Digital TSO, we will provide the interfaces opportunity at the same time. Often needed to implement a true digital architecture where market parties and new developments or technologies consumers can participate and contribute to the balancing of the system. We will are not obvious or broadly known for a also increase the value of existing assets by helping to extend their lifespan. The long time and then suddenly they are everywhere. Examples are WhatsApp or use of smart sensors and automation will help us to manage the system close to digital photography. We must work more real-time. horizontally across functions and provide the right tools for open communication and have a free information flow in all directions. I also believe we can free-up some space and leave it to our people to take part in projects or initiatives of their choice. And we need to be more flexible in starting and stopping activities and significantly reduce the time we spend The digital transformation is in full swing. Start-ups on planning. ” “ often play a pioneering role with their agile culture. I have learned that corporate culture and start-ups do not exclude one another, but often can be mutually Elia employees at Hack Belgium, the Belgian festival of open innovation, beneficial. It is crucial to take all employees along with in Brussels on 30 April 2019. the necessary and meaningful changes and implement them in a human way. It is very important to me to make this successful!

Michael von Roeder, Elia Group Chief Digital Officer 108 We keep our eyes wide open for innovation and growth opportunities Elia Group Activity Report 2019 109 IO.Energy

INTERVIEW WITH DAVID ZENNER AND FLORIAN REINKE, LEADING THE IO.E INITIATIVES IN IO.Energy in Belgium BELGIUM AND GERMANY On the initiative of Elia, the Belgian system operators joined forces in February 2019 and invited market parties to sign up and to participate in joint developments. More than 60 companies from different sectors (including energy, banking, IT and buildings) responded positively. 60+ Gigawatt Energy services partners The journey has delivered its first results. Eight consumer-centric use cases from eight consortia are currently in the sandboxing phase. The 5 sandboxing phase will continue until mid 2020. The outcome of this first System for consumers operators sandboxing phase will lay a strong foundation for consumer centricity. Firstly, by paving the way for the demonstration of the current use cases Elia Group believes we are on the verge of a new era where energy as a service under more realistic conditions, in preparation for industrialisation. 30+ Megawatt will breakthrough dramaticly. With more and more flexible assets in the system Secondly, by accelerating the set-up and delivery of a second round of partners ideation and sandboxing with a view to addressing other consumer needs (heat pumps, electric vehicles, etc.) and meters that measure consumption every via innovative power and digital technologies. quarter of an hour, the hardware will be in place soon. The challenge is to manage a more fragemented system while incentivising consumers to help us keep the lights on by getting access to market-based price signals. That is why we joined forces to invite companies and insitutions to co-create step by step, the energy services of tomorrow within the context of the IO.Energy initiative. David: “ Beyond the necessary exist yet. That is why we are extensively communication infrastructure, testing interaction possibilities consumer value will come from the between customers, suppliers and Why do we want to put the Florian: “ The European Commission has services developed by market players. system operators in concrete use cases. consumer more upfront? also strengthened consumers' rights If the consumer behaviour is in line By performing use cases, we gain and opportunities for participation in with the needs of the power system, insights that contribute to the further David: “ The starting point was our vision the energy market. The Clean Energy the notion of energy service can take development of the communication paper in 2018 on the so-called vertical Package was launched end of 2019 with another dimension.There will be value- infrastructure as well as TSO and DSO system: “Towards a Consumer Centric new regulations supporting this point. add for all parties - and ultimately for services to be used by market players. ” System”. In the future, consumers will Throughout Europe, more and more the society. Such novel services do not have a central role in the energy system. consumers are becoming "prosumers” This development is already being with the ability to purchase, generate driven by the increase in decentralised and store electricity. ” photovoltaic generation, private storage, the envisioned rise of electric vehicles What is the concept? and the ongoing digitalisation. But more importantly, consumers seek to Florian: “ To fully enable their IO.Energy in Germany contribute to the energy transition, participation, every consumer and improve their standards of living and prosumer needs a smart meter The 50Hertz project team is currently working on three smart meter have access to diverse and customized gateway on top of the smart meter. data use cases. The extensive tests of the planned infrastructure aim to services. ” The gateway is a kind of radio box that demonstrate: allows secure communication between 1. Automated billing of remuneration and payments under the Combined the consumer's meter and the system Heat and Power Generation Act (KWKG) and the Renewable Energy operator or electricity supplier. Electricity Sources Act (EEG) suppliers can thereby offer new types of 2. Control of delivery or acceptance of positive or negative balancing contracts to their customers - such as power variable tariffs or the possibility to react to signals from the system by adapting 3. The use of decentralised, interruptible consumption equipment such as their feed-in or consumption. ” electric cars or heat pumps for congestion management, coordinated with the distribution system operators

50Hertz is collaborating with a variety of players operating or using such infrastructure in future. These include distribution system operators, municipal utilities, gateway administrators and start-ups. Also electric car David Zenner manufacturers and heat pump suppliers are highly interested to find out how they can contribute to a better use of the electricity grid.

Florian Reinke 110 We keep our eyes wide open for innovation and growth opportunities Elia Group Activity Report 2019 111

Further key innovation projects and initiatives Drones in Asset Management Bastian Bohm: "Today, for the maintenance of our overhead lines, we carry out To successfully transition to a Digital TSO, we are working together with many partners cost-intensive inspection flights with helicopters, which also cause extensive across the energy sector and beyond seeking innovative solutions to drive the energy emissions. In addition, our employees climb masts to obtain detailed transition forward. Our Elia Group Innovation team highlights some of the key projects information on the exact condition and necessary maintenance measures. We and initiatives of the past year. are currently actively testing the use of drones to monitor the overhead lines at 50Hertz. On the one hand, we are thus pursuing the clear goal of increasing OKTO Acoustics our occupational safety by avoiding climbing the masts. On the other hand, we hope to reduce maintenance costs and planning time for maintenance." Kai Schmid: “OKTO Acoustics develops sensors, which use artificial intelligence to identify and assess a whole range of sounds an noises. The sensors are being tested at the Nemo Link converter station in Bruges. With the help of the sensors, the monitoring of our assets can be improved. In this special case, Elia Group is trying to understand the condition of the bearings in the cooling pumps. The acoustic sensors can provide additional health indicators to complement the existing monitoring and alert system.” Elia Group Innovation Week

Tangant Work Machine Learning Aurélie Meurs (Internal Communication): “Elia and 50Hertz also look to internal Thijs Vral: “Digitalisation is always partners for innovative ideas that will enable about the intelligent connection and us to transform ourselves and encourage us analysis of data. Elia Groups Innovation to co-create the future together. In the first team is working together with the week of December, Elia Group organised and dispatching teams and external its first joint Innovation Week. The idea is partners on an intelligent layer that to inspire our colleagues and spark their will support the system operators in innovative spirit by introducing them to the IO.Energy Ecosystem decision making. One first step is to set innovative projects underway within the up a proper prediction of the system Group and the opportunities offered by the Johan Maricq: “The idea of the Sensa project is imbalance for the next 15 to 45 minutes digital transformation in the energy sector. to develop a version 2.0 of day and night energy to better react to increasing variability The programme consisted of an interactive prices. These were introduced at a time it was of the system. The dispatching task Innovation Fair that took place in both needed to incentivise consumption at night and is becoming ever more complex. The Brussels and Berlin.” during the weekends. Although well integrated objective is to develop a ‘machine’ that in the consumption habits, it does not match is able to provide valuable information, with the integration of intermittent renewable advantages and disadvantages of energy sources anymore. With Sensa, we want different options supporting the 50Hertz uses AI to estimate grid to switch to real-time consumption, incentivising dispatcher.” losses consumers to support the system needs. Prices Elia Group Open Innovation Challenge are designed to target the desired reaction level, Jasmin Löffler (Elia Group Communication): “In To predict grid losses more accurately, depending on the needs, using AI/machine June 2019, Elia Group organised the third edition 50Hertz has developed a new model learning algorithms.” of the Open Innovation Challenge - a competition based on artificial intelligence. This for international start-ups to take part and win a more accurate calculation means that proof-of-concept with Elia Group worth €20,000. 50Hertz can purchase the right amount This time, we invited start-ups to develop solutions of additional energy in advance to IO. Energy Flexity Use Case for improving day-to-day activities in asset offset its grid losses. The further the management and maintenance. Of the 83 ideas electricity has to travel, the greater the Pieter Vanbaelen (Market Development): “This year we launched the 'Flexity' submitted, 20 were selected and supported by grid losses. For 50Hertz, which transmits use case which aims to investigate the flexibility potential of households internal mentors for several weeks. The Danish large quantities of renewable energy, and test how consumers can actively contribute to the energy transition. start-up Okto Accoustics was finally selected this is a very important consideration as For example, we are dealing with heat pumps, electric boilers and the smart among five finalists. Their software uses artificial generation sites are located far from the charging of electric vehicles (EVs). We facilitate the operation of household intelligence to distinguish normal operating sounds consumption centres. appliances and EVs remotely and shift consumption to cheaper and greener from anomalies and also detects unauthorised moments of the day or night with no loss in comfort. End consumers that access to assets. This helps us at Elia Group to are interested to share the control of their appliances with energy service further increase safety and reliability of our assets.” providers can contribute to a more sustainable world and save money on their Visit

electricity bill. Currently a field test with real households is being prepared. The https://innovation.eliagroup.eu/ successful laboratory test performed last autumn with respect to the remote for more information on our use cases control of household appliances and two Tesla cars has set the ground for a and projects. real-life test. We are already well on the way there.” 112 Corporate Governance Elia Group Activity Report 2019 113

CORPORATE BODIES 114 Corporate CORPORATE GOVERNANCE STATEMENT 116 REMUNERATION REPORT 127 Governance RISK MANAGEMENT AND UNCERTAINTIES FACING THE COMPANY 132 FEATURES OF THE INTERNAL CONTROL AND RISK MANAGEMENT SYSTEMS 141 114 Corporate bodies Elia Group Activity Report 2019 115 Corporate bodies GRI 102-18

Elia Group Committee (EGC) Elia in Belgium The activities of Elia Group are coordinated by the Elia Group Committee (EGC) composed of: Executive Committee

Chris Peeters Catherine Vandenborre

Chris Peeters Stefan Kapferer Michael von Roeder Chris Peeters Elia Group CEO Stefan Kapferer CEO 50Hertz Marcus Berger Patrick De Leener Michael von Roeder Chief Digital Officer Peter Michiels Chief Alignment Officer Catherine Vandenborre Peter Michiels Catherine Vandenborre Chief Financial Officer

Frédéric Dunon Pascale Fonck

Chris Peeters Chief Executive Officer and Chairman

Catherine Vandenborre Chief Financial Officer 50Hertz in Germany Marcus Berger Chief Infrastructure Officer

Executive Committee Patrick De Leener Chief Customers, Market Peter Michiels Ilse Tant and System Officer

Frédéric Dunon Chief Asset Officer

Pascale Fonck Stefan Kapferer Dr. Frank Golletz Chief External Relations Officer Stefan Kapferer CEO 50Hertz Peter Michiels Chief Human Resources and Internal Dr. Frank Golletz Communication Officer Chief Technical Officer Dr. Dirk Biermann Ilse Tant Chief Markets & System Chief Community Relations Officer Operation Officer Marco Nix Chief Financial Officer Sylvia Borcherding Dr. Dirk Biermann Marco Nix Sylvia Borcherding Chief Human Resources Officer 116 Corporate governance statement Elia Group Activity Report 2019 117

Composition of the management bodies Corporate governance as at 31 December 2019 statement Board of Directors Advisory Committees to Auditors CHAIRPERSON the Board of Directors • KPMG Réviseurs d’Entreprises SCRL, • Bernard Gustin, represented by Alexis Palm. CORPORATE GOVERNANCE COMMITTEE Elia satisfies specific obligations in terms of transparency, independent director • Luc Hujoel, Chairman • Ernst & Young Réviseurs d’Entreprises SCRL, represented by Patrick Rottiers. neutrality and non-discrimination towards all stakeholders involved in its activities. VICE-CHAIRPERSONS • Luc De Temmerman • Claude Grégoire, • Frank Donck At Elia, corporate governance in 2019 was based on two pillars: Management director appointed upon proposal • Philip Heylen 1 • the 2009 Corporate Governance Code , which Elia has adopted as of Publi-T • Jane Murphy Committee its benchmark code; • Geert Versnick, AUDIT COMMITTEE • Chris Peeters, director appointed upon proposal • the Act of 29 April 1999 on the organisation of the electricity • Michel Allé, Chairman Chairman and Chief Executive Officer of Publi-T market and the Royal Decree of 3 May 1999 on the management of the electricity transmission • Frank Donck • Markus Berger, • Roberte Kesteman system. DIRECTORS Chief Infrastructure Officer • Dominique Offergeld • Michel Allé, • Patrick De Leener, • Rudy Provoost independent director Chief Customers, Market & System Officer • Luc De Temmerman, REMUNERATION COMMITTEE • Frédéric Dunon, independent director • Luc De Temmerman, Chairman Chief Assets Officer • Frank Donck, • Philip Heylen • Pascale Fonck, independent director • Roberte Kesteman Chief External Relations Officer • Cécile Flandre, director appointed • Dominique Offergeld • Peter Michiels, upon proposal of Publi-T • Saskia Van Uffelen Board of Directors GRI 102-22, GRI 102-23 • Claude Grégoire, Chief Human Resources & Internal STRATEGY COMMITTEE director appointed upon proposal Communication Officer • Rudy Provoost, Chairman of Publi-T • Ilse Tant, • Claude Grégoire • Bernard Gustin, Chief Community Relations Officer • Bernard Gustin independent director • Catherine Vandenborre, • Luc Hujoel • Philip Heylen, Chief Financial Officer • Geert Versnick director appointed upon proposal • Michel Allé, standing invitee of Publi-T Secretary-General Bernard Gustin Claude Grégoire Geert Versnick Michel Allé Luc De Temmerman • Luc Hujoel, • Aude Gaudy director appointed upon proposal of Publi-T • Roberte Kesteman, independent director • Jane Murphy, independent director • Dominique Offergeld, Frank Donck Cécile Flandre Philip Heylen Luc Hujoel Roberte Kesteman director appointed upon proposal of Publi-T • Rudy Provoost, director appointed upon proposal of Publi-T • Saskia Van Uffelen, independent director • Geert Versnick, director appointed Jane Murphy Dominique Offergeld Rudy Provoost Saskia Van Uffelen upon proposal of Publi-T

REPRESENTATIVE OF THE FEDERAL GOVERNMENT WITH AN ADVISORY ROLE • Nele Roobrouck

1 The Corporate Governance Code can be found on the website of the Corporate Governance Committee (www.corporategovernancecommittee.be). 118 Corporate governance statement Elia Group Activity Report 2019 119

