Report on the fiscal year 2020 of 50Hertz Transmission GmbH, Berlin

Translation from the German language from 1 January to 31 December 2020

50Hertz Transmission GmbH Heidestrasse 2 10557 Berlin

Table of contents

Page

1. Management report of 50Hertz Transmission GmbH ...... 3 1.1. Purpose of the Company ...... 3 1.2. Management system ...... 4 1.3. Industry-specific environment ...... 4 1.4. Business development ...... 11 1.5. Economic situation of 50Hertz Transmission ...... 20 1.6. Forecast report ...... 27 1.7. Risk management system ...... 29 1.8. Opportunities and risks...... 29 1.9. Accounting-related internal control and risk management system ...... 36 1.10. Corporate governance declaration ...... 38

2. Statement of financial position ...... 40

3. Income statement ...... 41

4. Statement of cash flows ...... 42

5. Statement of changes in fixed assets ...... 43

6. Notes to the financial statements ...... 44 6.1. General ...... 44 6.2. Accounting policies ...... 45 6.3. Notes to the statement of financial position ...... 50 6.4. Notes to the income statement ...... 55 6.5. Other notes ...... 60

7. Company boards ...... 66 7.1. Members of the supervisory board ...... 66 7.2. Members of management ...... 67

1. Management report of 50Hertz Transmission GmbH

1.1. Purpose of the Company

50Hertz Transmission GmbH (“50Hertz Transmission”) has a 100% shareholding in 50Hertz Offshore GmbH (“50Hertz Offshore”). Both companies are referred to as “50Hertz” together and both are affiliates of Eurogrid GmbH (“Eurogrid”), Berlin. 50Hertz Transmission is included in the consolidated financial statements of Eurogrid.

The shareholders of Eurogrid are Eurogrid International NV/SA (“Eurogrid International”) with registered offices in Brussels, Belgium, and Selent Netzbetreiber GmbH (“Selent”) with registered offices in Frankfurt am Main. As listed holding company, Elia Group NV/SA (“Elia Group”) holds all of the shares in Eurogrid International, which in turn has an 80% shareholding in Eurogrid. KfW indirectly holds the remaining 20% share in Eurogrid via its wholly owned subsidiary Selent.

As transmission system operator (TSO), 50Hertz Transmission operates the extra-high-voltage grid in northern and eastern Germany with a network grid length of around 10,380 km. In this connection, the company is also responsible for maintenance and needs-based expansion as well as for maintaining the balance of generation and consumption within the balancing zone’s whole electricity supply system. The business activities of 50Hertz Offshore comprise the planning, construction and maintenance of electricity lines as well as the associated plants and facilities for connecting offshore wind turbines/farms primarily erected in the Baltic Sea to the grid.

50Hertz Transmission performs the accounting of the legal provisions of the EEG [“Erneuerbare- Energien-Gesetz”: German Renewable Energy Act], the KWKG [“Kraft-Wärme- Kopplungsgesetz”: German Combined Heat and Power Act] and particular surcharges pursuant to the EnWG [“Energiewirtschaftsgesetz”: German Energy Industry Act] as well as the StromNEV [“Stromnetzentgeltverordnung”: Ordinance on Electricity Network User Charges]. These transactions do not have any impact on profit/loss of the TSO; however, their cash effects have a considerable influence on the statement of financial position of the Company.

As transmission system operator responsible for the balancing zone, 50Hertz Transmission is responsible for its secure, reliable, efficient and environmentally friendly operation, maintenance and needs-based expansion as well as for maintaining the balance of generation and consumption within the balancing zone’s whole electricity supply system. Since 2012, 50Hertz has been certified as an ownership unbundled grid operator by the Federal Network Agency [“Bundesnetzagentur”: BNetzA].

A profit and loss transfer agreement is in place between Eurogrid and 50Hertz Transmission and a domination and profit and loss transfer agreement is in place between 50Hertz Transmission and 50Hertz Offshore. There is a cash pooling agreement as part of the uniform financial management of all the German companies within the Eurogrid Group. This as well as other intercompany loans guarantee the Company’s financing.

1.2. Management system

The supervisory board of Eurogrid is responsible for monitoring the German group activities. This supervisory board also performs the function of an audit committee under Sec. 324 HGB [“Handelsgesetzbuch”: German Commercial Code].

The operational management of the Group is performed by the management of 50Hertz Transmission as the Group’s leading company.

The central performance indicators for group management include both financial and non- financial elements; they are based on the Group’s objectives (competitive and sustainable result, high efficiency, occupational health and safety and value-based corporate culture, needs-based grid expansion, high level of supply reliability) and are recorded and continuously analysed using a performance indicator system containing various dimensions. Financial performance indicators are the after-tax result in accordance with IFRS, an absolute value for operating onshore expenses (OPEX value onshore) reflecting the efficiency value of 50Hertz Transmission; OPEX primarily contains personnel expenses and non-energy-related expenses, as well as the investment behaviour for the transmission grid. The investment behaviour for the transmission grid is managed by the achievement of specific milestones, the value added of the projects, the level of capital expenditures per year and taking into account the quality of the project management. For these financial indicators, a contribution to the group targets has also been taken into account within Elia Group since 2020. In occupational health and safety, the non- financial performance indicators take into account the accident rate, accident severity and employee availability as well as grid availability as a technical performance indicator.

The financial position of 50Hertz Transmission is assessed by means of rolling liquidity planning which primarily takes into account, assesses and manages the status of investment accounting.

1.3. Industry-specific environment

Strategic direction of business

As a company with a great social responsibility for the success of the energy transition, the political conditions in Germany and Europe are of enormous importance for the activities of 50Hertz as a regulated company in a natural monopoly. As a consequence, 50Hertz engages in intense dialogue with political decision-makers. In particular, political decisions regarding the withdrawal from various forms of energy generation as well as at the same time the particular promotion of renewable forms of energy generation has posed constant challenges for the company legally responsible for the electrical system for years now, challenges which 50Hertz has taken up actively and innovatively. It is thus the Company’s new strategic aim to cover the entire electricity consumption in 50Hertz’s grid area with 100% renewable energy by 2032.

In order to be able to integrate the large volumes of renewable energy into the grid securely and efficiently, 50Hertz develops and operates an increasingly complex system and is putting the digital transformation to good use in the process. The quicker, data-based decisions, automations and simplified processes this enables creates opportunities for action to be taken in order to meet the expectations of new players along the value added chain, the changing needs of consumers, an evolving legal framework as well as the increasing expectations of external partners towards the joint development of future solutions.

Economic and political environment

As a result of the coronavirus pandemic, fiscal year 2020 witnessed significant declines in GDP compared to prior years. According to the Federal Statistics Office, there was a sharp drop in economic output of around 5% for 2020, a level last seen during the financial and economic crisis of 2008/2009. As documented in the BDEW’s [“Bundesverband der Energie- und Wasserwirtschaft”: Federal Association of the Energy and Water Industry] 2020 annual report, the pandemic also had a considerable impact on electricity supply; at just 564 billion kWh, gross electricity generation decreased 6.5%, gross domestic electricity fell by 4.4% to 544 billion kWh and Germany’s export surplus dropped from 34.9 billion kWh to just 20.9 billion kWh.

The energy and climate change are of central importance in the political and social debate. The individual legislative projects in 2020: On 3 July 2020, the lower and upper houses of German parliament passed legislation to end coal-fired power generation by 2038 at the latest. This is to be implemented on the basis of two main laws: The KVBG [“Kohleverstromungs- beendigungsgesetz”: Coal-fired Power Generation Termination Act], which includes a concrete shutdown plan for German lignite power plants and tenders for the shutdown of hard coal power plants, as well as the Structural Development Act for Coal-mining Regions, which regulates billions of euros in aid for the affected coal-mining regions. 50Hertz’s grid region is affected by this with the shutdown of the Moorburg power plant in 2021.

With the adoption of the National Hydrogen Strategy in June 2020, the Federal Government has set itself the target of increasing electrolysis output in Germany to five gigawatt (GW) by 2030 on the basis of renewable energy. This is to be followed by an additional five GW. An amount of up to nine billion euros is earmarked for promoting this future technology.

Following intensive discussions, the upper house of the German parliament on 27 November 2020 followed the lower house of the German parliament in approving the amendment to the WindSeeG [“Windenergie-auf-See-Gesetz”: German Offshore Wind Energy Act]. This amendment sets the targets for the expansion of offshore wind energy at a minimum of 20 GW by 2030 and a minimum of 40 GW by 2040.

