FOR a SUCCESSFUL ENERGY TRANSITION in a Sustainable World 2

1 50Hertz annual report 2017

annual report 2017 FOR A SUCCESSFUL ENERGY TRANSITION in a sustainable world 2

KEY FIGURES AT A GLANCE

50Hertz key figures

Value Share Germany

Grid-related key figures Grid area 109,619 km2 ~ 31%

Total lenghts of lines (equivalent to power circuit length) 10,200 km ~ 30% thereof overhead lines 380 kV 7,245 km thereof overhead lines 220 kV 2,612 km thereof sea cables 150 kV 270 km thereof underground cables 73 km

Substations and switching stations (number) 76

Installed capacity 54,069 MW ~ 27% share of renewable energies 31,177 MW thereof wind onshore 17,866 MW thereof wind offshore 690 MW share of conventional energies 22,892 MW

Maximum load 16,054 MW Power consumption (according to electricity supply to end consumers according to EEG) 96,120 MWh ~ 20%

Production/feed-in thereof conventional 79 TWh thereof renewable 51 TWh

Calculated share of renewable energies in energy consumption 53.4%

Power export from control area (physical load flows) 61 TWh

2017 2016 Financial key figures (IFRS) Revenue 9,803 9,449 in EUR million therof grid business revenue 1,257 1,228 Consolidated net income 182 128 Balance total 7,114 6,642 Investment total 461 737

2017 2016 Further key figures Workforce at year-end 1,0431) 1,0121) Congestion management amouts 6,108 GWh2) 7,083 GWh Congestion management costs 187 million2) 183 million

1) At group level including trainees and inactive employees 2) Preliminary values

All information for 50Hertz Transmission GmbH, 50Hertz Offshore GmbH and Eurogrid GmbH, as of: 31 December 2017 3 50Hertz annualGeschäftsberic report 2017ht 2016

about us

In the north and east of Germany, we operate the high voltage grid reliably ensuring electricity supply for around 18 million people. Our grid with voltage levels of 150 kilovolt (kV), 220 kV and 380 kV extends over a circuit length of more than 10,000 km. At our eight locations, over 1,000 employees ensure that electricity flows around the clock in Berlin, Brandenburg, Hamburg, Mecklenburg-Western Pomerania, Saxony, Saxony-Anhalt and Thuringia. our task

– We ensure stability. – We promote the integration of renewable energies. – We strongly facilitate the electricity market. – We are realising the grid of the future. – We are connected with Europe.

Electricity is produced from conventional As a transmission system operator we ensure Use the electricity fed by the and renewable energy sources. together with the distribution system operators producer into the power that electricity gets to the consumers. transmission grid. figures from 2017

53.4 percent 49 TWh 1,043 calculated share of renewable physical electricity exports employees working on a energies in power consumption from the 50Hertz grid area successful energy transition

Secure power supply to 10,200 km 18 million 109,619 km2 circuit length people grid area our vision

FOR A SUCCESSFUL ENERGY TRANSITION in a sustainable world

The energy transition will not just happen by itself. It is only possible if we actively work towards it. If we maintain a dialogue with all the players involved to openly discuss the challenges of grid expansion. If we offer a reliable infrastructure that reacts flexibly to fluctuations in supply and demand. And if we consider the customer’s perspective in all of our. Then we can look forward to a successful energy transition for a sustainable world.

The Annual Report as well as the following interviews with the Board of Management members can also be found online at: csr.50Hertz.com

The EUROGRID Annual Report is available to download as a PDF from: www.eurogrid.com/en-en/Investor-Relations/Financial-Reports 2 50Hertz annual report 2017

the ENERGy transition and its impact on the 50Hertz grid area

installed capacity in the 50hertz grid area

17,866 MW Wind onshore

22,892 MW 31,177 MW Conventional energy 54,069 MW Renewable energies

690 MW

1,884 MW Biomass 70.2 MW Geothermal energy, 10,385 MW 282 MW and mine gas Photovoltaics Water

ENERGY TRANSITION TARGETS FOR 2025 ALREADY ACHIEVED*

In 2017, already 53.4 percent of the average annual electricity consumption has in % been covered by renewable energies in the 53.4 50Hertz grid area. In 1,223 hours of the year 50.9 47.8 the energy consumption was already fully 50 42.2 covered by renewable energies. And for the 38.3 40 35.8 new political renewable expansion target 28.3 of 65 percent by 2030, 50Hertz is ready to 30 24.2 25.7 25.6 make additional efforts. This will require a sustainable regulatory framework with the 20 right incentives. 10

0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

* Target corridor share of renewable in power consumption in Germany: EEG 2016 (2025: 40 – 45%, 2035: 55 – 60%) The energy transition and its impact on the 50Hertz grid area 3

PHYSICAL IMPORTS AND EXPORTS*

We are a major exporter of electricity in Germany and Europe. An ever increasing amount of renewable energy generated in the 50Hertz grid area is facing a relatively low population density and thus lower energy consumption. We transport the resulting surplus energy via the high voltage grid to metropolitan areas in the south and west of Germany and to Europe.

* The amounts shown refer to physical electricity flows, not commercial exports. energinet.dk Denmark 957 2,503

Denmark Sweden 2,148 272 5,271

4,101

7,340 PSE Benelux** 21 Poland 21,266 2,699 7,340 Poland 21

France germany 50Hertz grid area 2,940 6,996

5,550 9,043

Czech Republic 167 44,789 7,988 9,623 Čeps tennet Czech Republic 19,284 19,194 Germany 1,559 3,840 Switzerland Austria Total exports in 2017: 61,074 GWh Total imports in 2017: 12,314 GWh export in GWh import in GWh Net exports 2017: 48,760 GWh

** The interconnector to Belgium is currently under construction. Completion is planned for 2020.

Exports in GWh Exports in GWh Imports in GWh ertz Imports in GWh Net exports (balance) Net exports (balance) in GWh in GWh

100,000 60,000 48,760 80,000 50,000 39,389 40,418 57,696 40,000 60,000 55,266 30,413 41,128 53,681 30,000 40,000 26,291 35,709 20,000 20,000 10,000 0 0 20,000 10,000 40,000 20,000 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 4 50Hertz annual report 2017

highlights 2017

EUR 181 MILLION IN ANOTHER BUILDING BLOCK REDISPATCH COSTS SAVED LAID FOR A SUCCESSFUL ENERGY TRANSITION On 14 September 2017, it was finally time: The Southwest Interconnector from Bad The “Combined Grid Solution – Lauchstädt in Saxony-Anhalt to Redwitz Kriegers Flak” interconnector will in Bavaria was fully commissioned after 15 use the grid connections of two years of planning and construction. In the wind farms, the Danish Kriegers 50Hertz Netzquartier, the Prime Minis- Flak wind farm and the German ter of the State of Saxony-Anhalt, Reiner Baltic 2 wind farm, to connect the Haseloff, gave the official order to switch transmission grids of two coun- on the second power circuit. This allows tries. In addition to the cables be- an additional 5,000 megawatts (MW) of tween the two offshore wind farm electricity to be transported from the platforms, 50Hertz is constructing north and east of Germany to the south, a double converter in Bentwisch leading to EUR 181 million savings in near Rostock, where work com- redispatch cost in 2017. menced in May 2017.

15 years of 50Hertz

On 28 June 2002, 50Hertz Transmission GmbH was entered in the commercial register – at that time still under the name of Vattenfall Transmission GmbH. 15 years 50Hertz DIALOGMOBIL RECEIVES THE later, over 1,000 employees together with “GOOD PRACTICE OF THE YEAR AWARD” the Board of Management celebrated this event at the All Employee Meeting. Today, On 01 June 2017, the 50Hertz mobile citizens’ office received the “Good Practice of 50Hertz is a transmission system operator the Year Award” for innovative public participation and proximity to the citizens in Germany that is 100 percent unbundled from the Renewables Grid Initiative (RGI). During the award ceremony, the jury from production and distribution, and a praised the innovative and committed public participation in particular. With the pioneer in integrating renewable energies. DialogMobil, 50Hertz has been informing citizens on-site about line construction projects in the affected regions and giving them the opportunity to actively participate in the planning process since 2014. highlights 2017 5

START OF CONSTRUCTION OF A EMPLOYEES SHAPE COMPACT PILOT LINE THE COMPANY

In October 2017, 50Hertz started to build a entirely new pilot For the first time ever, 50Hertz conducted the regular “Say it!” em- line at the Jessen/Nord substation. The so-called compactLine ployee survey on a purely digital basis in November 2017. The survey is characterised by lower pylon heights, narrower routes and is an important management tool for the company for the further smaller solid wall pylons. In future, using these should help development of the corporate and management culture. The partici- to reduce adverse effects on the landscape and on nature in pation rate of 91 percent once again showed how important it is to the sensitive areas. Completion is planned for 2018. After that the 50Hertz workforce to actively get involved in shaping the company. At line will be monitored and tested under real operating condi- the same time, “Say it!” is a call to action for managers and employees tions for a period of one year. to get involved in an intensive dialogue and to work together on the issues identified

EFFICIENcy project WOLMIRSTEDT AND FOUR OTHER SUBSTATIONS CONNECTED TO THE GRID 50Hertz started the year 2017 with a cost-efficiency project to create room for further growth and to continue actively After several years of modernisation and expansion the Energy shaping it. The aim is to increase the efficiency of business Minister of the State of Saxony-Anhalt, Prof. Dr. Claudia Dalbert, processes and to save controllable costs. Various initiatives also put the Wolmirstedt substation near Magdeburg into operation on put the 50Hertz investment projects and IT architecture to the 23 October. The Minister called the substation “A further building test. Cost efficiency is one of the company’s top five objectives. block on the way to 100 percent renewable energies”. In addition, Therefore, 50Hertz regularly reviews its activities for potential the 50Hertz substations in Hamburg, Putlitz, Heinersdorf and improvement. Initial measures derived from the efficiency Altentreptow were also commissioned in 2017. project already showed positive effects in 2017.

GOOD NEIGHBOURS – YOUNG ART IN THE NETZQUARTIEr

50Hertz funded an exhibition of works by young contemporary artists for the very first time with the opening event for “Rundgang 50Hertz” in July 2017. In cooperation with Hamburger Bahnhof – Museum für Gegenwart – Berlin, 50Hertz will be showing final pieces from art colleges in Berlin, Hamburg and Leipzig over the summer months for a period of three years. During the exhibition, the Netzquartier is open to all interested visitors. Thus, 50Hertz will be promoting dialogue with its neighbours in the Europacity living and working quarters once a year. 6 50Hertz annual report 2017

At the Friedrichshain substation: Marco Nix, Dr. Dirk Biermann, Boris Schucht, Dr. Katharina Herrmann, Dr. Frank Golletz (l. to r.) Foreword 7

FOREWORD by the BOARD OF MANAGEMENT

Dear Readers,

German government policy has set an ambitious goal: By 2030, the share of renewable energies in electricity consumption is to reach 65 percent. 50Hertz came a step closer to achieving this goal once again last year: In our grid area – Berlin, Brandenburg, Hamburg, Mecklenburg-Western Pomerania, Saxony, Saxony-Anhalt and Thuringia – over half (53.4%) of the calculated energy consumption came from renewable energies. The electricity consumed in the grid area was fully covered by renewable energies for around 14 percent of the total number of hours in the year. As a transmission system operator, we are contributing to the success of the energy transition in Germany by integrating this outstanding share of renewable energies into the grid – and we are proud of this.

We will continue resolutely on this path. To do so, we need a future-oriented regulatory framework that provides the right incentives. Of course, while pursuing this course, we also keep a close eye on our costs. Therefore, the positive result achieved in the last fiscal year was largely attributable to the company’s efficiency program. The impact of grid expansion can also be expressed in concrete figures: EUR 181 million had been saved as a result of the full commissioning of the Southwest Interconnector by the end of 2017. We were able to reduce our congestion management costs by this figure thanks to this interconnector, which transports power from Saxony-Anhalt via Thuringia to Bavaria. Consequently, we were also able to reduce grid charges for 2018 by 11 percent and thus relieving consumers.

But this is only a snapshot. The expansion and reinforcement of our transmission grid will be our key task in the coming years – to become faster in this process is our objective. In addition, we will have to develop, test and deploy innovative technological solutions wherever it is reasonable to do so. However, for the coming years the main focus is and will remain on realising the necessary grid expansion. Through all of this, we must never forget the importance of public participation at an early stage as I am convinced that we can only succeed if people understand and accept what we are doing.

Boris Schucht Chairman of the Board of Management (CEO) 8 50Hertz annual report 2017

“50 Hertz plays a significant role in realizing the energy transition and enjoys high respect and trust in society.” Chris Peeters

Chris Peeters, Chairman of the Supervisory Board of 50Hertz and CEO of Elia Group, advises the Executive Board on important matters of corporate governance, together with his colleagues. Interview with Chris Peeters 9

Mr Peeters, has 50Hertz seen good progress in 2017? Which other subjects were top of mind for the — Chris Peeters: Yes, without a doubt – once again, the successful Supervisory Board in 2017? organisation of the energy transition was central to the business — Chris Peeters: Naturally, we closely followed the evolution of the activities. This included the cost-efficient and essential expansion legal and regulatory framework conditions. Of equal importance is of the transmission system as well as the development of the elec- how health and safety can be further improved at 50Hertz. We also tricity market. Additional renewable energy was integrated into the discussed the subject of women in leading positions at all levels and electricity grid while system and grid operations remained secure. decided on targets regarding the ratio of women in the Supervisory This was not without its challenges for 50Hertz and its employees. Board, between the members of the Board of Management and for On the one hand, the transmission system has to be planned and the extended Board of Management. Matters of human resources, financed; on the other hand, greater public acceptance is required organisational and corporate development are also important sub- for our line construction projects. Important groundwork was also jects for the Supervisory Board. Specifically worth mentioning are laid with regard to the digitisation and the creation of smart grids. the efficiency programme and its impact on the company and its All this shows that 50Hertz is successfully helping to shape the en- personnel. And furthermore, we continuously talk about energy ergy transition. economy topics which are of particular importance when it comes to assuming our role as service provider to society on the one hand, and Which offshore projects do you feel are worth mentioning? realizing the energy transition on the other. Lastly, the Supervisory — Chris Peeters: We intensively debated on the offshore projects Board recommended the approval of the business plan, which details Ostwind 2 and Hansa PowerBridge. Both projects do not only closely the corporate strategy and financial, investment and personnel involve many European companies, but also other European transmis- plans, to the shareholders. sion system operators. Swedish TSO Svenska kraftnät, for instance, is involved in the construction of a direct current transmission line over What do you wish for 50Hertz in the coming years? land and through the Baltic Sea. This line, the Hansa PowerBridge, will — Chris Peeters: Of course, I hope that 50Hertz will be even more connect Hurva in Sweden to Güstrow in Germany. successful in supporting the energy transition as it was in 2017 – and I am fully convinced that that will be the case. And the colleagues of Elia are looking forward to an even more intensive collaboration and knowledge exchange. Elia and 50Hertz have in common that both companies can rely on highly committed staff with cutting edge expertise, while it is clear that we have complementary specialisms. By further bundling

The Supervisory Board of 50Hertz Transmission GmbH is composed these strengths, we will be the leading transmission operator in Europe of equal representation beyond the legal requirements. Three in renewable integration, interconnections and market development. employee representatives and three employer representatives are informed on a regular basis on the course of business, of the economic and financial situation and of the status, development and management of risks, and consult in detail with the Board of Management on significant business transactions, the strategic direction and planning of the company and the effectiveness of internal control and monitoring systems.

Furthermore, the Supervisory Board reviews the proper preparation of the Annual Financial Statement and the Management Report and endorses these. In the reporting year 2017, this was done through a total of three ordinary meetings of the Supervisory Board and through further written reports and an oral presentation by the Board of Management. 10 50Hertz annual report 2017

Corporate bodies 50Hertz Transmission GmbH

Members of the Board of Management

Boris Schucht Dr. Frank Golletz Chief Executive Officer (CEO) Chief Technical Officer (CTO)

Marco Nix Dr. Dirk Biermann Chief Financial Officer (CFO) Chief Markets and System Operation Officer (CMO)

Members of the Supervisory Board

50Hertz is controlled and monitored by Eurogrid and a co-determined Supervisory Board. The Supervisory Board of 50Hertz Transmission GmbH consists of six members and is composed as follows:

Chris Peeters Lars Bespolka Chief Executive Officer, Elia System Operator SA-NV, Executive Director, IFM Investors (UK) Ltd Chairman Andrea Ludwig 1) Peter Hausmann 1) Electrical engineer Member of the Executive Main Board, Union for the Mining, Chemical and Energy Industries, Dr. Lutz Pscherer 1) Deputy Chairman Electrical engineer

Markus Berger Chief Infrastructure Development Officer, Elia System Operator SA-NV

1) Workers’ representatives the corporate bodies 11

50Hertz company headquarters.

