TenneT Holding B.V. Integrated Annual Report 2019 Key figures 2019 Safe workplace Diverse workforce Safety (TRIR) Gender ratio 4.8 23% 77% Satisfied capital providers* Environmental impact ROIC % Greened of our carbon footprint 5.1 27.4% Grid availability Safeguard capital structure* Grid availability FFO/Net debt 99.9998% 14.8% Future proof grid* Our workforce Annual Investments (EUR million) Number of employees (internal and external) 3,064 4,913 Engaged stakeholders Healthy financial operations* Reputation survey EBIT (EUR million) fairly strong to very strong 768 * Based on underlying figures Table of contents Integrated 2019 at a glance 2 Annual Letter from the Board 4 Report 2019 * About TenneT 6 Profile 6 Our strategy and value creation 9 Materiality analysis 14 * Our performance in 2019 16 Deliver a high security of supply 16 Ensure critical infrastructure for society 23 Create a sustainable workplace 30 Contents Create value to transition to a low carbon economy 36 Secure a solid financial performance and investor rating 44 Solve societal challenges with stakeholders and through partnerships 50 Statements of the Executive Board 57 Our Executive Board 58 Supervisory Board Report 60 Supervisory Board Report 60 Remuneration policy 66 Board remuneration 68 Our Supervisory Board 72 * Governance and risk management 74 Corporate governance 74 Risk management and internal control 76 Risk management and internal control framework 79 Compliance and integrity 80 Risk appetite 82 Key risks 83 Financial statements 87 Consolidated financial statements 88 Notes to the consolidated financial statements 95 Company financial statements 147 Notes to the company financial statements 149 Other information 152 Profit appropriation 152 Independent auditor’s report 153 Assurance report of the independent auditor 160 About this report 163 Reconciliation of non-IFRS financial measures 168 SWOT Analysis 169 Key figures: five-year summary 170 Glossary 171 * These sections reflect the director’s report as mentioned by Part 9 of Book 2 of the Dutch Civil Code. Integrated Annual Report 2019 - TenneT Holding B.V. 1 2019 at a glance TenneT at a glance 2019 Q2 Q3 After five years of construction, the Randstad We decided to 380 kV North Ring was increase our commissioned. This will biodiversity further strengthen measures at 462 of our grid in one of our stations in the the most densely Netherlands and populated regions in Q1 Germany. the Netherlands. We partnered up with Gasunie and Thyssengas in the Element Eins Q4 project, where In November 2019, TenneT entered into We completed the COBRAcable in we aim to find the largest sustainable Revolving Credit September 2019, which now allows solutions to Facility in the Benelux. This EUR 3 billion green energy to flow between the connect both facility provides TenneT with more options Netherlands and Denmark. electricity and gas to drive the energy transition. infrastructures through the production of hydrogen. We completed Borssele Alpha, TenneT’s first, and at the same time largest connection system for wind farms on the Dutch North Sea. We successfully issued another EUR 1.25 billion We have completed our project at the Elbe of Green Bonds. Crossing in Germany. With this project, we quadrupled our capacity (from 2.4 to 9.6 gigawatts (GW)) and it created TenneT’s most powerful line, using the highest masts in Europe. Together with 50Hertz, Amprion and We welcomed new members of the TenneT announced plans TransnetBW, we submitted the German Grid Supervisory Board (Edna Schöne, to invest an additional development plan (Netzentwicklungsplan) Essimari Kairisto and Stijn van Els) EUR 215 million in the high to the BNetzA after taking comments from and Tim Meyerjürgens as COO in We organised an annual event voltage grid in the north of a public consultation into consideration. our Executive board in the first half combining forces together with over the Netherlands to increase of 2019. 150 energy professionals to discuss connection capacity from how we can drive the energy transition. solar and wind farms. 2 Integrated Annual Report 2019 - TenneT Holding B.V. 3 Letter from the Board Letter from the Board In order to implement the sustainable energy policies of the That’s why we focus on three main points when designing Netherlands and Germany, drive the energy transition and an energy system fit for a fossil-free future. Firstly, expansion carry out large-scale maintenance work on our high-voltage – by which we mean extending the reach of our grids to grids, our annual investments will need to expand from connect and carry the power of on- and offshore wind approximately EUR 2 to 3 billion today to approximately to millions of users across the Netherlands and Germany EUR 4 to 5 billion within the next five years that implies that and beyond. Transport across large distances, combined Letter we are preparing for doubling our execution capacity in the with international exchange of green electricity, is