The aim of the PlanSiG [“Planungssicherstellungsgesetz”: German Planning Assurance Act] is to facilitate approval processes under the special framework conditions of the coronavirus crisis. Specifically, the act - initially running until 31 March 2021 - provides for a modification of the public participation in numerous approval processes by establishing the announcement and display of documents on the internet and the replacement of discussion hearings with online consultations or telephone and video conferences. A potential extension of this deadline or removal of the deadline altogether is currently being discussed. In May 2020, under the Ordinance to Amend the German Renewable Energy Act, the Federal Government set the EEG surcharge for 2021 at 6.5 cents per kilowatt hour (ct/kWh). The lower and upper houses of the German parliament had given the ordinance their final approval on 2 July 2020. To stabilise the EEG surcharge, the Federal Government at the same time decided on a federal grant. The four German transmission system operators announced the amount involved on 15 October 2020: for 2021, it comes to just under EUR 10.8b. The federal grant is funded from annual income from the new CO2 pricing in national emissions trading as well as from the economic stimulus package the Federal Government had decided on in summer 2020. With the amendment to the second supplementary budget for 2020, the funds for the federal grant for 2021 have already been provided. The result of the state aid review performed by the European Commission is still outstanding.

In 2020, the legislator had to deal intensively with the EEGuaÄndG [“Gesetz zur Änderung des Erneuerbare-Energien-Gesetzes”: Act to Amend the German Renewable Energy Act] as well as additional energy regulations. Amongst other things, the act sets out the expansion plans of various renewable energy technologies so as to ensure that the target of renewable energies accounting for 65% of gross electricity consumption set by cabinet resolution can be achieved by 2030.

The legislator is expected to approve the amendment to the German Federal Requirement Plan Act and other regulations in the first quarter of 2021. The federal requirement plan contained in the BBPIG [“Bundesbedarfsplangesetz”: German Federal Requirement Plan Act] as an attachment is the key instrument for expanding the electricity grids at transmission level. The draft act takes into account the raised target for the expansion of renewable energies of a 65% share of gross electricity consumption in 2030.

With a view to implementing the “Green Deal”, which the European Commission presented on 11 December 2019, the key steps are now taking shape for the European Union (EU) to achieve its declared target of being climate-neutral by 2050. In trialogue proceedings, the European Commission, the Council of Ministers and the Parliament are currently negotiating the European climate bill, last amended in September 2020, which is to enshrine the target of achieving climate- neutrality by 2050 in law. While the Commission and Parliament advocate an ambitious target, there are still reservations in some eastern European member states about the path to be taken to achieve the increased reduction target.

Another important component of the Green Deal is the increased expansion of renewable energies – onshore and offshore. The EU Commission’s new offshore strategy takes into account all of the EU’s marine areas, i.e., the North Sea and the Baltic Sea, the Atlantic, the Mediterranean and the Black Sea. In order to tap into the potential that lies off Europe’s coastlines, there are plans to increase the installed offshore wind power capacity of 12 GW to 60 GW by 2030 and to 300 GW by 2050. The EU Commission’s strategy here is to largely focus on major joint projects between various member states. This development is to be enabled by means of a clear legal framework, adapted regulations for the internal electricity market and environmental protection as well as amended guidelines on state aid.

These and future legislative and regulatory proposals as well as political developments are being closely monitored by 50Hertz at a federal and regional level as well as – within Elia Group – at a European level. Through various statements, 50Hertz has been constructively engaged in energy policy debates.

Regulatory framework for the energy industry

European law

The implementation of the Clean Energy for all Europeans Package (CEP) was the dominant issue concerning European law for the energy industry in 2020. While the regulation on the internal electricity market has already applied directly in all member states since 2020, the new internal electricity market guideline only had to be transposed into national law by the end of 2020. However, this implementation will be delayed by several months in Germany, meaning that any specific effects have yet to be ascertained.

In a series of rulings, the European courts have also again contributed to the development of the legal framework.

In a landmark ruling, the European Court of Justice (ECJ) further increased the possibilities for seeking court action against projects in Germany affecting the environment. The judges ruled that the EU Water Framework Directive allows private persons who are directly affected – also with regard to groundwater – to file lawsuits. The judgement is of great relevance for projects and applications that may have an impact on the water balance. This may affect extraction and discharge allowances and also agriculture. The ECJ also clarified that national regulatory authorities must also carry out abuse proceedings against TSOs upon the request of end consumers that are only indirectly connected to the transmission grid via subordinate grid levels.

National law

At national level, the legal framework for 50Hertz was primarily shaped by rulings by the highest court and the entry into force of various planning and environmental regulations.

The Federal Supreme Court reasserted the lawfulness of determining the equity interest rate for the third regulatory period, thus ruling in favour of the Federal Network Agency. According to the Federal Supreme Court, the interest rates set by the Federal Network Agency were not based on discretionary powers being wrongly exercised. However, several grid operators have filed a constitutional complaint about this ruling. The Federal Court of Justice also issued a ruling on the compensation claims coming from renewable energy and CHP plant operators during grid bottlenecks. Since the Federal Court of Justice included a broader area of application compared to the previous instances/past practice, considerable claims are expected to be filed by plant operators in future.

The German Federal Administrative Court strengthened the rights of environmental associations to file lawsuits. It also ruled that preparatory investigations of a project developer may also be accepted even if planning permission has not yet been completed, thus confirming a model claim drawn up by 50Hertz together with another TSO.

In an additional decision, the BVerwG [“Bundesverwaltungsgericht”: German Federal Administrative Court] confirmed that species relevant for planning may be included in the species protection assessment. When it comes to realising 50Hertz’s overheard lines projects, any issues regarding the protection of species are of utmost importance and have a considerable impact on the duration of the approval processes.

Furthermore, the BVerwG rejected a claim for provisional legal protection against the construction of the eastern section of the “Nordring Berlin” [Berlin Northern Ring]. In August 2019, 50Hertz had received the requested planning approval decision, against which action has been filed by an environmental association, a municipality and two private individuals. Following the rejection of the application for expedited proceedings, 50Hertz may continue with the construction of the Nordring Berlin despite the ongoing court case.

The BVerwG also took an interim decision in rejecting a claim for provisional legal protection against the construction of sections 4 and 5 of the Uckermark line. In August 2020, 50Hertz had received a construction right following the decision to supplement the plan, against which action has been filed by an environmental association.

Two rulings handed down by the BVerwG have sparked uncertainty as to the enforceability of planning approval decisions if they infringe upon European Union law. Should it not be legally permissible outside of the planning permission to implement amended provisions that are mandatory under European Union law, there may be a risk of enforceable planning approval decisions and even those determined legally valid by the courts being revoked.

Following confirmation of the Federal Network Agency’s decision on the standard balancing group contract, the Higher Regional Court of Düsseldorf clarified the relationship between the European network codes and national law, and also in particular the law on general terms of business. According to the Higher Regional Court of Düsseldorf, European law takes priority; however, national regulations must also be complied with where the legal EU requirements leave leeway for national regulations.

Furthermore, the Higher Regional Court of Düsseldorf revoked the Federal Network Agency’s decision on the determination of an effective process regulation of costs and income from the procurement and remuneration of redispatch measures pursuant to Sec. 13 (1) No. 2 EnWG, ref. no. BK8-18/0007-A (“FSV redispatch”). The decision was applied for by the transmission system operators so as to make the BDEW industry guidelines agreed on with the power plant operators on redispatch remuneration the basis for allocation to network user charges. Complaints against this were filed with the Federal Court of Justice by the Federal Network Agency as well as the transmission system operators 50Hertz, Amprion and TransnetBW, such that the ruling by the Higher Regional Court of Düsseldorf remains unenforceable for the time being. Meanwhile, the parties involved are negotiating to reach an agreement on this issue.

The Higher Regional Court of Nuremberg issued a ruling on the amount of compensation claims against a TSO responsible for the connection for causing the delayed connection of an offshore wind farm to the grid. According to the decision, the wind farm operator was entitled to make such a claim, and the amount awarded should not be too low, even taking any reductions into account. The Higher Regional Court specifically defined how the claim is to be calculated.

The complaint filed with the Higher Regional Court of Düsseldorf against the accounting treatment of the EEG items when calculating the equity interest rates in the cost review notice of 50Hertz was rejected. In response, 50Hertz filed a complaint with the Federal Court of Justice. The complaint is still pending.