* As of 31/12/2017

Elia System 60% 40% IFM INVESTORS Operator SA-NV

Eurogrid International 100% Gridlab GmbH 50.1% CVBA/SCRL 100%

Eurogrid GmbH**

100%

Hertz Transmission GmbH

49.9% 7.7% 7.9% 100% 5.2% 5%

Elia Grid TSCNET Hertz Oshore European Energy Joint Allocation CORESO SA International SA-NV Services GmbH GmbH Exchange AG Oce SA

100%

Elia Grid International GmbH

*“50Hertz” – we collectively refer to 50Hertz Transmission GmbH and its wholly- ** Eurogrid GmbH is a fully-owned subsidiary of Eurogrid International CVBA/ owned subsidiary 50Hertz Offshore GmbH under this name. The sole shareholder SCRL (Eurogrid International) with its headquarters in Brussels, Belgium. As of 50Hertz Transmission GmbH is Eurogrid GmbH. All three companies have their of 31 Dec 2017, Eurogrid International was owned to 60 percent by Elia System headquarters in Berlin, are connected by a tax organ and form an economic unit Operator NV-SA (Elia), Brussels/Belgium, and to 40 percent by Global InfraCo (also called a group). The operational management of this unit is delegated to S.à.r.L., Luxembourg/Luxembourg (as of 31/12/2017). Elia is the Belgian national the 50Hertz Board of Management. transmission system operator (TSO) and a listed company in Belgium. 12 50Hertz annual report 2017

our business we are consistently working on the success of the Energy transition

As a transmission system operator, we ensure the electricity supply for around 18 million people in the north and east of Germany. Our high voltage grid has a power circuit length of approximately 10,200 kilometres. We keep up the condition of the lines and substations through efficient maintenance and repair, expand our grid based on the need and ensure the electrical balance between energy consumers and producers in our grid area at all times. Over 1,000 employees at eight locations ensure that electricity flows 24/7 in Berlin, Brandenburg, Hamburg, Mecklenburg-Western Pomerania, Saxony, Saxony-Anhalt and Thuringia.

With the energy transition, the energy system has fundamentally changed. Increasingly, renewable energies are fed into our grid, either directly or via the distribution grids, and have to be transported via our lines. Already today, the share of renewable energies in electricity consumption in the 50Hertz grid area is calculated at over 53 percent. And this share will continue to grow. The 50Hertz grid is prepared to keep the region stable and provide a secure supply of power also in the future – because we are dedicated to successfully shaping the energy transition. 53.4 OUR ELECTRICITY OSCILLATES AT 50Hertz percent 50Hertz primarily transmits the energy in its grid using alternating current. This current changes its flow direction 100 times per second. was the calculated share of renewable Technically speaking, the current oscillates at a frequency of 50 energies in electricity consumption hertz. Fluctuations in electricity generation and consumption have in the 50Hertz grid area in 2017. an impact on the frequency. The frequency falls if there is a power deficit and increases if there is a power surplus. To ensure that the frequency is always in the range of 49.8 and 50.2 hertz, we constantly balance the oscillations. In doing so, we always keep the system stable. our business 13

Energy Minister of the State of Saxony-Anhalt, Prof. Dr. Claudia Dalbert, commands the commissioning of the Wolmirstedt substation via radio transceiver. To her left, 50Hertz Chief Technical Officer, Dr. Frank Golletz, to her right, Johannes Kempmann, Chief Technical Officer of Städtische Werke Magdeburg, and to the far right Rainer Schmittdiel, Managing Director of Avacon Netz GmbH.

OUR BUSINESS IS EXCITING their respective region at a high voltage <= 110kV. Between high and extra-high voltage, the transformers convert the electrical energy As a transmission system operator, we transport the electrical energy from one voltage level to the other. Particularly energy-intensive over great distances at high voltages of 150, 220 and 380 kilovolt (kV). industrial plants are connected directly to our high voltage grid, for The distribution grid operators distribute the electrical energy in example steel works.

WE SHAPE OUR SOCIAL MANDATE EFFICIENTLY, SAFELY AND SUSTAINABLY. IN DOING SO, WE HAVE TO FULFIL VARIOUS ROLES:

Grid Owner System controller market Facilitator Trustee 14 50Hertz annual report 2017

grid ownership – We plan and / build our transmission grids

According to needs 4

We are constantly adapting and expanding our transmission grid according to needs, keep it in operating condition and repairing damage caused by age or severe weather, for example. In 2017 we fully connected 3 the Southwest Interconnector from Bad Lauchstädt in Saxony-Anhalt High security of supply in times of steadily to Redwitz in Bavaria to the grid. The Southwest Interconnector is a rising infeed of renwable energies

380 kV transmission line. It leads from the Bad Lauchstädt substation 2 to the Vieselbach substation near Erfurt in Thuringia and from there via the Altenfeld substation to the Redwitz substation. The section in Bavaria is constructed by the transmission system operator TenneT. 1

0 SouthWest Interconnector 2005 2007 2009 2011 2013 2015 2017

The Southwest Interconnector mainly transports renewable ener- 50Hertz TSO gies from the north to the large consumption centres in the south of Germany. Its construction was funded by the European Union as a “project of common interest” (PCI) and financially supported up to a total of EUR 100 million. The reason is that the Southwest Interconnector also improves system security at the European level. The two power circuits of the line, which totals almost synchronously. Therefore, a so-called double converter will have to 200 kilometres in length, (161 km in the 50Hertz grid area, 31 km be interposed. This is currently being built on land in Bentwisch near in the TenneT grid area) can now transfer an additional 5,000 mega Rostock. This project is also funded by the European Union to the sum watts (MW) from north to south. of EUR 150 million.

When expanding the grid, 50Hertz operates sustainably and protects natural resources and the environment. We only build as many lines as are really needed. Out of a sense of responsibility for nature and the environment, we balance any necessary interventions in nature with During the planning and construction of the Southwest Interconnect appropriate compensation measures and give habitats and cultural or, 50Hertz not only faced technical challenges. At times, citizens in landscapes back to society. the affected regions of Thuringia protested vehemently against the → You can also read the “Environmentally-aware Actor” chapter. construction of the route. We have learned a lot from it. → You can also read the “Committed Partner” chapter. THE ENERGY TRANSITION IS A CHALLENGING TASK

In the Baltic Sea, the connection between two offshore wind farms, In the “Energy Transition Outlook 2035” study, we examined various the so-called “Combined Grid Solution”, is currently being built. This development scenarios for the energy transition. The focus of consid interconnector is considered to be the first of its kind worldwide to be eration was on checking whether the planned grid expansion would used to connect wind farms at sea in order to connect the transmission also meet needs even if the energy transition develops along a path grids of two countries. Thus, wind farm infeed and power trading will other than is currently envisioned. The study clearly showed that be combined. To this end, 50Hertz is connecting the Danish Kriegers all of the grid expansion measures planned by 50Hertz are suitably Flak wind farm to the German Baltic 2 wind farm and will connect dimensioned for all development paths. them to the transmission grid together with the Baltic 1 wind farm. www.50hertz.com/de/Netzausbau/ The special thing about this project is that the Danish and the German Wofuer-Netzausbau/50Hertz-Energiewende-Outlook-2035 grids will not operate on the same frequency – they do not oscillate our business 15

million181 euros cONGESTION MANAGEMENT AND REDISPATCH in redispatch cost savings due to the On particularly wind and solar-intensive days, more power is traded than can physically be transported by the grid. In order to ensure Southwest Interconnector in 2017. system security even in such situations, conventional power producers who are the spatially near a grid bottleneck, are instructed to reduce their power. At the same time, power generation on the other sYstem control – we maintain side of the grid bottleneck is activated. This so-called redispatch is the balance complex and cost-intensive, because while the electricity producers in the north and east of Germany are shut down, reserve power By keeping the production and consumption of electrical energy in plants in the south of Germany or Europe are powered up at the balance at all times in our grid area, we ensure an optimal power flow same time. The costs incurred by the power plants are compensated. and a smooth transition to our neighbouring transmission system If this is not enough to resolve grid congestion, the generation of operators and distribution grids. This is a particularly challenging task electricity from renewable energies must also be restricted through in our grid area, because more generation capacity from renewable infeed management. This also leads compensation payments made energy sources is installed than from conventional power plants. In to producers of renewable energy. The total costs are the so-called particular, wind power plays a major role. On 28 October 2017, we reg congestion management costs. istered a new infeed record to our grid of 14,266 MW of wind energy. The infeed quantity is constantly changing at short intervals. The same is true for the infeed from photovoltaic systems to our grid. This differs from hour to hour and depends on the weather. In 2017, for example, the daily values on 07 June were between 0 MW and 7,200 MW. Through Stabilisation of the costs of congestion management constant control, infeed and consumption are kept in balance and the In spite of the further renewable capacity additions of 2,100 MW in security of the electrical system as a whole is ensured. 2017, we were able to keep the congestion management costs at the previous year’s level. The newly built Southwest Interconnector af- fects congestion management by 50Hertz positively. After the first two circuits of the line were connected to the grid in 2015, we were . . able to save about EUR 80 million in redispatch costs the next year. in EUR million When the second circuit was commissioned in September 2017, the 400 Southwest Interconnector finally went into full operation after 15 354 years of planning and construction. The redispatch cost savings came to EUR 181 million in 2017.

300 Grid expansion has a positive effect Without the Southwest Interconnector, 50Hertz would have been able to transport far less power from the north and east of Germany 200 184 187 to the south. As part of the congestion management, we would have had to restrict cost-effective power plants in the 50Hertz grid area and instead, switch to power plants in Bavaria and Austria. Over the next few decades, more plants for the production of renewable ener- 100 89 63 gies will be built in our grid area. In view of this and the upcoming nuclear power phase out, the completion of this line is an important milestone on the way to a successful energy transition. 0 www.50hertz.com/de/Kennzahlen/redispatch-Rechner-SWKL 2013 2014 2015 2016 2017 Furthermore: On our company website, we provide live information on the current status of the savings and the current Section 13.1 Redispatch national, grid area 50Hertz Section 13.1 Redispatch international Section 13.2 Feed-in management renewable energies transport performance for the Southwest Interconnector. e values shown here refer to the service period. 16 50Hertz annual report 2017

Balancing group management Electricity is freely tradable. Traders, power distributors, producers Phase Shifter Transformers and grid operators are assigned to difference balancing groups in the

50Hertz grid area. Within each individual balancing group, power Phase shifter transformers (PST) are used to control the power infeed and consumption are held in balance on a quarter-hourly ba- flows. You can imagine a phase shifter transformer as an adjust sis. If balancing groups are not balanced, deviations from the overall able valve. In a line network, this valve changes the energy flows balance arise, which we balance. To do so, we take excess amounts and distributes them around. of electricity from or add balancing energy to the balancing group.

Corresponding balances are invoiced monthly with those responsible Thus, the overloading of individual lines can be avoided and lines for the balancing group. We maintain the balance between infeed and with lower loads can be used. Currently, 50Hertz operates two consumption for the sum of all balancing groups at all times. We use PST in Röhrsdorf at the transition to the Czech grid. Another is balancing energy to do so. under construction in Vierraden at the transition to the Polish grid.

market facilitation – We are an

innovative part of european market activity

Similar to traffic, electricity also flows across borders – and we want to Together with our neighbours and the market participants, we develop improve the international electricity flow. Due to our central location energy market products that facilitate the efficient use and control in Europe, we are predestined for this. 50Hertz is directly connected of the grids and the energy system. to the high voltage grids of Denmark, Poland and the Czech Republic as well as our German neighbours, and works closely with the operators We also take on new challenges: Thus, the increased infeed of wind of these grids. We are committed to the development of a European energy in the 50Hertz grid area placed an increasingly heavy load on internal energy market and are working to achieve this in numerous the interconnectors to Poland and the Czech Republic. This resulted in initiatives, collaborations and projects. 50Hertz also has shares in the loop flows, in which power from the north of Germany sought a way European Energy Exchange (EEX) in Leipzig and thus indirectly also to Bavaria and Austria via Poland and the Czech Republic. 50Hertz in the European Power Exchange (EPEX) in Paris. agreed with the transmission system operators PSE in Poland and CEPS in the Czech Republic, to better control these cross-border power flows: Therefore, phase shifter transformers (PST) were installed at the coupling points to these neighbours’ control zones. This has allowed us to efficiently control the power flows in the 50Hertz grid area, exploit transmission potential as fully as possible and significantly improve free power trading in Europe.

50Hertz is already a pioneer for the integration of volatile renew able energies. That is why we are developing solutions with over 70 partners in the “WindNODE” project, with which large quantities of renewable energies can be integrated into the system while keeping the electricity grids stable. → You can also read the “Committed Partner” chapter.

One of the two phase shifter transformers being discharges at the Röhrsdorf substation. our business 17

Discussion on regional cooperation on the Brussels stage. CEO Boris Schucht is there, too. He is presenting the 50Hertz perspective In front of 150 guests from politics, industry and society.

trusteeship – we rely on the cooperation of all stakeholders Sales and income IFRS in EUR million in our grid area 9,848 9,875 10,000 9,511 1,329 8,593 8,614 1,495 1,290 1,022 In addition, the German legislator has transferred the responsibil- 8,000 929 ity for coordinating and processing legal levy systems to promote 6,000 environmentally-friendly technologies to the transmission system 8,353 8,221 8,546 operators. These include, among others, the Renewable Energies Act 4,000 7,664 7,593 (EEG) levy and the Power and Heat Cogeneration Act (KWKG) levy. 2,000 We collect these levies as a trustee, administrate these and coordinate their distribution to the recipients. If the producers does not market 0 electricity from renewables directly, we sell this electricity on the 2013 2014 2015 2016 2017 power exchange. By doing so, we integrate renewable energies in the EEG and other operating revenues Grid revenues electricity market transparently. 18 50Hertz annual report 2017

Berlin on the way to a climate-neutral city Interview with Boris Schucht and Thomas Schäfer

The city of Berlin has set itself the goal of being carbon neutral by 2050. Thomas Schäfer, Chief Executive Officer of Stromnetz Berlin, and Boris Schucht, Chief Execu- tive Officer of 50Hertz, are committed to this goal. For both, it is clear that, in order to achieve this, Stromnetz Berlin and 50Hertz will have to redefine their roles, redesign processes and coordinate with each other. And both admit that on the way to a successful energy transition, they will be working even more closely together than ever before and in partnership with each other in the future. Berlin on the way to becoming a climate-neutral city 19

Berlin has set its climate target high. How can we achieve this goal and what challenges are we going to face? — Thomas Schäfer: Climate-neutral city 2050, that still sounds far away. But it is a topic that we are already addressing today. It is doable. For Berlin as a metropolis, this means an energy transition of up 20 percent for electricity and 80 percent for heating. The challenge will be to integrate renewable energies in the city.

— Boris Schucht: Climate change is, of course, not a question that a city like Berlin can solve alone. It is a global challenge to which every nation, every region and every city has to contribute. Thomas Schäfer is absolutely right. A very important aspect in order to successfully combat climate change is the integration of renewable energies into the entire power system. To do so, we have to create a different infrastructure to the one we have today. One that can transport electricity from the renewable energy regions to the consumer centres. But we also realise that we can achieve the climate targets relatively well in the energy sector. In other sectors, such as mobility and heat for example, this is much more difficult. Big cities are facing immense challenges related to the following question: What contributions

can be achieved in these two sectors in big cities? Specifically: How much CO2 savings can be realised on the mobility side and how can we bring renewable energies into the heat supply? All this is happening under the keyword “sector coupling”.

When sector coupling is spoken of, Power-to-X is always mentioned. Are there opportunities for these technologies in Berlin? — Boris Schucht: In the next few years, we will already have more days and hours in the north of Germany during which more renewable energies than we can use or transport will be available to us. In the meantime, we follow the principle of “utilise instead of switching off”. For example, this means that we can also produce heat from this renewable power. Berlin, with its large heat market, is a very interesting place for driving the development of power-to-heat solutions. We believe that this will be one of the most important instruments in the future for integrating more renewable energies into the district heating network and thus the urban centres.