In accordance with the Act of 29 April CHANGES IN THE COMPOSITION OF THE The Act of 29 April 1999 on the BOARD OF DIRECTORS’ ACTIVITY Members who are unable to attend Board of Directors 1999 on the organisation of the electricity BOARD OF DIRECTORS organisation of the electricity market REPORT usually grant a proxy to another The Boards of Directors of Elia System market, the Belgian Companies Code, gave the Corporate Governance member. In accordance with Article 19.4 The composition of the Board of Directors GRI 102-19, GRI 102-26 Operator and Elia Asset consist of the Belgian Code of Companies Committee an important task of of the Elia System Operator articles of did not change in 2019. 14 members, none of whom perform an and Associations and the articles of proposing candidates for the role of The Board of Directors exercises at least association (at present: Elia Group) and association of Elia System Operator independent director to the General Article 18.4 of the Elia Asset articles of executive role within either of those two TERM AND EXPIRY OF DIRECTORSHIPS the following powers (non-exhaustive and Elia Asset, at least one third (1/3) Meeting. The directors are appointed on association, members who are absent companies. AND APPOINTMENT PROCEDURE list): of the Board members must be of the the basis of a list of candidates drawn up or unable to attend may grant a written The same directors sit on the Boards of opposite gender to the remaining two The directors of Elia System Operator and by the Corporate Governance Committee. • It defines the general, financial and proxy to another member of the Board both companies. thirds. This one-third rule is applied Elia Asset are appointed or reappointed For each candidate, the Committee takes dividends policy of the company, to represent them at a given meeting proportionately to the independent and for a six-year term. into account their up-to-date curriculum as well as its values and strategy. In of the Board of Directors and vote on Half of the directors are independent non-independent directors. vitae and their sworn declaration transposing the values and strategy their behalf at that meeting. However, no directors, satisfying the conditions The directorships of all of the directors concerning the independence criteria into primary guidelines, the Board of board member can hold more than two set out in Article 526ter of the Belgian In addition, in accordance with the are due to expire after the 2023 Ordinary as stipulated by legislation applying Directors takes into account corporate proxies. Companies Code (at present Article Belgian Companies Code, the Belgian General Meeting of Elia System Operator to Elia and the company’s articles of social responsibility, gender diversity 7:87 of the Belgian Code of Companies Code of Companies and Associations, and of Elia Asset for the financial year association. The General Meeting then and diversity in general. EVALUATION and Associations), Article 2(30) of the the Belgian Corporate Governance Code ending 31 December 2022, with the appoints the independent directors. • It exercises the powers given to it by The Board’s evaluation procedure is Act of 29 April 1999 on the organisation 2009 and the Internal Regulations of the exception of the directors mentioned These appointments are submitted or pursuant to the Belgian Companies conducted in accordance with principle of the electricity market and in the Board of Directors, the composition of below, whose directorships expire on to the CREG for its opinion (“avis Code, by the Act of 29 April 1999 on the 4 of the Belgian Corporate Governance articles of association, and having the Board of Directors is based on the different dates. conforme”/“eensluidend advies”) on the organisation of the electricity market Code 2009 and principle 9 of the Belgian received a positive opinion (“avis complementarity of skills, experience independence of each independent and by the articles of association. Corporate Governance Code 2020, conforme”/”eensluidend advies”) by the and knowledge as well as on gender Luc De Temmerman, Frank Donck, Luc director. A similar procedure applies • It takes all action appropriate or which the company has adopted as its CREG on their independence. The other diversity and diversity in general. Hujoel, Saskia Van Uffelen and Geert where an independent directorship necessary to carry out the corporate benchmark code. half are non-independent directors Versnick’s directorships of Elia System becomes vacant during the relevant term appointed by the General Meeting on When searching for and appointing Operator and Elia Asset will expire after purpose, excluding powers reserved of office and where the Board co-opts The evaluation at Elia System Operator proposal of Publi-T, as per the current new directors, special attention is paid the companies’ 2020 Ordinary General for the General Meeting by law or the a candidate proposed by the Corporate is conducted by means of a transparent shareholder structure (see also the to diversity parameters in terms of age, Meeting for the financial year ending 31 articles of association. Governance Committee. and regular procedure that sees ‘Shareholder structure’ section on page gender and complementarity. December 2019. • It ensures oversight. Within this directors complete an evaluation 148 of this statement). The Corporate Governance Committee context it provides, inter alia, general questionnaire, then undergo an Michel Allé’s directorship of Elia System therefore acts as a nomination oversight of the (Daily) Management individual interview with the Chairman In accordance with provisions stipulated Operator and Elia Asset will expire after committee for independent directors. For Committee in accordance with legal of the Board of Directors and the by legislation and the articles of the companies’ 2022 Ordinary General the appointment of non-independent restrictions concerning access to Chairman of the Corporate Governance association, these Boards of Directors Meeting for the financial year ending 31 directors, there is no nomination commercial data and other confidential Committee. The results are discussed are supported by four committees – the December 2021. committee to make recommendations information relating to grid users by the Board of Directors and, as the Corporate Governance Committee, the to the Board. This situation therefore and the processing of such data; as The six-year term of these directorships case may be, appropriate actions are Audit Committee, the Remuneration deviates from that prescribed by the part of this oversight it also monitors diverges from the term of four years taken. Elia organised an evaluation of Committee and the Strategic Committee Belgian Corporate Governance Code the way in which the business of the recommended by the Belgian Corporate the functioning of the Board of Directors – which are the same for Elia System 2009 and the Belgian Corporate company is carried out and developed Governance Code 2009 and the Belgian at the end of 2018. The results of this Operator and Elia Asset. The Boards of Governance Code 2020. This divergence in order to, among other things, assess Corporate Governance Code 2020. The evaluation have been discussed in depth Directors ensure that these committees can be explained by the application whether the company is being properly six-year term was justified in light of the in 2019. operate in an efficient manner. of the Act of 29 April 1999 on the managed. In addition, it monitors and technical, financial and legal specificities organisation of the electricity market. evaluates the effectiveness of the and complexities that apply within Elia However, although the Corporate advisory committees to the Board and DIVERSITY WITHIN THE BOARD OF DIRECTORS System Operator and Elia Asset. Governance Committee does not the manner in which business is carried make recommendations to the Board out. Number of people on the Board of Directors of It should be remembered that the regarding the appointment of non- Elia System Operator and Elia Asset as Unit 2019 appointment of independent and independent directors, it does review In 2019, the Board of Directors of Elia at 31 December 2019 non-independent directors of the Elia the compliance of a non-independent System Operator met eleven times and System Operator and Elia Asset Boards director's membership of the supervisory the Board of Directors of Elia Asset met Aged 35 < 55 3 of Directors, as well as the composition Men board, the board of directors, the six times. The Board primarily focused on and operation of their committees, are Aged ≥ 55 6 supervisory board, administrative strategic issues (specifically the capital subject to specific corporate governance authorities or bodies legally representing increase of Elia System Operator and the Aged 35 < 55 2 rules. These provisions are laid down an undertaking which exercises, directly internal reorganisation of the Elia group), Women in the Act of 29 April 1999 on the or indirectly, control over a producer and/ the financial and regulatory situation of Aged ≥ 55 3 organisation of the electricity market and or electricity supplier. the company and its subsidiaries, and in the companies’ articles of association. progress on major investment projects. 120 Corporate governance statement Elia Group Activity Report 2019 121

Auditors AMENDMENTS TO THE ARTICLES AMENDMENTS TO THE ARTICLES The €500 million senior bond will mature electricity market and the approval by OTHER SIGNIFICANT EVENTS OF ASSOCIATION FOLLOWING OF ASSOCIATION FOLLOWING in 2026 and has an annual coupon of the extraordinary shareholders’ meeting For the other significant events in 2019, The Ordinary General Meeting of Elia IMPLEMENTATION OF THE CAPITAL IMPLEMENTATION OF THE CAPITAL 1.375%. The proceeds from the new bond of Elia System Operator on 8 November see the section ‘Elia Group in 2019’ and System Operator and Elia Asset held on INCREASE RESERVED FOR STAFF INCREASE OF €434,8 MILLION issue were used to refinance an existing 2019. pages 20 to 23. 16 May 2017 reappointed Ernst & Young MEMBERS €500 million Eurobond that has matured On 3 June 2019, the Board of Directors On 31 December 2019 just before Réviseurs d’Entreprises SCRL and KPMG in May 2019. The Extraordinary General Meeting of approved the launch of a public offering midnight, Elia Transmission Belgium, Réviseurs d’Entreprises SCRL as auditors Remuneration Elia System Operator of 15 May 2018 to existing shareholders and any holders Through this transaction, Elia has which was created on 31 July 2019, took of these companies for a period of three Committee approved the proposed capital increase of an extra-legal preferential right of taken advantage of supportive market over the Belgian regulated activities years. Their term of office will come to reserved for members of staff of the €434,801,928 maximum, through the conditions to proactively manage its of Elia System Operator, including the an end after the 2020 Ordinary General In addition to its usual support role to the company and its Belgian subsidiaries. issuance of up to 7,628,104 new shares at liquidity position and reduce its average indebtedness related to these activities. Meeting of Elia System Operator and Board of Directors, the Remuneration a subscription price of €57 per share, on cost of debt to the benefit of consumers. At that time, not all designations of Elia Committee is responsible, pursuant Elia Asset relating to the financial year This capital increase took place in the basis of 1 new share for 8 preferential Transmission Belgium as national and to Article 526quater of the Belgian ending 31 December 2019. two stages, in December 2018 and COMPLETION OF THE INTERNAL rights. regional/local Transmission System Companies Code (at present: Article March 2019, for a maximum total of REORGANISATION OF THE ELIA GROUP Ernst & Young Réviseurs d’Entreprises Operator were already obtained. During 7:100 of the Code of Companies and €6 million (maximum of €5,300,000 After the public offering of new shares to SCRL was represented by Patrick Rottiers an interim period (during which Elia Associations), the Act of 29 April 1999 in 2018 and maximum of €700,000 existing shareholders and any holders of On 31 December 2019 just before for the exercise of this office. Transmission Belgium had not yet on the organisation of the electricity in 2019) subject to the issuing of new an extra-legal right (rights subscription midnight, Elia effectively implemented obtained the designations), Elia System market and the articles of association, for Class B shares, with cancellation of period was from 6 June 2019 at 9 a.m. its internal reorganisation, the aim of KPMG Réviseurs d’Entreprises SCRL Operator subcontracted the operation making recommendations to the Board the preferential subscription right CET up to and including 13 June 2019 at 3 which is to ring-fence its regulated was represented by Alexis Palm for the of the transmission system to Elia of Directors regarding remuneration of existing shareholders in favour of p.m. CET), 7,030,981 new shares or 92.17% activities in Belgium from its exercise of this office. Transmission Belgium in the framework policy and the individual remuneration staff members of the company and its of the 7,628,104 new shares offered as unregulated activities and its regulated of a silent partnership between Elia of members of the (Daily) Management Belgian subsidiaries, if necessary below part of the rights offering of maximum activities carried out outside Belgium. Significant events in System Operator, Elia Transmission Committee and directors. The the accounting par value of the existing €434,801,928, were subscribed. 2019 The internal reorganisation of the Elia Belgium and Elia Asset, for as long as Elia Remuneration Committee also draws up shares in the same class. Transmission Belgium was awaiting the The 4,776,986 preferential rights group emanates from the new tariff a remuneration report for presentation necessary designations. ESTABLISHMENT OF A WORKGROUP The Extraordinary General Meeting which were not exercised at the end methodology for 2020-2023 which at the Ordinary General Meeting. provides, amongst other things, that decided to set the issue price for the 2019 of the rights subscription period were With effect as of 31 December 2019 The Board of Directors approved the financing of unregulated activities The Remuneration Committee of Elia capital increase at a price equal to the converted into an equal number of just before midnight, Elia Transmission the establishment of a temporary of Elia System Operator is valued at System Operator met three times in average of the closing prices on the 30 scripts. Further to the completion of Belgium has been designated as the Workgroup. The Workgroup was created conditions equivalent to financing 2019. The Remuneration Committee of calendar days prior to 31 January 2019, the private placement of scripts to national and regional/local Transmission to reflect on the reorganisation of the that would be fully covered by equity Elia Asset met three times in 2019. less 16.66%. institutional investors, an additional System Operator by decision of Group during the transitional period that capital. The reorganisation avoids the 7.83% of the new shares offered respectively the CREG on 13 January The company evaluates its management the Group operates in accordance with The total value of the 2019 capital risk of cross-subsidy between Belgian by Elia System Operator as part of 2020, the VREG on 24 December staff on a yearly basis in accordance with good governance. increase (including share premium) was regulated activities from the unregulated its €434,801,928 rights issue were 2019 and the Brussels Government its performance management policy. €494,274.56. 9,776 Class B shares in Elia activities and regulated activities carried The members of the Workgroup are subscribed at €57 per share. for the Brussels Capital Region on This policy also applies to members of System Operator were issued. out abroad and, as a result, prevents Bernard Gustin (Chairman), Michel Allé, 19 December 2019. In the Walloon the (Daily) Management Committee. As a result, 100% of the rights offering any adverse financial impact of the new Claude Grégoire, Luc Hujoel, Dominique Region, the designation as (local) TSO Accordingly, the Remuneration Accordingly, Articles 4.1 and 4.2 of the has been subscribed. tariff methodology on investments in Offergeld and Geert Versnick. The is automatically obtained following the Committee evaluates the members of articles of association of Elia System unregulated activities and regulated members of the Workgroup are not designations as TSO at federal level, the (Daily) Management Committee Operator relating to the share capital and Accordingly, Articles 4.1 and 4.2 of the activities carried out abroad as of 2020. remunerated. the number of shares were amended on articles of association of Elia System i.e. 13 January 2020. Consequently, the on the basis of a series of collective 22 March 2019. Operator relating to the share capital and The Board of Directors approved the new subcontracting by Elia System Operator and individual targets, of a quantitative The Workgroup met thirteen times in the number of shares were amended on corporate structure of Elia Group on to Elia Transmission Belgium of the and qualitative nature, also taking into 2019. The latest version of Elia System 18 June 2019. 2 October 2019. operation of the transmission system has account the feedback from internal and Operator’s articles of association is ended and “Elia System Operator” has external stakeholders. available in full on the company’s COMPLETION OF A €500 MILLION The completion of the reorganisation been renamed “Elia Group” as of website (www.elia.be, under ‘Company’, BOND OFFERING as per 31 December 2019 just before 31 December 2019 just before midnight. It should be noted that remuneration ‘Corporate governance’, ‘Document midnight, followed the fulfilment Elia Group remains the listed parent policy concerning the variable portion library’). In January 2019, Elia System Operator of all conditions precedents, which company, being a company that is no of the Management Committee’s successfully launched a €500 million included several regulatory approvals, longer subject to the Act of 29 April 1999 remuneration takes into account the Eurobond under its €5 billion EMTN confirmation of compliance with on the organisation of the electricity implementation of multi-year tariffs. (Euro Medium Term Note) programme. the unbundling and independence market. Consequently, the salary scheme for requirements set out in the Act of members of the (Daily) Management 29 April 1999 on the organisation of the Committee has included, among other things, an annual variable remuneration 122 Corporate governance statement Elia Group Activity Report 2019 123

and long-term profit-sharing spread out Audit Committee have the sufficient experience and including the General Management The Committee took note of the shareholder, on the other hand, and over the multi-year regulation period. expertise required to exercise the role Program at Cedep (INSEAD) in internal audits carried out and the to report to the Board of Directors on The annual variable remuneration, which In addition to its usual support role to the of the Audit Committee, particularly Fontainebleau (France). She started recommendations made. the matter. This responsibility aims to is connected with Elia group’s strategy, Board of Directors, the Audit Committee in terms of accounting, auditing and her career at Générale de Banque (now strengthen the directors’ independence The Committee follows an action plan has two components: the attainment is, pursuant to Article 526bis of the finance. On the basis of this rule, the BNP Paribas Fortis) in the corporate above and beyond the procedure for each audit carried out, in order to of collective quantitative targets and Belgian Companies Code (at present: professional experience of at least two finance department in 1988, and was detailed in Article 524 of the Belgian improve the efficiency, traceability and the individual performances, including Article 7:99 of the Code of Companies members of the Audit Committee must subsequently appointed as specialist Companies Code, which the company awareness of the areas audited and progress on collective infrastructure and Associations), the Act of 29 April 1999 be detailed in this report. advisor to the vice-president and minister also applies; thereby reduce the associated risks projects, safety and AIT (‘Average on the organisation of the electricity for economic affairs of the Walloon • deciding on cases of incompatibility The experience of Michel Allé, Chairman and provide assurance that the control Interruption Time’ – average time of market and the articles of association, Region in 1999. In 2001 she became on the part of members of the 2 of the Audit Committee, and Dominique environment and risk management are interruption of electricity supply) . responsible in particular for: advisor to the Deputy Prime Minister Management Committee and In addition, the remuneration policy Offergeld, member of the Audit and Minister for Foreign Affairs. Between appropriate. The Committee followed • examining accounts and controlling personnel; foresees also in the allocation of Committee, is described in detail below. 2004 and 2005, she was deputy director the various action plans from a number budgets; • ensuring the application within the exceptional cash bonuses for specific of the office of the minister for energy, of perspectives (timetable, results, Michel Allé (independent director of Elia company of provisions laid down by projects in specific, non-recurring cases. • monitoring financial reporting subsequently becoming general advisor priorities) on the basis, among other System Operator and Elia Asset since law, regulations, decrees and other procedures; to the SNCB holding company in 2005. things, of an activity report from the 17 May 2016 and Chairman of the Audit instruments relating to the operation The Remuneration Committee also • monitoring risks; She was previously director of (among internal audit department. The Audit Committee) has degrees in physics of electricity systems, evaluating their approved the proposed collective and others) Publigas and government Committee noted the strategic risks • ensuring the effectiveness of the civil engineering and economics (both effectiveness in view of the objectives individual targets for the Management commissioner at Fluxys. She was also and the ad-hoc risk analyses based company’s internal control and risk from the Université Libre de Bruxelles for the independent and impartial Committee for 2019. In addition, the Chairwoman of the Board of Directors on the environment in which the management systems; (ULB)). Alongside his academic career operation of those systems, and Remuneration Committee approved the and the Audit Committee of SNCB. group operates. The Audit Committee • following up on internal audits and their as a professor of economics and finance ensuring compliance with Articles remuneration report, which is part of the Between 2014 and 2016, she was Director regularly examined the compliance of effectiveness; (Solvay Brussels School, ULB’s École 4.4 and 13.1(2) and (3) of Elia System annual report for 2018 of the Minister for Mobility’s Strategy the non-audit services with the legal Polytechnique), he worked for many Operator’s articles of association. A • following up on the statutory audit of Unit, with responsibility for Belgocontrol requirements. years as a Chief Financial Officer. In report on this subject is submitted annual accounts; and the SNCB. She has been CFO of 1979, he began his career in the service every year to the Board of Directors • evaluating and verifying the ORES since August 2016, a position she Corporate Governance of the Prime Minister, as an advisor in and the federal and/or regional body or independence of auditors; also held between 2008 and 2014. the Science Policy Department. He Committee bodies responsible for regulating the • making proposals to the Board of was appointed Director of the National electricity market; The Audit Committee may investigate In addition to its usual support role to Directors on the appointment and re- Energy R&D Programme in 1982 and any matter that falls within its remit. For the Board of Directors, the Corporate • convening, at the request of at least one election of auditors and on the terms of then Director in charge of Innovative this purpose, it is given the resources it Governance Committee was, pursuant third of the members, meetings of the their appointment; Companies. In 1987, he joined the needs to perform this task, has access to the Act of 29 April 1999 on the Board of Directors in accordance with • investigating, where appropriate, any Cobepa group, where he held many to all information, with the exception of organisation of the electricity market and the formalities for calling meetings as issues that resulted in the resignation positions including Vice President of confidential commercial data concerning the articles of association, responsible laid down in the articles of association; of auditors and making proposals as to Mosane from 1992 to 1995. From 1995 to grid users, and can call on internal and for: • examining, after notification by what actions, if any, should be taken in 2000 he was a member of the Cobepa external experts for advice. a director, whether a director’s this respect; group’s Executive Committee. He • proposing candidates to the membership of the supervisory board, then served as Chief Financial Officer The Audit Committee met eight times in General Meeting to be appointed as • verifying the nature and extent of non- the board of directors or bodies legally of BIAC between 2001 and 2005 and 2019. independent directors; audit services provided by auditors; representing an undertaking which Chief Financial Officer of SNCB (Belgian • giving prior approval for the • verifying the effectiveness of external exercises control, directly or indirectly, Railways) between 2005 and 2015. The Committee examined the annual appointment and/or removal (where audit procedures. over an electricity producer and/or He also has extensive experience as a accounts for 2018, under both Belgian applicable) of Management Committee GAAP and IFRS. It also examined the supplier complies with Article 9.1b), Pursuant to Article 96, §1, 9° of the director, including past and present roles members; half-yearly results as at 30 June 2019 and c) and d) of Directive 2009/72/EC of Belgian Companies Code (at present: at Telenet, Zetes, Eurvest, Mobistar and • examining, at the request of any the 2019 quarterly results, in accordance the European Parliament and of the Article 3:6, §1, 9° of the Code of D’Ieteren. He has served on the Telenet independent director, the Chairman with Belgian GAAP and IFRS rules. Council of 13 July 2009 concerning Companies and Associations) and Audit Committee and chaired the Zetes of the Management Committee Furthermore, the Committee was common rules for the internal market the articles of association, this report Audit Committee. or any competent federal and/or responsible for the selection procedure in electricity, and reporting on this must contain justification of the regional regulatory body or bodies Dominique Offergeld (non-independent that has been organised with regard to matter to the Board of Directors. As independence and accounting and for the electricity market, all cases director of Elia System Operator and the appointment of the new auditors as part of this examination, the Committee auditing competence of at least one of conflicts of interests between Elia Asset) has a degree in economics the term of office of the current auditors takes account of the role and influence member of the Audit Committee. The the system operator, on the one and social science (specialisation: public comes to an end after the 2020 Ordinary that the director concerned has in the internal rules of procedure of the Audit hand, and a dominant shareholder, economics) from Université Notre Dame General Meeting of Elia Group and undertaking concerned and of the Committee require, in this respect, that municipal shareholder or company de la Paix in Namur. She has taken Elia Asset relating to the financial year degree of control or influence that all members of the Audit Committee associated with or linked to a dominant various extra-academic programmes, ending on 31 December 2019. the undertaking concerned has over