Grid development plans

Drafting of the seventh German network development plan began in January 2020 with the submission by the transmission system operators of the scenario framework draft, with the needs assessment relating to the target years 2035 and 2040. With the Federal Network Agency approving the 2021-2035 scenario framework on 26 June 2020, the current legal framework as well as the energy targets set out in the 2030 climate package and the national hydrogen strategy have been taken into account.

Compared to the 2019-2030 scenario framework, a considerable increase in the expected gross electricity consumption can be observed in all scenarios. This is due to the increasing electrification of the heating, transport and industrial sector, for example due to heat pumps, electromobility and power-to-gas technologies. On account of the higher gross electricity consumption and a continuing increase in renewable energies’ share of gross electricity consumption also after 2030, the assumed installed capacity of renewable energies has increased significantly compared to the previous network development plan. There has been a particularly strong increase in photovoltaics and offshore wind energy. However, just like today, onshore wind energy also remains the most important renewable source of electricity generation in the scenarios presented.

With the amended WindSeeG coming into force on 3 December 2020, 40 GW was defined as the new expansion target by 2040. The vast majority of the expansion is planned for the North Sea.

The spatial planning plan (Raumordnungsplan, “ROP”) for the German Exclusive Economic Zone (EEZ) in the North and Baltic Sea is being updated for the first time since 2009 by the BSH [“Bundesamt für Seeschifffahrt und Hydrographie”: German Federal Maritime and Hydrographic Office] on behalf of the German Federal Ministry of the Interior, Building and Community. The ROP defines space utilisation in the EEZ, also including commercial utilisation such as offshore wind energy. On 25 September 2020, the BSH published a first draft of the ROP and the associated environmental reports. As the draft did not identify any development opportunities for the Baltic Sea, the TSOs again underscored in their joint statement on the ROP draft issued on 3 November 2020 that the planned decisions on areas in the Baltic Sea as of 2026 would cause expansion to stop, with significant economic ramifications for the region. The TSOs therefore also recommended specific options for further expansion in the Baltic Sea (e.g., through collaborative space utilisation). On the basis of the statements, the BSH will prepare a second draft which they plan to publish at the end of the first quarter of 2021. The final ROP is scheduled for publication in summer 2021.

On 19 June 2020, the BSH announced that the updating and amending of the area development plan 2020 had been initiated. This was necessary as the first area development plan had to be adjusted with regard to the increased expansion plan from 15 to 20 GW of offshore wind energy by 2030. On 18 December 2020, the updated area development plan 2020 was published. For the Baltic Sea, only the O-1.3 area with 300 MW and the associated offshore grid connection system OST-1-4 (Ostwind 3) continued to be confirmed. Contrary to the statement of the TSOs made during the consultation process, further potential areas in the Baltic Sea, including O-2.2 (formerly Ostseeschatz) and O-6 (Gennaker), were not taken into account. The area development plan 2020 also made no decision on the test field grid connection due to open questions surrounding the topic of shipping. The area development plan is already expected to be updated again in 2021, to include amongst other things the implementation of the expansion plan of 40 GW of offshore wind energy by 2040.

By contrast, existing conventional power plants show a sharp decrease compared to today and to the previous scenario framework. Coal-fired power plants are now only included in one of the three scenarios for 2035.

The requirements of the CEP were used to model European electricity trading. Accordingly, at least 70% of line capacity must be made available for trading in all scenarios. Flow-based market coupling is used on all of Germany’s borders with neighbouring countries of the Continental Synchronous Area, which allows for particularly efficient use of transmission capacities.

Transmission system operators are now also required to provide an economic cost-benefit analysis in the draft of the 2021-2035 grid development plan for those interconnectors that were not yet legally prescribed or included in the 2019-2030 grid development plan. For 50Hertz, the “Hansa PowerBridge II” project will be subject to such an analysis. Furthermore, the transmission system operators are also to assess the “North-Sea-Wind-Power-Hub” project in a sensitivity analysis for the C2035 scenario using an economic cost-benefit analysis.

As in the previous grid development plan, the TSOs are required to present new and innovative technical approaches for the use of grid operating equipment as well as for grid management. The suitability of these approaches for increasing transport capacity and the best possible use of the existing grid is also assessed by the transmission system operators.

The publication and consultation on the first draft of the grid development plan is planned for the first quarter of 2021.

1.4. Business development

Strategic objective “From 60 to 100 by 2032”

By actively contributing to the next phase of the energy transition with our strategic objective “From 60 to 100 by 2032”, we are sending a signal not only in terms of energy and climate policy, but also industrial policy. Our goal is to cover 100% of energy consumption from renewable energy in 50Hertz’s balancing zone by 2032 while of course observing the requirements of non- discriminatory and transparent grid connection and grid access in the regulatory environment. The volatile feed-in of renewable energy leads to fluctuations in the share of electricity consumption over the course of the year. It is also becoming increasingly important for companies to settle in regions where a high share of renewable energy is available in the electricity grid. The objective of our strategy is to be able to cover electricity consumption in 50Hertz’s grid area from 100% renewable energy on average over the year.

For many years now, 50Hertz has been a leader in integrating renewable energy: In 2019, the share of electricity consumption in our grid area covered by renewable energy stood at 60%, in 2020 it was already at around 62%. We are therefore making a major contribution to the Federal Government’s 65% objective for 2030, particularly as the share of variable PV and wind generation in 50Hertz’s grid area is especially high.

We want to further expand on this knowledge, push ahead with further innovations and use them in a value-added manner both internally and externally.

• Support for establishing emissions-free industries of the future: Not only will we make an ambitious contribution to the European, national and regional renewable energy and climate targets, we will also support developers of renewable energy in speeding up their expansion and supporting the industry with its decarbonisation projects. With this in mind, we bring various players together to come up with joint solutions for decarbonising the industry. • Business location development to exploit the potential of renewable energy: We are actively supporting the government and federal states in tapping into further renewable energy potential both onshore and offshore. • Development of grid infrastructure and increased utilisation: We invest in a strong transmission grid, using all technical possibilities that can contribute to a higher utilisation of the grids and can therefore transport more electricity. • Technology pioneer for the integration of renewable energy: We are expanding our leading role in managing the electricity grid and developing innovative solutions to ensure the electricity supply remains secure in a world with increasingly fewer fossil-fired power plants. • Digitalisation for a flexible system with a high share of renewable energy: When it comes to integrating renewable energy into the grid and managing the electricity system, we are placing our full trust in digitalisation. After all, this is the only way for additional flexibility potential necessary in a highly volatile environment to be efficiently realised. • Sector coupling and decarbonisation: We participate in model projects in order to use surplus volumes of renewable electricity where it makes sense to be used for power to heat and power to gas.

Our strategy establishes our grid area as a “green power plant” of the energy transition within the meaning of our engagement for society as a whole and as an attractive location for energy- intensive industries as well as for new industries that are creating future-proof workspaces.

Onshore grid expansion

In the area of onshore projects, 50Hertz worked in particular on the further implementation of the mast reinforcement programme in the balancing zone, the phase-shifting transformers in Hamburg-Ost as well as several infrastructure measures in the capital city (several transmission substations as well as the Berlin diagonal power link). Efforts to convert communications technology to modern IP technology were also continued. Work on increasing the carrying capacity of the Wolmirstedt – Stendal/West lines was completed. For the Nordring Berlin project, legal certainty was achieved with regard to when construction could potentially be continued.

As regards approval procedures, intensive preparations are currently underway for the high- voltage DC line route SuedOstLink. In addition, numerous projects are in the approval phase such as Stendal/West – Güstrow, Bertikow – Pasewalk, Röhrsdorf – Weida – Remptendorf, Pulgar – Vieselbach, Südharz grid connection, Helmstedt – Wolmirstedt, and Vieselbach – Mecklar. For the Uckermark line project, the decision to supplement the plan was adopted in August 2020.

Interconnector projects

Significant progress was made with the interconnector projects. With Kriegers Flak Combined Grid Solution, the world’s first combination of grid connections of offshore wind farms with an interconnector between Germany and Denmark transferred its first quantities of electricity in 2020. This project was supported by EU subsidies. Furthermore, on 11 November 2020 an application by Germany and Denmark for exemption from the regulations of the CEP and from network codes was approved for an initial period of 10 years. According to the application, only the capacity remaining after the previous day’s wind forecast is to be made available for internal electricity trading. This approval allows for considerable costs to be avoided that would have been incurred had the CEP regulations been strictly applied.