Boris Schucht Chief Executive Officer 50Hertz 20 50Hertz annual report 2017

Sector coupling also plays a major role in electric mobility. What does this mean for the electricity grids of the future? Is our power grid built for 100-percent electric mobility at all? — Boris Schucht: The energy transition means an upheaval in the — Thomas Schäfer: The power supply seen in absolute terms is not energy system. In the past, a few hundred power plants in the vicinity currently suitable for switching personal transport over to 100 per- of the consumption centres were connected to the high voltage level cent electric mobility. This is precisely the challenge of the future: in Germany. Today, we have over 1.7 million distributed installations Developing our entire power grid and private transport so that this – and this number will increase. A much higher proportion of the integration succeeds. What we already know is that, in Berlin, we are system control will have to be performed in a decentralised manner ready to add the first 250,000 electric vehicles to our distribution grid at the medium and low-voltage grid level. On the other hand, there without having to significantly change anything about the structure. is the higher-level transport and coordination requirement at the So we are ready for electric mobility. However, the extent to which we European level. can achieve 100 percent electrification of transport will initially need to develop socially. This is what is so exciting about this turnaround What challenges do you see in the decentralisation of power situation. It is not just a parameter that will change but rather the generation? whole world. And we have to be prepared for this. — Thomas Schäfer: We are already seeing the challenges today in Berlin’s distribution grid. We have more than 1,500 Co-heating power — Boris Schucht: It is clear that in a battery-based world of electric units or micro power plants and around 6,000 photovoltaic systems in mobility, it is necessary to ensure that, in addition to planned grid our grid. We can see that the Berlin customers are very open to new expansion, no unnecessary expansion takes place and that we make things – for example, we are mapping more than 270 tenant electricity optimum use of the existing infrastructures. In the transmission projects on the basis of the Tenant Electricity Act. To date, this is unique grids, there is no restriction to electric mobility, and we can envisage in Germany. We are continuously learning about the impact this change a high proportion with ease. is having on the quality of supply in the low-voltage grid. That is why we have begun to visualise the low-voltage grid in our central grid management. This is an epochal change. We have to develop technology and processes in order to develop new low-voltage grid management. Not only is grid management in focus; we will also need to develop a new form of communication with our customers. This is exactly the way to achieve the energy transition.

— Boris Schucht: We can see the effect of more and more households having a photovoltaic system on the roof and a battery in the basement. In doing so, they are no longer following a statistical model as to how an end user should behave. This raises several questions: For the distribution system operators, it is important to see what is actually happening right now and how the distribution grid is loaded in this second. Is the customer currently charging or discharging his battery? Perhaps he is also charging an electric vehicle at the same time? These are questions we will have to address together in the future. We have to handle the amount of possible data that we will receive from the transmission and distribution grids in a way that makes sense in the future. This will require significantly more intelligent grids, in terms of both the transmission grids and the distribution grids.

Thomas Schäfer Chief Executive Officer Stromnetz Berlin Berlin on the way to becoming a climate-neutral city 21

What role will grid operators play in the future? And we have to find out together with 50Hertz how these processes can — Thomas Schäfer: The lower the voltage level, future grids will be be designed in the future. more interesting and also intelligent. This is a completely new trend. The energy transition is happening in cities and in the medium and — Boris Schucht: I can only agree with this. The distribution system low-voltage grid areas. But it will only work if we have strong high and operators will be given new tasks and cooperation will become more extra high voltage grids. However, visualising the change, controlling complex. This will only succeed if both sides work very closely together. it and intervening intelligently, interaction between the customers I would like to mention a pioneering project for the energy sector, which connected to the grid, and the electrical system all take place in the we are driving together: In our SINTEG* project, WindNODE, we are medium and low-voltage grids. Therefore, in the future, the role of the developing solutions for the energy sector of the future together. In transmission system operators in system management and the distri- the interplay between what are now more than 70 project partners, bution system operators in grid management will change dramatically. including a wide range of distribution system operators as well as equipment manufacturers and customers, we are testing different What will this cooperation look like in the future? scenarios. How do we deal with local congestions and how can we — Thomas Schäfer: Traditionally, we work precisely at the interface overcome them? Which options to control the system are available between the transmission and distribution grids. Our colleagues have and how do we organise such control in detail? The goal is to use an being doing it this way for the last 40 years. We are now considering intelligent control system to prevent power outages and also to avoid what challenges we will have to face at the level of the distribution grids unnecessary grid expansion. We realise that we are dependent on each and what that means for cooperation with the transmission grids. This is other in these areas. Even if interests sometimes differ as to who plays uncharted territory. Stromnetz Berlin is responsible for controlling the what role where, in the end, we are all bound by the same objective of distribution grid and sees the control and adaptation requirements in finding the best and most cost-effective solutions for society in order to the Berlin medium and low-voltage grid as being in indirect interaction be able to provide a cheap and reliable power supply for grid customers. with the customers. We are still at the beginning of the road and have → You can also read about WindNODE in to find out what this actually means. our “Committed Partner” chapter.

* The funding programme “Schaufenster intelligente Energie – Digitale Agenda für die Energiewende” (SINTEG: Showcase Intelligent Energy – Digital Agenda for the Energy Turnaround) aims to develop and demonstrate scalable model solutions for a safe, economic and environmentally sustainable energy supply at high proportions of fluctuating electricity production from wind and solar energy in large “showcase regions”. The solutions found should serve as models for widespread implementation. The focus is on the intelligent networking of production and consumption as well as the use of innovative network technologies and operational concepts. 22 50Hertz annual report 2017

finances Sustainable business activity requires responsible and solid financing

We have given ourselves demanding targets. This is reflected in an ambitious investment programme for the next few years, with which we will provide vital support for the energy transition.

50Hertz, as the core company in the Eurogrid Group, has already in- – We finance our investments in conservative manner. We do not take vested EUR 3.1 billion in the expansion of its grid and the construction speculative approaches when it comes to selecting financing instru- of wind farm grid connections in the last five years. And we will invest ments and their collateral security neither regarding rescheduling at least the same amount again in the coming years. (always taking the “golden financing rule” into account) – The structure of the entire financing depends on the volume of the individual investment projects and the respective temporal capital in EUR millions commitment of the investment measures. – We only make use of well established financial instruments, whose EUR 3.1 billion EUR 3.3 billion economic and legal effects can be assessed by us. 1,000 – We mainly focus on public capital markets. This enables us to provide transparency on our financing terms. 800 – Sustainable corporate value creation contributes to the overall financ ing. We measure the companies’ debt service efficiency accordingly. 600 600 419 EUR 461 million 308 400 154 247

200 302 318 248 264 214

0 2013 2014 2015 2016 2017 ø 2018 – 2022* Onshore

* estimation

These investments must be financed. As a result of the long-term planning horizon of our investment measures, a sustainable financing million 461euros was our investment volume in 2017 strategy is required, which can be regarded as a reflection of the invest ments. Within this strategy, we are guided by the following principles: (not including financial investments). finances 23

in EUR million

1,000 EUR 1,407 million 900 900 775 800 700 632 600 cashflow 500 in EUR million 400 Liquidity at the beginning of the year EUR 1,223 million 300 200 Cash flow from operating activity EUR 750 million 100 Cash flow from investment activities EUR – 466 million 0 Free Cash Flow EUR 284 million Core business* EEG Open credit lines Cash flow from financing activities EUR – 100 million * incl. other levies (e.g. oshore liability levy) Liquidity at the end of the year EUR 1,407 million

A STRONG BALANCE SHEET WITH ROCK SOLID FIGURES financing. The conditions for a positive rating are in place, through which good capital market access will remain easy in the future. The sustainable financing strategy is supported by a solid balance sheet. Shareholders and management take the interests of our exter- In the context of the sustainable business activities of 50Hertz, we are nal capital investors into account in management decisions. This was currently assessing another financing option looking at the dynami- again confirmed by the Moody’s rating agency with a stable outlook cally developing market for so-called “Green Bonds”. for our rating in Investment Grade Baa1.

Key Figures Consolidated Balance Sheet, IFRS in EUR million

2017 2016 Assets 7,114 6,642 + 7% Equity 1,381 1,297 + 6% Equity ratio 19% 20% – 5% Equity capital ratio core business (w/o EEG) 25% 25% Net financial debt 1,441 1,625 – 11% Net financial debt core business (w/o EEG) 2,216 2,217

A stable core capital ratio and the availability of liquidity resources to ensure solvency at all times underlines the robustness of the approach. The long-term tied assets from the balance sheet are almost completely covered by equity and financing provided on a long-term basis. This, in turn, creates the base for covering a future need for external financing on the capital market. We will finance future growth to 40 percent through internal funds, while 60 percent is to come from external 24 50Hertz annual report 2017

KEY FIGURES CONSOLIDATED PROFIT AND LOSS ACCOUNT The grid revenues effecting the income statement are made up of in EUR million different components.

2017 2016 The graph shows both the structure and the development of these Revenue 9,875 9,511 componnts and their share of revenue for 2017: thereof revenue grid business 1,329 1,290 EBITDA* 471 376 () . , [ : , ] Earnings before interest and taxes (EBIT) 322 238 in EUR million in EUR million Earnings before taxes (EBT) 277 182 Consolidated result (net profit) 182 128 1,200 1,120 210 [167] 952 [960] * Earnings before interest, taxes, depreciation on property, plant and Horizontal grid revenue Vertical grid revenue equipment and amortisation of intangible assets 960 incl. compensation* 1,000 952 346 94 [99] 815 183 192 Revenue energy business 800 723 97 33 40 44 59 18 SUSTAINABLE EARNINGS IN 2017 73 [64] 11 191 66 132 207 198 Other revenue 600 587 In the reporting year 2017, the Eurogrid Group generated a result after 176 233 154 128 97 taxes of EUR 182 million. This good result underlines the profitability 518 400 of 50Hertz, with which the operational expenditure, interest rate for borrowing as well as the increasing depreciation resulting from the 402 421 * corresponds to real upper revenue limits 392 396 growing assets could be serviced. Beyond that, the remaining available 200 354 means were invested in our grid infrastructure.

0 The total revenue includes revenues from the fiduciary surcharge 2013 2014 2015 2016 2017 business and processing() of legal levy systems. The entire surcharge . , [ : , ] business has no effect in the income statement of 50Hertz. These rev- in EUR million Congestion management Oshore Baltic Sea Oshore North Sea inenues EUR million are offset against corresponding expenses. Grid losses and system services Onshore

1,200 1,120 210 [167] 952 [960] Horizontal grid revenue Vertical grid revenue 960 incl. compensation* 1,000 952 346 94 [99] 815 183 192 Revenue energy business 800 723 97 33 40 44 59 18 73 [64] 11 191 The upper revenue limit without 66 132 207 198 Other revenue 600 energy transition costs fell by 587 176 154 97 233 128 518 400

402 421 * corresponds to real upper revenue limits 392 396 200 354

0 percent 2013 2014 2015 2016 2017 12 Congestion management Oshore Baltic Sea Oshore North Sea last year. Grid losses and system services Onshore finances 25

ertz in ct/kWh

4 3.74 – 11 %

3.34 3

Know the company figures down to the smallest detail: 2.25 2.23 2.66 Chief Financial Officer Marco Nix and 2 Boris Schucht, Chief Executive Officer 2.02

The grid revenues thus crucially depend on the regulatory framework, which is determined by the Federal Network Agency through the estab- 0 lishment of a so-called revenue cap for a period of 5 years. In case the 2013 2014 2015 2016 2017 2018 determining parameters for this revenue cap are seized too narrowly, the resulting reduced profitability could jeopardise the further growth of 50Hertz.

The reduction in the equity yield rate applicable from 2019 under the to the energy transition by around 12percent over the last 5 years. requirements of the Incentive Regulation Ordinance (ARegV) will lead, (Figure: “Vertical Grid Revenues”). for example, to an imputed equity yield rate reduction from 7.4 percent to 5.6 percent for 50Hertz. The equity on operating assets can thus only GENERAL STATEMENT FOR THE GROUP AND make a smaller contribution to the result in the future than in previous OUTLOOK FOR 2018 years. This leads to a reduction in the result of more than 20 percent. The economic situation of the Group is significantly influenced by At regular intervals, we check the efficiency of our business processes the regulatory framework conditions in grid operation by 50Hertz. for the benefit of our customers and, of course, also in order to make an – albeit temporary – contribution to the result. To this end, we carried The increase of earnings in 2017 shows the relevant revenue effect of out an efficiency project in 2017. The aim of this project was a saving of higher investment activity in the group as well as further effects of the 8 percent on our controllable costs. First measures were already com- efficiency project, whereof only a smaller part is long-term in nature. pleted in the reporting year and had a positive effect on the operating To further achieve a positive contribution to the result in subsequent cost structure, without having to reduce quality standards. years, these rather one-time effects are now to be underpinned by long-term effects of the efficiency project. Over the next few years, other pending actions will contribute to per- manently stabilising the profitability of 50Hertz. The rising financing The financing volume was covered from the funds from internal costs from the growing financing volume, as well as the long-term pro- financing for the reporting year, as well as from the funds already visions caused by lower interest rates, have a disproportionate impact raised in the previous year. on the financial result. We are assuming a comparable investment volume for 2018. If neces- WE ARE MAKING OUR CONTRIBUTION TO THE ENERGY sary, we will decide on the availing of additional funding in considera TRANSITION THROUGH SUSTAINABLE MANAGEMENT tion of the generated cashflow. We are planning a lower result after tax compared to 2017. We keep costs under control for our customers. To achieve this, we focus on tailor-made financing, sustainable investors, competitive tenders and intelligent solutions. Our decision in favour of shared use of offshore platforms and specific efficiency approaches will prepare for limited capital costs and operating costs. In congestion management, we also reduced costs, through intelligent processes, e.g. re-dispatch. Thus, we have succeeded in reducing costs that are not attributable 26 50Hertz annual report 2017

Our Sustainability Strategy

Over 300 years ago, the Freiberg Chief Mining Officer Hans Carl von Carlowitz adopted sustainable forestry as a principle. Just as the concept of sustainability once advanced forestry, it has been increasingly determining corporate activity for a number of years now. Carlowitz called for nature and raw materials to be handled with care. Today, the topic of sustainability has long been expanded upon with further content. 50Hertz has adopted sustainability as a company maxim in its principles and policies. 27

In exceptional cases, technicians and engineers control the 50Hertz grid from the Reserve Control Center (RCC). 28 50Hertz annual report 2017

“We take the principle of sustainable efficiency very seriously.” Marco Nix, Chief Financial Officer

Can the historical principle of sustainability even be transferred to a modern company like 50Hertz? — Marco Nix: We have to weigh up what we should and shouldn’t do! In my opinion, this is the essential lesson to be learned from Carlowitz. It is not always possible to balance financial and efficiency goals, occupational safety goals and the 50Hertz corporate culture without conflict. But above all come the objectives of demand-oriented grid expansion and ensuring security of supply. Company management has prescribed principles that set out working norms and standards for occupational safety, environmental protection, human rights and combating corruption. Since April 2017, we have been involved in the German Global Compact Network, and are part of this world-wide value alliance. Our employees work according to policies based on these values. In IT and occupational safety, we comply with the basic statutory requirements and have set out our own policies. In many places these go beyond the legal requirements. our SUSTAINABILITY STRATEGY 29

INFORMATION SECURITY MANAGEMENT SYSTEM

The 50Hertz information security management system is certified according to ISO27001. Thus, the system introduced over the last two years corresponds to the legal framework of the IT security catalogue of the German Energy Industry Act (EnWG) for operators of critical infrastructure. This means that 50Hertz has met the legal requirements as the second of the four German transmission system operators on time.

Sustainability will become more and more an integral part of our corporate strategy.