2 Supply reliability indicator: number of minutes per consumer per year. 124 Corporate governance statement Elia Group Activity Report 2019 125

its subsidiary. The Committee also In 2019, the Management Committee DIVERSITY WITHIN THE MANAGEMENT COMMITTEE Strategic Committee Management examines whether, in the exercising of met on 21 occasions for Elia System Number of people on the Board of Directors of the director’s role within the company, The articles of association stipulate that Committee Operator and on 21 occasions for Elia Elia System Operator and Elia Asset as Unit 2019 there is the potential or motive for the role of the Strategic Committee is to Asset. Pursuant to Article 9(9) of the Act of at 31 December 2019 favouring certain generation or supply issue recommendations to the Board of 29 April 1999 on the organisation of Each quarter, the Management interests as regards access to and Directors on matters of strategy. Aged 35 < 55 4 the electricity market and the articles Committee reports to the Board of investment in the grid, to the detriment Men of association, the Management of other grid users; As such, the Committee is responsible Directors on the company’s financial Aged ≥ 55 1 Committee was responsible in particular situation (in particular on the balance • verifying, prior to any appointment for: for: between the budget and the results Aged 35 < 55 3 of a director, whether that be the • identifying and examining market • the operational management of the stated). It also reports on transmission Women appointment of a new director or the trends and contextual factors that Aged ≥ 55 0 electricity grids, including commercial, system management at each meeting re-election of an existing director, could influence Elia Group’s strategic technical, financial, regulatory and of the Board of Directors. As part whether the candidate director takes direction and associated strategic personnel issues related to such of its reporting on management of account of the incompatibilities set choices and priorities in the medium operational management; the transmission system in 2019, the forth in the company’s articles of and long term; In addition, in accordance with the CORPORATE GOVERNANCE CHARTER Management Committee kept the Board association. To this end, every candidate • day-to-day management of the system Belgian Companies Code, the Belgian AND INTERNAL RULES OF PROCEDURE • preparing and maintaining a dialogue informed of strategic issues (particularly director is required to provide the operator; Code of Companies and Associations,, OF THE BOARD OF DIRECTORS, THE about the key issues and associated the internal reorganisation of the Elia Committee with an overview of (i) any • the exercise of powers given to it under the composition of the Management BOARD’S ADVISORY COMMITTEES AND options and scenarios that are relevant group), developments in legislation offices he or she holds on the Board the articles of association; Committee is based on gender diversity THE MANAGEMENT COMMITTEE for Elia Group’s strategy in the medium applying to the company, the company’s of Directors, supervisory board or and diversity in general, as well as on the and long term; • the exercise of powers delegated to it financial situation, the situation of its any other body of other legal entities complementarity of skills, experience and The Corporate Governance Charter and • developing and submitting proposals by the Board of Directors, in accordance subsidiaries, the main decisions taken by other than the company and (ii) any knowledge. the internal rules of procedure of the about the core strategic choices and with the general policy rules and regulators and administrations, as well other functions or activities, paid or Board of Directors, the Board’s advisory priorities that will shape Elia Group’s principles and the resolutions adopted as the monitoring and development of unpaid, which he or she carries out for When searching for and appointing committees and the Management future in the medium and long term. by the Board of Directors. major investment projects. an undertaking performing any of the new members of the Management Committee can be found on the Committee, special attention is paid to company’s website (www.elia.be, under following functions: the generation or The Strategic Committee met two times The Management Committee has all GRI 102-20 diversity parameters in terms of age, ‘Company’, ‘Corporate Governance’, supply of electricity. in 2019. Its discussions focused on value powers necessary, including the power of Corporate social responsibility (CSR) gender and complementarity. ‘Document library’). The responsibilities creation through innovation (“digital”) representation, and sufficient margin for The Corporate Governance Committee at Elia System Operator and Elia of the Board of Directors and of the and (in)organic growth, working with manoeuvre to exercise the powers that met six times in 2019. Asset is the responsibility of the Chief CODE OF CONDUCT Management Committee are described various assumptions and scenarios. have been delegated to it and to propose Community Relations Officer. in detail in the articles of association and implement a corporate strategy, Following the entry into force of In line with its competences under of the company and are therefore without prejudice to the powers of the CHANGES IN THE COMPOSITION OF THE European Regulation (EU) No. 596/2014 the law and the articles of association not reiterated in the internal rules Board of Directors and the obligation MANAGEMENT COMMITTEE on market abuse, Elia amended its Code and in compliance with confidentiality of the Board of Directors and of the on the part of the Board of Directors to of Conduct that aims to prevent staff and rules, the Committee dealt in Management Committee. observe the legal restrictions in terms The composition of the Management particular with the following matters: those with leadership responsibilities in of access to commercial data and other Committee did not change in 2019. application of and compliance with the the Elia Group from potentially breaking Elia is currently working on new versions confidential data relating to grid users requirements of laws, regulations and any laws on the use of privileged of the Corporate Governance Charter and and the processing of such data. the articles of association concerning information and market manipulation. internal rules of procedure in order to The Code of Conduct lays down a series comply with the Group’s new structure the independence of the company’s The Management Committee generally of regulations and communication and the changes introduced by the independent directors (article 13 of the meets formally at least once a month. Its obligations for transactions by those new Belgian Code of Companies and Articles of Association of Elia System members also attend informal weekly Operator), the analysis of compliance individuals in relation to their Elia Associations. meetings. Members who are unable System Operator (at present: Elia with requirements in the area of full to attend usually grant a proxy to a ownership unbundling as provided for by Group) securities, in accordance with Management Committee member. A the provisions of the Market Abuse law and the articles of association (article written proxy, conveyed by any means 14 of the Articles of Association of Elia Regulation and the Act of 2 August 2002 (of which the authenticity of its source on monitoring of the financial sector System Operator) and preparation of the can be reasonably determined), can corporate governance statement. The and other financial services. This Code of be given to another member of the Conduct is available on the company’s Committee also handled the succession Management Committee, in accordance planning. website (www.elia.be, under ‘Company, with the internal rules of procedure of ‘Corporate Governance’, ‘Document the Management Committee. However, library’). no member may hold more than two proxies. 126 Corporate governance statement Elia Group Activity Report 2019 127

Remuneration report REMUNERATION OF THE MEMBERS OF THE BOARD OF DIRECTORS AND THE MANAGEMENT COMMITTEE TRANSPARENCY RULES – shares in Elia System Operator. See also Elia System Operator gave notice of the Procedure approved in Remuneration of mem- For each company, additional basic re- NOTIFICATIONS the press release of 18 January 2019, capital increase as result of its €434.8 muneration for each member of an advi- published on the company’s website million rights offering, which was formally 2016 to define the remu- bers of the Board of sory committee to the Board of Directors Elia System Operator received no (www.eliagroup.eu, under ‘News’, ‘Press recorded before a notary on 18 June neration policy and the Directors (the Audit Committee, the Remuneration notifications in 2019 within the meaning releases’, ‘Regulated information’). 2019 and led to the issuing of 7,628,104 Committee and the Corporate Govern- of the Act of 2 May 2007 on disclosure new shares in Elia System Operator. See remuneration of mem- Following the decision adopted by the ance Committee is set at €3,000 per an- of major shareholdings in issuers whose In addition, in accordance with Article also the press release of 19 June 2019, bers of the Board of Ordinary General Meeting of Elia Sys- num per committee, and the attendance shares are admitted to trading on a 15 of the Act of 2 May 2007, on 26 March published on the company’s website Directors and the Man- tem Operator and Elia Asset on 17 May fee for each member of a committee is regulated market and laying down 2019 Elia System Operator gave notice of (www.eliagroup.eu, under ‘News’, ‘Press 2016, the rules on the remuneration of €750 per committee meeting (starting miscellaneous provisions, and within the capital increase reserved for the staff releases’, ‘Regulated information’). agement Committee directors were amended. The new rules, with the first meeting attended by the the m eaning of the Royal Decree of of Elia System Operator and its Belgian which have been in force since 1 January member). Both the basic remuneration In accordance with Articles 16.1 and 15.1 14 February 2008 on disclosure of major subsidiaries, which was formally recorded Elia has issued a total of 68,652,938 2016, are described below. and the attendance fee are increased by of the respective articles of association1 shareholdings. before a notary on 22 March 2019 and shares. 30% for each committee chairman. The of Elia System Operator2 and Elia Asset, a led to the issuing of 9,776 new shares in The total cost of gross remuneration members of the Strategy Committee are In accordance with Article 15 of the Act For more information about the remuneration policy for members of the Elia System Operator. See also the press paid to the 14 directors in 2019 was not remunerated, with the exception of of 2 May 2007, on 18 January 2019 Elia shareholder structure as at 31 December Board of Directors and the Management release of 26 March 2019, published on €861,045.20 (€458,887.10 for Elia System the Chairman, who is remunerated in the System Operator gave notice of the 2019, see the section ‘Shareholder Committee3 was drawn up in 2016 by the the company’s website (www.eliagroup. Operator and €402.158,10 for Elia Asset). same way as the Chairs of the Board of capital increase reserved for the staff structure on the closing date’. Remuneration Committee and approved eu, under ‘News’, ‘Press releases’, Directors’ other advisory committees. by the Boards of Directors of Elia System of Elia System Operator and its Belgian ‘Regulated information’). The table below lists the individual gross Operator and Elia Asset. subsidiaries, which was formally recorded sums paid to each director for Elia Sys- The basic annual remuneration and the before a notary on 20 December 2018 Further, in accordance with Article 15 of tem Operator and Elia Asset combined. attendance fees are indexed in January The remuneration policy for directors and led to the issuing of 114,039 new the Act of 2 May 2007, on 19 June 2019 each year on the basis of the consumer was approved by the General Meeting These amounts were calculated on the price index for January 2016. of Shareholders of Elia System Opera- basis of eleven meetings of the Board of tor and Elia Asset on 17 May 2016. The Directors of Elia System Operator and six The basic annual remuneration and the remuneration policy for members of the Management committee meetings of the Board of Directors of Elia attendance fees cover all costs, except (a) Strategy Committee was approved by Asset in 2019. In 2019, the Audit Commit- any costs incurred by a director resident the Extraordinary General Meeting of tee met eight tim Corporate Governance outside Belgium in connection with the Shareholders of Elia System Operator Committee six times, the Remuneration exercise of his/her office (such as travel and Elia Asset on 15 May 2018. Committee of Elia System Operator three and accommodation costs) providing times and the Strategy Committee two that the director in question was resident The Remuneration Committee also times. outside Belgium at the time of appoint- made recommendations regarding the ment or, if the director changed his/her remuneration policy and the remuner- Directors’ remuneration consists of place of residence after appointment, ation of directors and Management a basic remuneration of €25,000 per Chris Peeters Markus Berger Patrick De Leener providing that the Remuneration Com- Chairman and Chief Catherine Vandenborre Chief Infrastructure Chief Customers, Market Committee members. The composition annum (€12,500 for Elia System Oper- mittee gave its approval; (b) any costs Executive Officer Chief Financial Officer Officer & System Officer and activities of the Remuneration Com- ator and €12,500 for Elia Asset) and an incurred by a director in the event that a mittee are covered in greater detail on attendance fee of €1,500 (€750 for Elia meeting of the Board of Directors is held page [6]. System Operator and €750 for Elia Asset) outside Belgium (e.g. in Germany); and per Board meeting, starting with the first (c) any costs incurred by a director trav- Board meeting attended by the director. elling abroad in connection with the ex- The basic remuneration and the attend- ance fee are increased by 100% for the Chairman of the Board of Directors and Peter Michiels Pascale Fonck Chief Human Resources & Ilse Tant by 30% for each Vice-Chairman of the Frédéric Dunon Chief External Relations Internal Communication Chief Community Board of Directors. Chief Assets Officer Officer Officer Relations Officer

1 Please note that the articles of association of Elia System Operator and Elia Asset were amended in connection with the reorganisation of the Elia Group and to bring them into line with the new Belgian Companies and Associations Code (CAC) (see page 148). The new articles of association have been in force since 1 January 2020. Since this remuneration report is for the financial year 2019, it refers to the articles of association that applied in 2019. 2 Please note that following the reorganisation of the Elia Group, Elia System Operator’s name was changed and has been Elia Group since 1 January 2020 (see page 121). Since this remuneration report is for the financial year 2019, we have used the old name, Elia System Operator [unless indicated otherwise]. 3 Please note that Elia Group (the new name of Elia System Operator) has not had a Management Committee since 1 January 2020. Instead, it has a day-to-day management board. 128 Remuneration report Elia Group Activity Report 2019 129

ercise of his/her office upon the request first, second and third quarter. A detailed Management Commit- tion Committee may, on a case-by-case VARIABLE REMUNERATION: of the Chairman or a Vice-Chairman of account is prepared during the month of basis, plan to recommend that the Board As regards variable remuneration, the the Board of Directors. All remuneration December for the current year. tee remuneration policy of Directors award exceptional bonuses Remuneration Committee evaluates the and costs are included in the company’s for special services on specific, non-re- members of the Management Commit- Directors do not receive any other bene- Aspirations : operating costs. curring assignments. tee at the end of each year based on a fits in kind, stock options, special loans or Our remuneration system is designed to number of qualitative and quantitative All remuneration is paid on a pro rata advances. Neither Elia System Operator attract, retain and motivate the most tal- Since 2004, the Hay Group methodology targets. Since 2008, variable remunera- basis according to the duration of the nor Elia Asset has issued credit to or on ented individuals with a view to achiev- has been used to define the weighting tion has comprised two components: a director’s term of office. behalf of any member of the Board of ing our short- and long-term goals within for each management position and to short-term one and a long-term one. Directors. a consistent framework. ensure that remuneration is in line with An advance on annual remuneration is The principles governing remuneration the going market rate. Short-term variable remuneration paid to the directors at the end of the of the Group’s executives are: The remuneration of members of the The first component of variable remu- • Focus on safety first and work in the Management Committee consists of the neration is based on the attainment of CORPORATE following components: a certain number of targets set by the GOVER- CORPORATE REMUNE- best interests of society by targeting BOARD OF AUDIT NANCE GOVER- RATION REMUNE- STRATEGY operational performance • basic salary; Remuneration Committee at the start of DIRECTORS BOARD OF COMMITTEE AUDIT COMMITTEE NANCE COMMITTEE RATION COMMITTEE STRATEGY OF ELIA DIRECTORS OF ELIA COMMITTEE OF ELIA COMMITTEE OF ELIA COMMITTEE OF ELIA COMMITTEE • Design a salary scheme that encourag- • short-term variable remuneration; the year, with 30% of variable remuner- SYSTEM OF ELIA SYSTEM OF ELIA SYSTEM OF ELIA SYSTEM OF ELIA SYSTEM OF ELIA ation being awarded for the attainment DIRECTOR REMUNERATION OPERATOR ASSET OPERATOR ASSET OPERATOR ASSET OPERATOR ASSET OPERATOR ASSET es executives to live up to our core val- • long-term variable remuneration; ues of entrepreneurship, collaboration, of the individual targets and 70% for the • pension; Michel ALLÉ 65,126.60 € 11/11 6/6 8/8 8/8 - - - - 1/2 1/2 accountability and agility attainment of Elia Group’s collective tar- • other benefits. gets (‘short-term incentive plan’). Luc DE TEMMERMAN1 69,916.60 € 10/11 6/6 - - 6/6 6/6 3/3 3/3 - - • Attract, retain and nurture the best talent to achieve our strategy and goals In accordance with Article 17.9 of the In 2019, the short-term variable re- Frank DONCK 2 72,954.00 € 10/11 6/6 8/8 8/8 5/6 5/6 - - - - in the short and long term articles of association of Elia System Op- muneration earned by the Chairman erator, an exemption from the provisions of the Management Committee was • Ensure that our variable remuneration Cécile FLANDRE3 38,605.00 € 10/11 5/6 ------of Article 520ter, paragraphs 1 and 2 of €368,365.39. rewards both team success at company 4 the Belgian Companies Code is pro- The variable remuneration earned by Claude GRÉGOIRE4 52,263.90 € 11/11 6/6 ------2/2 2 / 2 level and individual contributions vided for members of the Management other members of the Management • Develop a job classification and staff Committee. Bernard GUSTIN5 80,406.00 € 11/11 6/6 ------2/2 2 / 2 Committee in 2019 was €765,724.53 remuneration system based on an ob- (€523,229.30 for management employed jective and measurable methodology BASIC REMUNERATION: Philip HEYLEN 60,969.00 € 8/11 5/6 - - 5/6 5/6 2/3 2/3 - - by Elia System Operator and €242,495.23 • Position the remuneration system at All the members of the Management for management employed by Elia Asset, Luc HUJOEL6 58,894.40 € 11/11 6/6 - - 6/6 6/6 - - 2 / 2 2/2 the appropriate point of reference in Committee of Elia System Operator and respectively). the marketplace to attract the talent we Elia Asset have employee status. Roberte KESTEMAN7 70,557.00 € 11/11 6/6 8/8 8/8 - - 3/3 3/3 - - need and to be competitive, using data In 2019, the basic remuneration paid to A total of €1,134,089.92 in variable remu- Jane MURPHY 56,179.00 € 11/11 6/6 - - 6/6 6/6 - - - - from multiple providers (including Hay) the Chairman of the Management Com- neration was therefore paid to members • Do not discriminate between em- mittee was €448,812.19. The recurring re- of the Management Committee in 2019. Dominique 69,758.00 € 10/11 6/6 8/8 8/8 - - 3/3 3/3 - - OFFERGELD ployees on any grounds whatsoever muneration paid to the other members The collective targets for 2019 were: through our remuneration system of the Management Committee totalled • Net financial result after tax Rudy PROVOOST 63,364.80 € 9/11 6/6 5/8 5/8 - - - - 1/2 1/2 €1,627,858.78 (€1,122,741.95 for manage- • Design our benefit plans to promote • OPEX efficiency] retention and provide a secure envi- ment employed by Elia System Operator Saskia VAN UFFELEN8 49,787.00 € 10/11 5/6 - - - - 3/3 3/3 - - • Safety ronment for our employees and their and €505,116.83 for management em- ployed by Elia Asset, respectively). • Implementation and monitoring of Geert VERSNICK9 52,263.90 € 11/11 6/6 ------1/2 1/2 families Total basic remuneration of collective projects and our company The Remuneration Committee evaluates €2,076,670.97 was therefore paid to transformation 1 Luc De Temmerman’s fees are paid to the company InDeBom Strategies CommV. the members of the Management Com- members of the Management Commit- • AIT (grid reliability) 2 Frank Donck’s fees are paid to the company Ibervest NV. mittee once a year. Any change in the ba- tee in 2019. 3 Cécile Flandre’s fees are paid to the company Belfius Insurance SA. sic remuneration is linked to the position Following the successful implementa- 4 Claude Grégoire's fees are paid to the company Socofe SA until 31 May 2019. of each member of the Management tion of the Topco project and the value 5 Bernard Gustin’s fees are paid to the company Bernard Gustin SRL. Committee with respect to the general creation achieved in 2019 , the Board of 6 Luc Hujoel’s fees are paid to the company Interfin [CVBA]. 7 Roberte Kesteman’s fees are paid to the company Symvouli BV. benchmark salary in the market and the Directors, acting on the recommenda- 8 Saskia Van Uffelen’s fees are paid to the company Quadrature SRL. assessment of the member’s individual tion of the Remuneration Committee, 9 Geert Versnick's fees are paid to the company Flemco bvba. performance. Moreover, the Remunera- decided to award certain members of