For the Hansa PowerBridge interconnector project, route surveys and preparations for approval continued; all approval documents have been submitted to the Energy Minister of Mecklenburg- West Pomerania as well as the BSH and the Stralsund mining authority. The first approval for laying and operating the underwater cable from Güstrow to Sweden (Hurva) was granted in December by the mining authority of Stralsund.

Offshore grid expansion

In the offshore area, the planning approval decision was issued by the BSH for the grid connection of offshore wind farms in the Westlich Adlergrund 2 cluster (Ostwind 2) in the Exclusive Economic Zone; the contract had been awarded in the 2018 bidding process. Route preparation including munitions clearance was completed and work has begun laying the cables. Based on the stipulations of the area development plan and the grid development plan 2030 (version 2019), preparations for the grid connections OST-1-4 (Ostwind 3) continued. Preparations for OST-7-1 are not being continued for the time being. The approval procedure, a critical step in the process, has not yet been started because the project was not disclosed in the area development plan or the network development plan. Furthermore, additional questions have since been raised about shipping. It will not be possible to assess these until the expertise taking into account nautical points of view has been presented. The findings of the expertise could have a considerable impact on the approval procedure and the realisation of the project.

Network user charges

50Hertz’s network user charges for the calendar year 2021 were published on 11 December 2020. Compared to the prior year, the average network user charges are up by around 7%. The increase in network user charges is primarily attributable to cost increases for investments and costs to ensure system stability. In 2021, the third step will go ahead with the introduction of standard network user charges across all federal states on the basis of the NEMoG, which came into force in July 2017. This law provides for a gradual standardisation of transmission grid user charges over five years from 2019, meaning that they will be completely the same across all federal states from 2023. In 2021, the uniform national share of network user charges is being calculated from 60% of the respective cost basis (revenue cap) of the transmission system operators. The company-specific share of network user charges of the respective transmission system operator will be determined from the remaining 40%.

Regulatory issues

To examine a potential further development in the ARegV [“Anreizregulierungsverordnung”: German Incentive Regulation Ordinance], the Federal Ministry for Economic Affairs and Energy (BMWi) entered into a dialogue between May 2019 and March 2020 with representatives of the transmission, transmission system and distribution system operators, representatives of the respective industry and stakeholder associations, the Federal Network Agency, other departments, of the federal states as well as members of the Bundestag and their staff. For the BMWi, the talks resulted in the amendment of two regulatory provisions: The introduction of an incentive tool to reduce bottleneck management costs as well as the introduction of a capital cost adjustment model. The exact scope of the amendment as well as the time frame are currently unclear. The incentive tool created to reduce bottleneck management costs provides for a collective, symmetrically designed bonus/malus model for the four German transmission system operators. The capital cost adjustment model, which has been used by distribution grid operators for a few years now, will replace the current model of investment measures for infrastructure investments of transmission system operators and transmission system operators (gas) as of the coming regulatory period.

The decision of the Federal Network Agency on the equity interest rates for the third regulatory period (2019 to 2023) was confirmed in 2020 by the Federal Court of Justice in the second instance. With regard to the decision for the fourth regulatory period, which is expected in the second half of 2021, we refer to the section on opportunities and risks.

The regulatory account balance for the years 2013 to 2016 (second regulatory account period) and 2017 was approved by the Federal Network Agency by notice dated 28 July 2020 and 10 August 2020. The notices meet the Company’s expectations and contributed significantly to future planning and legal certainty.

Following the amendment to the ARegV and the StromNEV dated 22 March 2019, the offshore grid connection costs have since 1 January 2019 no longer been recognised in the revenue cap of the transmission system operators, but instead together with the costs from compensation payments made to offshore wind farm operators via the offshore grid levy. The settlement of the grid connection costs for 2019 was based on the 2019 annual financial statements of 50Hertz Offshore and the independent auditor’s report dated 30 June 2020, which provided an unqualified confirmation of the allocable actual costs for 2019 of EUR 251.6m. These grid connection costs for 2019 were invoiced to the Federal Network Agency (Ruling Chamber 4). At present, Ruling Chamber 4 of the Federal Network Agency has not yet issued a final response. For the forecast of the offshore grid levy for 2021, in addition to the forecast compensation payments and the forecast costs for setting up and operating the offshore grid connections in 2021, the differences between the costs actually incurred and the levy income for 2019 were also taken into account.

Since the beginning of the third regulatory period in 2019, some new effective process regulations have applied for the following matters in the form of voluntary self-commitments [“Freiwillige Selbstverpflichtungen”, or “FSV”] pursuant to Sec. 11 (2) ARegV: FSV redispatch, FSV grid losses, FSV congestion management, FSV inter-TSO compensation, FSV costs for European initiatives, FSV “Nutzen statt Abregeln”, FSV grid reserve. Furthermore, following the decision by the Federal Network Agency on 11 September 2020, a new FSV was concluded for the performance of compensation programmes for the inadvertent exchange of energy and dealing with the resulting costs and income for the third regulatory period. This means that the costs that are incurred and the income that is generated cannot be influenced on a permanent basis, although the FSV grid losses and the FSV balancing energy do contain incentive components in the form of a bonus/malus function.

By 31 December 2020, 50Hertz had received 88 approvals concerning an investment volume of approx. EUR 9.0b out of the 99 active applications filed for investment measures since 2008.

Energy management

Balancing group management

50Hertz settles all balancing groups in its balancing zone on a monthly basis. As of the end of 2020, there were 2,037 balancing groups for the 691 traders, electricity distributors, generators and grid operators operating in the balancing zone. As of 1 August 2020, all balancing group contracts have been converted to the new model agreement. This new balancing group contract leads, amongst other things, to significant improvements in terms of controlling the traded energy volume.

System services

50Hertz procures system services in order to maintain the system balance. As of 3 November 2020, the introduction of the balancing energy market brought with it a fundamental change in market design, decoupling the procurement of actually recognizable balance energy from the provision of balancing power. The implementation of this market in Europe is a requirement of the Guideline Electricity Balancing, in which the EU Commission has specified the regulations for electricity balancing in Europe and which is now being gradually implemented. This amendment makes it possible for quantities offered and energy prices to be changed almost in real time. In the event of technical difficulties, recourse is taken to the bids submitted on the balancing power market and replacement energy prices. With the balancing energy market, the provision of balancing energy also becomes more attractive for flexibility providers as they are able to react at short notice to the availability of their plants and the development of alternative marketing opportunities, in particular intraday trading. The new market design also offers flexibility from storage or renewable energies, as current storage volumes or short-term forecasts can be transformed into balancing energy bids as part of portfolio optimisation.

Since February 2020, part of the balancing energy, the secondary balancing energy, has been procured in a joint tender with Austria. The expansion of the market territory and market volume are expected to bring welfare gains and are important steps on the path towards a joint internal market for system services.

EEG settlement

In 2020, the EEG electricity output in 50Hertz’s grid area increased by just over 5% in comparison to the prior year, in particular due to the expansion of onshore wind energy and solar radiation energy. At the same time, the share of output sold directly increased further in 2020. Overall, only just over 11% of EEG electricity output in 50Hertz’s balancing zone was sold by 50Hertz.

In particular due to the fall in demand stemming from the coronavirus pandemic and the associated decline in market prices, the balance of the German-wide EEG account plunged in 2020. As of 30 September 2020 – the date for measuring the EEG surcharge – there was a nationwide balance on the account of minus EUR 4.1b, which was included in the calculation of the EEG surcharge for 2021. As of 31 December 2020, the EEG balance allocated on a pro rata basis to 50Hertz, and that has to be funded, amounted to minus EUR 809m.

On 15 October 2020, the four German transmission system operators published the EEG surcharge for 2021. At 6.500 ct/kWh, it is 3.8% lower than the surcharge for 2020. For the first time in 2021, the EEG surcharge had to be shored up by a newly introduced federal grant of EUR 10.8b in order to reach the legally required target surcharge of 6.500 ct/kWh. Without this federal grant, the EEG surcharge would have stood at 9.651 ct/kWh in 2021.

Other surcharges in the energy industry

The decrease in end consumer sales caused by the coronavirus did not have an effect on the KWKG-based surcharges levied during the year, as this is based on annual forecast data. In consultation with the Federal Network Agency, the wish expressed by some distribution grid operators to reduce the advance payments made during the year was not met.