Why do you consider it so important? Does this make the company’s internal processes more efficient? — Marco Nix: In the future, nobody who fails to respect these values — Marco Nix: The new system has helped us to examine our pro- will be able to be commercially successful. It is becoming increasingly cesses with a view to the safety requirements and, if necessary, to common for investors to demand sustainable strategies, in order to correct them. Based on the regulatory period specified by the BNetzA, thus reduce their own risk. 50Hertz investments are already measured 50Hertz reviews the efficiency of company-wide processes every five by how sustainable and resource-conserving they are in the medium years. In 2017, this was particularly important, as our business had and long term. And this no longer only applies to so-called sustain grown very strongly over the past few years. Our internal company ability funds. In the future, anyone who fails to anchor their business processes were also changing at a rapid pace and in part had to be strategy in sustainability will find it difficult to survive. Reputation completely revised. In the context of the efficiency project, we carried and sustainability are decisive for the success of a company. out an extensive process inspection in 2017. We can be quite satisfied with the initial results. With a cost base that is below what is legally Your investments are, in particular, long-term investments. How prescribed for efficiency efforts, we undertook to save about eight can you successfully oversee the risks over these periods? percent compared to the planned cost. These savings initially benefit — Marco Nix: Our company consists of more than just masts and 50Hertz and, in the medium term, our grid customers. We can prove transformers. With these investments, we keep a very close eye to the BNetzA that we keep an eye on the costs of the energy transition on the risks; in the area of offshore grid connections, our learning us and that we take the concept of sustainable efficiency seriously. curve is also very steep. Energy markets, energy procurement, system management and IT are moving far more quickly. Here, we are constantly setting ourselves new challenges. Technical components and standards in these areas are developing very dynamically. In system management, we have rolled out and had a comprehensive security system certified on the basis of the Bundesnetzagentur (Federal Network Agency) IT Security Catalogue. This certification is demanding on businesses and employees, I realise this. But at the same time, with the information security management system, we now have information structures that notify us of critical points in our applications. We are currently assessing this with our system partners and suppliers to find out where we need to be even better. 30 50Hertz annual report 2017

FOR A SUCCESSFUL ENERGY TRANSITION IN A SUSTAINABLE WORLD

STRATEGy aND MANAGEMENT

STRATEGy A company-wide panel, chaired by the Chief Finance Officer and the Chief Human Resources Officer, controls this development – from the Responsible corporate management and a vision led by social inter- development of measures to reporting. ests – this is what distinguishes 50Hertz. Motivated by the vision of a successful energy transformation – for a sustainable world, we have MATERIALITY set ourselves strategic objectives: We want to make grids suitable for increasing the shares of renewable energies, maintain the level of 50Hertz has examined the economic, ecological and social impact of security of supply and, in doing so, achieve a competitive result. At the its own business activities in accordance with the G4 Guidelines of the same time, we have to focus even more on occupational safety, increase Global Reporting Initiative (GRI) on sustainability reporting. We have the efficiency of our activities and continue to promote a value-based translated the general aspects stated therein into topics that are relevant corporate culture. for 50Hertz and have compared these to the interests of our stakeholders with the help of benchmarks, peer group reports and surveys. With In its own Corporate Charter, 50Hertz has undertaken to act in accord- the aim of systematically further developing the materiality analysis ance with the ten principles of the UN Global Compact in the areas of and sustainability management, a detailed survey of stakeholders was working norms, occupational safety, environmental protection, human conducted in the third quarter of 2017. This group includes shareholders, rights and combating corruption. We joined this important global the public, non-governmental organisations (NGOs), politicians, regu value alliance in April 2017 and have become increasingly involved lators, investors, media, customers, suppliers and representatives of in the German network. We are committed to transparency: All ap- the 50Hertz workforce. The qualitative survey confirmed the essential plicable guidelines, policies and manuals, work instructions, process reporting topics. At the same time, it demonstrated the desire among manuals and operating agreements are available to our employees in respondents for 50Hertz regional centres to be more closely involved our company documentation. in regular stakeholder dialogues than before.

MANAGEMENT

The 50Hertz Board of Management consists of four members: Boris Schucht (Chief Executive Officer, CEO), Dr. Dirk Biermann (Chief Mar- kets and System Operations Officer), Dr. Frank Golletz (Chief Technical Officer) and Marco Nix ( Chief Finance Officer). Our Chief Human Resources Officer, Dr. Katharina Herrmann, completes the extended Board of Management.

The aim of the Board of Management is to successfully continue to develop the company sustainably. In the context of the sustainability strategy, goals, indicators and measures are systematically further developed, reviewed, and thus anchored in the corporate strategy. our SUSTAINABILITY STRATEGY 31

THE THEMATIC FIELDS CONFIRMED IN THE STAKEHOLDER SURVEY ARE THE BASIS FOR THE 2017 REPORTING:

SOCIAL

Occupational health Stakeholder 7 9 and safety dialogue Employee Customer relation- 8 commitment, 10 ships, cooperation education and and networks Security of 1 further training supply Energy and Social 13 11 emissions 2 Grid development engagement

Costs and process Diversity and equal Nature conservation ECOLOICAL 3 12 14 e ciency opportunities and species protection System and market integration 4 of renewable energies Operational environ- Governance, risk management mental protection and 5 15 and compliance conservation of resources 6 Supplier relations ertz

OUR TARGET VISION FOR SUSTAINABLE ACTION:

1 – High security of supply through 7 – Prevention of work-related accidents 12 – Equal and fair participation of all sustainable system, market and grid – Promoting awareness for safe employees operation behaviour – Supporting people with disabilities – Top performance in comparison to other – Re-certification of the occupational in working life grid operators safety management system – Maintaining the gender quota for – Certified information security manage- all management levels ment system 8 – High employee commitment – Promotion of needs and target-oriented 2 – Need-based grid expansion development and further training – Reduction of connection costs for – Offering internal development and career offshore wind farms opportunities

– Continuous improvement of – Early public participation 3 9 – Minimising controllable energy process efficiency – Applying the 50Hertz standards regarding 13 consumption and emissions – Sustainable increase of cost information, dialogue and participation to – Replacement of the SF6 greenhouse gas efficiency all relevant projects – Establishing a lessons learned process, – Minimising intervention in nature and – Comprehensive system integration of including evaluation for public 14 4 the landscape when building lines and renewable energies, among other things, participation substations through physical grid connection of – Implementing compensation measures particularly system related components 10 – Intensifying cooperation and networks with the greatest benefits to the whole with customers and with politically and of society – Improved cooperation in the three socially relevant stakeholders 5 – Forward-looking, intervention-minimi- GRC fields – Reliable and timely communication with sing and ecologically sustainable line and – Strengthening the internal control systems customers route planning and the compliance function – Use of customer surveys as a basis for – Better protection of birds and amphibians – Set-up of a supervisory committee at further improvements holding level 15 – Prevention and recycling of waste – Introduction of a tax compliance – Appropriate, systematic support for 11 generated when building, operating and management system social, cultural and community pro- demolishing plants jects 6 – Consideration of environmental awareness and occupational safety standards for selection of suppliers – Increase ratio of companies with Further informationen is available according certification at: csr.50hertz.com

32 50Hertz annual report 2017

In the process of the materiality analysis, the 50Hertz stakeholder environment was analysed and defined:

GOVERNANCE, RISK & COMPLIANCE LEGAL FRAMEWORK CONDITIONS

The framework for our business activity is provided in particular by For 50Hertz, sustainable corporate governance includes purposeful the following important national laws and European regulations corporate structures with clear responsibility and control functions. and directives: Our organisational structure is based on common corporate governance requirements, while at the same time including company-internal – The Energy Industry Act (EnWG) requirements. These have been set out in the Corporate Charter and – The Renewable Energies Act (EEG) internal policies, and focus on particularly important fields of action – The Combined Heat and Power Act (KWKG) – The Federal Emissions Control Act (BImSchG) and positions. The EU has agreed on a policy and target package that – The Federal Nature Conservation Act (BNatSchG) contains targets for climate protection and energy consumption up – The Law on the Digitisation of the Energy transition to 2020. The Federal Republic of Germany has adopted policies for an – The Energy Efficiency Directive of the European Union (EU) environmentally responsible, reliable and affordable energy sup- – The Habitats Directive of the EU and ply. On this basis, the business activities of 50Hertz are subject to – The Birds Directive of the EU. numerous national and European regulations, according to which we align our actions. In 2017, numerous laws in the field of energy An overview of the key strategies, laws and regulations can be found at changed substantially. In the newly adopted Grid Fees Modernisation Act (NEMoG), 50Hertz’ long-standing demand for nationwide allocation www.bmwi.de/Redaktion/EN/Publikationen/ of transmission grid fees has been heard. With the amendments to the gesetzeskarte.html Spatial Planning Act and the Federal Nature Protection Law as well as a law for the modernisation of the environmental impact assess- our SUSTAINABILITY STRATEGY 33

130 guests attended the Supplier Day 2017 in the 50Hertz Netzquartier in 2017.

ment, the legislator partially adapted the framework conditions for parently and are publicly available at all times. The communications the expansion of the grid. In the change to the Electricity Grid Access and public affairs department is responsible for this. We therefore Regulation, published on 23 December 2017 in the Federal Law Gazette, practice political communication responsibly and refrain from making the German transmission system operators were given requirements party donations in any form. The company-wide guidance coordinat- for maintaining the single German bidding zone. At European level, ed with the Board of Management on decision-making practices in the EU Commission, the European Parliament and the Council are the political environment was updated in 2017 to include a chapter continuing negotiations on the so-called Winter Package (Clean Energy on “Ethical principles for political representation of interests”. This for all Europeans Package). This will have a significant impact on the specified that 50Hertz does not make donations to politicians, parties core business of the transmission system operators. or political institutions. In the case of sponsorship, attention is paid to appropriate consideration and balance. The responsibility for donations The legislator has a strong influence on 50Hertz’ business activities. to foundations and associations affiliated with parties is centrally This is why our positions are brought into the political process trans- anchored in the f communications and public affairs department. Our employees who are active in the areas of public and external affairs are familiarised with these policies and recommendations in specif- Clean Energy for all ic training programmes, so they can base their communication and Europeans Package actions on clearly defined principles. 50Hertz is also entered in the “EU Transparency Register”. This transparency register is a publicly

In November 2016, the EU Commission has presented the draft accessible database, in which all of the activities of interest groups at of the “Clean Energy for all Europeans” legislative package (the policy level are recorded. The Code of Conduct of the EU Transparency so-called EU Winter Package) compiling a total of four directives Register requires that all players must adhere to directives and regu- and four regulations. These include proposals to improve EU-wide lations on dealing with political decision-makers. We have voluntarily further coordination of national energy policies to reform energy undertaken to comply with this Code of Conduct. efficiency policies and promote renewable energy sources, as well as a European power market design and cooperation between the transmission system operators. The EU Commission’s legislative package is to set a framework for EU energy policy over the coming years, and pays particular attention to the establishment of an EU energy union of Member States.

https://ec.europa.eu/energy/en/topics/ energy-strategy-and-energy-union/ clean-energy-all-europeans 34 50Hertz annual report 2017

SUSTAINABLE VALUE CREATION IN THE 50Hertz GRID AREA

In 2017, 50Hertz purchased goods and services from Germany-based companies to the value of EUR 339 million. Thereof, EUR 214 million were paid to companies located in the 50Hertz grid area. This corresponds to a ratio of more than 63 percent.

Uwe Herzfeld, Head of Purchasing at 50Hertz: making the representatives of our suppliers aware of the sustainability topics.

COMPLIANCE AND ANTICORRUPTION For 2018, three training courses for approximately 40 further participants are planned. In its corporate activity, 50Hertz complies with the law. We do not give corruption a chance. In our Company Charter as well as our Since 2010, a directive has regulated our whistle-blower system and internal policy for corruption prevention, we have specified what prescribes the establishment of an internal Compliance Committee we consider to be ethically correct corporate conduct. We implement and an external Ombudsman. The Compliance Committee consists these principles as organisational measures. These apply company- of one member each from Legal and Human Resources as well as the wide and are binding for all employees as well as for the 50Hertz Compliance Coordinator. Once a year, the Ombudsman reports to the Board of Management. committee in writing on his activities and informs of the number of notices received. If the Ombudsman forwards a substantiated notice In June 2017, the European Money Laundering Directive was adopted of an offence to 50Hertz, the Compliance Committee is convened into national law. As 50Hertz does not conduct any cash operations, immediately. It addresses the respective case and if necessary ini- the introduction of risk management within the meaning of money tiates internal steps. The committee reports to the 50Hertz Board of laundering law was not necessary. However, we are expressly com- Management once a year and as required. mitted in this context to conscientious compliance with the general duty of care obligations. Therefore, our supplier manual includes In 2017, the Ombudsman did not receive any corruption notices. The reference criteria and these criteria are further specified for man- Compliance Committee was convened anyway, as the committee agers responsible for the different balancing zones. Contradictions became aware of a proposed contribution to the capital reserves of in the legal registry entries have been corrected. a foundation. An internal investigation was launched, during which a lack of clarity concerning the process was identified but no breach In order to minimise the risk of corruption, we regularly train all of a directive could be identified. In the reporting year 2017, no sig- employees involved in the purchasing process on the basics of pro- nificant fines were legally imposed against 50Hertz in relation to the curement, anticorruption and rule-compliant behaviour. Therefore, general business activities, line construction or grid operation. For in 2017, five training courses involving a total of 55 workers took the delimitation of administrative offences, the reporting threshold place across all business locations. 14 training courses have taken was set at EUR 25,000. place since 2016 for 151 employees throughout the company across all locations. our SUSTAINABILITY STRATEGY 35

RISK MANAGEMENT IT security

In our corporate activities, we always weigh up opportunities and Being an operator of so-called critical infrastructure, the IT securi- risks to us and our social environment. Therefore, 50Hertz regularly ty law applies for 50Hertz: We need to ensure information security. records and assesses the following areas in the context of systematic 50Hertz is therefore obliged to organise the processing, storage and risk management: communication of information in such a way that the availability, confidentiality and integrity of information and systems is sufficiently secured. On the basis of an IT security catalogue by the Federal Net- Risik Areas work Agency (Bundesnetzagentur, BNetzA), we introduced and had an information security management system certified according to – Protection of life and limb ISO 27001 in January 2018. With the introduction of this system, we – Profit and loss reviewed our internal IT processes and the interfaces to our partners – Liquidity and made them even more secure and efficient. – Reputation – Security of supply. In 2017, the Federal Office for Security in Information Technology (BSI) forwarded a total of 32 security instructions and warnings to 50Hertz. These were assessed and processed by our IT division. Recommended protective measures were – insofar as possible – implemented. Concrete attacks on our systems were not detected. The operational tasks of IT 50Hertz strives at all times to prevent risks that jeopardise the existence security also include detecting, analysing and removing viruses and of the company, to reduce risk positions as purposefully as possible and spam e-mails as well as monitoring the Internet presences of 50Hertz. to optimise the risks-opportunities profile. This is why we have set out In the past year, no cyberattacks on 50Hertz were registered. in a risk policy how risks are systematically identified, assessed and monitored by us on a quarterly basis. At an annual risk conference, all head of departments as risk owners and the risk managers meet with the Board of Management to discuss the central risks and risk-related CRITICAL INFRASTRUCTURE topics. In the context of our social responsibility, among other things, these concern occupational safety and new requirements under envi- Critical infrastructures are facilities, technical assets and ele- ronmental legislation. ments thereof that are immensely important for the functioning of the commonwealth. Their failure or detraction would result in significant bottlenecks of supply, threats to public safety or In the sense of a holistic approach to risk management, we involve our other dramatic consequences. These infrastructures include, for suppliers and the associated processes. We have anchored requirements example, the following sectors: regarding occupational safety and environmental protection in our purchasing and procurement policy, which are binding for all suppliers. In – Energy and water supply the future, we will analyse our influence on the structure of sustainable – Information technology and telecommunications supply chains in detail, expand upon documents relevant to our suppliers – Medical care on sustainability-related aspects and make our business partners even Ensuring the protection of such critical infrastructure is a core task more aware of occupational safety, health protection and environmental of state and corporate security provision and a central theme of protection topics. security politics in Germany. Being an operator of such critical → You can also read our “Preferred Employer” chapter. infrastructure, 50Hertz bears a high level of social responsibility. With the advanced digitisation of technical assets and operations, In order to minimise risks to our social environment and, at the same the need to guarantee information security accordingly is in time, explore opportunities to further shape it sustainably, we engage creasing. The legal framework is set by the IT security catalogue according to §11, para. 1a EnWG of the Federal Network Agency for in an intensive and open dialogue with all stakeholder groups affected Electricity, Gas, Telecommunications Post and Rail (BNetzA). by our activities. → You can also read our “Committed Partner” chapter. 36 50Hertz annual report 2017

PREFERRED EMPLOYER The further development of our value-based corporate culture is one of our top objectives

Employee development, health and participation are a significant part of responsible and sustainable corporate management. Diversity and equal opportunities also reflect the canon of values and thus the corporate culture of 50Hertz. 37

Knows how important work safety is: Franz Seifert, Regional Centre West in Wolmirstedt. 38 50Hertz annual report 2017