4  Please note that since 1 January 2020, the new CAC has applied to all Elia Group companies that existed on 1 May 2019. The rules set out in Article 520ter, paragraphs 1 and 2 of the Belgian Companies Code can now be found in Article 7:91, paragraphs 1 and 2 of the Belgian Companies and Associations Code. 130 Remuneration report Elia Group Activity Report 2019 131

the Management Committee addition- CONTRIBUTIONS TO THE CORPORATE Management Committee members’ MEMBER OF THE MANAGEMENT COMMITTEE as at 31 Dec. 2019 as at 31 Dec. 2018 al remuneration totalling €150,000 for PENSION SCHEME: employment contracts concluded after Chris PEETERS [this additional work]. Of this amount, 3 May 2010 were drawn up in accordance 3,758 3,324 Since 2007, all pension plans for Manage- Chief Executive Officer - président du comité de direction €100,000 was paid to the Chairman of ment Committee members have been with the prevailing legislation on notice Markus BERGER the Management Committee, while and dismissal. 5,156 9,156 defined-contribution plans, where the Chief Infrastructure Officer €50,000 was paid to certain other mem- amount paid, excluding tax, is calculated The employment contracts of members Patrick DE LEENER bers of the Management Committee (of on the basis of annual remuneration. 2,652 3,886 Elia System Operator). This remunera- of the Management Committee hired Chief Customers, Market & System Officer tion, which counts as exceptional remu- In 2019, Elia System Operator paid a total before 3 May 2010 contain no specific Frédéric DUNON 2,268 2,171 neration for special services (on certain of €115,303.76 for the Chairman of the provisions regarding dismissal. Chief Assets Officer specific, non-recurring assignments) was Management Committee. For the other Pascale FONCK If the company decides to impose a 661 661 paid in addition to the aforementioned members of the Management Com- Chief External Relations Officer 12-month non-compete restriction on a short-term variable remuneration earned mittee, Elia paid a total of €368,908.96 Peter MICHIELS Management Committee member, that 839 729 for 2019. (€244,416.01 for management employed Chief Human Resources & Internal Communication Officer member is entitled to an additional six by Elia System Operator and €124,492.95 Ilse TANT months’ compensation. 2,460 2,460 Long-term variable remuneration for management employed by Elia Asset, Chief Community Relations Officer The second component of variable respectively). Elia System Operator shares held by Catherine VANDENBORRE 1.422 1.406 remuneration is based on multi-annual members of the Management Commit- Chief Financial Officer OTHER BENEFITS: criteria covering a period of four years tee (‘long-term incentive plan’). The varia- Other benefits awarded to members of The members of the Management No stock options were awarded at ble remuneration earned in 2019 can the Management Committee, such as Total annual remuneration Committee held the following number of Elia System Operator for the mem- be estimated at €110,391.38 (maximum guaranteed income in the event of long- In 2019, the total remuneration paid shares as at 31 December 2019 : bers of the Management Committee amount in the event of full attainment term illness or an accident, healthcare to the Chairman of the Management in 2019. Members of the Management of the multi-annual criteria for the tariff and hospitalisation insurance, invalidity Committee was €1,181,809.42. Committee may purchase shares via cap- period concerned) for the Chairman of insurance, life insurance, reduced energy ital increases, capital increases reserved the Management Committee in 2019 prices, other allowances, assistance with The total annual remuneration of for members of staff, or on the stock and €405,374.74 for the other mem- public transport costs, provision of a other members of the Management exchange. bers of the Management Committee company car, employer-borne costs and Committee was €3,441,944.01 (€279,136.90 for management employed other minor benefits, are in line with (€2,376,073.94 for management by Elia System Operator and €126,237.83 the regulations applying to all company employed by Elia System Operator for management employed by Elia Asset, executives. and €1,065,870.08 for management respectively). employed by Elia Asset, respectively). The cost of these other benefits for 2019 These amounts are reviewed at the end was valued at €38,936.70 for the Chair- Total annual remuneration for all mem- of each year based on the achievement man of the Management Committee bers of the Management Committee in of the multi-annual criteria. The first part and at €224,077.01 for the other mem- 2019 was therefore €4,623,753.43. of the long-term variable remuneration bers of the Management Committee for the 2016-2019 tariff period was paid (€156,549.78 for management employed in 2018. The balance will be paid in 2020. by Elia System Operator and €67,527.23 Remuneration is definitively acquired at for management employed by Elia Asset, the moment of payment. respectively). No stock options were awarded at Elia for the Management Clawback Committee in 2019. Bonuses paid for the prior period may be clawed back in case of proven fraud or Employment contract provisions and material misstatement. severance benefits of members of the Management Committee 132 Risk management and uncertainties facing the company Elia Group Activity Report 2019 133

Risk management and 3. Link between main risks, opportunities materiality topics & uncertainties facing the strategic priorities Risk Strategic priorities Materiality topics Short term Secure, trend company GRI 102-15, GRI 102-30 Energy Community's Category Topic reliable & transition interest efficient grid

Changing/ Regulation misinterpretations, conflicts with Strategic/ 1. What for? 2. How does it work? new regulatory envisioned strategy, clean energy package, x x = Regulatory conditions evolution of TSO role Elia group’s ambition to deliver the infra- Uncertainties may generate desirable critical level defined by the risk appetite Early termi- TSO appointment, licence renewal, image, structure of the future and enable a suc- Strategic/ events, the opportunities, and unwanted a cost-benefit analysis determines the nation of TSO real/perceived failure of governance or com- x x ↓ Regulatory cessful energy transition to the benefit events, the risks. Both are in the scope of use of control measures to reduce risks. licence pliance, “caretaker” government of the consumer is formulated in a highly risk management. For a few cases where it facilitates deci- Maintain & grow asset base, timely project challenging context. sion-making, the risk appetite has been execution, increase overall efficiency, tariff Strategic/ Sustainability Different types of objective aspects methodology/parameters which takes into x x x = translated into more operational crite- Regulatory of incomes Changing European Energy market, might be impacted by risks, like health account energy decentralization, supplier’s ria, which are used by the operational risk (material) large-scale deployment of renewa- and safety, continuity of supply or entities. Culture change to deliver our vision & strat- ble-based generation technologies, with profitability. These are called the risk Strategic/ Anticipate HR egy, sufficient technical profiles, succession x x x = intermittent and harder to predict pro- Regulatory needs dimensions. There are processes in place which aim planning, training & development, new skills duction patterns, steadily increasing at identifying key risks, assessing them, Integration of RES, harder to predict energy energy consumption, ageing infrastruc- The Risk Management framework of Elia defining appropriate responses, commu- Operational Balancing x x x = flows ture, resource bottlenecks, to name but a Group is strongly linked to COSO’s frame- nicating them to the board of directors 3 few, increase the complexity of our trans- work , which gathers best practices for and monitoring the effectiveness of mit- Evolution of generation units fleets, CRM assessing business risks. Operational Adequacy (law voted in April 2019 in BE), nuclear phase x x x = mission system operator’s mission. There igation actions . All information collected out is a need to anticipate (unwanted) events by these processes is recorded into risk In line with these guidelines, risk man- Cyberattacks (IT/OT), failure of IT systems, Contingency and understand their causes, conse- registers. Regular exchanges between supplier’s risk (design), unavailability of crit- agement takes place at different lev- events & Busi- quences and likelihood. All this with risk managers & risk owners allow these Operational ical software, malicious attacks, unfavorable x x = ness continuity els in the organization (strategic, busi- weather events, offshore/new technologies, the aim of making informed decisions. registers to be kept up to date. The most disruption ness/operational, project…) and relies on ageing infrastructure That is exactly what risk management is important elements are summarized into Elia group’s strategy and risk appetite, about: it allows us to manage the effect risk reporting’s, which are presented four Failure of Infor- Compliance, GDPR, network codes, data the levels of risks our organization is pre- mation & com- security, privacy & cybersecurity, reputation, of uncertainties on the achievement of times a year to the Board of directors & pared to accept in pursuit of its objec- Operational munication communication issues, less performant fault x x = objectives1. audit committee. technology & elimination tives. If the (aggregated) risk is below the data security

As put in a mildly provocative way by Changing European Energy market, Inte- James Lam2: “The only alternative to risk gration of RES, community acceptance of Operational Permitting x x x = management is crisis management and projects, delay in execution of key projects, “caretaker” government crisis management is much more expen- sive, time consuming and embarrassing. “ Limited number of key suppliers, increasing demand for works & supplies, pressure on supplier’s business models, ability to deliver Operational Supplier’s risk x x x = the required capacity on time & with quality, FIGURE 1  ILLUSTRATION OF THE STEPS availability of skilled technical profiles, safety OF THE RISK MANAGEMENT Risk on works PROCESS identification Health & safety Safety for contractors, error producing Operational x x = accidents conditions

Negative Financial rating, access to debt & capital changes in market, instable interest rates, macro- Financial x x x ↑ financial mar- economic context kets Control/ Risk Cost/revenue forecast/actuals, Levies & green Financial Cashflow x x x = monitoring assessment certificates,

New business Capped liabilities, new ring-fencing struc- Financial x x = developments ture, EGI

Legal disputes, Capped liabilities, appropriate provisions 1 ISO 31000 Financial x x = liabilities 2 JAMES LAM, Enterprise Risk Management, Information Risk Wiley Finance 3 COSO: Committee of Sponsoring Organisations & communication response Opportunities are further discussed in the R&D section. 134 Risk management and uncertainties facing the company Elia Group Activity Report 2019 135

4. Strategic/regulatory risks & responses provided 5. Operational risks & responses provided

Changing/new regulatory anticipate proactively evolution brought Sustainability of incomes Further information Balancing Adequacy conditions to national or local legislations. CREG's Management Committee has The remuneration of the Group is almost approved Elia's Tariff proposal for the The consumption of electrical energy The federal governments in place have a Given the specificities of its activities, the Risk of early termination of TSO entirely driven by the regulatory frame- 2020-2023 regulatory period. Despite should be equal to the production at any key role to play in ensuring enough gen- Group is subject to extensive European, licence work applicable to Elia, 50Hertz and inflation and the continuation of Elia's time. The two transmission system oper- eration capacity is available in their coun- federal and regional legislation and reg- Nemo. Changes to the regulatory param- ambitious investment program, elec- ators use balancing energy to balance tries to avoid risk of electricity shortage To execute its activities, Elia and 50Hertz ulation. Unplanned and/or inconvenient eters could impact the profitability of tricity transmission tariffs will decrease unplanned fluctuations in the produc- and problems of supply. The transmis- have licenses, which can be revoked ear- changes or misinterpretations in regula- the Group. In addition, the realization of over the period 2020-2023, ending up tion of electricity or the energy load. sion system operators of our group, for lier if Elia or 50Hertz do not have, inter tory or policy mechanisms in Belgium or certain parameters defined in the tar- 1% lower than the current 2019 tariffs by their part, provide them with useful infor- alia, the human, technical and/or finan- The growth across Europe in the num- Germany could conflict with the Group’s iff methodologies are subject to spe- the end of that period. This effect can mation. As an example, Elia performs, in cial resources to guarantee the contin- ber of renewable energy units connected existing and envisioned strategy caus- cific uncertainties that could affect the be explained mostly by the expected accordance with the legal prescriptions uous and reliable operation of the grid to distribution systems, the connection ing severe financial and organizational Group’s financial position. reduction in financial charges and ancil- in this respect regular assessments of in accordance with the applicable legis- of large offshore wind farms, also creates impacts. lary service costs, as well as by the resti- Belgium’s security of supply situation in lation, as well as the unbundling obliga- In particular, the remuneration of the new challenges for operational grid man- tution of the tariff excesses collected in the short and the longer term. Responses tions as described in Article 9 of the EU Group depends in part on its ability to agement, particularly through increased the past. In order to minimize uncertainties, the Electricity Directive. Such a revocation realize the needed projects and maintain volatility of energy flows on our network. For the adequacy situation in the short- two transmission system operators in would have an adverse material impact the realized assets, as the current remu- https://www.elia.be/en/news/press- term, Elia mainly assesses the adequacy Responses the Elia Group strive to proactively antic- on Elia and/or 50Hertz. neration in both Belgium and Germany releases/2019/11/20191107_elia-press- between load projections and available Maintaining security of the grid with ipate European legislation, new direc- is subject to the Regulatory Asset Base. release-creg-approves-tariff-proposition generation (incl. Demand Side Response, tives and regulations being prepared at Responses This depends on its ability to obtain respect to balancing at reasonable costs denoted DSR, load shifting…) in Belgium EU level or awaiting transposition into The Elia group has performed a reorgan- the necessary permits and to man- for the society relies on a mix of meas- and the surrounding countries against Anticipate HR needs Belgian and German law, notably as part ization by the end of 2019, which enables age potential environmental and public ures. These involve improving the coop- security of supply criteria defined by law. the ring-fencing of the Belgian regu- eration for grid control at both national & of the “Clean Energy Package” and the health risks and accommodate city plan- The energy transition drives us to a con- If the study reveals that the latter criteria lated activities of Elia from its other activ- international levels, enhancing the qual- possible evolution of the Transmission ning constraints without incurring sig- sumer centric model on which our strat- may not be met, the Minister in charge ities (German regulated activities or non ity of forecasts (consumption, offshore, System Operator (TSO) role to Regional nificant costs. In case the group would egy and ambition is based. To enable of Energy can ask Elia to constitute a regulated activities). This in turn limits etc), ensuring a market design that Operational Center (ROC) one. not be able to realize or not timely/eco- this consumer centric model the group Strategic Reserve. A Strategic Reserve the risk of cross-subsidy between reg- incentivizes the Balancing Responsible nomically realize its investment program, culture and emerging changes must be is composed of assets sitting out of the Elia and 50Hertz are also founding ulated activities or with non-regulated Parties to manage their portfolio balance this could have a negative impact on the fully aligned with the group strategy. market and that can be called upon in members of the European Network activities. It thereby provides a suitable Group’s future profits. whilst at the same time offering them the event that the market cannot ensure of Transmission System Operators for framework for the further development Additionally, with regard to talent man- the market arrangements allowing them security of supply. Electricity (ENTSO-E). Through partici- of all activities by Elia Group (regulated in Responses agement we are aware that specific to trade out their imbalances as close as pating in this network, the transmission Belgium and Germany, as non-regulated In the context of the Energy transition, technical expertise (offshore, digitaliza- possible to real time (e.g. intraday mar- On 2 December, Elia has published its system operators provide advocacy for activities). the development needs of transmission tion, IP...) will be required in the future to kets) and implementing market reforms probabilistic analysis of Belgium’s ade- evolutions in line with their strategy. infrastructure in Belgium and Germany support the achievement of the group that unlock as much flexibility as possi- quacy situation for the winter 2020-21. Further information require the implementation of ambitious strategy. ble that can be called upon in real time The results of this study are available Further information Elia Transmission Belgium was recently investment program, which indirectly to keep the grid balanced at least cost. here: The regulatory and legal framework designated as Belgian transmission contributes to increase their regulatory Responses The latter market reforms aim at open- entails risks with regard to the division of system operator with effect as from asset base. A reinforced focus on talent and culture ing balancing markets to all technologies https://www.elia.be/en/news/press-re- powers between Belgium’s federal and 31 December 2019 by different public led to several anticipating actions, like and all players, irrespective of the voltage leases/2019/12/20191202_strategic-re- regional entities. For instance, contradic- entities (the Federal Government includ- The Group also strives to develop tar- workshops, transparent communication, level at which these are connected to. serve-for-winter-2020-21 tions between the various regulations, ing for the Walloon region for a period iff methodologies that take into account a group wide roll-out of a culture change including the grid codes, could hinder of 20 years, the Brussel’s Government the changes brought about by the project, as well as specific trainings, that As an illustration of the latter measure, in Elia also looks at Belgium’s adequacy sit- the exercise of the Group’s activities. The for a period of 20 years, and the energy transition and the decentraliza- are currently ongoing to achieve this Belgium, in course of 2020, Elia will move uation on the longer term. These stud- further development of and changes to regulator (for a period of 4 years). The tion of energy generation. alignment. from monthly procurement of mFRR ies assesses the adequacy between load these regulations may also impact the risks of early termination of TSO licences (manual frequency restoration reserve) projections and anticipated available Group’s liability in the event of a power are therefore limited in the short term. Lastly, the Group seeks to act as effi- A succession planning is being imple- and weekly procurement of aFRR (auto- generation (incl. DSR, load shifting…) in outage on the grid or – in the context of a It is noted, however, that some discus- ciently as possible in its investment & mented with a focus on leadership skills matic frequency restoration reserve) to a Belgium and the surrounding countries reform of the State – the division of pow- sions around interpretation to give to asset maintenance policies. This allows and an upgrade in the mapping of criti- daily procurement of both reserves. This on the longer term. The anticipated avail- ers between federal and regional author- Corporate Governance rules shall be con- consumers to benefit from the scale cal functions is also foreseen. will greatly lower the entry barrier for the able generation includes politically set ities, potentially including the power to ducted prior to the next renewal of the effect of centralized grid management. reserve market and allow the effective objectives in terms of renewable genera- approve transmission tariffs. In order to Flemish licence. participation of more technologies. tion as well as an economic viability gap minimize those risks, Elia also strives to to assess if sufficiently robust signals are 136 Risk management and uncertainties facing the company Elia Group Activity Report 2019 137