Grid operation and system management

50Hertz makes sure that secure grid operation is ensured and that the electricity grid is available within the entire balancing zone. In addition to constantly managing the entire grid taking into account new construction and maintenance projects, the grid operator has to regularly intervene in electricity generation in order to ensure that the system remains stable.

In 2020, use of the 50Hertz grid for cross-border electricity trading again increased considerably. On the border to Poland in particular, investments in phase-shifting transformers made in past years had a positive impact.

The operation of offshore assets went without incident for most of the year. On 17 December and 19 December 2020, there were two interruptions in electricity transmission to the grid connections Baltic 1 and Baltic 2, respectively. By applying the internal repair concept as well as using the existing service agreements and stockpiling spare parts, disruptions were resolved and cables put back in service quickly.

Energy needed to cover grid losses

In 2020, grid losses came to 2.2 terawatt hours (TWh), some 0.3 TWh below the expected figures. 50Hertz obtains the energy it needs to cover grid losses in a risk-averse procurement strategy, based on the existing regulations of a voluntary commitment.

In order to minimise risks, approximately 2.5 TWh was procured for 2021 in the reference period from 1 July 2019 to 30 June 2020. For 2022, 1.1 TWh was already procured in 2020.

Employees

The number of employees in 50Hertz Transmission increased from 1,089 to 1,237 as of 31 December 2020, a rise of 13.59% compared to the prior year.

The number of trainees/dual students amounts to 29. A total of seven employees are completing a trainee programme with stations in the different departments of 50Hertz as well as European TSOs and non-governmental organisations.

This year, employees had the opportunity to subscribe for 6 or 12 discounted shares of Elia Group as a way of participating in the success of the past fiscal year. This offer was exercised by 71.29% of entitled employees.

Occupational health and safety

The primary aim is to use the legal framework to shape conditions at the workplace or in the working environment in such a way that occupational accidents and work-related illnesses are avoided. In connection with the COVID-19 pandemic, the existing risk assessments in the area of occupational health and safety were supplemented by dedicated hygiene concepts and occupational safety regulations. Remote working was put on a par with working in the office and the option was used by the majority of employees in administrative departments from the first quarter in order to limit personal contact. The guideline on remote working had already paved the way for flexible working back in mid-2019. On this basis and by putting the required technical infrastructure in place, it was possible to ensure staff could work from home within a very short period of time. Employees were instructed on the potential dangers of remote working from an occupational health and safety perspective. Remote working was also included in the risk assessment category mental strain.

In order to achieve this overarching goal of ensuring the health and safety of the employees, optimising structures and coming up with a focus of measures, occupational health and safety is seen as a continuous improvement process and further developed. 50Hertz has set itself target of living a high standard in terms of occupational health and safety. In the reporting year, the occupational health and safety management system pursuant to DIN ISO 45001:2018 was confirmed in a surveillance audit without any exceptions.

In the reporting period, there were 7 workplace accidents resulting in a total of 56 lost working days. No accidents resulted in serious injury. With an accident rate of 3.9, the target set for 2020 (≤ 3.0) was not achieved. At 0.03, the severity rate was in the target range (≤ 0.15). The number of work-related accidents at contracted third-party companies in 2020 decreased to 12 year on year.

Research and development

The integration of renewable energies and the required development of the electrical system continued to be reflected in 50Hertz’s various research and development projects and studies. In the areas of energy markets, system security and new technologies, a total of EUR 1.8m was spent on research and development projects in 2020 (prior year: EUR 2.0m). These expenses were counterbalanced by public non-repayable subsidies of EUR 0.11m.

1.5. Economic situation of 50Hertz Transmission

The Company operates exclusively in the field of electricity transmission as defined by Sec. 6b (3) EnWG. For this reason, the separate activity-based financial statements to be prepared correspond to the Company’s financial statements.

Financial performance

Income statement 1 Jan to 1 Jan to EUR m 31 Dec 2020 31 Dec 2019 Change

Cost-matching income 9,686.1 9,410.2 275.9

Non-profit issues 9,686.1 9,410.2 275.9

Revenue from the grid business 1,408.9 1,308.7 100.2

Sundry other income 61.8 50.6 11.2

Expenses for the grid business -935.5 -897.3 -38.2

Other expenses -299.2 -264.9 -34.3

Investment result/financial result 58.9 79.5 -20.6

Income taxes 0.0 0.0 0.0

Profit after tax 294.9 276.6 18.3

Other taxes -1.7 -1.5 -0.2

Profit transfer to the shareholder 293.2 275.1 18.1

50Hertz Transmission’s absolute income and expenses are largely characterised by the non-profit settlement of the EEG and other surcharges. Transmission system operators sell the renewable electricity fed in by upstream grid operators and directly connected producers to an electricity exchange, provided that this is not sold directly. In addition to this sales revenue, the transmission system operators levy a charge for all trading and distribution companies operating in the grid area to cover the difference between the costs for the reimbursement of electricity generated from renewable sources and the revenue from selling the electricity generated from renewable sources. The settlement of the EEG generated revenue of EUR 8,586.0m (prior year: EUR 8,133.0m).

Under revenue and cost of materials, the settlement volume of services rendered to third parties accounts for EUR 645.5m of both revenue and cost of materials (prior year: EUR 823.6m). Furthermore, revenue of EUR 209.5m (prior year: EUR 274.3m) resulted from the settlement of the KWKG. Income of EUR 237.4m (prior year: EUR 205.6m) related to the allocation mechanism for reductions in charges granted to grid customers in accordance with Sec. 19 (2) StromNEV. Income of EUR 7.7m (prior year: EUR 5.1m) was attributable to the allocation mechanism pursuant to Sec. 18 (1) AbLaV [“Verordnung zu abschaltbaren Lasten”: Regulation on agreements on interruptible loads].

Overall, income and expenses from the individual allocation mechanisms are recognised without affecting the profit or loss of 50Hertz Transmission. In the fiscal year, a total business volume of EUR 9,686.1m (prior year: EUR 9,410.2m) relates to the settlement of non-profit issues.

Revenue from the grid business primarily related to network user charges levied (EUR 802.3m; prior year: EUR 815.1m), system services (EUR 219.0m; prior year: EUR 157.3m) as well as balancing group management (EUR 27.7m; prior year: EUR 18.2m). In addition, EUR 13.1m (prior year: EUR -46.3m) relates to effects from the compensation for network user charges in different periods, which are realised with a time delay as a result of the current regulatory framework.

Income from the offshore grid levy in accordance with Sec. 17f EnWG amounts to EUR 300.0m (prior year: EUR 329.1m). Expenses relating to the offshore regulation contain chargeable grid connection costs of EUR 253.5m (prior year: EUR 251.6m). In the prior year, costs of EUR 34.4m associated with the offshore liability for delays and interruptions when establishing offshore grid connections pursuant to Sec. 17e EnWG were invoiced for past reporting periods. From fiscal year 2020 onwards, components of the offshore liability will be settled in full via the offshore grid levy.

System services are required for reliable and safe transmission of electricity. System services comprise the areas of operational management, frequency and voltage control as well as the re- establishment of power supply. Therefore, expenses for the grid business mainly contain expenses for system services (procurement of electricity) of EUR 402.1m (prior year: EUR 381.0m) and for grid services of EUR 124.8m (prior year: EUR 96.6m).

Other expenses include personnel expenses of EUR 133.7m (prior year: EUR 116.2m). The increase on the prior year is primarily due to the further increase in the headcount. Amortisation, depreciation and impairment came to EUR 115.4m (prior year: EUR 106.6m) in the fiscal year.

The negative interest result within the financial result amounts to EUR 21.6m (prior year: EUR 18.6m). In fiscal year 2020, the interest result continued to be influenced by the high financing volume for investments. Under investment result, 50Hertz Transmission generated income from the profit transfer from 50Hertz Offshore of EUR 80.5m (prior year: EUR 98.1m). The decline in the investment result was due to a regulatory special effect at 50Hertz Offshore in the prior year.

Profit after tax amounts to EUR 294.9m (prior year: EUR 276.6m). Overall, profit was influenced by an increase in revenue from the grid business and corresponding expenses relating to the grid business, which have increased only on a small scale. The positive effects from the regulatory field and the increase in other operating income also had a positive effect compared to the prior year. In particular, the lower investment result had a negative effect on profit.

Expenses for income taxes are very low due to the tax group for income taxes that is in place with Eurogrid.

The expense of other taxes amounts to EUR 1.7m (prior year: EUR 1.5m).

The Company closed the fiscal year 2020 with a profit for the period (before profit/loss transfer) of EUR 293.2m (prior year: EUR 275.1m), which will be transferred in full to Eurogrid.