“our DEMANDS OF THE CORPORATE CULTURE ARE HIGH.” Interview with Dr. Katharina Herrmann, Chief Human Resources Officer

What topics were most important for you as CHRO in 2017? — Katharina Herrmann: Clearly, the issue of occupational safety is the most important concern for me. In 2017, we laid a lot of new groundwork so that all 50Hertz employees and our partners can go home from work healthy and happy. Together with our contractors, we actively worked on the topic of occupational safety. After three years of preparation and a mutually instructive, joint growth process, we have been able to integrate the basics of occupational health and safety as a relevant part of the new contracts with our partners. We developed a point system with an escalation model which also means that the high occupational safety requirements are visible to and complied with by our partners. So we can now make sure that, even in the financial accounting of projects, our requirements are implemented by our partners. PREFERRED EMPLOYER 39

50Hertz also engages in open and honest dialogue within the company. How does this work in detail? — Katharina Herrmann: Our “Say it!” employee survey was conducted in November 2017 for the third time already, with a detailed assessment in the first quarter of 2018. The intensive dialogues on this began immediately afterwards. This also includes reflecting within the team on the effects of the measures implemented after the previous survey. What do we do well and where can we improve? What topics are important to us all? An employee survey is always a good reason for team development, too. I was particularly pleased that the employee commitment had remained at the same high level as the 2014 employee survey. This is particularly impressive against the background of the strong growth of 50Hertz in recent years. We have convinced all of our new colleagues that it is a pleasure to work at 50Hertz, shaping the energy transition. For Chief Human Resources Officer, Dr. Katharina Herrmann, This is certainly also due to the active participation of occupational safety is of the utmost importance. the workforce in company affairs. What were you especially pleased about? — Katharina Herrmann: In addition to the voluntary equal rep- We gained two important insights: Our application processes are very resentation on our Supervisory Board, we also try to motivate the fair, because both women and men come through the different applica- younger members of our workforce to get involved in co determination tion levels equally successfully without being given any preference. But at an early stage. I am particularly pleased that, after being elected we simply receive too few applications from women for the technical at the end of 2016, our youth and apprentice representatives (JAV) professions and projects. With only ten percent of women in the appli- were able to get actively involved for the first time in 2017. The JAV cation procedure for technical profiles, we are unable to increase the representatives, for example, looked at the training conditions in all percentage of women at 50Hertz. Within the company, on the other hand, professional areas and searched for opportunities to improve. This a much larger proportion of women also apply for technical projects. resulted, among other things, in a new, uniform evaluation form for I hope this will also be the case for our external applications in the trainees across all locations. future.

How does 50Hertz ensure a diverse workforce? — Katharina Herrmann: The structure of our co determination and Number of employees the many other Works Council committees stand, on the one hand, for a high level of workforce involvement, but also require a high level 31/12/2017 of commitment by the individual. Many different committees, for Entire group 1), 2), 3) 1,043 example, the inclusion team, are active at 50Hertz and stand for the of which were temporary contracts 39 diverse composition of our company. The step from co determination to diversity is not very big at all. Of course, we also employ diversely. of which were permanent contracts 979 The number of different nationalities has developed very positively. of which were part-time 56 This year we have a severely disabled trainee for the first time. And of which were full-time 962 we also have a very active women’s network. of which were trainees 25

1) Not including personnel leasing. What is yet to be done to promote women at 50Hertz? 2) Including inactive employees. — Katharina Herrmann: This year, we analysed our application 3) Consolidation group: Eurogrid GmbH, 50Hertz Transmission GmbH, 50Hertz Offshore GmbH. processes in detail for the third year in a row. How many women and men applied for which positions? How is this percentage broken down at our company and to what extent does it reflect the labour market? 40 50Hertz annual report 2017

PREFERRED EMPLOYER

At 50Hertz, we are successful because our employees are. Helping them to develop, promoting their commitment and health, involving them in decisions and guaranteeing equal opportunities for all, is an essential part of our corporate responsibility.

AGE STRUCTURE – AVERAGE AGE IN YEARS We have adopted the maintenance and further development of our value-based corporate culture as one of the top objectives for the compa- 31/12/2017 ny and made this the strategic basis for all personnel-related decisions. Responsibility for questions pertaining to human resource strategy in Entire group 1) 43.2 the extended Board of Management lies with Chief Human Resources Tariffs area 42.6 Ofiicer Dr. Katharina Herrmann. Non-tariff area 47.7 Executive employees 52.4 A business plan that is updated annually, based respectively on a five- year period, provides the framework for qualitative and quantitative 1) Consolidation group: Eurogrid GmbH, 50Hertz Transmission GmbH, 50Hertz Offshore GmbH. Persons at group level including trainees and inactive employees. personnel planning. Beyond collective agreements and works agreements, 50Hertz has committed itself to internationally established NUMBER OF EMPLOYEES – policies, to the core labour standards of the International Labour Or- ACCORDING TO AGE STRUCTURE AND GENDER ganisation (ILO) and the workers’ rights of the UN Global Compact.

Age Women Men Our workforce consisted of 226 female employees and 817 male em- 15–19 1 8 ployees on 31 December 2017. The average age of our employees is 43.2. 20–24 4 19 EDUCATION AND FURTHER TRAINING 25–29 17 70 30–34 48 126 The 50Hertz workforce is highly qualified and informed of current 35–39 37 131 developments. We offer our employees individually tailored further 40–44 28 82 training and relevant additional qualifications. Needs-based training courses allow all our employees to further develop defined areas 45–49 25 90 of competence in a targeted manner. The average training costs per 50–54 20 104 participating employee came to about EUR 1,350 in 2017. 55–59 29 109 60–64 16 76 We endeavour to ensure that a sufficient number of potentially suitable 65–69 1 2 employees are available for all management positions at 50Hertz. To this end, we have set up systematic succession planning. Thus, we can Entire group 1) 226 817 preferably fill any positions that become vacant in work areas within 1) Consolidation group Eurogrid GmbH, 50Hertz Transmission GmbH, 50Hertz Offshore GmbH. Persons at group level including trainees and inactive employees. PREFERRED EMPLOYER 41

50Hertz employees are proud of the new Arkona offshore platform.

our company internally. For this purpose, talents are identified and promoted. This is done, for example, through programmes for young Trainee at 50Hertz – What does that professionals that we implement together with Elia. In addition to this, mean specifically? managers at 50Hertz can participate in specific modules to develop their own leadership skills. Since 2014, 94 employees have taken advantage The 50Hertz Trainee Programme lasts 24 months and includes of this offer and worked through specific cases in practice across areas taking on responsible projects in different departments of the and hierarchies from their everyday working life as managers. company. Our trainees work at the headquarters in Berlin and at the 50Hertz regional centres. In addition, task-related deploy- ments to European countries for several months and stationing We pay attention not only to the development of the individual mana at a non-governmental organisation are an integral part of the gers, but also to further shaping the entire management culture at programme. 50Hertz together. An important basis for this is our regular employee survey, “Say it!” which was conducted for the third time in 2017. 50Herz attracts qualified young talent through training within its own operation and together with our partners, with a 24-month trainee programme, dual study partnerships with universities and the supervision of Internships, diploma, bachelors and masters theses in cooperation with universities and technical colleges. Additionally, 26 working students had been employed at 50Hertz in 2017.

Currently, 25 young women and men are completing industrial or commercial training. The training quota thus amounts to 2.4 percent of 1,043 employees. In addition, four employees are currently completing an interdisciplinary trainee programme.

young 25women and men are currently completing industrial or commercial apprenticeship at 50Hertz.

42 50Hertz annual report 2017

DIVERSITY AND EQUAL OPPORTUNITIES ment was concluded with the Annedore-Leber-Berufsbildungswerk (vocational training works) in the context of which a severely disabled We encourage diversity out of conviction. We have set out this require- trainee completed her practical placement at 50Hertz. ment in our Company Charter. We strictly condemn any discrimina- tory action in all professional situations. All our employees are equal, OCCUPATIONAL HEALTH AND SAFETY irrespective of their ethnic origin, age, gender, sexual identity and orientation, religion, political views, national or social background or The protection of life and health takes top priority for us. The health other factors. In 2017, there were no cases of discrimination at 50Hertz. and safety at work policy is binding for all employees. Occupational safety and health protection as well as the prevention of injuries and We offer equal opportunities for women and men. We have made a com- illnesses are integrated into our corporate strategy and are implement- mitment by signing the Mining, Chemical and Energy Industrial Union ed in practice in the day-to-day work of all employees. (Industriegewerkschaft Bergbau, Chemie, Energie, IG BCE) Charter for Equality. We feel obliged to uphold the “fair share” concept. According to this, we wish to keep the proportion of women in the job profiles ACCIDENT STATISTICS 50Hertz at 50Hertz as high as outside of the company. Our company-internal 31/12/2017 31/12/2016 initiative “50:50 – The Women’s Network” promotes the further develop- Work-related accidents 50Hertz ment of personal and professional competences as well as the presence (with at least 1 day of downtime) 6 3 and influence of women at 50Hertz. On 06 July 2017, the Remuneration Accident rate 1) 4.5 2.0 Transparency Act (Entgelttransparenzgesetz, EntgTranspG) entered into force. We have submitted the first report on equality and equal pay. Accident seriousness 2) 0.23 0.16 Health rate 3) 96.1 96.3 Our employees find a family-friendly working environment at 50Hertz. Number of accidents external companies 16 21 They can achieve a balance between life and work. We have anchored 1) Number of work-related accidents resulting in downtime (≥1 day) x 1,000,000/Number of this in a Works Agreement on better reconciliation of work and family. hours actually worked. This regulates questions of parental leave, support services, flexible 2) Number of days lost due to work-related accidents in calendar days x 1,000/Number of hours actually worked. working hours, special leave and sabbaticals as well as professional 3) Number of planned working hours – Hours lost due to incapacity for work x 100/Number advancement. At the end of 2017, there were 13 employees on parental of planned working hours. and care leave. At our headquarters, the 50Hertz Netzquartier, we have set up a children’s day care centre called Energiebündel (Bundles of Energy). Mainly the children of employees are cared for there but a few Each and every employee is jointly responsible for identifying and places we offer for children from the immediate vicinity of the living immediately reporting dangers in their day-to-day work and making and working quarters of our corporate seat. 20 employees’ children and suggestions to ensure safe and healthy work. The number of work-re- five children from the neighbourhood currently attend the day care lated accidents at 50Hertz and absenteeism are among the lowest centre. In addition to this, a parent-and-child office was set up within throughout the entire energy sector. The employees in the industrial the 50Hertz headquarters for short-term gaps in childcare. areas are trained six times a year and those in the engineering and commercial areas once a year on matters of occupational safety and At 50Hertz, we also guarantee people with health impairments the health protection. Once a year, we also run an occupational safety right to diversity and equal opportunities. We grant them the same competition. During this, we make our employees aware of this top- opportunities as employees without health problems. Together with ic and motivate them to take it seriously. The personal protective the severely disabled persons’ representative, the Works Council and equipment for employees is always kept up-to-date and we update the speakers committee approved an inclusion agreement in 2013. In the catalogue of requirements continuously. The occupational health this, measures were set out to promote people with health impairments and safety management system complies with the most important in working life. An internal inclusion team supervised the implemen- international standard for health and safety at work, the “Occupa- tation of this agreement. In 2017, the proportion of severely disabled tional Health and Safety Assessment Series” (OHSAS) 18001: 2007, employees was 2.8 percent of our workforce. Depending on the job which applies company-wide and was re-certified in the follow-up specific requirements in the commercial and technical areas, the rate audit in November 2017. is to gradually increase in the future. In 2017, a Cooperation Agree- PREFERRED EMPLOYER 43

In 2017, 50Hertz had to register six reportable accidents at work. There- fore, we have not achieved our set goals with regard to the accident rate and the severity of accidents. We have intensively assessed each accident and have derived and implemented conclusions to improve health and safety at work. In 2018, we will work to make safety a top objective and implement extensive measures to ensure that every single employee complies with the occupational safety standards.

These occupational safety and health protection standards also apply to external companies commissioned by us. A mandatory component of our tenders and contracts, therefore, is the commitment of our partners in the form of a regulation to ensure occupational safety and environmental protection. This regulation was specified and made more transparent in 2017. During tendering and subsequently using IT-based construction inspections with trained 50Hertz personnel, we are already ensuring that the suppliers meet 50Hertz’ high safety standards. In 2017, the Counting the votes – election of the youth and number of accidents at work involving external companies further apprentice representation for the first time. decreased. From our perspective, the 16 reported accidents at work involving external companies are still too many. This is why we included an “Agreement on quality assurance on construction sites at 50Hertz” in new contracts from 01 July 2017 as a further component of the contract that allows us to carry out unrestricted inspections.

In addition to occupational safety, we place great value on a high level of health protection. Using a digital health platform, we offer a variety of measures to maintain and increase the well-being of the workforce. The employees can choose from courses on various topics to promote health, such as exercise, nutrition, stress management and quitting smoking awards and find the right option for them. Under the motto “Fit at 50Hertz”, we provide financial support for company sports clubs. Holistic forms of exercise such as yoga, Qi Gong or Feldenkrais complete the variety of offers. Furthermore, we make it possible for our employees to participate in various public sports events, such as the Berlin team relay race, the “HSH Nordbank Run” for the benefit of the “Kinder helfen Kinder” (Children Helping Children) organisation, the “Jedermann-Radrennen Cyclassics” cycling race in Hamburg or the “Rennsteig” autumn run in Thuringia.

To promote and maintain capacity to work, the Works Council, 50Hertz and IG BCE have agreed specific measures. In the three fields of “health promotion”, “balancing work and personal life” and “needs-based life- time/working time arrangements”, attractive benefits are bundled and deployed. 44 50Hertz annual report 2017

Themes pertaining to the energy transition are recorded by an artist at the 50Hertz Innovation Day – in conversation, Joachim Löbe, Head of Line Projects, and Eike Göhmann (Gridlab).

DIALOGUE AND CO DETERMINATIOn

At 50Hertz we work together on the basis of trust and openness. This the Supervisory Board was informed in depth and advised on the includes a regular exchange of views. For this, we use a number of current business performance, the economic situation and the state different platforms, as well as regular notifications on the Intranet, and the development of the risks. A spokesperson for the speakers e-mail surveys and interactive information events that are broad- committee represents the interests of the executive personnel. The casted live and also recorded on video. Of course, this also includes Works Council is responsible for representing the other employees at the annual all employee meeting and the employee party afterwards. 50Hertz. A cross-company exchange takes place within the European Works Council of the Elia Group. In December 2016, we additionally In 2017, we invited our employees to participate in a broad-based established a youth and apprentice representation at 50Hertz. The employee survey for the third time. 91 percent participated. Issues three-member committee is elected for a term of two years, repre- such as cooperation, cross-divisional processes and leadership be- sents the interests of young people throughout the company and haviour were assessed. They were discussed openly from the Board works closely with the other corporate co determination committees. of Management to the employees. The detailed results were discussed in workshops with the workforce in the first quarter of 2018. We will Through joint events such as the Electricity Sector Industry Groups derive specific, company-wide fields of action and measures for the Committee and the “Netzer” Working Group, 50Hertz is committed individual teams from the results. to promoting the interests of employees working in the area of infrastructure networks. In addition, the company regularly sends guest We place particular value on trusting and continuous collaboration speakers and presenters to IG BCE training events. In order to promote with all the corporate co determination committees. Our Supervisory the trade union involvement of employees, we offer orientation and Board consists of six members. Beyond the legal requirements, it information events, such as the “Co determination Taster Course”. is represented equally by employee and employer representatives.

In a total of three Supervisory Board meetings in 2017, in written reports and through oral presentations by the Board of Management, PREFERRED EMPLOYER 45

REMUNERATION AND SOCIAL BENEFITS Excerpt from our company 50Hertz is an attractive employer and intends to continue to be so. We social benefits pay our employees fairly and offer attractive additional benefits. Our Referral Wage Agreement for the Energy Pay Scale Group regulated this. We supplement appropriate, performance-related remuneration regardless of gender with extensive in-company social benefits and the offer of a company pension scheme. The remuneration for all -em ployee groups includes success and performance-related elements, Employee Restaurant which offer an incentive to achieve the common business objectives as well as the resulting individual priorities. Some business objectives relate to sustainable corporate management, including, for example, compliance with occupational safety and health protection as well Ticket for Public Transport as successful social dialogues. The factor of the remuneration of the highest-paid employee to the median total annual compensation of all employees is 8.2.