available to trigger investments in the Contingency events & Business and transmission system operators, as Failure of Information and ously adapt their processes and are put- cient, the quality of their supplies is good market to close any potential adequacy continuity disruption the case may be, are ready to deal with Communication Technology (ICT) ting in place new processes to ensure and their work teams demonstrate a gap against the legally defined security the most unexpected and extreme situ- and data security compliance. deeply embedded safety culture. Should of supply criteria. The transmission systems operated by ations. In the event of an error attributa- they fail to have enough skilled profiles, the Group are very reliable. Nonetheless, ble to Elia or 50Hz, the respective general A failure of the ICT systems and pro- Permitting risk this might adversely impact our busi- Elia’s latest study in this respect unforeseen events, such as unfavora- terms and conditions of its contracts pro- cesses used by the Group or a breach ness, including the safety of our works. The changing European Energy market “Adequacy & Flexibility study 2020- ble weather conditions, may occur and vide for appropriate liability caps for the of their security measures may result in In addition, the Group and the relevant and largescale deployment of renewa- 2030”, dates from June 28th, 2019. It is alter the smooth operation of one or Group and the relevant affiliate, as the losses for customers and reduced reve- affiliates of the Group are also exposed ble-based generation technologies also available here: more infrastructure components. In case may be, to a reasonable level. Each nues for the Group and its affiliates. to the risk of public procurement claims requires the further development of the most cases, these will lead to a so-called relevant insurance policy is designed to and that their respective suppliers, when The Group and its relevant affiliates also infrastructure of the two transmission https://www.elia.be/en/publications/ single contingency event, and have no limit some of the financial repercussions facing financial difficulties, may not be collect and store sensitive data, their own system operators. The development of studies-and-reports impact on end customers’ power sup- if these risks were to occur. able to comply with their contractual business data and that of their suppliers such infrastructure and interconnec- ply because the meshed structure of obligations. Any cancellation of or delay This study concluded that by 2025, as a and business partners. The Group and its tors with other neighbouring countries the grids operated by the Group. Indeed, Should unfavorable circumstances in the completion of its infrastructure result of the nuclear phase out, Belgium relevant affiliates are subject to several are dependent on securing permits and electricity can often reach end custom- occur, the TSO may take any emergency works could have an adverse effect on would face an adequacy gap and that privacy and data protection rules and approvals from local, regional, national ers via a number of different connections measures it deems appropriate, such the business & reputation of the Group & there are insufficient robust investments regulations, including, as of May 25, 2018, and international authorities. The need in the system. However, in other cases, as disconnecting some or all electricity its affiliates. signals to expect this gap to be filled an incident in the electricity system may exports, requesting electricity-generat- the General Data Protection Regulation to obtain such approvals and permits up by the market without additional lead to a multiple contingencies event. ing companies to increase or decrease (EU Regulation 2016/679 of April 27, 2016), within certain timeframe represents a Responses intervention. This may lead to a local or widespread their electricity production or requesting Despite all precautions taken, important critical challenge to timely implementa- In order to minimize supplier’s risk, the electricity outage provoking liability from the competent Minister a reduction system hardware and software failures, tion. Moreover, these approvals and per- two TSO’s from the group maintain As a result, and in order to guarantee claims and litigation which could nega- in the electricity consumption in the rel- failure of compliance processes, com- mits can be contested in the relevant ongoing dialogue with their suppliers Belgium’s security of supply in the longer tively impact the financial position of the evant area to reduce the event impact. puter viruses, malware, cyber-attacks, courts. and regularly perform predictive capac- term, the Belgian government decided Group. accidents or security breaches could still ity analysis at market level. They also on the introduction of a capacity remu- Responses Also, the design and operation of as well occur. develop more resilient purchasing strate- neration mechanism (“CRM”). To this In order to manage uncertainties related There are causes other than unfavora- offshore as onshore technologies takes gies and diversify the supplier portfolio. end, a law proposal on this CRM mecha- ble weather conditions for contingency into account constraints related to repair Any such events could impair the ability to permitting, concrete and upfront nism was debated and adopted on April events & business continuity disruption. time, monitoring opportunities & grid of the Group and/or the ability of any of stakeholder management takes place, Health & safety accidents 4th 2019. Elia is assisting the government Examples include human errors, mali- resilience. the Group’s relevant affiliates to provide as well as transparent communication to in designing and implementing this CRM cious attacks, terrorism, equipment fail- all or part of their services and generally the community. Elia & 50Hz operate facilities where acci- mechanism. ures, etc. Further information may result in a breach of its legal and/ dents, asset failure or external attacks As a regulated entity, Elia acts in accord- or contractual obligations. This could, in Further information may cause bodily harm to persons. As a The aforementioned study also indicated The case of offshore equipment has our ance with the "network codes" applica- turn, result in legal claims or proceed- In Belgium, one may mention three pro- result, the Group and its relevant affili- that Belgium might face an adequacy full attention, in a context where there ble at European, federal and regional ings, contractual liability, liability under jects that are particularly important to ates may be exposed to potential liabil- issue already between 2022 and 2025 are less years of track records with these level, while network access contracts are any other data protection laws, criminal, facilitate the energy transition, but which ities that may have a material, negative (period during which some nuclear units technologies and a higher complexity for approved by the regulator. civil and/or administrative sanctions, a also require a great deal of effort to impact on their financial position, require will leave the market already). An assess- curative actions. disruption of the operations of the Group gain community acceptance: Boucle du significant financial and managerial ment of the exact scale of the identified Elia's exposure under the regulatory or the operations of the relevant affiliates Hainaut, Ventilus and MOG II. resources, or possibly harm their respec- deficit as well as the (need for) possi- The probability of the occurrence of one framework and these contracts is limited of the Group, or damage to the reputa- tive reputations. Supplier’s risk ble mitigating mechanisms will be con- or more of the above-mentioned events to an acceptable amount. tion of the Group or to the reputation of ducted in the course of 2020. may increase if the competent authori- Response the relevant affiliates of the Group, and in The two TSO’s rely on a limited number ties do not approve the necessary oper- These risks are generally covered by a The safety and welfare of individuals general could adversely affect the busi- of key suppliers to provide them with ational procedures, investments or full "liability" insurance contract for appropri- (both the Group’s staff, the staff of the ness of the Group & its relevant affiliates. material and realize their investment pro- time equivalent (FTE) resources pro- ate amounts. relevant affiliates of the Group and third jects. Given the complexity of the infra- posed by Elia & 50Hz. Response parties) is a key priority and a daily pre- In Belgium, due to resource bottlenecks, structure works, the increasing demand The Group and each of its relevant affili- occupation for the Group and for the rel- asset replacements and capital expendi- in the market, and the filling level of the Response ates take appropriate measures to revise, evant affiliates of the Group. The Group tures in general are subject to arbitration, factories' order books, the Group may There are several procedures in place to update and back up its ICT processes and its relevant affiliates have put in which contributes to the ageing of some not be able to find sufficient suppliers or manage these risks, going from crisis and hardware, software and network place a health and safety policy, under- asset fleets, complicates the asset man- supply capacity for their projects. These management plans to operational proce- protection (for example, failover mecha- take safety analyses and promote a agement and may eventually affect the key suppliers also face the challenge of dures like defense plans and restoration nisms) on an ongoing basis to the maxi- safety culture. availability of some network components having enough skilled HR profiles, so plans. All of them are regularly trained mum extent permitted by technical and & performance of protection devices. that the design of their products is ade- and tested with large-scale exercises financial considerations. The two trans- quate, their production capacity is suffi- and simulator trainings so that our staff mission system operators also continu- 138 Risk management and uncertainties facing the company Elia Group Activity Report 2019 139

Financial risks & responses provided

Negative changes in financial any given period or that the rating will ulated tariffs are set pursuant to fore- Responses pleted in late 2017 by a new green cer- Legal disputes & liabilities markets not be lowered by the rating agency if, casts of interest rate. The short-term liquidity risk is man- tificate temporisation mechanism. In in its judgment, circumstances in the aged on a daily basis with funding needs this context, the Walloon Region is enti- The outcome of legal disputes and law- The ability of the Group to access global future so warrant. A decision by a rating Cashflow being fully covered through the availabil- tled to buy to Elia appropriate quantities suits may negatively affect the business sources of financing to cover its financ- agency to downgrade or withdraw the ity of credit lines and a commercial paper of GC and to resell these GC to the mar- operations and/or the financial results. The fluctuation in interest rates of the ing needs or repayment of its debt could Company’s credit rating could reduce program. ket in a few years. A new decree of May Group’s debt mentioned in the previ- Response be impacted by the deterioration of the Group’s funding options and increase 2, 2019 amending the decree of April 12, ous section can also have an impact on The Group and the relevant affiliates of financial markets. its cost of borrowing. Other risk mitigation measures include 2001 relating to the organization of the the actual financial charges by causing the Group carry out their activities in involvement in the design of public ser- regional electricity market should pro- Fluctuations of interest rates may neg- a time differential (positive or negative) such a way as to reduce (as much as pos- Responses vice obligation mechanisms aiming to vide an additional structural and last- atively influence the financial situation between the financial costs effectively sible) the risk of legal disputes and, if The risks the Group faces are identified support the development of renewable ing solution as from 2020 to the imbal- of the Group. Indeed, in order to finance incurred by the Group and the fore- necessary, the appropriate provisions are and analysed in order to establish appro- energy. Once these mechanisms are in ance on the GC market in Wallonia and its investments and to achieve its short casted financial costs. This could cause identified and implemented on a quar- priate limits. The Group controls and place, performing good forecasts, as well organize the establishment of a mobili- and long-term strategic goals, the Group transitory effects on the cash position of terly basis. monitor risks and compliance with such as reporting and communicating issues zation mechanism of some GCs bought and its affiliates need to access to capital the Group. limits. To this end, the Group has defined to governments and regulators contrib- by the Local TSO. Unlike the mechanisms markets. In the current bank and capital responsibilities and procedures specifi- ute to keep a sound balance. Deviations between actual and budg- already in place, the mobilization mecha- market environment characterized by a cally for the financial instruments to be eted volumes of electricity transmitted nism will make it possible to avoid defer- low interest rate environment, the Group used and the operating limits for manag- Further information and between effectively incurred and ring Walloon debt over time by cancel- has currently no constraints on the avail- ing them. These procedures and related With the advent of Belgian laws and budgeted costs/revenues may have a ling the excess GCs on the market. The ability of funding. However, the Group is systems are revised on a regular basis to regulations governing decentralised or negative short-term effect on the cash mobilization mechanism is based on a partly financed by debt instruments with reflect any changes in market conditions renewable energy generation, notably position of the Group as well a negative Special Purpose Vehicle (SPV) which is floating interest rates, and a change in and the activities of the Group. The finan- via photovoltaic solar panels and wind medium-term impact on the tariff set- not consolidated with the Local TSO and interest rates of financial instruments in cial impact of these risks is limited, as Elia turbines, the Federal and Regional gov- ting for the next period. is financed by the issue of bond loans. the market can have an impact on the ernments organized the issuance of and 50Hertz operate under the Belgian The income of the SPV is generated financial charges. Regulatory schemes so-called ‘green certificates’ (GC), which or German regulatory framework. In the framework of their respective by a new charge collected on the final can also be adversely affected by these are used as a financial support mecha- competences, national & regional gov- Walloon consumers. fluctuations of interest rates when As part of the Group’s efforts to mitigate nism for renewable energy. ernments have taken measures to sup- impacting the allowed return on equity. the funding risk, the Group aims to diver- port the further development of renew- At the stage of writing, the compliance sify its financing sources in debt instru- On the federal level in Belgium, last able energy by introducing different of this decree with the current European In order to finance their investments, ments. As a stock quoted company, the years, offshore wind turbines have been support mechanisms. The two TSO’s of state-aid regulation still needs to be con- the Group is dependent on its ability Group also has access to the equity mar- installed in the North Sea and their num- the Group are entitled several of these firmed. The operationalisation of the to access debt and capital markets in ket. The refinancing risk is managed ber will continue to grow, generating public service obligations mechanisms. mechanism is still in progress and is order to raise funds necessary to repay through developing strong bank rela- green certificates which are sold to Elia. This may have an indirect impact on the expected to be ready for mid-2020. its existing indebtedness and meet its tionships with a group of financial insti- This offshore green certificate public ser- Group’s cashflow. Deviations from the financial needs under its future invest- tutions, through maintaining a strong vice obligation generates an increasing New business developments expected number of sales of green cer- ments. This funding risk is heavily and prudent financial position over time large cash out flow, compensated by an tificates at a guaranteed minimum price impacted by macro-economic trends. and through diversification of funding equivalent cash in flow resulting from Any negative results from new business or deviations from the expected volumes In 2020, these will be mainly shaped by sources. The short-term liquidity risk is an increasing tariff to be approved on an developments are entirely born by the of sales of renewable energy at a fixed the outcome of the trade discussion managed on a daily basis with funding annual basis in the coming years by the Group and represent an additional finan- price could generate short-term signifi- between the US and China, the evolu- needs being fully covered through the government. cial risk. cant cash expenses. TSO Public Service tion in the Middle East and the execu- availability of credit lines and commercial Obligations costs are covered by tar- In terms of the regional public service Responses tion of the Brexit. All of these macroe- paper program. iffs to be approved on regular base by conomic factors are reflected at market obligations, the imbalance on the green The new ring-fencing structure regulators. level by major volatility, which could have Further information certificates market in Wallonia will con- explained in the “Risk of early termina- a negative impact on the growth of the In Belgium, the funding costs linked to tinue the first next coming years, with tion of TSO licence” section is one of the Elia Group and on the pursuit of their the financing of the regulated activities high levels of sales of green certificates responses provided. objectives. are qualified as “Noncontrollable ele- at the guaranteed minimum price to Elia. For what concerns the group affili- ments” and potential deviations from The high tariff for public service obliga- ate EGI, the services provided so far are Elia Group, financial instruments issued budgeted figures can be passed on in tions for financing the support measures mainly owner’s engineering ones, char- by Elia Transmission and Eurogrid GmbH a subsequent regulatory tariff period for renewable energy in Wallonia, which acterized by lower risks of claim and are rated by S&P. There is no assurance (or in the same period in the event of an is established to cover the cost of sell- liabilities. that the rating will remain the same for exceptional change in charges). The reg- ing green certificates to Elia, was com- 140 Risk management and uncertainties facing the company Elia Group Activity Report 2019 141 Features of the internal control 6.R&D activities 7. Contextual factors and risk management systems GRI 102-17, GRI 102-30 In line with our strategic priority to facil- Caretaker government itate the energy transition, the group In Belgium, the presence of a “caretaker The reference framework for internal control and risk management, established by the explores, with partners, ideas that could government” may lead to increased help reshape the future of energy & lead delays in some decision-making Management Committee and approved by the Elia Board of Directors, is based on the COSO II the way into a group of digital TSO’s. processes. framework. The framework has five closely linked basic components, providing an integrated procedure for internal control and risk management systems: control environment, risk Our R&D activities relate to three Preparing the energy transition domains: asset, market & system As outlined in the risk description, in a management, control activities, information and communication, and monitoring. The operation. context of nuclear phase out, prepar- use and inclusion of these concepts in Elia’s various procedures and activities enables the ing the energy transition requires addi- company to control its activities, improve the effectiveness of its operations, optimally deploy The first one provides a valuable contri- tional generation units to be available, in its resources, and ultimately achieve its objectives. The implementation of COSO II at Elia is bution to manage the continuity of sup- order to ensure both the network balanc- ply & health & safety risks topics through ing and adequacy. This in turns requires described below. using advanced analytics to increase a framework in which investors will feel the efficiency of maintenance activi- confident enough to invest in those gen- ties, connecting assets so as to improve eration units. This framework is not yet their monitoring and maximize their use, available. 1. Control environment increasing automation of asset inspec- tion and developing devices which alert Also, preparing for the energy transition ORGANISATION OF INTERNAL rate financial services. External financial deemed necessary, as laid down in the workers in case some specific risks are has a cost. Finding ways to finance them CONTROL reporting – one of Elia’s duties – includes company regulations and employment detected. It also explores some options in a manner that is responsible toward (i) statutory financial and tax reporting; contracts. to reduce the environmental impact of future generations and in a context of Pursuant to the Elia articles of associa- (ii) consolidated financial reporting; (iii) assets. indebtedness is a challenge in itself. tion, the Board of Directors has estab- specific reporting obligations applicable The Ethical Code defines what Elia lished various committees to help regards as correct ethical conduct and In the market domain, activities aim at Energy demand & energy efficiency to public companies; (iv) reporting obli- it fulfil its duties: the Management sets out the policy and a number of prin- providing a digital test bed to put con- While global energy demand has steadily gations under the regulatory framework. Committee, the Audit Committee, the ciples on the avoidance of conflicts of sumer centricity into practice and to increased over the past decades, energy The structured approach developed by Strategic Committee, the Remuneration interests. Acting honestly and inde- understand the potential of advanced efficiency is also one of the key measures Elia helps to ensure that financial data is Committee and the Corporate pendently with respect to all stakehold- technologies for existing processes & outlined by the EU in respect of Union- both exhaustive and precise, taking into Governance Committee. The Board ers is a key guiding principle for all of our new ways of market facilitation. These wide CO2 footprint reduction. Significant account the deadlines for activity reviews has charged the Audit Committee with employees. Elia’s Ethical Code expressly activities are a valuable contribution to energy efficiency measures in Belgium and the actions of key players so as to the task of monitoring: (i) the financial states that the Group prohibits bribery in manage the balancing and changing/ and Germany can potentially affect ensure adequate control and accounting. reporting procedure; (ii) the effective- any form, misuse of prior knowledge and new regulatory condition’s risks. power consumption and thus reduce the ness of internal control and corporate INTEGRITY AND ETHICS market manipulation. This is confirmed volumes of electricity transmitted via the With the third domain, system opera- risk management systems; (iii) the inter- by the Elia Code of Conduct. Elia and its Group’s networks. The same applies for a Elia’s integrity and ethics are a crucial tion, the transmission system operators nal audit and its effectiveness; (iv) the employees do not use gifts or entertain- slowing down of the economic activities aspect of its internal control environ- of our group start getting ready to oper- statutory audit of annual and consoli- ment to gain competitive advantage. of industrial clients and reduction of their ment. The Management Committee and ate the increasingly complex system reli- dated accounts, including the follow-up Facilitation payments are not permitted consumption. management regularly communicate ability, by studying challenges related to of any issues raised or recommendations by Elia. Disguising gifts or entertainment about these principles in order to clarify the changed context and by learning to Macroeconomic context made by external auditors; (v) the inde- as charitable donations is also a violation the mutual rights and obligations of the anticipate and act on grid state, in order 2019 was characterized by a rather uncer- pendence of external auditors, (vi) exam- of the Ethical Code. Moreover, the Ethical company and its employees. These rules to automate tasks and free up human tainty macro-economic climate, in par- ining accounts and controlling budgets. Code prohibits all forms of racism and are disseminated to all new employees, resources. These activities are a valuable ticular due to high indebtedness and the discrimination, promotes equal oppor- The Audit Committee generally meets and compliance with them is formally contribution to manage the continuity of perspective of a no-deal Brexit. tunities for all employees, and ensures quarterly to discuss the above points. included in employment contracts. The supply risks and HR needs risks. the protection and confidential use of IT Also, interest rates remained very low, Code of Conduct also helps to prevent systems. All parties involved in procure- The Finance Department helps the following the ECB’s highly accommoda- employees from breaching any Belgian ment must abide by Elia’s Purchasing Management Committee by providing, tive monetary policy stance, but this situ- legislation on the use of privileged infor- Code of Ethics and all associated regula- in a timely manner, correct and relia- ation may change in the future. mation or market manipulation and sus- tions. Elia’s Purchasing Code of Ethics is ble financial information to aid not only picious activities. Management consist- published internally and externally and decision-making with a view to moni- Evolutions in long-term interest rates ently ensures that employees comply is based on four pillars: confidentiality, toring the profitability of activities, but may affect the expected return for trans- with internal values and procedures and non-discriminatory treatment of suppli- also effective management of corpo- mission system operators. – where applicable – take any actions ers, transparency, and avoidance of con- 142 Features of the internal control and risk management systems Elia Group Activity Report 2019 143