Assets, liabilities and financial position

Statement of financial position

EUR m 31 Dec 2020 31 Dec 2019 Change Assets

Fixed assets 5,579.5 4,962.6 616.9

Current assets (including prepaid expenses) 1,915.4 1,444.9 470.5

7,494.9 6,407.5 1,087.4

Equity and liabilities

Equity 1) 3,290.1 2,118.6 1,171.5 Long and medium-term liabilities 1,839.9 2,207.9 -368.0

Short-term liabilities 1) 2,364.9 2,080.9 284.0 7,494.9 6,407.4 1,087.5 1) Adjustment of prior-year figures necessary due to allocation of special item to equity

In addition to intangible assets of EUR 62.3m (prior year: EUR 61.1m), fixed assets primarily comprise 50Hertz Transmission’s technical grid systems of EUR 1,943.8m (prior year: EUR 1,859.2m), prepayments and assets under construction of EUR 844.4m (prior year: EUR 564.3m) as well as financial assets of EUR 2,446.0m (prior year: EUR 2,196.0m). The latter primarily relates to the investment in 50Hertz Offshore of EUR 1,683.0m with a contribution to the capital reserves of EUR 750.0m made in the fiscal year as well as loans issued to 50Hertz Offshore, which were repaid by additional EUR 500.0m in 2020 bringing the total to EUR 740.0m. Securities classified as fixed assets of EUR 19.9m are also recognised, which solely include shares in European Energy Exchange AG (“EEX”).

For fiscal year 2020, additions to investments in property, plant and equipment amount to EUR 469.7m (prior year: EUR 273.5m). The completed assets added in the fiscal year mainly comprise the construction of the new Stendal/West – Wolmirstedt lines, additional completions in connection with the mast reinforcement programme, capacity increases of the transmission substation in Neuenhagen as well as the expansion of other locations and lines.

Under current assets, EUR 1,642.3m relates to trade receivables (prior year: EUR 946.7m). These increased significantly on the prior year and still reflect the high settlement volumes attributable to the largely non-profit grid business also when considering the results of operations. Other assets of EUR 26.6m (prior year: EUR 34.2m) include claims due from the tax office.

As of the reporting date, the inclusion in Eurogrid’s cash pool system resulted in a receivable due from affiliates of EUR 227.3m. In the prior year, the Company recognised a liability to affiliates from the cash pool of EUR 19.7m.

The changes in equity relate to contributions to the capital reserves of EUR 1,170.0m, increasing it to EUR 3,010.8m. As in the prior year, the Company reports capital stock of EUR 200.0m. The special item from investment subsidies amounting to EUR 79.3m (prior year: EUR 80.1m) is allocated to equity.

Long and medium-term liabilities primarily include shareholder loans granted by Eurogrid of EUR 1,575.0m (prior year: EUR 1,965.0m). This item also mainly contains various provisions of EUR 55.4m (prior year: EUR 44.9m) and deferred income of EUR 160.3m (prior year: EUR 147.2m), with longer terms.

Short-term liabilities mainly contain the remaining provisions of EUR 921.3m (prior year: EUR 1,371.0m), which in turn mainly result from the EEG and the other surcharge processes (EUR 539.1m; prior year: EUR 1,035.8m). Furthermore, trade payables amounted to EUR 510.1m (prior year: EUR 527.6m). The addition is primarily attributable to taking out short- term loans for the EEG process.

Statement of cash flows

Statement of cash flows (condensed) 1 Jan to 1 Jan to EUR m 31 Dec 2020 31 Dec 2019 Cash flow from operating activities -708.7 -151.3

Cash flow from investing activities -724.1 -431.5

Cash flow from financing activities 1,249.0 -308.3

Change in cash and cash equivalents -183.8 -891.1

Cash and cash equivalents at the end of the period 230.5 414.3

Compared to the prior year and taking the higher net profit for the year as a starting point, cash flow from operating activities was for the most part negatively influenced by the increase in non- cash impairments and the sharp decline in provisions, in particular from the surcharge business. The significant increase in receivables and other assets, in particular from the EEG surcharge process, also had a negative impact on the Company’s liquidity situation.

As well as payments for additions to property, plant and equipment of EUR 493.8m, the cash flow from investing activities includes the repayment of a loan of EUR 500.0m as well as the contribution to the capital reserves of EUR 750.0m at 50Hertz Offshore.

Cash flow from financing activities comprises the net cash outflow from the profit transfer for fiscal year 2020 of EUR 293.2m, interest payments of EUR 46.7m and cash outflow from the repayment of shareholder loans of EUR 500.0m. This is counterbalanced by cash inflow from shareholder loans of EUR 918.9m and cash received from equity contributions of EUR 1,170.0m.

The financing of 50Hertz was secured throughout the entire fiscal year 2020. The cash pool with Eurogrid was in place throughout the entire fiscal year.

In fiscal year 2020, there was a consolidated tax group for income tax in place with Eurogrid. Furthermore, 50Hertz Transmission acts as the interposed parent for 50Hertz Offshore in terms of income tax and VAT.

Overall picture of the economic situation

In fiscal year 2020, profit after tax was primarily shaped by a considerable increase in revenue from the grid business, which was mainly the result of higher income for reserve expenses in connection with Sec. 13g EnWG (capacity reserve) compared to the prior year. This was counterbalanced by a rise in expenses relating to the grid business, which also mainly resulted from a significant increase in reserve expenses. Furthermore, there were positive effects from the compensation for network user charges in different periods, which are realised with a time delay.

The lower profit transfer of 50Hertz Offshore, which influences higher amortisation, depreciation and impairment as well as personnel expenses, had a negative effect on profit. Overall, 50Hertz Transmission generated a satisfactory result in fiscal year 2020 due to which the forecast earnings before taxes were exceeded (EUR 242.3m).

The continued increase in capital expenditures in grid expansion continue to make a positive contribution through their profit and loss effect.

The financial obligations due in fiscal year 2020 were covered at all times by the available liquidity and the shareholder loans.

Investments

50Hertz Transmission continues to have a 100% shareholding in 50Hertz Offshore. 50Hertz Transmission assigned the task of planning, constructing and maintaining the grid connections of offshore wind farms in the Baltic Sea to 50Hertz Offshore.

50Hertz Transmission still holds slightly less than 50% of the capital stock of Elia Grid International NV/SA, Brussels, Belgium, which provides consulting and engineering services in the area of grids and system services.

As of 31 December 2020, 50Hertz Transmission continues to hold 5.4% in the capital stock of EEX AG, Leipzig. EEX develops, operates and connects secure, solvent and transparent markets for energy and energy-related products.

50Hertz Transmission has a shareholding in Joint Allocation Office S.A. (“JAO”) with registered offices in Luxembourg. 50Hertz continues to hold shares in issued capital in JAO of 4.0% as of 31 December 2020. The purpose of the company is providing congestion management services for transmission grids.

As in the prior year, 50Hertz Transmission has a 7.9% shareholding in CORESO SA based in Brussels, Belgium, as of 31 December 2020. CORESO is a coordination and service centre for grid security calculations and analyses in Western Europe.

On 31 December 2020, 50Hertz holds 6.7% in the capital stock of TSCNET Service GmbH with registered offices in Munich. The purpose of the company is primarily to render technical support services in the area of electrical system security and capacity calculations in order to support transmission system operators with their grid operations.

On 31 December 2020, 50Hertz Transmission still had its 10.4% shareholding in the endowment funds of the Kurt Sanderling-Academy Foundation of the Konzerthaus Orchestra Berlin in Berlin. The purpose of the foundation is to promote music, art and education as well as vocational training including student support.

1.6. Forecast report

50Hertz Transmission will continue to invest in the development of the transmission grid in order to securely and efficiently establish the increasing share of renewable energies and to be able to transport these in the direction of consumption centres. The current statutory requirements are causing an increased number of measures and the implementation of these is under even greater time pressure.

In light of the larger number of measures, approvals received and the progress of construction, the investment volume in 2021 will be more than in past fiscal years. On account of the growing investing activities, there will also be an additional need for financing in future fiscal years. This will be covered, amongst other things, by the issue of additional corporate bonds, possibly again in the form of a green bond.