In addition, our employees can participate in the success of the previous Sports Sponsoring fiscal year through an Elia Group shares programme. Already for the fifth time, every employee was offered up to 20 shares at a discounted price in 2017. Almost 55 percent of those eligible availed of the offer. Birth Allowance We transparently and voluntarily disclose the total remuneration paid to the Board of Management in the Consolidated Financial Statement. www.eurogrid.com/en-en/Investor-Relations/Financial-Reports Day Care

Coverage of Child Care Cost

Cost Coverage for Preventive Check-ups

Senior Care percent

Special Leave for 91of employees participated in our Personal Events third employee survey in 2017. 46 50Hertz annual report 2017

ENVIRONMENTALLY CONSCIOUS PLAYER We care for nature, environment and people

The energy transition requires power grids that can integrate more green electricity and deliver it to the people reliably. To do so, the grid must be further expanded as demanded, lines have to be strengthened and the operation has to be optimised. 50Hertz has to intervene in nature and the environment to do so. We do this as little as possible and compensate for adverse effects that cannot be avoided. 47

Carrying out an inspection at the Röhrsdorf substation: Sabrina Neßmann and Tony Teuber (Regional Centre South). 48 50Hertz annual report 2017

“s ustainability involves technical aspects for 50Hertz.” Interview with Dr. Frank Golletz, Chief Technical Officer

50Hertz has to expand its transmission system for the energy transition and in doing so wants to interfere as little as possible in nature and the environment. How do these fit together? — Frank Golletz: 50Hertz is, first and foremost, a technology company. But the technology must be sustainably in harmony with nature and the environment. This is important to us. We have been given the task by politics and society to facilitate the energy transition with our transmission system. We also need to increase our transport capacity. This is being done, on the one hand, by optimising and strengthening existing facilities and, on the other hand, by expanding the grid. This is being done as carefully as possible with the aim of having a minimal impact on nature and the environment. ENVIRONMENTALLY CONSCIOUS PLAYER 49

How can we visualise that? — Frank Golletz: We have an extensive tool box with industry-stand ard and new, innovative technologies. So, for example, using so-called phase shifters – also known as cross-regulating transformers – we control the flow of current in our grids. Thus, the uniform utilisation of our existing grid can be controlled and power from highly load ed lines can be redirected to less loaded lines, so the existing grid is optimally used. Our tool box also includes transporting power at a higher voltage. This allows more electrical energy to be transported via existing corridors. In Saxony-Anhalt, we are currently building a pilot line that should allow the corridor for a 220-kilovolt line to ac- commodate a 380-kilovolt line, without the need to take up additional space. And last but not least: we are proactively building new lines. One example is the highly publicly disputed Southwest Interconnect or through the Thuringian Forest Nature Park. We have designed Knows the grid like the back of his hand. this comparable to a four-lane highway. Currently, two tracks have Dr. Frank Golletz, Chief Technical Officer. essentially been released. If the need for transportation increases in the South of Germany, we will expand the Southwest Interconnector to four tracks without further intervention in nature. We will then equip the existing masts with additional lines.

That sounds like a flexible approach to line construction. But how innovative are you regarding the further technical development THE USE OF SULPHUR HEXAFLUORIDE (SF6) of your substations? — Frank Golletz: We are currently searching intensively for a replace Sulphur hexafluoride (SF6) is used in switchgears, transformers ment for the insulating gas, sulphur hexafluoride (SF6). Because of its and gas-insulated switching stations. Due to its excellent insu- good insulating properties, is has been used in high voltage switching lating and arc properties, this gas is a key resource for 50Hertz. stations for about 40 years. SF6-insulated switching stations are com- However, the gas is very harmful to the environment. Never theless, we do not only meet the requirements of the European pact, require little space and are indispensable especially in cities. F-Gas Regulation, but further consider the voluntary negotiated Disadvantage: The gas is harmful to the climate, increasing the green- agreement of SF6 manufacturers and users. In 2017, we already house effect. A replacement gas must be much more climate-friendly managed to significantly undershoot their target of reducing with the same insulating properties. In 2019, we want to commission a the loss rate to 0.6 percent by 2020 measured against the total switching station specifically for testing such a gas in Berlin as a pilot. inventory. Our SF6 loss rate accounted merely for 0.06 percent.

So you also economise in a sustainable and environmentally friendly manner. But adverse effects cannot be avoided entirely. What do you do in such cases? — Frank Golletz: If we have to intervene in nature, we do so as sensitively as possible. And of course, these interventions always have to be compensated for. In order to find the right solutions, we need the support of those affected locally. We know the best technical solution, and those affected know the local area and its particular characteristics. Our aim is to bring this knowledge together to find a solution that is acceptable to all. To this end, we seek out local contacts in a variety of measures: from the demolition of old buildings and at a very early stage, send our DialogMobil to visit, for example, and ground unsealing to compensatory planting and bird and amphibian take notes from the citizens affected as well as the nature protection conservation to the restoration of entire cultural landscapes. We oper associations into consideration in our planning. This has resulted ate with regard for nature, the environment and people at all times. 50 50Hertz Annual report 2017

ENVIRONMENTALLY CONSCIOUS PLAYER

We assume social responsibility and are committed to the common good. Therefore, we are actively involved in the protection of the environment and climate in our grid area. We protect flora, fauna and biodiversity, conserve natural resources and keep our energy consumption and emissions as low as possible in our business activities.

The quantities of renewable energies that we integrate and transport the so called compactLine. This line features lower mast heights, in our grid are constantly increasing. Therefore, 50Hertz is constantly narrower routes and a solid panel mast on a smaller scale. In the further developing its high voltage grid. So that this has as little im- future, it should allow landscape and nature interventions by over- pact on humans and nature as possible, the so-called NOVA principle head lines to be reduced in sensitive areas. The compactLine is a applies: Grid optimisation before reinforcement before expansion. So 380-kilovolt line that, due to its compact design, fits into sections of we only build new lines when there is no other option. Before this, existing 220-kilovolt lines. In the fourth quarter of 2017, we began we exploit all other technical options with which we can increase construction work on about a two-kilometre long pilot line. the capacity of the grid. 50Hertz plans, operates and maintains its transmission grid on the A further step in the systematic reduction of adverse effects on the basis of national and European requirements and regulations, and environment is the development of the new type of transmission line, builds and expands it in an environmentally sustainable manner.

Smaller, slimmer, more effective – – We are developing a new mast design

Everyone knows electricity pylons – and hardly anyone finds compactLine Danube mast them particularly attractive. Together with partners from in- 50–60 m dustry and science, in the context of the compactLine research and development project, we are testing the most space-sav ing mast constructions possible. The basic idea: Between the masts, carrier lines are pulled taut, so that they hardly sag at all. Similar to a cable car, the power lines are then hung from 30–36 m the carrier lines. In effect, compactLine is a small space-saving miracle: The mast height of 50–60 metres can be reduced to 30–36 metres and the line widths reduced from 72 metres to 55–60 metres.

55–60 m 72 m Line width ENVIRONMENTALLY CONSCIOUS PLAYER 51

Jessen/Nord grid connection using the new compactLine mast design.

We implement the environmental regulatory framework conditions We train those involved in the process of dangerous goods and the operationally in company policies and procedures that are continually officer for dangerous goods every five years. Respective departments updated and adapted. In the environmental protection organisation within the company, such as purchasing and facility management as policy, we have defined the specific duties and tasks of 50Hertz. In well as project management, receive training as required. principle, our Board of Management – and in particular our Chief Technical Officer Dr. Frank Golletz – is responsible for the protection ENERGy aND EMISSIONs of the environment at the company. It sets out the objectives and organisation of environmental protection at 50Hertz. The Board Sustainability and environmental protection are firmly anchored in of Management also appoints the compliance officer for hazardous the business operation of 50Hertz. We are a world champion in the materials, waste and water protection who advises the entire organi integration of volatile renewable energies: In 2017, over 53 percent sation on environmental issues. of the gross electricity consumption in the 50Hertz grid area came from wind power, photovoltaics and biomass. We have documented our environmental protection activities within the company in annual environmental reports. The focus is on the The total energy consumption that could be influenced by 50Hertz interests of environmental and water protection, soil and emission in 2014 without grid losses was at 59,832 megawatt hours (MWh). We protection as well as the disposal of waste. 50Hertz is currently regularly conduct an energy audit according to DIN EN 16247-1. The examining the possibility of providing individual key figures in last audit took place in 2015 for the reporting year 2014. In 2019 we advance in the coming reporting year. plan to conduct the follow-up audit. We are currently looking into the possibility of installing a process to determine consumptions For the first time, in 2015 50Hertz had an external energy audit per- during the year. formed in accordance with DIN EN 16247-1. This systematically recorded the energy consumption of our facilities and administration With power transmission, energy losses inevitably occur. These arise building. In accordance with the applicable schedule, we are planning in the form of heat losses at transmission lines, transformers and the next audit for 2019. other system elements as well as discharge losses and corona losses. In 2017, 50Hertz’ grid losses came to 2.4 TWh. The average grid losses We are developing our operational environmental protection and at the high voltage level come to 231.7 MWh and those from transfor- energy management step-by-step. We are sensitising our employees mation to 43.5 MWh. 50Hertz is planning the first high voltage direct to the associated topics and getting them actively involved. 50Hertz current (HVDC) transmission line route in its grid area, between has met the statutory provisions on training. Water protection and Lower Saxony and Bavaria – the SuedOstLink. The HVDC technology waste officers are trained annually on a one-day basis at 50Hertz. is more suitable compared to alternating current (AC) technology for Here, we exceed the statutory provision of two days of training every transmitting large quantities of power at low grid losses with optimal two years. control and in a targeted manner over large distances. 52 50Hertz annual report 2017

A fleet car plugged in to charge.

INFLUENCEABLE TOTAL ENERGY CONSUMPTION At 50Hertz for 2014 1)

Energy consumption

MWh % Electricity 50,744.187 84.8 District heating 2,467.109 4.1

Fuel (petrol) 32.910 0.1 Dialogue about a line route. Fuel (diesel) 5,799.063 9.7 Natural gas 788.442 1.3 Total energy consumption 59,831.710 100.0

1) Data resource: External energy audit according to DIN EN 16247-1 in 2015. Periodic reporting is subject to future planning.

We use various means of transport for business travel. Fleet vehicles time though, SF6 has very high greenhouse potential. Therefore,

have the greatest impact on the CO2 balance. Their use is indispen- during transport, storage and use, this gas must be handled with the sable for comprehensive coverage of the extensive grid area and appropriate sensitivity. The requirements of the 2014 Revised Euro- quick system access. In 2017, these vehicles emitted 1,854 tonnes of pean F-Gas Regulation are complied with. Since 2005, 50Hertz has carbon dioxide. This value is below the previous year’s value of 2,058 applied the “Voluntary commitment on the part of SF6 manufacturers

tonnes of CO2. We attribute this to fewer trips to the grid area and and users”. It aims to reduce the measured loss rate for the entire to our efficiency project that started in 2017. In the context of fleet inventory of 0.8 percent in 2004 to 0.6 percent by 2020. As a result management, we tested and selectively deployed electric and hybrid of conscious internal monitoring of the operation and maintenance vehicles. Large-scale use is not currently foreseeable from the effec- of our insulated facilities, we were already significantly below our tiveness point of view. In the context of replacement procurement, we own commitment at a SF6-loss rate of 0.06 percent in 2017. A new are continually adapting our fleet to the current state of technology. kind of gas-insulated 110-kV switching station is being built at the Berlin Charlottenburg substation. Here, instead of the conventional Air travel by 50Hertz employees in 2017 caused emissions of 335 tonnes insulating gas, sulphur hexafluoride (SF6), we are using a gas mixture

of CO2 equivalents. Furthermore, our employees travelled about with far less greenhouse warming potential. The gas mixture with 540,000 kilometres by train. According to Deutsche Bahn, we travel the designation g³ offers the same technical properties as SF6, but in this manner using 100 percent green power. Thus, we saved around is up to 99 percent less harmful in regard to the greenhouse effect.

118 tonnes of CO2 compared to the previous year.

In switchgears, transformers and gas-insulated switching stations, sulphur hexafluoride (SF6) is used. Due to its excellent insulating and arc properties, this gas is a key fuel for 50Hertz. At the same ENVIRONMENTALLY CONSCIOUS PLAYER 53

in t in t

3,752 1,580 0 10,000 20,000 30,000 Hazardous waste Hazardous waste for disposal Building and for recycling demolition waste 29,603 Soil 13,139 Organic waste 6,385 Devices 697 Residential waste 686 Metal 643 Waste oil 387 Separator waste 203 Batteries 16 46,497 Cable 15 Non-hazardous waste for recycling

DISPOSAL OF WASTE

When dealing with waste, we act according to the motto “avoid – reuse – reduce – remove”. If plants are newly built, reconstructed or demolished, we dispose of the parts that are no longer required in a manner that saves resources.

In 2017, in addition to many new construction projects, we also realised numerous reconstruction and demolition projects. During these, a total of around 51,000 tonnes of waste were disposed of at the facilities. Com- pared with the previous year, the amount of waste generated increased by about 33 percent.

The waste to be disposed of consisted of over 60 different types of waste. The vast majority, at around 85 percent, was attributable to the construction and demolition waste group, such as soil, concrete, building rubble, bricks or asphalt. 50Hertz was able to implement the statutory obligation to recycle (recycling before disposal) at a recycling rate of around 95 percent. An obsolete transformer being disposed of in an environmentally-friendly manner. 54 50Hertz annual report 2017

NATURE CONSERVATION

We take the greatest possible care regarding nature, the environment and living space for people in our grid area. We follow this principle in all Planting tree aisles and rows, of our reconstruction and expansion measures for our transmission grid hedges, orchards and in our substation projects. In project planning, during the approval process we responsibly balance technical requirements, the interests of the people affected by our projects and protection of flora and fauna.

So before such approval procedures, we conduct environmental impact assessments and local investigations to determine the current situation and identify the most compatible line corridor possible. Then, we map the exact course of route in this locality and determine what protective measures we need to pay attention to. These investigations are carried out in cooperation with external environmental planners, Pond renaturation, restoring straightened line mapping experts and other specialists from the fields of science rivers to their original condition, creating and nature conservation. Only then do we start our construction proj small bodies of water, renaturation of ects which are also monitored by external environmental specialists. Even construction site installations and the construction process are implemented so temporary adverse effects on nature are minimised, deadlines of relevance to nature conservation are complied with and Building amphibian protection facilities, requirements are taken into account at an early stage. The companies nesting aids, bat habitats, reptile habitats, conducting the work on behalf of 50Hertz are obligated to comply with species protection towers the environmental aspects of their activities.

Unsealing, demolition of buildings in community outdoor areas Essential components of ecological monitoring of construction

– Monitoring compliance with protection, prevention and Cabling medium voltage lines minimisation measures of the landscape conservation plan and fulfilment of requirements and conditions in the planning approval decision – Advice on selecting the construction site and the building material storage – Acceptance of all areas taken up after recultivation and renaturation including photographic documentation – Written documentation of the protection and minimisation measures to be submitted to the nature conservation authorities – Drafting of a landscape care monitoring programme for non-balanced, unavoidable adverse effects during construction – Participation in construction consultations ENVIRONMENTALLY CONSCIOUS PLAYER 55

630 compensation measures were being planned, realized and financed within 50Hertz-control area in 2017.

In addition, 50Hertz strives for forward-looking, minimally-invasive and ecologically sustainable line and route planning and management for more biodiversity in forest clearings, as well as for better bird and Rings for peregrine falcon chicks. The protected birds of amphibian conservation. Together with our partners, we examine prey have nested on a 50Hertz overhead line mast. potential risks to the animal world from power lines and derive appropriate recommendations for action.