2. Risk management

flicts of interest. The management of relating to financial fraud were reported scope of consolidation use the same Risk management is another internal both transparent and accurate; (iii) using risks. Emphasis is put on risks associ- the employees involved in the procure- in the audits making up the annual audit ERP software, which has a range of inte- control system that is crucial in help- accounting principles appropriate to the ated with changes in the financial and ment and payment processes regularly plan of 2019. grated controls and supports task sep- ing Elia to achieve its strategic objec- sector and the company’s transactions; regulatory context, industrial prac- provides opportunities for training and aration as appropriate. Elia also clari- tives as defined in its mission. The Board (iv) ensuring the accuracy and reliability tices, accounting standards and corpo- awareness-raising on these topics. ROLES AND RESPONSIBILITIES fies the roles and responsibilities of all of Directors and the Risk Manager jointly of financial results. The activities under- rate developments such as mergers and its employees by providing a descrip- and regularly identify, analyse and assess taken by Elia, as an electricity transmis- acquisitions. Elia’s internal control system relies on Elia offers its employees the opportu- tion of each job in line with the Business key strategic and tactical risks. The risks sion system operator in relation to its clearly defined roles and responsibilities nity to express their concern about an Process Excellence methodology. are assessed qualitatively and/or quan- physical installations, contribute signifi- Operational management assesses the at all levels of the organisation. The roles (alleged) breach of the ethical code with- titatively depending on their nature and cantly to its financial results. relevant risks and puts forward action and responsibilities of the various com- out fear of sanctions and/or unfair treat- COMPETENCIES potential effect. The Risk Manager then plans. Any significant changes to assess- mittees established within Elia are pri- ment. In addition to the existing report- makes recommendations on how best to Therefore, appropriate procedures and ment rules must be approved by the marily identified in the legal framework With a view to ensuring its various activ- ing channels, an external system for manage each risk considering the close control systems have been established Board of Directors. Risk Management applicable to Elia, the articles of asso- ities are performed reliably and effec- reporting breaches of professional integ- interaction of Elia’s entire risk universe. to ensure an exhaustive and realistic is instrumental for Elia to maintain its ciation and the Corporate Governance tively, Elia clearly spells out the vital rity has been implemented. Internal Based on this assessment, preventive, inventory of physical installations. Risk value for stakeholders and the commu- Charter. Under the supervision of the importance of its employees’ compe- employees can report via this platform remedial and/or corrective actions are management is a company-wide activ- nity, works with all departments with a Chief Financial Officer, the Accounting tencies and expertise in its recruitment, their suspicions about possible breaches implemented, including the strengthen- ity, actively supported by the delegation view to optimising Elia’s ability to achieve Department is responsible for statutory training and retention procedures. The of the Elia Code of Ethics which may ing of existing internal control activities of relevant responsibilities to all employ- its strategic objectives, and advises financial and tax reporting and the con- Human Resources Department has harm Elia's reputation and/or interests in where applicable. ees as part of their specific activities, as the company regarding the nature and a protected manner. solidation of the Elia Group’s various sub- drawn up the appropriate policies and defined in the Policy. potential effects of future risks. sidiaries. The Controlling Department defined all jobs in order to identify the As part of its responsibilities, Elia’s man- By virtue of its legal status as a power monitors analytical accounting and relevant roles and responsibilities as agement establishes an effective internal CONTINUOUS ASSESSMENT transmission system operator, Elia is reporting and assumes responsibility for well as the qualifications needed to ful- control system to ensure, among other Employing a simultaneously top-down subject to a large number of statutory all financial reporting in a regulatory con- fil them. objectives, accurate financial report- and bottom-up approach enables Elia and regulatory rules setting out three text. The Investor Relations Department ing. It emphasises the importance of Elia has drawn up a policy for the man- to identify and, where possible, antici- fundamental principles: non-discrimi- is responsible for specific reporting risk management in financial reporting agement of generic and specific compe- pate forthcoming events and react to natory conduct, confidential process- applicable to companies listed on the by taking into account, with the Audit tencies in line with the company’s values, any incidents occurring inside or outside ing of information, and transparency stock exchange. Committee, a whole range of associated and promotes training so as to enable all the organisation which might affect the towards all electricity market players as activities and risks. It ensures that risks As regards the financial reporting pro- its employees to effectively perform the attainment of objectives. regards non-confidential market infor- are truly reflected in financial results and cess, the tasks and responsibilities tasks allocated to them. Requirements mation. With a view to meeting these reports. In addition, Risk Management of all employees in the Accounting with regard to competency levels are TOP-DOWN APPROACH BASED ON specific obligations, Elia has drawn up goes beyond those risks known to Elia Department have been clearly defined continually analysed by means of formal STRATEGIC RISKS an Engagement Programme, which and tries to anticipate the nature and with a view to producing financial results and informal self-assessments at various has been approved by the Corporate characteristics of emerging risks, which Elia’s strategic risk assessments are that accurately and honestly reflect Elia’s stages of an employee’s career. Governance Committee. The Compliance may impact Elia’s objectives. Financial reviewed on a quarterly basis in the Audit financial transactions. A detailed frame- Officer reports annually to the relevant risk assessments primarily involve the Committee. Action plans or specific, work of tasks and responsibilities has Training programmes on financial regulatory bodies in this regard. identification of: theme-based risk assessments are car- been drawn up to identify the main con- reporting are offered to all employees involved directly or indirectly with that ried out whenever there is a perception Any violations of these codes can be trol duties and the frequency with which 1. significant financial reporting data and task. The training emphasises the exist- of potential threats or opportunities. reported to the Compliance Officer, who tasks and control duties are performed. its purpose; ing regulatory framework, accounting handles them objectively and confiden- BOTTOM-UP APPROACH WITH An IFRS Accounting Manual is used by obligations and actual activities, with tially. The Compliance Officer declares 2. major risks involved in the attainment REGARD TO BUSINESS that no such violations were reported all entities within the scope of consolida- a high level of understanding enabling of objectives; by internal employees or external stake- tion as a reference for accounting prin- participants to address the appropriate With a view to identifying new risks or holders in2019. ciples and procedures, thus ensuring issues. 3. risk control mechanisms, where evaluating changes in existing risks, the consistency, comparability and accu- possible. Risk Manager and management remain Internal Audit’s annual programme rate accounting and reporting within the in contact and look out for any changes Financial reporting objectives include includes a number of actions and verifi- Group. that may call for the relevant risk assess- (i) ensuring financial statements com- cation audits designed to act as specific ment and associated action plans to be The Finance Department has the appro- ply with widely accepted accounting safeguards against fraud. Any findings amended. Various criteria are used to priate means (including IT tools) to per- principles; (ii) ensuring that the infor- are systematically reported to the Audit determine the need to re-evaluate finan- form its tasks; all entities within the mation presented in financial results is Committee. In2019, no relevant findings cial reporting procedures and associated 144 Features of the internal control and risk management systems Elia Group Activity Report 2019 145

4. Information and 3. Control activities communication 5. Monitoring

MAIN CONTROL ACTIVITIES FINANCIAL REPORTING Elia communicates relevant informa- Elia continually re-evaluates the ade- The Group’s legal entities are also sub- PROCEDURE tion to its employees to enable them to quacy of its risk management approach. ject to external audits, which generally Elia has established internal con- fulfil their responsibilities and achieve Monitoring procedures include a com- entail an evaluation of internal control trol mechanisms at its various struc- For all significant financial reporting their objectives. Financial information bination of monitoring activities car- and remarks on (annual and quarterly) tural levels so as to ensure compliance risks, Elia sets out appropriate control is needed for budgeting, forecasts and ried out as part of normal business statutory and consolidated financial with standards and internal procedures mechanisms to minimise the probability ensuring compliance with the regula- operations, in addition to specific ad results. External auditors make recom- geared to the proper management of of error. Roles and responsibilities have tory framework. Operational information hoc assessments on selected topics. mendations for improving internal con- identified risks. These include: been defined in connection with the is also vital for the production of various Monitoring activities include (i) monthly trol systems. In entities that have an closing procedure for financial results. reports, essential for the well-function- reporting of strategic indicators to the Audit Committee, the recommendations, (i) clear task separation as part of pro- Measures have been established for the ing of the company. As such, Elia records Management Committee and the man- action plans and their implementation cedures, preventing the same per- continuous follow-up of each stage, with recent and historical data needed for agement; (ii) follow-up on key opera- are reported annually to that Committee, son from initiating, authorising and a detailed agenda of all activities under- corporate risk assessments. Multiple tional indicators at departmental level; which in turn reports to the Board of recording a transaction – policies have taken by Group subsidiaries; control communication channels are used: man- (iii) a monthly financial report includ- Directors on the independence of the been drawn up regarding access to activities are performed to ensure quality uals, memos, emails, bulletin boards ing an assessment of variations as com- auditor or statutory audit firm and drafts information systems and the delega- and compliance with internal and exter- and intranet applications. Financial pared with the budget, comparisons a motion for a resolution on the appoint- tion of powers; nal requirements and recommenda- results are reported internally and val- with preceding periods and events liable ment of external auditors. tions. During the financial closing period, idated at different levels. The manage- to affect cost controlling. Consideration (ii) integrated audit approach as part of a specific test is performed to ensure ment responsible for financial reporting is also given to third-party feedback from internal procedures so as to link end control over significantly unusual trans- regularly meets other internal depart- a range of sources, such as (i) stock mar- results with the transactions support- actions, accounting checks and adjust- ments (operational and control depart- ket indices and reports by ratings agen- ing them; ments at the end of the relevant finan- ments) to identify financial reporting cies; (ii) share value; (iii) reports by federal (iii) data security and integrity through cial period, company transactions and data. It validates and documents the crit- and regional regulators on compliance the appropriate allocation of rights; critical estimates. The combination of ical assumptions underpinning booked with the legal and regulatory framework; all these controls ensures the reliability reserves and the company’s accounts. (iv) reports by security and insurance (iv) appropriate documentation of of financial results. Regular internal and companies. Comparing information from procedures through the use of external audits also contribute to finan- At Group level, consolidated results are external sources with internally gener- the Business Process Excellence cial reporting quality. broken down into segments and vali- ated data and ensuing analyses allows Intranet, which centralises policies dated by means of a comparison with Elia to keep on making improvements. and procedures. Departmental man- In identifying those risks that may affect historical figures and a comparative anal- agers are responsible for establishing the achievement of financial reporting ysis between forecasts and actual data. Internal Audit also plays a key role in activities to control the risks inherent objectives, the management takes into This financial information is reported monitoring activities by conducting to their department. account the possibility of misreporting monthly to the Management Committee independent reviews of key financial and associated with fraud and takes appro- and is discussed quarterly with the Audit operational procedures in view of the priate action where internal control Committee. The Chairman of the Audit various regulations applicable to Elia. The needs to be strengthened. Internal Audit findings of those reviews are reported to performs specific audits based on the Committee then reports to the Board of the Audit Committee to help it monitor risk assessment for potential fraud, with Directors. internal control and risk management a view to avoiding and preventing any systems and corporate financial report- instances of fraud. ing procedures. 146 Investor Relations Elia Group Activity Report 2019 147

LEGAL STRUCTURE 148 Investor ELIA ON THE STOCK EXCHANGE 150 MANAGEMENT REPORT AND Relations ANALYSIS OF THE 2019 RESULTS 153 148 Legal Structure Elia Group Activity Report 2019 149

Legal Structure INTERVIEW WITH CATHERINE VANDENBORRE, CHIEF FINANCIAL OFFICER ELIA GRI 102-5, GRI 102-45

Elia Group acts as a holding company owning Elia Transmission Belgium (Belgian TSO), Eurogrid International (comprising the activities of 50Hertz, the German TSO) and Elia Grid International (the 2019, an ambitious year Group’s international consultancy branch). Its main shareholder is the municipal holding Publi-T. Elia Group (formerly Elia System Operator SA/NV) has been listed on the regulated market of Euronext for our growth strategy Brussels, since June 2005.

Unregulated Debt Looking at Elia Group’s ambitious You received the CFO of the Year The Elia share performed CAPEX programme, it seems like it Award 2019 in recognition of particularly well in 2019. Why do

99.9% 100% might be very challenging to get all Elia Group’s excellent financial you think that is? the projects financed. performance. What do you think Regulated Debt swayed the jury? Catherine: “First of all, our peers’ share Eurogrid Elia Transmission KfW Catherine: “There is ample liquidity on prices followed a similar trend: Elia is not Belgium International (Transmission System Operator) the financial markets and interest in Catherine: “This accolade recognises the the only utility company to have seen a company like Elia remains high. The hard work put in by Elia’s entire financial strong share price performance in 2019. 80% 50% 99.9% primary challenge still lies in delivering team. We’ve managed a number of However, I also believe that the increase critical infrastructure in a timely manner, significant transactions in recent years is partly driven by Elia’s track record of 20% Eurogrid GmbH despite the length of time required to and have thus made a substantial following through in recent years: we Other Nemo Link Elia Asset minority stakes secure permits.” contribution to the company’s value. have implemented the investments we Moreover, Elia has been performing announced, and these have translated 100% increasingly well for some years now. into strong RAB growth.” The jury was looking to honour a financial team that excelled on both Entities regulated in Belgium (Transmission System Elia Engineering Operator) the transactional and strategic sides of Entities not regulated in Belgium 50% finance.” New entity

50%

Elia Group holds direct stakes in: GRI 102-10 Elia Transmission Belgium (ETB) fully Eurogrid GmbH (80% stake) and Elia Grid International (EGI), a 50/50 owned. ETB is the Belgian transmission comprising the activities of 50Hertz, joint venture with 50Hertz Transmission system operator for high-voltage the German TSO. The remaining 20% GmbH. EGI offers supporting services electricity (30,000–380,000 volts). being held by the German state-owned and advice to government bodies, Its main activities include managing Bank Kreditanstalt für Wiederaufbau (« utilities and other key players around the We've managed a number of grid infrastructure (maintaining and KfW»). KfW is one of the world’s leading world seeking support for the design “ significant transactions in recent developing high-voltage installations) promotional banks. With its decades and implementation of future projects years and have this made a substantial and electrical system (monitoring flows, of experience, KfW is committed in the power sector. It provides advisory contribution to the company's value. maintaining the balance between to improving economic, social and services in the following domains: Asset electricity consumption and generation ecological living conditions across the Management, System Operations, Grid Catherine Vandenborre 24/7, importing and exporting to and globe on behalf of the Federal Republic Development and RES integration. Its from neighbouring countries) as well of Germany and the federal states. KfW activities are considered to be non- as facilitating the market (developing does not have any branches and does regulated. services and mechanisms with a view not hold customer deposits. It refinances to developing the electricity market at its promotional business almost entirely Re.Alto: To become the main European national and European level). through the international capital digital energy marketplace/platform for markets. In Germany, the KfW Group is data and digital services to accelerate represented in Frankfurt, Berlin, Bonn the innovation and digital transition and Cologne. Its network includes 80 towards energy as a service. offices and representations around the world. 150 Elia on the stock exchange Elia Group Activity Report 2019 151

Appointment of three liquidity shareholders of 19 May 2020, in accord- Dividend policy providers for the elia share ance with the dividend policy and sub- Elia ject to approval of the profit appropria- On March 21, 2019 the Board of Directors Elia concluded liquidity provider con- tion by the annual general meeting of formally approved the policy it intends to tracts with KBC Securities, Bank Degroof shareholders. This represents an increase apply when proposing dividends to the on the stock and Belfius Bank. These three finan- in dividend for the fifth consecutive year General Shareholder’s Meeting. Under cial institutions have been continually and an increase of 1.81% compared to this policy, the full-year dividend growth present in the order book for the Elia 2018.This gives a net dividend of €1.183 is intended not to be lower than the exchange share and are involved in both sales and per share. increase of the Consumer Price Index I’m delighted that the financial purchases. (“inflation”) in Belgium. The complet- “ markets subscribed to such a The following paying agents will pay out ed reorganisation of the group has no huge extent and once more Dividend dividends to shareholders: BNP Paribas impact on this dividend policy. The policy Fortis, ING Belgium, KBC and Belfius. supports the group’s long-term ambition demonstrated their confidence in On 5 March 2020, the Elia Group Board of Dividend pay-outs for shares held in a to offer a secure dividend in real terms to Strong performance of the Elia share, hitting a new the company’s strategy. Directors decided to propose a nominal stock account will be settled automat- the shareholders while at the same time dividend of €116.0 million, or €1.69 per record high in 2019. €435 million rights offer fully Catherine Vandenborre, ically by the bank or stockbroker. Elia enabling the group to sustain a strong Chief Financial Officer Elia share (gross) to the general meeting of subscribed. Group will pay out dividends on regis- balance sheet that is needed to fund the tered shares directly to shareholders. group’s investment program.