Liquidity for settling surcharges (e.g., EEG) is managed separately. The liquidity situation for the EEG business therefore remains volatile on account of the numerous influencing factors on generation, supply in-feed and marketing. The pro rata EEG account balance is stable thanks to the EEG federal grant of EUR 2.0b, of which EUR 1.0b has already been received in 2021. The liquidity reserve from the EEG surcharge will be raised to 10% in 2021. In the medium term, investing activities require the refinement of Eurogrid’s financial instruments and active cash management. Financing on the capital market is secured by Eurogrid’s stable rating.

50Hertz strives constantly to ensure efficiency in its processes and cost structures in order to minimise the increased costs in grid operation that are necessary for the energy transition in Germany. Nevertheless, 2021 is expected to see an increase in operating expenses. The drivers behind this are the higher fixed assets as well as new regulations and requirements for system operations. In addition to external expenses, there will also be greater demand for resources, which was already evident from the increase in personnel expenses in 2020. The costs for system services, redispatch measures as well as grid losses are primarily influenced by the development of electricity prices, weather conditions and grid topology.

In terms of the financial performance indicators, the Group expects a substantially higher investment volume in the range of EUR 820m to EUR 920m (excluding financial assets) in 2021 compared to 2020 (EUR 716m). A key indicator for the significant operating expenses, the OPEX value onshore is forecast at EUR 249m for 2021 (2020: EUR 198m). At approx. EUR 146m, the Group’s IFRS after-tax result will be lower than in 2020 (EUR 192.7m) as a result of cost increases.

The imputed returns can probably be achieved in the coming fiscal year based on the assumptions below. The forecast for 2021 is mainly based on the following premises:

• Stable regulatory framework in line with the current legislation • Maintaining a sound investment grade • Moderate development in energy costs and • Normal business development of 50Hertz without any extraordinary weather conditions and without any major technical disruptions

For the non-financial performance indicators, quality standards will continue to be set at a high level and continuous efforts made for sustainable improvements. With regard to the quality of grid availability, the Group strives constantly to maintain a high level of quality and a low disruption rate. The assessment of grid availability includes the number of grid incidents in absolute terms in relation to the length of the system circuit as well as the proportion of avoidable grid incidents to all grid incidents. In 2020, there were 1.06 grid incidents on 100 km of system circuit. The share of avoidable grid incidents stood at 3.7% in 2020. To determine the level of goal achievement, the two performance indicators are put in relation to one another, which resulted in 2020 in a goal achievement of 120%.

For 2021, the aim is to at least maintain this previous quality level. The Group continuously tries to keep the accident frequency rates low and availability of employees at a high level with appropriate occupational health and safety offers and measures. The assessment involves determining the injury rate (the number of work-related accidents in absolute terms in relation to the number of hours worked) and the severity of the accident (the resulting downtime in relation to the number of hours worked). The health rate (the number of sick days in relation to the planned number of working days) is also tracked. In 2020, an injury rate of 6.1 and an accident severity rate of 0.03 (meaning only slight injuries and no downtime) were achieved. The health rate stood at 97.3% in 2020. These three performance indicators represent a goal achievement of 131% in 2020.

A health rate of 96.5% is being targeted for 2021. For the injury and accident severity rates, the focus is always on accident avoidance. As an attractive employer, 50Hertz also strives to maintain a high level of employee satisfaction. Overall, the Company expects business development to be positive in 2021 with a sound capital base.

1.7. Risk management system

The aims of the risk management system are to avoid any risks jeopardising the Group’s ability to continue as a going concern, to reduce existing risk items and to optimise the risk/opportunity profile. Risks are recognised, recorded, evaluated and monitored in a standardised manner applying the risk guidelines. The assessment of potential losses and the likelihood of their occurrence is based on scenarios. This ensures that the risk situation is continually monitored, especially to ensure the early recognition of risks to the Group’s ability to continue as a going concern, and supports the selection and implementation of measures to overcome such risks. Enhancement of the risk management system entails the systematic development and central pursuit of plans of action for combating key corporate risks. Relevant individual risks and the overall risk situation are reported regularly to management, the supervisory board and the shareholders. The respective decision makers are informed ad hoc in the event of any significant changes. The functionality and effectiveness of the risk management system is regularly subject to review. Individual items with an estimated value of more than EUR 100k are taken into account.

1.8. Opportunities and risks

50Hertz has the opportunity to improve its regulated asset base and to achieve organic growth by ensuring that it invests in the transmission and grid connections as and when needed without compromising efficiency. Further opportunities for 50Hertz as an independent transmission system operator in Europe involve it actively implementing the changes and new regulations relating to the energy transition in Germany as well as being a reliable and high-performing partner for the customers it supplies in the grid area. The European position is to be strengthened further through joint activities with Elia Group.

Opportunities and risks from political, regulatory and legislative matters

50Hertz’s network user charges are subject to regulations issued by the Federal Network Agency. Any decisions made by the Federal Network Agency in the current regulatory framework as well as any changes in the regulatory framework in the form of amendments to regulations could have a significant impact on 50Hertz, be it positive or negative.

Further changes in the legal framework cannot be ruled out. The capital cost adjustment model would result in a change in the regulatory regime for expansion and restructuring investments away from the current incentives regulation system, most likely from the start of the new regulatory period in 2024. In addition to individual design points, the main open items currently involve the regulations concerning the transition.

Investments that are not approved by the Federal Network Agency also lead to lower imputed costs and therefore to a decrease in revenue. Furthermore, the regulatory framework is subject to intense European, national and regional legal debate. 50Hertz monitors and follows European and national legislative proceedings and is actively involved in such discussions. The intense discussions with the BMWi on adjusting or expanding the ARegV, with a particular focus on the treatment of investment measures and incentives for congestion management, will continue in 2021.

Continuing to use the method currently in place to calculate the permitted equity interest rates would considerably reduce 50Hertz’s profitability in the fourth regulatory period. A central parameter in determining the permitted equity interest rates is the market risk premium. 50Hertz, together with other industry participants, have repeatedly informed the Federal Network Agency that the currency weighting of these risks reflected in this premium would result in returns on equity below the usual international level. As the composition of the market risk premium is part of the Federal Network Agency’s judgement, it can grant the grid operators a proper level of the permitted equity interest rates that fulfils the market conditions. Industry activities regarding appropriate equity interest rates are ongoing.

In November 2018, actions were filed by various power plant operators regarding the determination of the conditions of the FSV redispatch. To settle the dispute and ensure that the form the redispatch remuneration takes is legally watertight, settlement talks are currently being held between the Federal Network Agency and the power plant operators.

This therefore gives rise to a potential liquidity risk from the adjustment of the remuneration components for power plant operators when the existing FSV redispatch is revoked and a new one enacted. The attachment currently contains an “industry compromise”, which sets adequate compensation for power plant operators and which due to the definition as FSV has been implemented by Ruling Chamber 8.

European guidelines and regulations due to be transposed soon into national law (e.g., provisions contained in the CEP) can also lead to new burdens or risks for 50Hertz. Back in 2019, 50Hertz had already made comprehensive arrangements to be able to implement the Regulation on the internal market for electricity taking into account the “Aktionsplan Gebotszone” (action plan bidding zone) enacted by Germany pursuant to Art. 15 of this regulation. Taking into account the modifications contained in the action plan and the supplementary requirements of the Federal Network Agency, the minimum levels of available capacity for cross-zonal electricity trade pursuant to Art. 16 (8) (70% rule) was complied with at all times. It is expected that the Federal Network Agency will confirm this in its monitoring report that it will present mid-2021. Negative effects for 50Hertz were thus averted.

Energy policy laws and guidelines on renewable energies have a strong influence on 50Hertz’s risk situation and liquidity. Changes to such legislation or the interpretation of this legislation by the Federal Network Agency can either significantly improve or worsen the Company’s risk or liquidity situation.

In the settlement process, planning data and estimates are processed on an ongoing basis. These are then replaced by the corresponding actual values in subsequent periods as they become available. These estimation processes may give rise to deviations and knock-on effects with an impact on liquidity and/or earnings. These planning data may also deviate significantly from the actual values due to unforeseeable circumstances or weather conditions or other benchmarks may be set in connection with the regulatory allocation or the Federal Network Agency may introduce new stipulations.

The rapid development of renewable energies and the fact that the grid expansion is inevitably unable to keep up with this development may also make it necessary in future for the grid operators to intervene more heavily in electricity generation, leading in turn to correspondingly high surcharges.

An adjustment or further development of the applicable accounting standards may lead to the Group’s assets, liabilities, financial position and financial performance being presented differently in future, which would in turn affect the key performance indicators.