vital for the next years. As announced earlier and recognised by our success of the energy transition. Secondly, optimising the principal shareholder, the Dutch State, it is clear that utilisation of our existing grids will help us achieve a clean from the additional equity capital is needed to maintain our solid energy future faster. A promising development in this standing in the financial markets and to ensure favourable respect is the advanced thinking about an integration of access to a wide-ranging supply of financing sources. electricity and gas power networks. In addition, automated Board system operations will help us achieve higher grid utilisation, Our aim is to further build on TenneT’s strength as an which we are exploring together with universities, integrated, European company. The energy transition distribution system operators, suppliers and governments. recognises no borders – and we believe in a unified, rather With this new technology we expect to unleash latent grid than fragmented country-by-country approach. This is the capacity instead of upgrading or expanding our assets. Ben Voorhorst Manon van Beek Otto Jager Tim Meyerjürgens Chief Operational Officer Chief Executive Officer Chief Financial Officer Chief Operating Officer best way to ensure the highest availability of our grid when And finally system thinking and sector coupling, where it either gets flooded with green electricity, or when it is dark flexiblity is key. Flexibility of demand and supply of electricity and windless. It also ensures efficient investment across is essential to keep the system in balance while intermittent Dear all, a larger geographical area, avoiding costly miniature renewable energy sources will increasingly dominate the To put it in a nutshell: our task is it, to keep the lights on. And we are good at it. solutions. Finally, it will bundle knowledge and spur scene. Flexibility can be achieved, among other things, With 99.9998% our grid availability is amongst the highest in the world. But times cooperation to achieve ambitious climate goals at a faster from interconnectors, storage (batteries, hydrogen pace. As a consequence, we would like to further broaden conversion), comprehensive participation of consumers in are changing, and we face new challenges as we prepare for a clean energy future, and professionalise our existing shareholder base with the energy system and demand-side response. largely dependent on volatile renewable energy sources such as wind and sun. a European-oriented party, that will continue to enable us to drive integrated network development, planning and This presents the framework of our work in the coming As we transition to a sustainable, reliable and affordable CO2-free energy system, the tried and trusted methods and solutions we applied during the past 20 years, operations across borders and facilitates a uniform, years, something that we feel very passionate about. functional management of the entire company. We expect to We need everyone at TenneT as well as all the partners with will not sustain us in the decades ahead. reach a satisfactory solution on this before the end of 2020. whom we drive the energy transition, to pull this off together. We will also practise what we preach, with a comprehensive With much investment and innovation required to deliver plan to reduce our own carbon footprint and build our new energy solutions, the bill will rise in the foreseeable reputation as a green grid operator. We bring expertise and experience, but we don’t have all We share a degree of concern about the affordability of future, whether funded through tariffs or taxes. Although the answers. We need to transform the way we collaborate, the energy transition and the social acceptance that goes our share of consumers’ electricity bills is relatively low Clearly, the pressure on us and our partners to deliver, to make decisions and solve problems to navigate the with it. It’s primarily funded with public money – through (less than 10%), the costs of the necessary investments perform, is high. This does not mean that haggling with an challenging times ahead. Being open and honest about taxes and energy tariffs. It can sometimes be difficult to in high-voltage networks will increase and we want to be important theme such as security is acceptable. Working these challenges is important to find the best way forward explain why the energy transition requires such enormous as prudent as possible about how we invest our money. safely, where everyone can come home healthy in the in partnership with others. investments. Even though sun and wind come for free, evening, simply is a prerequisite in everything we do and we harnessing their power for society’s ever-growing Although major expansions of our onshore and offshore require the same dedication from our partners when it Last year exemplified the scale of change. It was a pivotal appetite for electricity is technically challenging and costly.