Nevertheless, future dividends will re- EVOLUTION OF THE ELIA SHARE AGAINST ITS EUROPEAN EVOLUTION IN PRICE AND TRADED VOLUMES EVOLUTION OF THE ELIA SHARE AGAINST THE BEL20 INDEX COUNTERPARTS main dependent upon the results of the group (which are affected by a number 85.00 500,000 150.0 150.00 of factors, outside the Company’s con-

140.00 trol) as well as the Company’s financial 80.00 140.0 400,000 situation, financing needs (in particular, 130.00 75.00 130.0 capital expenditures and investment 300,000 120.00 plan) and business perspectives. 70.00 120.0 110.00 200,000 The proposed dividend represents a pay- 65.00 110.0 100.00 out ratio of 45.6% of the IFRS reported 100,000 profit attributable to owners of ordinary 60.00 100.0 90.00 shares. 55.00 0 90.0 80.00 Jan/19 Feb/19 Mar/19 Apr/19 May/19 Jun/19 Jul/19 Aug/19 Sep/19 Oct/19 Nov/19 Dec/19 Jan/19 Feb/19 Mar/19 Apr/19 May/19 Jun/19 Jul/19 Aug/19 Sep/19 Oct/19 Nov/19 Dec/19 Jan/19 Feb/19 Mar/19 Apr/19 May/19 Jun/19 Jul/19 Aug/19 Sep/19 Oct/19 Nov/19 Dec/19

Elia Group (Eli) Volume Elia Group (Eli) Bel 20 Elia Group (ELI) National Grid Terna Red Electrica

Following the completion by the Elia The Elia share price, closed the year at a group of its internal reorganisation on price of €79.10, up 35.7% from €58.30 at 31st of December 2019, the listed com- the end of 2018. On the 23rd of April 2019 SHAREHOLDER STRUCTURE FINANCIAL CALENDAR pany Elia System Operator SA/NV was the share price hit a low of €57.77 and 13 April 2020 Publication Annual Report 2019 renamed Elia Group SA/NV. recorded a high of €82.40 on 20th of de- Free float Publi-T 19 May 2020 General meeting of shareholders cember 2019.The yearly return including 51.90% 40.82% 44.87% 20 May 2020 Interim statement for Q1 2019 The Elia group delivered strong financial the dividend is 40.21% and hereby largely results over the year supported by the 01 June 2020 Payment of 2018 dividend CONTRIBUTION OF GERMANY TO outperforming peers and the BEL 20 THE NET PROFIT ATTRIBUTABLE TO first full year of control and consolidation Index. 29 July 2020 Publication of half-yearly results for 2019 THE ELIA GROUP of 50Hertz, the comissionning of Nemo 25 November 2020 Interim statement for Q3 2019 Link and the realisation of investments in Liquidity of the Elia share increased the grid in the interest of society. together with its value from an average INVESTORS of 27.793 shares traded per day in 2018 to 2019 was marked by fully susbcribed 39.559 in 2019. For any questions regarding Elia and its shares, please contact: € 1.69 rights issue of €435 million, marking one Elia of the largest rights issue over the last With 68,652,938 shares outstanding, the Investor Relations Manager, GROSS DIVIDEND years on Euronext Brussels. The sub- company’s market capitalisation stood at Boulevard de l’Empereur 20 • 1000 Brussels, Belgium PER SHARE scription price for this 1-for-8 rights issue €5,430,447,396 at the end of December. Interfin Tel.: +32 2 546 75 79 • Fax: +32 2 546 71 80 was set at €57.00 per new share, which In 2019, 10,048,162 Elia shares were trad- Publipart E-mail: [email protected] implied a discount to TERP of 8.03%. The ed on the Euronext Brussels market. 3.78% 3.32% Information about the Group (press releases, annual reports, take-up of existing shareholders during Katoen Natie Group share prices, disclosures, etc.) can be found on the Elia Group the subscription period stood at 92%, Belfius Insurance website www.eliagroup.eu. highlighting shareholders’ confidence in 6.16% the group. 1.04% 152 Key figures Elia Group Activity Report 2019 153

Key figures Management report and analysis of the 2019 results Elia Group realised its ambitious investment program, achieved strong operational and financial results and is ready to realise the next phase of the energy transition bringing maximum welfare to society.

(in million EUR) 2019 2018 2017(1) 2016 2015 • Grid investments of €723.5 million in • Adjusted net profit up 9.0% to €306.2 • Implementation of a Group function- Consolidated results Belgium and €488.6 million in Germany million driven by the timely realisation al organisation to leverage synergies Total revenue and other operating income 2,319 1,931.8 867.1 868.1 851.4 to ensure a reliable and sustainable en- of investments and solid operational and improve services to the benefit of ergy system leading to an asset growth performance consumers (*) EBITDA 930.2 750.5 455.4 425.0 442.8 of 9.0% • Realisation of a new corporate structure • A dividend of €1.69 per share will be Results from operating activities (EBIT) (*) 569.7 502.6 324.6 295.0 336.4 • Good progress in the increase of inter- to increase regulatory transparency and proposed at the General Meeting on 19 Net finance costs (139.6) (93.2) (76.5) (82.9) (92.8) connections capacities with commis- pursue our growth strategy May 2020 sioning of Nemo Link Income tax (121.0) (102.2) (39.6) (32.0) (32.9)

Adjusted net result (*) 306.8 280.8 203.4 168.0 175.8

Reported net result 309.1 307.1 208.5 179.9 210.6 Non-controlling interest 35.5 25.7 0.0 0.0 0.0 Elia group Hybrid securities 19.3 6.2 0.0 0.0 0.0 Key figures (in € million) 2019 2018 Difference (%) Profit attributable to owners of ordinary shares 254.3 275.2 208.5 179.9 210.6 Revenue, other income and net income (expense) from 2,319.0 1,931.8 20.0% settlement mechanism (in million EUR) 31.12.2019 31.12.2018 31.12.2017 31.12.2016 31.12.2015 Equity accounted investees 8.3 65.6 (87.3%) Consolidated balance EBITDA 930.2 750.5 23.9% Total assets 13,893.4 13,754.3 6,582.3 6,241.5 6.435,6 EBIT 569.7 502.6 13.4% Equity attributable to owners of the company 4,022.3 3,447.5 2,563.3 2,511.4 2.413,6 Adjusted items 6.0 28.1 n.r. Equity attributable to ordinary shares 3,320.9 2,741.3 2,563.3 2,511.4 2.413,6 Adjusted EBIT 563.7 474.5 18.8% Hybrid securities 701.4 706.2 0.0 0.0 0.0 Net finance costs (139.6) (93.2) 49.8% Net financial debt 5,523.1 4,605.6 2,689.1 2,557.3 2.583,4 Adjusted net profit 306.2 280.8 9.0%

31.12.2019 31.12.2018 31.12.2017 31.12.2016 31.12.2015 Net profit 309.1 307.1 0.7%

Other key figures Non-controlling interests 35.5 25.7 n.r.

Regulatory Asset Base (RAB) (bn EUR) (2) 8.9 9.2 7.4 7.1 6.7 Net profit attributable to the Group 273.6 281.4 (2.8%)

Dividend per share (EUR) 1.69 1.66 1.62 1.58 1.55 Hybrid securities 19.3 6.2 n.r.

Return on Equity (%) 6.80% 8.16% 8.14% 7.16% 8.73% Net profit attributable to owners of ordinary shares 254.3 275.2 (7.6%)

Return on Equity (adj.) (*) 7.66% 10.04% 8.14% 7.16% 8.73% Total assets 13,893.4 13,754.3 1.0%

Earnings per share (adj.) (EUR) (*) 3.91 4.52 3.42 2.95 3.47 Equity attributable to the owners of the company 4,022.3 3,447.5 16.7%

Equity per share (EUR) 48.4 44.9 42.1 41.2 39.7 Net financial debt 5,523.1 4,605.6 19.9%

Number of shares (period-end) 68,652,938 61,015,058 60,901,019 60,753,714 60,750,239 Key figures per share 2019 2018 Difference (%)

Reported earnings per share (EUR) (Elia share) 3.91 4.52 (13.5%) (*) See the Elia Group Financial Report 2019 for a detailed glossary of definitions. Return on Equity (adj.) (%) (Elia share) 7.66 10.04 (23.7%)

(1) The Group applies IFRS 15 under the full retrospective method under which comparative figures for financial year 2017 have been restated Equity attributable to owners of the company per share (EUR) 48.4 44.9 7.8% (2) The Regulatory Asset Base includes 60% of the RAB of 50Hertz until 2017 and 80% of the RAB as from 2018.

1 Reported net profit Elia Group amended with adjusted items linked to the corporate reorganisation and regulatory compensation linked to prior year acquisition. 154 Management report and analysis of the 2019 results Elia Group Activity Report 2019 155

Results In Germany, the adjusted net profit Elia Group’s reported net profit rose Capital expenditures ELIA GROUP INVESTMENTS IN 2019 TOTALS €1,212 M drops by €38.8 million to €177.5 million. less sharply (by 0.7%) to €309.1 million. By expanding international connections The comparison of the 2019 and 2018 This effect is almost entirely attributa- Adjusted items totalling €2.9 million and integrating ever-increasing amounts +14% financial statements is still substantially ble to the release of the legal claim ease- were recognised, being mainly related of renewable energy generation, the Elia affected by the Group’s acquisition of ments that occurred in 2018 (down €46.4 to costs linked to the Group’s corporate Group promotes both the integration an additional 20% stake in Eurogrid on million Y-O-Y). The effect from the lower reorganisation (-€2.2 million), regulatory [1%] of the European energy market and the 26 April 2018. After that transaction, the regulatory return with the start of the compensation linked to the acquisition decarbonisation of our society. consolidation of Eurogrid and its affili- new regulatory period is almost entirely made the previous year (€5.1 million). ates switched from the equity method, offset by higher base year revenues and Elia Group’s net profit attributable to In 2019, the Elia Group invested €723.5 which applied for the first four months higher capex remuneration. The com- owners of ordinary shares (after deduct- million in Belgium and €488.6 million 637.0 723.5 491.5 488.6 of the 2018 financial year, to a full con- mission of CWA 1 end 2018, lead to higher ing the €35.5 million in non-controlling in Germany to ensure a reliable and sus- solidation from the date of the acqui- depreciation and financial cost. interests and €19.3 million attributable to tainable energy system leading to a sition. Consequently, the 2019 financial With Nemo starting operations since end hybrid securities holders) was down 7.6% growth of the Regulatory Asset Base statements present a full consolidation of January, it contributed €6.5 million to to €254.3 million as prior year benefited (RAB) of 9.0%. 2018 2019 2018 2019 of Eurogrid and its affiliates, whereas the Group result in 2019. Additionally the from the release of the major bulk of the Elia Transmission 50Hertz the 2018 financial statements present Group’s result benefited from a stronger easement provision (making a net contri- four months of figures according to the performance of EGI, partially offset by bution of €30.9 million in 2018), offset to equity method and eight months using higher non-regulated financial costs. a certain extent by the timely realisation the full consolidation method. of investments and a solid operational In addition, Nemo Link, a joint venture performance by Elia Group in 2019. with National Grid that was commis-

sioned in January 2019 is treated as an Infrastructure work for great interconnectivity equity- accounted investee.

Elia Group’s adjusted net profit rose by Work on the ALEGrO project is making the Port of Antwerp, the Brabo project We are focusing on replacing over- 9.0% to €306.2 million. This increase was good progress. The first interconnector is being implemented in three phases head lines by introducing a new type the result of the aforementioned acqui- between Belgium and Germany is being between 2016 and 2023. of conductor that can support higher sition (and its impact on consolidation), implemented in partnership with the flows, increasing grid capacity in cold In August 2019, Elia finalised the a higher result for Elia Transmission and German system operator Amprion and and windy weather (Dynamic Line Mercator-Horta project between the contribution by Nemo Link and the is scheduled for commissioning in 2020. Rating) where appropriate, and find- COMPONENTS OF ELIA GROUP'S ADJUSTED NET PROFIT Zomergem and Kruibeke. Over the past lower result in Germany. On the Belgian side, work on the cable ing better ways to control electricity Non-regulated for the underground HVDC connection few years, pylons, foundations and con- flows via devices such as Phase Shifting Looking at the various segments, we 50Hertz Trans. (incl. Nemolink) and the construction of the converter ductors have been replaced to increase Transformers (PST) and High Voltage remark an increase of the adjusted net station in Lixhe, have been completed. the transmission capacity to 380 kV. The Direct Current (HVDC) lines. 58% 2% profit inBelgium increasing by €7.4 mil- Mercator-Horta project is part of the big- lion to €122.3 million and mainly driven After a 10-year development and con- ger Mercator-Avelin interconnection by the realisation on the mark-up invest- struction phase, transmission capac- project that is 110 km long and passes

ments, higher incentives and efficiency ity on Nemo Link, the subsea inter- through 25 municipalities before extend- and higher capitalised borrowing costs connector between Great Britain and ing into France. due to the growing asset base. This was Belgium, has been available for purchase In May 2019, work to replace the first offset to a certain extent by a lower by implicit day-ahead auction since 30 section of the 380 kV overhead line equity remuneration due to a decreas- January 2019. The cable has a capacity of from Perleberg to Wolmirstedt began. ing OLO, higher IAS 19 and tax provisions. 1,000 MW and is Elia’s first subsea inter- Several construction companies are The tariff compensation for the finan- connector in Belgium. It is also the coun- working simultaneously along the route cial costs linked to the capital increase try’s first high-voltage direct current to ensure rapid progress with its con- contributes positively to the result (€6.1 Elia Trans. (HVDC) project. struction and minimise the project’s million). 40% In the second phase of the Brabo pro- impact on local residents and nature. ject, Elia built the tallest electricity pylons (192 m) in the Benelux countries to span In addition, Elia Group is investing in the the River in the Port of Antwerp. optimisation of existing assets by inte- Designed to strengthen the high-voltage grating new technologies and more grid from 150 kV to 380 kV in and around advanced system operation concepts. 156 Management report and analysis of the 2019 results Elia Group Activity Report 2019 157

Infrastructure work to integrate offshore wind NET DEBT & CREDIT METRICS The MOG is Elia’s first power hub in the marine cables to the Lubmin substa- curement, construction and operation of Belgian North Sea, 40 km off the coast. tion. For the first time, 50Hertz is using a joint offshore platform. The corridor for (in € million) 2018 2019 In September 2019, it was inaugurated 220 kV three-phase AC cables (instead of the submarine cables has been explored Net debt 4,605.6 5,523.1 in the presence of His Majesty King 125 kV AC). This enables a higher trans- and contaminated sites cleaned up. Philippe of the Belgians. The MOG is a mission capacity. In April 2019, German Leverage (D/E) (incl. NCI & hybrid)) 1.71x 1.5x critical link in transmitting the renewa- Chancellor Angela Merkel attended the With the Combined Grid Solution pro- Net debt / EBITDA 6.1 5.9 ble energy generated by offshore wind inauguration of the Arkona wind farm ject, 50Hertz and the Danish grid oper- EBITDA / Gross interest 6.5 6.4 farms safely and efficiently to the main- (E.ON & Equinor). ator Energinet are realising a worlds’ land. Bringing together the cables first; connecting the electricity grids of Average cost of debt 2.30% 2.13% Meanwhile, 50Hertz is progressing two countries via offshore wind farms. from four wind farms (Rentel, Seastar, % fixed of gross debt 94.39% 96.8% Mermaid and Northwester 2) saves 40 according to schedule on Ostwind 2. In 2019, submarine cables were installed km of cable compared to point-to-point This project will connect two addi- between the offshore substation of the connections. tional wind farms to the Lubmin sub- wind farms Baltic 2 and Kriegers Flak station: Arcadis Ost (Parkwind) and (see illustration 3). The electrical instal- Net financial debt increased to €5,523.1 Besides a €434.8 million capital increase, Elia Group’s rating by S&P remained After three years of construction and Baltic Eagle (Iberdrola). Both are located lations at sea are now ready for opera- million (up 19.9%), driven by the Group’s Elia Group also accessed the debt cap- unchanged at BBB+ with stable outlook. a total investment volume of ca 1.3 bil- 20 to 30 km northeast of the island of tion. The renewable energy generated investment programme totalling €1.2 ital market in 2019. Early 2019, Elia Eurogrid GmbH also carries a BBB+ rat- lion euros, the Ostwind 1 project in the Rügen. In October 2019, 50Hertz and by the wind turbines will always have pri- billion in 2019. In Belgium, net debt rose Transmission benefited from favourable ing with stable outlook, while the bonds Baltic Sea was finalised. Ostwind 1 con- Parkwind signed a Memorandum of ority. Free capacity from the connecting by €188.3 million with organic growth market conditions to manage its liquid- of Elia Transmission Belgium are rated nects two offshore wind farms (Arkona Understanding (MoU) including specific line can be used for electricity trading financed by the cash flow from operat- ity position and lower its average cost BBB+ aswell. and Wikinger) via three 90 km long sub- arrangements for the development, pro- between both countries. ing activities and proceeds from the cap- of debt (dropped by 17bps), successfully ital increase. For Germany, the financing refinancing a €500 million Eurobond at a

of the investment programme and EEG’s significantly lower coupon, to the bene- lower cash position (down €429.0 mil- fit of society. Eurogrid issued no external lion) led to a rise in net debt (up €835.1 debt in 2019. million).