For example, in Ilmkreis in Thuringia, we converted four disused transformer stations to species protection towers as a compensation measure. The towers with nesting boxes and entry holes in Dörnfeld, Espenfeld and at the Thomasmühle near Frauenwald now offer birds, Using appropriate measures, 50Hertz compensates for unavoidable hedgehogs, forest bees and bats a suitable habitat. The Ilmenau branch adverse effects on nature, the environment or habitats. We strive to of the Nature Protection Association (NABU) is to equip these four achieve compensation measures with the greatest overall social ben- towers with display boards and care for and maintain them. efits. We divide these into six categories: Planting measures, forestry measures, hydraulic engineering measures, species protection, renaturation measures and others. We involve the affected municipalities, conservation authorities, interested citizens and non-governmental What are compensation measures? organisations in the planning and implementation of compensation measures very early on, because they know the specifics of the nature The Federal Nature Conservation Act (Bundesnaturschutzgesetz, and habitats in their localities best. In partnership with each other, we BNatSchG) regulates the interests of nature conservation in develop suitable projects and propose these in the course of approval Germany. Appropriate compensation measures are also provided planning. In 2017, we adopted a policy for targeted compensation man- for in terms of adverse effects on nature (impact regulation) in agement. In this, we define fields of action required for the successful regard to infrastructure measures such as line construction. approval and implementation of the measures. An internal evaluation According to BNatSchG, the polluter is obliged to refrain from commission, which decides on the measures, meets every two months. preventable adverse effects on nature and the landscape or to The selected measures are recorded in a real estate cadastre. Currently, keep these as low as possible (prevention and minimise obliga- 440 compensation measures are in planning in the 50Hertz grid area tion). Unpreventable adverse effects are to be compensated for as well as 190 that are being implemented or maintained. through appropriate measures.

One of the largest single measures to compensate for the construction In the past, we at 50Hertz have always focused on the implemen- of the Southwest Interconnector through the Thuringian Forest was tation of our own compensation measures, for example in the the demolition of an eight-storey prefabricated building in Frauenwald form of replacement planting. In addition to this, investments (Ilmkreis) in 2017. The outer walls of the former army residence should in projects by other organisations and compensation payments be demolished in spring 2018. By then, the interior of the building are possible. For reasons of efficiency we want to avail of these should have been cleared and the materials disposed of. options more than previously in the future.

56 50Hertz annual report 2017

Sabrina Neßmann (Regional Centre South) inspecting a collection tank at the Röhrsdorf substation.

The “Storchenpflegehof Papendorf” in the district of Western sions, workshops and dialogue rounds, information is exchanged Pomerania-Greifswald cares for injured animals southwest of and the potential line corridors are discussed, in order to protect the Pasewalk, including many birds of prey. We supported the club in landscape and nature as much as possible. Wherever it makes sense, constructing a free-flight aviary for the white-tailed eagle. We also lines are bundled with existing overhead lines and other infrastruc- have brought the Brandenburg Aquila e. V. association and Storchenp- ture such as rail lines and highways. In order to avoid unnecessary flegehof Papendorf e. V. together, so that they can engage in a technical adverse effects on the landscape, we adapt the routes to the conditions exchange on caring for birds of prey and aviary building. of the landscape.

High voltage lines have adverse effects on the world of birds. Therefore, In order to build an overhead line in forest areas, forest aisles are 50Hertz minimises negative impacts on the protection of birds when usually laid. The conductor lines need enough free space on either expanding lines. Since 2017, we use a new species-specific method side and to the ground to provide the necessary safety clearances. for these projects to systematically determine the impact on species Therefore, recurring sections and trees have to be removed along the populations. With this we can identify targeted preventive and com- aisle. But trees and shrubs provide habitats for many animals and pensation measures. In 2018, we will install bird protection markers plants. Because of this, we try to have as little negative impact on along 30 kilometres of the existing grid. As older lines in the existing these natural habitats and biodiversity as possible in the long term, grid often require structural changes to the mast construction, we have thus increasing biological diversity below the lines. already begun appropriate, preparatory work. Being a member of the “Renewables Grid Initiative” 50Hertz actively supported Naturschutz In 2010, 50Hertz developed “Ecological Aisle Management” (EAM) in Deutschland e. V. (NABU, Germany’s largest nature conservation or- cooperation with the University of Applied Sciences Erfurt. This allows ganisation) in setting up the “Vogelfund und Stromleitung” hotline forward-looking, impact minimising and ecologically sustainable (bird finds and power lines hotline) in 2017. In a comparative study, route planning and management to be practised: The aisle under an the efficacy of spiral and flap markers was studied. They should help overhead line in consideration of safe operation is designed in such a birds to identify a line in flight and avoid it. Bird protection cameras way that natural habitats become re-established there. Thus, during between power masts in a bird sanctuary will also observe the behav- the course of the project, a biologically diverse and valuable aisle iour of animals. With these measures and projects, we are increasing develops. 50Hertz bindingly applies EAM for new routes and also on the protection of birds along our lines. a voluntary basis for existing routes. We have identified a total of 550 km of existing routes in our grid area that run through forest areas In the planning, construction and operation of lines, 50Hertz initiates and are therefore suitable in principle for EAM. On the basis of flight and shapes the dialogue with the public, specialist experts, asso data, a 17-kilometre line aisle was inspected by environmental planners ciations, environmental organisations and with local environmental in order to develop appropriate, area-specific ecological measures of and nature conservation authorities. In joint consultations, discus- care. After planning, all biotope care measures implemented along a ENVIRONMENTALLY CONSCIOUS PLAYER 57

route will be based on the principles of EAM. Thus, in comparison to construction is used to protect the environment in transformers at the previous year, in 2017 the structure of forest edges was increased substations, so that no oil gets into the soil. The systems are regularly from 7.1 km to 10.7 km and the number of plantations increased from checked by our maintenance personnel and, if necessary, restored or 20,700 to 25,700. In the case of new construction projects, EAM was replaced. Waste water may only be discharged with an official permit, first use for the Southwest Interconnector in construction phases 2 and has been checked regularly for harmful substances. and 3. A total of 36.5 km of the new route were entirely implemented using EAM. In order to protect water, we carefully observe the Water Management Act and the state-specific system ordinances. Employees are trained on Water Protection the environment-friendly operation of the systems. Water protection officers receive targeted further training. In the grid area, the require- The business activities of 50Hertz do not result in any significant water ments of the Water Management Act and the Ordinance on Installations consumption. Our responsibility is less about reducing water consump- for the Handling of Substances Hazardous to Water are particularly tion. Instead, during grid and substation projects, we want to pay par- relevant on the Mecklenburg-Western Pomerania coasts and thus for ticular attention to water retention in the soil as well as water and soil our offshore grid connections. pollution due to hazardous substances. Thus, 50Hertz already installed special security systems into systems that contain oil. An intricate

The new 50Hertz Netzquartier – ENERGY EFFICIENT

The new 50Hertz Netzquartier was awarded the internationally recognised Gold Standard of the German Sustainable Building Council (DGNB) and of the American LEED Standard (Leadership in Energy and Environmental Design). The regional centres in Röhrsdorf and Hamburg were also newly built as energetically sustainable buildings. dedicated PARTNER Shaping the energy transition together

In order to make the energy system safer and more stable every day, we engage in constant exchange with our partners, neighbouring grid operators and energy market participants. Together with them and in close interaction with politics and regulation, we are shaping the energy market of the future in Germany and Europe. The energy transition is bringing about dramatic change with completely new tasks and challenges. We need to master these – in dialogue with politics, science and society. 50Hertz colleagues discussing a line route planning. 60 50Hertz annual report 2017

“the share of renewable energies will increase drastically.” Interview with Dr. Dirk Biermann, Chief Markets and System Operation Officer

What do you mean by sustainable management? — Dirk Biermann: For 50Hertz, sustainable management means facilitating and driving the energy transition. To this end, we are strengthening the grids, expanding them as needed and are committed to keeping adverse effects on nature as low as possible. We are also enduring security of supply through the maintenance of our grids. In all aspects, we as a company can only act responsibly and sustainably if we maintain good communication and build understanding with our stakeholders. DEDICATED PARTNER 61

How important is the role of cooperation in doing so? In the “WindNODE” project, among others, 50Hertz works closely — Dirk Biermann: In Germany, we operate the grid with three other with producers, DSOs, industry, IT and science, in order to create transmission system operators (TSOs). Together, we ensure stable grid an intelligent energy system for the future. operation and protect the power supply around the clock. We succeed — Dirk Biermann: WindNODE shows very impressively how seriously through good cooperation and close coordination of our activities: So we take our dialogue and how intensively we are engaging in it. With every two years, we prepare and revise the grid development plans, over 70 partners, we develop new decentralised and sustainable solu- in order to further optimise the expansion of the grid to meet the re- tions for the energy transition. The aim is to efficiently integrate large quirements of the energy transition. Unlike the electricity market, we quantities of renewable energies into the energy system and at the same TSOs have to act as if there were only one transmission system operator time to keep the power grids stable. WindNODE uses the possibilities in Germany. presented by digitisation to make the energy system intelligent, and to allow a multitude of different, intelligently networked partners to act The European electricity market is also becoming ever more closely within a distributed system. This is about specific, real applications that intermeshed and so many of our processes are cross border ones and we develop up to field testing. We present them as transferable models part of the European interconnected system. In particular, trusting into a big “showcase”*, supported financially by the German Ministry international cooperation is indispensable for the joint operation of of Economy, in order to make the energy transition something that the European electricity system. can be understood and experienced and in order to drive the required innovation. With the increasing feed-in of renewable energies to our grids as well as decentralisation, new flexible players are emerging, who are both In a sub-project of WindNODE, 50Hertz investigates how small-scale producers and consumers at the same time (so called prosumers). They flexibility can be integrated both on the producer side and on the con- are usually connected to the distribution grids. The distribution grid sumer side in the new energy system. Together with our project part- operators (DSOs) are therefore one of our most important partners – ners, we developed a flexibility platform on which these decentralised therefore, our cooperation with them will continue to intensify. flexibilities could be recorded and efficiently integrated into grid -con gestion management processes. We can only implement our large infrastructure projects if – in addition to the grid operators – politics, society, interest groups and citizens in What kind of flexibility are you talking about? the regions concerned are involved in these projects at an early stage. — Dirk Biermann: The share of renewable energies will rise dra- We also professionalised and intensified these dialogues perpetuated matically. We estimate that we will have a good 1.6 million small in the last year. installations feeding into the power grid. How can we ensure power supply with these distributed producers as well as we previously did with hundreds of large power plants? This is one of the questions we are asking ourselves. The boundaries between energy producers and consumers are becoming increasingly blurred. The electricity customer with a photovoltaic system on the roof, a battery storage unit in the cellar, an intelligent energy management system in the house and an electric car outside the door will soon be the norm. This customer will be as flexible as never before.

What does that mean? — Dirk Biermann: Many very small, very complex players have to be integrated into the grid infrastructure and optimally coordinated via the electricity market. Digitisation will help us in doing so and we will see that the new world of energy will work at least as well as the old one and will not lead to any comfort losses. Biermann knows that security of supply and market security have to go hand in hand.

dedicated Partner

We are enabling a successful energy transition for a sustainable world – this is our vision. 50Hertz, as a transmission system operator, is aware of its social responsibility regarding this demanding and inter-generational collaborative project.

Engaging is an open dialogue with all our stakeholders is an integral part transparent, uniform and binding for all employees. In the allocation of our communication. We are involved in numerous cultural, sports of donations and support through sponsorship, we always ensure that as well as nature and species conservation projects in the grid area and this is in accordance with our corporate values, designed for the long support social initiatives in partnership. In doing so, the well-being term and that it offers real added value for people and society. and promotion of children and young people lies close to our heart. We also cooperate closely with partners from business and science as INTENSIVELY IN DIALOGUE WITH OUR STAKEHOLDERS well as NGOs. In order to successfully implement the energy transition, the high In order to implement our many social activities, we have established voltage grids have to be further developed. The involvement of clear management and organisational structures at 50Hertz. The respon- relevant stakeholders plays a special role in these demanding infra sibility for our commitment lies with the communications and public structure projects. In the regions where existing capacities are affairs department. In consultation with the Board of Management, strengthened or new substations and lines are built, the information the department defines the objectives, coordinates the activities and and participation needs of the citizens and special interest groups reviews requests for projects worthy of support. The internal policy on are huge. 50Hertz engages in this dialogue very openly and trans- donations and sponsorship sets out our general funding principles, the parently: We involve the public at an early stage, thus improving the evaluation criteria and the organisational process in a manner that is projects and laying the foundations for maximum acceptance of our

. Legal initiation . Feasibility study, internal . Presentation of the project, . Regional planning procedure/ . Scope of examination . Plan approval procedure, . Private law agreement . Construction . Ecient approval, budget conferences federal planning procedure building permit operation

Public participation DEDICATED PARTNER 63

Information market in Berlin Tiergarten: Eva Schulze from the nature conservation and approvals department in conversation with a local resident.

projects. We begin the dialogue with our stakeholder groups in very The challenges of the energy transition are very complex. We do not early planning stages of our projects. This includes both consulta- rely on our gut feeling, with good reason, regarding who we talk to tion on the grid development plan as well as grid enhancement and and when about our projects and how we approach our cooperation expansion projects. In concrete terms, we shape the dialogue, inter partners. In an indicator-based monitoring and assessment system, alia, using the following options: Info markets, district conferences, we measure the quality and effectiveness of public participation at planning forums, specialist workshops, thematic brochures, hotlines 50Hertz according to time, transparency, relationship and potential for citizens’ question or with our DialogMobil. In 2017, this mobile influence. Thus, we determine what needs to be discussed and can citizens’ office was awarded the “Good Practice of the Year Award” therefore approach our stakeholder groups as early as possible, in a by the “Renewables Grid Initiative” (RGI). In addition, project-re- topic-oriented and open manner. We are convinced that: The more lated internal policies regulate time sequences and the interplay of open and comprehensive we involve politics, society, our coopera project planning, approvals, public participation and stakeholder tion partners, stakeholder groups and interested citizens in our management. infrastructure projects, the higher the acceptance of our projects.

We use the knowledge and information gained in this proactive dialogue and the information events with as many affected stakeholders as possible in a comprehensible manner in the preparation of our line routes. Our dialogues are based on clearly defined specifications and are recorded in specified formats with the help of a standardised “tool box”. 50Hertz involves all communities affected by the expansion of the grid and potential neighbouring landowners in planning before the approval procedures begin. This approach was developed together with leading community associations in a position paper published in 2015.

Public participation 64 50Hertz annual report 2017

STAKEHOLDER DIALOGUES IN THE 50Hertz GRID NEIGHBOURHOOD

In 2017, we invited more than 80 government and association representatives, environmental experts, infrastructure planners, approval experts and legal experts to the specialist conference, “Vogelschutz an Höchstspannungsfreileitungen – Methoden, Spielräume und Realisierbarkeit” (Protection of birds on high voltage overhead lines – Methods, scope and feasibility). The aim was to exchange views on how we can meet the requirements for the protection of birds, without jeopardising our energy transition projects.

In addition, in 2017 at over 70 events we informed national and international stakeholders from politics, business, education and associations as well as from the energy sector of how we are approaching the challenges of the energy transition and securely integrating over 50 percent renewable energy into the electrical system. In particular, international groups from Australia, Belgium, Brazil, Bulgaria, China, India, Canada, Kuwait, Madagascar, Norway, Russia, Sweden, Singapore, Taiwan and the US gained insights into the successful integration of renewable energies.

With 180 industry experts and representatives from science, politics and administration, at our 10th System Security Conference we discussed, among other things, the challenges of the European Winter our high occupational safety and health protection standards. This Package (Clean Energy for all Europeans Package), conditions for is an important aspect for us in order to minimise the risks in our accessing the grid for the European power exchange, handling critical business activities. grid situations and, last but not least, the details of the data exchange. HOME GAME IN THE GRID AREA With the regular “Ländertreff Netze Nordost” event series, two to three times a year, 50Hertz provides and perpetuates contacts to and 50Hertz is cosmopolitan and, at the same time, has its feet on the ground. between the representatives of the executive branch of the federal We are at home here. This applies to our Grid Neighbourhood in the heart states. The meeting calls for a regular, joint exchange on energy policy of Berlin, as well as the regional centres in the east and north of Germany. issues. At the federal level, in 2017 50Hertz established the “Energy Lunch” in its new headquarters. In this discussion format, experts We get involved in the area surrounding our Berlin headquarters, in from 50Hertz meet experts and representatives of the Parliament, the the spirit of good corporate citizenship. As a good neighbour 50Hertz Government, associations and NGOs several times a year to discuss makes an active contribution to attractively shaping the new Europacity current challenges in the integration of renewable energies, grid living and working quarters. The “Energiebündel” daycare centre not expansion and system management. only provides space for the children of 50Hertz employees but also for children from the surrounding area. In the summer of 2017, 50Hertz, In 2017, about 40 experts from 20 different banks and financial -in together with its neighbour, the “Hamburger Bahnhof – Museum für stitutions came to Berlin for what was already the sixth time for the Gegenwart – Berlin” invited young graduates of art academies in our 50Hertz “Banker’s Day”. It was about sustainable financing options – grid area to present their work in our “Netzquartier”. The “Rundgang for example for offshore projects. 50Hertz” exhibition showed outstanding works by the young artists and offered the young talents a platform to launch the professional careers The dialogue with our suppliers and third party contractors who are and make valuable contacts. In 2018, we are continuing this cooperation working with us to shape the energy transition is getting more and with Hamburger Bahnhof. more important. At the 50Hertz Suppliers’ Day in autumn 2017, we sensitised our business partners to our demanding quality targets in realising our projects on time and within budget, and on maintaining eDngagEDICAierterTED PA pRTartNERner 65

Art in the 50Hertz Netzquartier: Works by young artists from the 50Hertz Grid Neighbourhood are shown on a regular basis.