2019 NET DEBT EVOLUTION +20%

109 429 319 (429) 125 4,606

1,184 (819) 5,523

2018 Oprerating Net CAPEX Net int.paid & Capital Dividend paid EEG Other 2019 Income tax increase 158 Management report and analysis of the 2019 results Elia Group Activity Report 2019 159

Elia Transmission in Belgium

Elia Transmission's total revenues reduced its average cost of debt, to con- the growing asset base (up €2.2 mil- Elia Transmission key figures (in € million) 2019 2018 Difference (%) decreased to €948.8 million, 1.1% down sumers’ benefit. This was partially offset lion). These impacts were offset to some Revenues, other income and net income (expense) from 948.8 959.4 (1.1%) on the previous year. Revenues were by a full year of interest charges linked extent by the lower average OLO com- settlement mechanism impacted by higher depreciations, to a €100 million EIB loan drawn in the pared to 2018, impacting equity remu- higher financial costs linked to the cap- last quarter of 2018 and lower inter- neration (down €5.5 million), higher IAS Revenues 914.2 908.1 0.7% ital increase and the bond consent pro- est income on cash advances provided 19 and tax provisions (down €4.1 million) Other income 60.7 57.2 6.1% cess for the corporate reorganization to Nemo Link during the construction and slightly more damages to electri- and higher taxes however are fully offset phase, because Nemo Link intercon- cal installations (down €1.4 million). The Net income (expense) from settlement mechanism (26.1) (5.9) n.r. by lower costs for ancillary services and nector was commissioned at the begin- result also benefitted from a one-off tar- Equity accounted investees 1.8 1.8 n.r. lower regulated net profit, which are all ning of 2019. The push-down of regu- iff compensation for the financial costs EBITDA 394.8 369.1 7.0% passed through into revenue to the ben- lated debt from Elia System Operator linked to the capital increase (up €6.1 efit of consumers. to Elia Transmission Belgium as part million) and accounted through equity EBIT 243.9 228.9 6.6% the Group’s corporate reorganisation under IFRS. EBITDA (up 7.0%) and EBIT (up 6.6%) Adjusted items 4.7 0.0 n.r. (Adjusted item), generated financial were mainly affected by higher depreci- charges totalling €4.7 million. As the Net profit increased by a more pro- Adjusted EBIT 239.2 228.9 4.5% ations attributable to the growing asset bank and consent fees are spread over nounced 8.8% to €125.0 million due to Net finance costs (64.4) (65.4) (1.5%) base, higher financing costs and higher the maturity of the various bonds under tariff compensations for the financial current taxes to be passed on in tariffs. IFRS, the net financial costs recognised costs linked to the push-down of regu- Income tax expenses (54.4) (48.6) 11.9% These increases were partly offset by a for regulated debt in 2019 totals to €0.9 lated debt to ETB as part of the corpo- Net profit 125.0 114.9 8.8% slightly lower regulated net profit. The million. rate reorganisation and amortised under contribution of equity-accounted invest- IFRS. Adjusted items 2.7 0.0 n.r. ments (HGRT, Ampacimon and Coreso) Elia Transmission achieved strong Adjusted net profit 122.3 114.9 6.4% remained flat at €1.8 million. results, with an adjusted net profit of Total assets increased by €542.9 million €122.3 million (up €7.4 million) driven to €6,452.1 million, mainly as a result of Total assets 6,452.1 5,909.2 9.1% Net finance costs dropped by €1.0 mil- mainly by the realisation of mark-up the investment programme. Total equity 2,157.5 1,757.1 22.8% lion (down 1.5%) compared to the previ- investments since the start of the tar-

ous year. Early in 2019, Elia took advan- iff period in 2016 (up €6.2 million), the Net financial debt 3,013.4 2,825.1 6.7% tage of supportive market conditions to strong operational performance on Free cash flow (444.9) (263.3) 68.9% manage its liquidity position by refinanc- incentives (up €4.9 million) and higher ing a €500 million bond that matured capitalised borrowing cost linked to in May 2019, and thereby significantly 160 Corporate governance statement Elia Group Activity Report 2019 161

50Hertz Transmission in Germany

50Hertz Transmission’s total reve- driven by the asset growth and the suc- attributable to the release of the legal 50Hertz Transmission key figures (in € million) 2019 2018 Difference (%) nues and other income are stable com- cessful commissioning of Ostwind 1 last claim easement provision that occurred Total revenue and other income 1,360.1 1,364.9 (0.4%) pared to last year (down 0.4%). With the year (up €15.7 million). Personnel costs in 2018 (down €46.4 million). Moreover start of a new regulatory period in 2019, increased compared to the same period the regulatory return on equity (RoE) Revenue 1,323.6 1,403.6 (5.7%) the regulatory return on equity dropped last year, following continuous busi- decreased (from 9.05% to 6.91% pre-tax) Other income 84.1 67.4 24.8% from 9.05% to 6.91% before tax, but this ness growth (down €8.2 million) lead- when the new regulatory period began, decrease was mainly offset by asset ing as well to higher own work capital- though this drop was partly compen- Net income from settlement mechanism (47.6) (106.1) (55.1%) growth. Furthermore, the offshore remu- ised (up €2.6 million). Finally, EBITDA was sated by asset growth and an updated EBITDA 530.5 475.0 11.7% neration scheme changed and is now also impacted by the treatment of leas- revenue base for that period. In combi- remunerated via a separate offshore sur- ing costs with the adoption of IFRS 16 (up nation with the roll-over of completed EBIT 321.3 385.4 (16.6%) charge. Although the asset growth and €7.6 million) and higher other revenues, onshore projects to the base year, the Adjusted items 0.0 30.6 n.r. updated Opex revenue base positively e.g. from damage claim payments (up Base Year revenues increased (up Adjusted EBIT 321.3 354.8 (9.4%) impacted the remuneration the turno- €1.5 million). €70.7 million) while the onshore invest- ver dipped due to the lower regulatory ment remuneration for investment Net finance costs (65.3) (45.6) 43.2% return on equity. Moreover the new off- EBIT dipped by €64.1 million (down measures decreased (down €45.5 mil- 16.6%) due to the release of a large por- Income tax expenses (78.6) (101.9) (22.9%) shore surcharge leads to decreased pass- lion). The offshore investment remuner- through third-party revenues for the off- tion of the easement claim provision ation increased (up €34.5 million) fol- 237.9 (25.4%) Net profit 177.5 shore business. in 2018 (€72.1 million) following a re-as- lowing the commissioning of Ostwind Of which attributable to Elia Group 142.0 169.2 (16.1%) sessment after a tax audit. A further por- 1 in late 2018. Finally, the result was Although the new regulatory period is tion was released in 2019, amounting to also impacted by higher depreciations Adjusted items 0.0 21.6 n.r. marked by a lower regulatory return on €5.9 million pre-tax (down €66.2 million). (down €37.8 million) linked to the ongo- Adjusted net profit 177.5 216.3 (17.9%) equity, the EBITDA increased by €55.5 Depreciations increased (down €53.7 ing investment programme and higher million (up 11.7%). With the start of the million), mainly as a result of commis- financial costs (down €13.9 million). Total assets 6,279.6 6,752.1 (7.0%) new regulatory period, the completed sioning the first cables and platform of Total equity 1,546.5 1,491.8 3.7% onshore investments measure projects Ostwind 1 in December 2018 (€36.5 mil- Total assets were €472.5 million down have rolled over to being remunerated lion) and due to the depreciation com- on the year-end total in 2018, mainly Net financial debt 2,108.1 1,272.9 65.6% via the Base Year Mechanism. Together ponent of leasing as per IFRS 16 (€6.9 due to a reduction in EEG cash (down Free cash flow (656.8) 278.7 (335.7%) with the decrease of the regulatory million). €429.0 million). In 2019 there was also a return on equity from 9.05% to 6.91%, the negative free cash flow of €656.8 mil- remuneration for investment measures Excluding the impact of the major lion, including €429.0 million associated dropped (down €64.7 million). However release of the easement provision in with the EEG mechanism. No new debts this decrease was more than offset by 2018, the EBIT would have increased (up were issued in 2019. Net financial debt higher revenues from the Base Year 13.7%), attesting to the strong operational rose by €835.1 million mainly due to the mechanism (up €100.4 million) as firstly performance of 50Hertz despite the drop financing of the ongoing investment completed onshore investment projects in regulatory return on equity with the programme and the high EEG cash-out. are now remunerated via the Base Year start of the third regulatory period. The EEG cash position as at December and secondly the OPEX revenue base totalled to €430.5 million. 50Hertz Transmission (Germany) (on a was updated at the beginning of the new 100% basis) recorded an adjusted net regulatory period. Despite the drop in profit of €177.5 million. The lower result regulatory return on equity, the offshore (down €38.8 million) is almost fully investment remuneration increased 162 Management report and analysis of the 2019 results Elia Group Activity Report 2019 163

Non-regulated activities & Nemo Link

Non-regulated revenue increased by to the contribution of Nemo Link (€6.5 cial result benefited from adjusted items Non-regulated activities & Nemo Link 2019 2018 Difference (%) 48.9% compared to 2018. EGI’s revenue million), a higher operational result for linked to the aforementioned acquisi- key figures (in € million) rose by €3.0 million to €12.5 million on EGI (up €0.6 million) and lower non-reg- tion, being a one-off financial gain (€9.2 Total revenue and other income 20.7 13.9 48.9% the back of stronger owner’s engineer- ulated costs. Taking into account one- million) linked to the remeasurement to ing services and the expansion of inter- time costs linked to the reorganisation of fair value of the Group’s initial 60% share- Equity accounted investees 6.5 0.3 n.r. national consulting activities. In addition, the corporate structure (down €2.5 mil- holding in Eurogrid and offset to some EBITDA 4.8 (7.9) (160.8%) one-off regulatory compensation linked lion) and a regulatory compensation (up extent by costs for the unwinding of the to the prior year acquisition totalling €3.8 €3.8 million), EBIT totals €4.5 million. hedge linked to the hybrid bond (€3.2 EBIT 4.5 (8.9) (150.6%) million was recognised. million). Adjusted items 1.3 (3.3) n.r. Net finance costs increased to €9.9 mil- As an equity-accounted investment, lion, primarily as a result of a full year of The non-regulated and Nemo Link seg- Adjusted EBIT 3.2 (5.6) (157.0%) Nemo Link contributed €6.5 million to interest charges linked to the €300 mil- ment, posted an adjusted net profit of Net finance income (9.9) 1.3 (861.5%) the Group’s result in its first year of oper- lion non-regulated senior bond con- €6.4 million, driven by the commission- ation. The interconnection was commis- tracted during the second half of 2018 ing of Nemo Link in 2019 (€6.5 million) Net profit 6.6 (3.5) (288.6%) sioned in late January 2019. Since then, to finance the acquisition of an addi- and a positive contribution from EGI (€0.1 Of which attributable to Elia Group 6.5 (2.8) (332.1%) 5.6 TWh of commercial flows have been tional stake in Eurogrid (€4.7 million). million). Furthermore, the deductibility of Adjusted items 0.2 4.3 (94.9%) exchanged between Belgium and the The corporate reorganisation of the the interest charges linked to the hybrid UK. The interconnector’s overall availa- Group resulted in a one-off consent fee security generated a tax credit (€5.9 mil- Adjusted net profit 6.4 (7.8) (182.0%) bility was 95.8%, but since Q4 2019, it has (€4.3 million) paid to noteholders for the lion), which was partly offset by inter- Total assets 1,733.5 1,677.9 3.3% been 100%. Despite this high availability, aforementioned non-regulated bond est costs on the senior bond (€3.2 mil- Nemo Link’s performance throughout and generated other financial costs lion) and other non-regulated costs (€2.8 Total equity 1,207.5 1,052.7 14.7% the year was impacted by low spreads amounting to €0.2 million. The financ- million). Net financial debt 401.6 507.6 (20.9%) of the electricity commodity price, ing of Nemo Link incurred a net financial driven by higher CO2 prices in continen- cost of €0.5 million due to higher finan- Total assets increased by €55.6 million tal Europe and low gas prices in the UK. cial costs linked to the €210 million take to €1,733.5 million driven by the capi- Higher-than-planned curtailments also out financing concluded at the end of tal increase of which €107.8 million was affected revenues from Nemo Link dur- 2018 and partly offset by interest income allocated to the non-regulated seg- ing the first half of 2019. Throughout the on cash advances to Nemo Link dur- ment to finance Nemo Link and was lifetime of the project, Nemo Link will be ing the construction phase. Following offset by the contribution of non-reg- exposed to volatility in the market spread the rights issue at the end of June, these ulated activities in the 2018 dividend pay- of the electricity commodity price. cash advances were reimbursed and ment. Consequently, net financial debt Nemo Link became financed in a man- decreased by €105.9 million to €401.6 Adjusted EBIT increased to €3.2 million. ner similar to the current regulatory million. The €8.8 million increase in adjusted framework in Belgium (33% equity / 66% . EBIT compared to last year is mainly due debt). Finally, the previous year’s finan- 164 Management report and analysis of the 2019 results

Adjusting items - Reporting reconciliation table parameters

Registered office Headquarters Elia Group 50Hertz Non-regulated (in € million) - Elia Transmission & Nemo Link Consolidation This report is limited to Elia System Boulevard de l’Empereur 20, Period ended 31 Dec. 2019 Transmission (100%) (100%) entries Elia Group Operator and Elia Asset, which operate B-1000 Bruxelles as a single economic entity under the T +32 2 546 70 11 Adjusted items names Elia and 50Hertz Transmission. F +32 2 546 70 10 Regulatory compensation for acquisition 0.0 0.0 3.8 0.0 3.8 The registered office of Elia System [email protected] Corporate reorganisation 4.7 0.0 (2.5) 0.0 2.2 Operator and Elia Asset is located at Heidestraße 2 Boulevard de l’Empereur 20 10557 Berlin Adjusted items EBIT 4.7 0.0 1.3 0.0 6.0 1000 Brussels, Belgium T +49 30 5150 0 Corporate reorganisation fin. cost (0.9) 0.0 (4.5) 0.0 (5.4) The registered office of 50Hertz GmbH F +49 30 5150 2199 [email protected] Adjusted items before tax 3.8 0.0 (3.2) 0.0 0.6 is established at Heidestraße 2 Concept and editorial staff Tax impact (1.1) 0.0 3.4 0.0 2.3 D-10557 Berlin, Germany Elia Group Communication & Reputation Net profit – Adjusted items 2.7 0.0 0.2 0.0 2.9 The registered office of Eurogrid International is located at Graphic design Rue Joseph Stevens, 7 www.chriscom.be 1000 Brussels, Belgium 50Hertz Non-regulated The registered office of Elia Grid Editor (in € million) - Elia Transmission & Nemo Link Consolidation Period ended 31 Dec. 2018 Transmission (100%) (100%) entries Elia Group International is located at Pascale Fonck Rue Joseph Stevens, 7 Ce document est également disponible Adjusted items 1000 Brussels, Belgium en français. Regulatory settlements prior year 0.0 (2.8) 0.0 1.4 (1.4) Reporting period Dit document is ook beschikbaar in het Nederlands. Equity consolidation 50Hertz 0.0 0.0 0.0 (0.6) (0.6) This annual report covers the period (60% net profit) from 1 January 2019 to 31 December 2019. Offshore commissioning 0.0 33.3 0.0 0.0 33.3 Contact Energy bonuses 0.0 0.1 0.0 0.0 0.1 Group Communications and Reputation Eurogrid acquisition costs 0.0 0.0 (3.3) 0.0 (3.3) Marleen Vanhecke T + 32 486 49 01 09 Adjusted items EBIT 0.0 30.6 (3.3) 0.8 28.1 Boulevard de l’Empereur 20 Financial acquisition cost 0.0 0.0 (3.8) 0.0 (3.8) 1000 Brussels [email protected] Revaluation participation Eurogrid 0.0 0.0 9.2 0.0 9.2

Adjusted items before tax 0.0 30.6 2.1 0.8 33.5

Impact tax reform on deferred tax 0.0 0.0 0.0 0.0 0.0

Tax impact 0.0 (9.0) 2.2 (0.4) (7.3)

Net profit – Adjusted items 0.0 21.6 4.3 0.4 26.3

We would like to thank everyone who contributed Adjusted items totalling €2.9 million to this annual report. were recognised in 2019, being mainly related to costs linked to the Group’s corporate reorganisation (-€2.2 million) and regulatory compensation linked to the acquisition made the previous year (€5.1 million). 166 We ensure a secure, reliable and efficient grid