Imparting specific knowledge to children and young people on COOPERATION WITH DISTRIBUTION SYSTEM OPERATORS the subject of the energy transition is close to our hearts. 50Hertz and the “Unabhängiges Institut für Umweltfragen e. V.” (UfU) have Only together can we master the energy transition. We are convinced therefore jointly developed an interactive exhibition, “Energie of this. Therefore, 50Hertz has been cooperating with the various gemeinsam wenden” (Turning energy around together), which is actors for many years on the subject of renewable energies, climate used at various locations in the grid area. It playfully demonstrates and environmental protection, as well as harmonisation of the to fifth and sixth grade pupils just how multifaceted the energy European electricity market. transition is. The interactive exhibition was awarded a prize by the German UNESCO Commission as a project of the UN Decade of Since 2014, 50Hertz has been cooperating even more closely with the “Education for Sustainable Development”. In 2017, around 850 pupils distribution system operators (DSOs) of the consortium “Flächen- visited the interactive exhibitions. netzbetreiber Arge Ost”. With the increasing feed-in of renewable energies to the grids and the associated further decentralisation, In its grid area, 50Hertz funds selected projects that make our so- new flexible players are emerging, who are usually connected to the cio-culture landscape even more multifaceted and eventful. In the distribution grids. It is therefore clear to 50Hertz that together we context of the renowned “Artist in Residence” programme series have to adapt our system and grid control to the new requirements. at Konzerthaus Berlin, in 2017 we supported the organist Cameron In a 10-point program, together with the Arge Ost DSOs, we have Carpenter. The Mecklenburg-Western Pomerania Music Festival therefore formulated necessary developments for the four system also values us as a reliable partner. services – frequency control, voltage control, operational management and restoration of supply. In 2017, 50Hertz got involved time and time again in numerous ini tiatives, associations and organisations. These included, among The first pilot tests for solution approaches to the system services of other things, the “Rennsteig Autumn Run” in the Thuringian Forest, frequency control and voltage control are currently being carried out. DRK Kreisverband Güstrow, Heimatverein Röhrsdorf and Fischerei- To this end, the DSOs together with 50Hertz have, among other things, wirtschaft Rostock. We supported the young volleyball talents of introduced active reactive power control. In alignment with energy VFB 91 Suhl e. V. as well as the young biathletes of SV Schorfheide producers 50Hertz will also make power plant deployment planning Groß Schönebeck e. V. 66 50Hertz annual report 2017

Out and about together at the Wolmirstedt substation: (from left) Rainer Schmittdiel, Chief Executive Officer of Avacon Netz GmbH, Saxony-Anhalt Energy Minister Prof. Dr. Claudia Dalbert, 50Hertz Chief Technical Officer, Dr. Frank Golletz, and Johannes Kempmann, Chief Technical Officer of Städtische Werke Magdeburg, and Andreas Mötzing, Director of the 50Hertz Regional Centre West.

data available to the DSOs. This places new demands on system grid WindNODE – SOLUTIONS FOR THE ENERGY TRANSITION control and requires intensive coordination between TSOs and DSOs. Therefore, a training concept was developed in order to provide ap- In January 2017, the WindNODE project began with an initial consor- propriate technical skills and training in the necessary procedures. tium meeting with all partners in the 50Hertz Netzquartier. Being the main coordinator, 50Hertz co-founded the project. More than 70 partners have teamed up in order to develop a Northeast German model region for intelligent energy within four years. In addition to energy suppliers and grid operators, companies in the automotive industry, the utilities and waste management sector, the housing sector, retail trade, and several universities as well as research institutes from the region are participating in the projects.

Solutions are being jointly developed in order to integrate ever larger quantities of renewable energies into the electricity grids as efficiently as possible and at the same time to maintain stable power grids. WindNODE involves all six East German states, including Berlin, and comes under the patronage of the six prime ministers and the Govern- point ing Mayor of Berlin. The project will cost nearly EUR 70 million and 10 will be funded as part of the “SINTEG – Showcase Intelligent Energy – Digital Agenda for the Energy Transition” funding programme by the programme Federal Ministry of Economy and Energy. defines responsibilities between TSOs and DSOs. DEDICATED PARTNER 67

FLEXIBILITY AND ORGANISATION IN THE ENERGY SYSTEM OF THE FUTURE the 50Hertz subprojects at WindNODE 010101110110100101101110011001000100111001001111010001000100 0 101001000000101011101101001011011100110010001001110010011110 1 In the WindNODE project, 50Hertz is responsible for the “Flexibility 0001000100010100100000010101110110100101101110011001000100 1 Platform” sub-project. Its intention is to show how decentralised 1100100111101000100010001 0 1 01010111011010010110111001100100 0 systems can be better used in energy industry processes. In this 10011100100111101000100010001010010000001010111011010010110 1 1100110010001001110010011110100010001000101001000000101011 1 context, together with regional distribution system operators, 011010010110111001100100010011100100111101000100010001 0 1 010 1 50Hertz is developing a flexibility platform, through which small G R IDS 011101101001011011100110010001001110010011110100010001000101 0 conventional and renewable generating facilities or switchable 01000000101011101101001011011100110010001001110010011110100 0 or shiftable loads can offer their flexibility. Based on these offers, 1000100010100100000010101110110100101101110011001000100111 0 0100111101000100010001 0 1 01010111011010010110 111001100100010 0 distributed flexibilities can be included in a technology-neutral 11100100111101000100010001010010000001010111011010010110111 0 manner in the grid congestion management processes. In another 0110010001001110010011110100010001000101001000000101011101 1 50Hertz sub-project, the balancing power processes are also to be 010010110111001100100010011100100111101000100010001 0 1 010101 1 further developed in terms of improved application possibilities for 10110100101101110011001000100111001001111010001000100010100 1 00000010101110110100101101110011001000100111001001111010001 0 distributed flexibilities. An important basis for the new processes is 0010001010010000001010111â0110å â1 å00101101â å â1 å1001100100010011100 1 offered by the smart meter infrastructure. The automated process 00111101000Production100010001 0 1 010101110110100Consumption101101110011001000 1001 1 ing of metered values is important for the efficient handling of the 10010011110100010001000101001000000101011101101001011011100 1 1001000100111001001111010001000100010100100000010101110110 1 processes. Furthermore, the data from the intelligent measurement 5 0 0010110111001100100010011100100111H z 101000100010001 0 1 010101110 systems is to be used to improve forecasting for marketing and 11010010110111001100100010011100100111101000100010001010010 0 system operation. 00001010111011010010110111001100100010011100100111101000100 0

100010100100000010101110110100M A1R0K1101E T 11001100100010011100100 1 11101000100010001 0 1 0101011101101001011011100110010001001110 0 Further information on the WindNODE cooperative programme and 10011110100010001000101001000000101011101101001011011100110 0 its sub-projects can be found here: www.windnode.de 1000100111001001111010001000100010100100000010101110110100 1 01101110011001000100111001001111010 0 0 100010001 0 1 01010111011010 0 10110111001100100010011100100111101000100010001010010000001010111 0 1

In search of solutions for the future: (from left) Markus Graebig (WindNODE), Marc Richter (Fraunhofer-Institut) and Olaf Ziemann (50Hertz). 68 50Hertz annual report 2017

intertwined WITH SCIENCE SUSTAINABLY DEVELOPING THE In the reporting year 2017, approximately EUR 3 million were used for EUROPEAN GRID INFRASTRUCTURE research and development projects. Additionally, 50Hertz received EUR 0.25 million, which was provided in public, non-refundable subsidies. The Renewables Grid Initiative (RGI), launched in 2009 together with environmental organisations, is a Europe-wide exchange and We share our experiences from practice with science on a regular basis. dialogue platform for transmission system operators and non- Considering that 50Hertz has founded a Scientific Advisory Board. The governmental organisations. 50Hertz was part of it from the very voluntary board currently consists of 16 professors from the fields of beginning. The globally unique initiative follows the effective energy technology, business, law and policy. The Advisory Board meets integration of renewable energies into the electricity grid and is once or twice a year to discuss and evaluate current topics of relevance committed to the sustainable development of the European grid to 50Hertz and future questions. Main aspects of cooperation are the infrastructures: initiation and conduct of joint research and development projects as well as studies and supervision of dissertations, bachelor’s and mas- The early exchange of information between transmission system ter’s theses. In the future, sustainability issues should become more operators and environmental organisations, local authorities, important in this scientific dialogue. institutions and citizens on grid expansion projects improves local understanding of the projects, accelerating the approval For many years, 50Hertz has been cooperating with universities in the process as much as possible. north and east of Germany. These scientific partners include, among others, the Technical University of Dresden, the Technical Universi- Under the leadership of the RGI, this was successfully tested ty of Ilmenau, the Otto-von-Guericke University of Magdeburg, the within the context of the EU-funded BESTGRID project in a total Friedrich Schiller University of Jena, the Brandenburg University of of five pilot projects. 50Hertz participated in the context of the Technology Cottbus and the Technical University of Berlin. Together Bertikow – Pasewalk 380-kV-overhead line grid expansion project. with the scientists and students, 50Hertz examined the voltage quality of high voltage grids, for example, the operation of alternating current and direct current on a shared mast, the determination of critical conditions in the 50Hertz grid or the implications of the energy transition for business, politics and society. In addition, we regularly bring practice-oriented presentations, lectures and workshops into studies and everyday scientific life at the universities and research facilities.

Selected 50Hertz partners:

Membership

Shareholdership Cooperation 69 150 .

2 150

150 220

- -

220 - 1

220 1

220 - 220 () 110

110

1 1

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 Operating voltage in 110/150/220 kV Transformation 380/220 kV Other companies 380/220 kV Conventional power plant (lignite-¬red or coal-¬red power plant) Transformation 380/150 kV HVDC/back-to-back converter 380/150 kV planned/under construction Pumped-storage plant Planned/under construction HVDC/DC link 400 kV Other companies Onshore/oshore wind farm HVDC/DC link 320/525 kV Onshore wind farm planned/under construction planned/under construction

1 New construction largely along existing routes Oshore wind farm planned/under construction 24/04/2018 Grid connection oshore 150/220 kV 2 e oshore wind farms, including their spatial location, only be determined in the outcome of the 2018 tender Grid connection oshore 150/220 kV procedure in accordance with the Oshore Wind Energy Act. planned/under construction

70 50Hertz annual report 2017

about this imprint report

Our Annual Report 2017 “For a successful energy transition in a sustainable world” is Publisher for the first time a combined report that presents the most important operational and 50Hertz Transmission GmbH financial indicators as well as all dimensions of sustainability and our main fields of Heidestrasse 2 action. Together with the Almanac 2017, this publication provides a comprehensive 10557 Berlin overview of our company on the basis of financial and non-financial indicators. T +49 (0) 30 5150-0 F +49 (0) 30 5150-2199 Our non-financial statement was published on 20.04.2018 in due time. It applies for the info@ 50 hertz.com consolidated companies of Eurogrid GmbH, 50Hertz Transmission GmbH and 50Hertz Offshore GmbH. It generally includes our sustainability activities for the fiscal year 2017 Board of Management (01 January 2017 to 31 December 2017) and complies with the legal requirements. Different Boris Schucht reporting periods for the data and contents are shown separately. Chief Executive Officer (CEO)

The sustainability section (pages 26 to 68) of this Annual Report considered the 20 Dr. Dirk Biermann criteria of the German Sustainability Code (DNK) and is based on the guidelines of the Chief Markets and System Operation Global Reporting Initiative (GRI), fourth generation (G4). It also serves as an annual Officer (CMO) progress report (Communication on Progress – COP) and shows how we implement the ten principles of the United Nations Global Compact (UN GC). In order to meet the Dr. Frank Golletz information requirements of rating agencies and other stakeholders, we even exceed Chief Technical Officer (CTO) these requirements. In November 2016, Eurogrid received an ESG rating (Environment, Social and Corporate Governance) from the Vigeo Eiris rating agency of “Robust” and Marco Nix is thus in the upper mid-field of the “Electricity & Gas Utilities” sector. In 2017, the Chief Financial Officer (CFO) Sustainalytics agency performed an initial review and submitted an assessment of “Average Performer”. In 2018, re-assessments are to be performed by the Vigeo Eiris Concept and Editorial agency (third quarter) and the Sustainalytics agency (fourth quarter). 50Hertz Communications and Public Affairs

The online version of the sustainability section is also available in German and English Design at csr.50hertz.com. Our next Annual Report containing more detailed sustainability Heimrich & Hannot GmbH reporting is expected to be published in the second quarter of 2019. Images This report contains forward-looking statements regarding the future development of 50Hertz 50Hertz as well as economic and political developments. These statements represent best Jan Pauls estimates made on the basis of all information available to us at the time of reporting. In Werner Huthmacher the event that the underlying assumptions do not materialise or additional risks arise, HGEsch the actual results, development and performance of 50Hertz may deviate from the estimates presented. 50Hertz therefore assumes no responsibility for the forward-looking Printing statements presented here. optimal media GmbH www.optimal-media.com about this report – dnk Index

dnk Index

Information on the DNK Indicators Page Reference GRI UN GC

STRATEGY 1 Strategic Analysis and Measures 30–31, 35 — 2 Materiality 31 — 3 Objectives 31 — 4 Depth of the Value Chain 32 —

PROCESS MANAGEMENT 5 Responsibility 30, 40, 50, 62 G4–56 — 6 Rules and Processes 30, 34, 40, 51, 62 — 7 Control 30, 31 — 8 Incentive Systems 45 G4–51a | G4–54 — 9 Stakeholder Engagement 30, 32, 44, 62–64 G4–27 — 10 Innovation and Product Management 50–51, 65–68 G4–EN6 | G4–FS11 8, 9

ENVIRONMENTAL 11 Use of Natural Resources 50–51, 54–57 G4–EN1 | G4–EN3 7, 8 12 Resource Management 53 G4–EN8 | G4–EN23 7 13 Climate-relevant Emissions 51–52, 56–57 G4–EN15 | G4–EN16 | G4–EN17 | G4–EN19 7, 8, 9

COMPANY 14 Employment rights 42–44 G4–LA6 3, 6 15 Equal opportunities 42 G4–LA8 4, 5, 6 16 Qualification 40–41 G4–LA9 | G4–LA12 | G4–HR3 6 17 Human Rights 35, 40 G4–HR1 | G4–HR9 | G4–HR10 | G4–HR11 1, 2, 3, 4, 5 18 Corporate Citizenship 34, 64–65 G4–EC1 — 19 Political Influence 32–33, 64 G4–SO6 10 20 Conduct compliant with Law and Policy 32–34 G4–SO3 | G4–SO5 | G4–SO8 10 contents

Flap Key figures About us Our task Our vision The energy transition and its impact on the 50Hertz grid area

4 HIGHLIGHTS 2017

7 Foreword 8 Interview Chris Peeters, Chairman of the Supervisory Board 10 Corporate bodies

12 OUR BUSINESS

18 Berlin on the way to a climate-neutral city – Interview with Boris Schucht (50Hertz) and Thomas Schäfer (Stromnetz Berlin)

22 FINANCES

26 OUR SUSTAINABILITY STRATEGY

36 PREFERRED EMPLOYER

46 ENVIRONMENTALLY CONSCIOUS PLAYER

58 DEDICATED PARTNER

69 Grid map

70 Imprint DNK index Cover Contact

Our Annual Report and other multimedia content can be found at: csr.50Hertz.com

The EUROGRID Annual Report is available to download as a PDF from: www.eurogrid.com/en-en/Investor-Relations/Financial-Reports 73 50Hertz annual report 2017 50Hertz Transmission GmbH Heidestrasse 2 10557 Berlin t +49 (0) 30 5150-0 f +49 (0) 30 5150-2199 [email protected]