Opportunities and risks from technology and infrastructure

50Hertz’s fixed assets are geographically widespread and can be the target of theft, acts of terrorism and sabotage. The facilities are also exposed to environmental influences which can lead to damage, in some cases significantly so, in the event of certain weather conditions or even to their faster wear and tear.

As an infrastructure operator for a secure and reliable electricity supply to some 18 million people, 50Hertz is also obliged to be well-equipped for crisis situations. Crisis tools have therefore been constantly refined and emergency exercises regularly carried out, so as to hone skills and identify any potential for improvement.

In the event of voltage fluctuations or interruptions, power outages or a failure to implement legally prescribed emergency measures, 50Hertz can be held liable for any customer and/or third-party damage. Additional costs that will not necessarily be recognised by the regulatory authorities may also be incurred.

The connection and operation of offshore wind farms is a business field with additional technical and organisational challenges, because the legislator has decided to locate wind farms relatively far away from the German coast. Despite careful preparation and analyses, technical problems are often only discovered in the implementation and operating stage and have to then be solved immediately. Delays and changes in the planning and construction stages as well as later, unplanned changes in the operating phase are therefore possible. Should 50Hertz be deemed responsible for the delay or interruption, the Company must reimburse the wind farm operator for most of the financial loss incurred. Any expenses in connection with such indemnification payments can partly be offset by compensation obtained by means of recourse from suppliers. According to the EnWG, the risks for transmission system operators are limited: the transmission system operator only has to pay a portion of the compensation payment itself in the event of culpable, unintentional delay or damage to the connection. Nevertheless, significant risks still remain at the transmission system operator making the connection.

The offshore cables represent a considerable value in 50Hertz Offshore’s fixed assets. As there is still no experience with the long-term operation of this technology, there is the risk of design flaws only being discovered once the cable is in use. To prevent this, various tests are performed before production and commissioning. However, this does not ensure that all or indeed a combination of causes of errors can be identified. In extreme cases, this can lead to an entire cable system having to be replaced. This would result in high impairment charges, indemnity payments to the offshore wind farm operators and investment costs. Measures taken to minimise the risk include working closely with suppliers, carrying out function tests before commissioning, monitoring the cable during its operation, taking out insurance policies as well as the possibility of allocating costs by way of an offshore surcharge. Since establishing the offshore grid levy in 2019, cost-related risks no longer necessarily affect the grid operators, and if so not in full; however, there are still approval risks 50Hertz Transmission should the Federal Network Agency deem that certain costs are not covered by the offshore grid levy.

The construction of power lines frequently meets with low levels of acceptance from local stakeholders, leading to long-winded and complex administrative proceedings. Line construction delays are therefore still possible despite the intense efforts of 50Hertz’s approval and participation experts. The high number of ongoing proceedings in parallel also harbours the risk of resource bottlenecks at the federal and state authorities concerned. Furthermore, the market for required services (appraisers, environmental planning and routing offices, engineering offices, mapping experts) is extremely stretched throughout the country on account of the high infrastructure needs in Germany. Timely access to suitable resources and suppliers that can render services when needed is becoming more and more important and can entail time restrictions as well as cost effects. In addition, the complexity of the projects means there are additional potential causes for delays and extra costs which can be minimised with the help of professional project management, although not eliminated entirely. Alongside the increase in operating costs to combat grid bottlenecks, delays in grid expansion can also lead to an increase in critical situations for grid operations as the new lines are urgently needed in high-consumption areas, mainly for transporting the ever-growing variable feed-in volume of renewable energies in 50Hertz’s balancing zone, and also because the planned shutdown of conventional power plants near consumption centres in southern and western Germany is getting closer.

Following extensive technical tests of the four German transmission system operators and in- depth consultation with the Federal Network Agency and federal policymakers, it was decided for economic and ecological reasons to use the world’s first extruded 525 kV cables for the large direct current connections from northern to southern Germany. However, this decision to use an innovative technology naturally involves technological risks compared to using tried-and-tested cable technology solutions.

50Hertz has a highly available grid control system in place to ensure the secure operation of its transmission grid. In a complex project, the existing grid control system is currently being replaced with a new system. As this project is delayed, the old grid control system must operate beyond its planned duration and operations must be secured in cooperation with the manufacturers of the subsystems.

In terms of the secure operation of grid facilities, maintenance and the construction of new facilities, the coronavirus pandemic only caused minimal extra expenses and delays. These mostly resulted from restrictions or delays in the cross-border transportation of goods or personnel of service providers. A negative impact on operations cannot be ruled out if the pandemic gets worse or drags on longer.

As an operator of critical infrastructure, 50Hertz is required by the IT-SiG [“IT-Sicherheitsgesetz”: IT Security Act] to ensure information security. This involves organising the processing, saving and communication of information in such a way that sufficiently ensures the availability, confidentiality and integrity of the information and systems. The regulatory requirements for this are defined in the IT security catalogue for grid operators of the Federal Network Agency pursuant to Sec. 11 (1a) EnWG. According to this catalogue, 50Hertz is required as a grid operator to have an information security management system certified in accordance with ISO 27001.

This established security process ensures that IT risks are systematically identified and addressed. In particular, security alerts and warnings that are issued by the German Federal Office for Security Technology (BSI) are recorded and evaluated as part of this process. If required, necessary protective measures are derived and implemented. In the past reporting year, a targeted cyber-attack was registered to 50Hertz, although at no time were current business processes or system operations impaired.

Occupational health and safety

At 50Hertz, avoiding accidents and work-related illnesses takes utmost priority. Occupational health and safety is integrated into the corporate strategy. Despite all of the precautionary measures, accidents cannot be entirely ruled out at 50Hertz’s facilities or in connection with the construction and use of 50Hertz’s plants. Accidents may result in human injury or, in extreme cases, death or other serious consequences. This could result in loss of reputation and actions against 50Hertz, which bring with them considerable financial obligations, as well as reductions in financial and human resources.

Occupational safety at 50Hertz is systematically refined in an ongoing improvement process. The focus, in addition to creating a safe and healthy workplace, is on strengthening a risk prevention culture by integrating occupational health and safety as a company value into the thoughts and actions of all employees. The occupational health and safety management system at 50Hertz has been certified in accordance with ISO 45001:2018 since November 2019. In this context, internal and external surveillance audits are performed regularly that assess the effectiveness of the management system and are used to derive and implement improvement measures.

The high occupational and health and safety standards apply equally for third-party companies contracted by 50Hertz. The “instructions for guaranteeing occupational health and safety when contracting external companies for work in the scope of the transmission grid of 50Hertz Transmission GmbH (OAFN)” as well as the “agreement for quality assurance on construction sites” are fixed contractual components of the contracting process. In this context, construction sites are regularly checked in terms of occupational safety and environmental protection as well as quality assurance.

Any incidents (near misses, work-related accidents, accidents among contractors) are systematically evaluated in a standardised process, from which measures are derived to remove the danger. For any relevant incidents, safety instructions are developed and communicated to employees.

Since 2018, occupational health and safety measures have been supported by the “gib8” (pay attention) campaign. The aim of this campaign is to create the desired awareness of dangers and the measures to overcome them and to strengthen a risk prevention culture.

In connection with the COVID-19 pandemic, the existing risk assessments in the area of occupational health and safety were supplemented by dedicated hygiene concepts and occupational safety regulations. In areas where on-site work is unavoidable, extensive hygiene and occupational safety measures (e.g., regular testing, issuing masks, extensive information and instructions) were taken.

Markets and finances

Overall, the coronavirus pandemic did not have any negative impact on the profit or loss for the period of the Company. However, the pandemic did cause electricity consumption to be lower, resulting in a lower cash flow from the EEG surcharge. Due to the necessary prefinancing function at the TSO, this had a major negative impact on the liquidity of the EEG business. The additional need for financing this caused resulted in Eurogrid having to take out additional funds. There are no effects on earnings as the allocation system does not affect income.

Extreme fluctuations can also arise in the costs for balancing energy, grid losses and redispatch measures. Earnings effects here are reduced by regulatory models.

In the area of energy procurement, 50Hertz is subject to the general market risks to which the electricity market is exposed. 50Hertz uses electricity products and contracts customary on the market for the energy it needs to cover system-related grid losses, in order to be able to counter the existing market price risks in an appropriate manner. Based on a risk-averse procurement strategy and considering the regulatory framework conditions available to compensate for costs for grid losses, 50Hertz actively manages its market activities and its related internal risk considerations. When procuring the energy needed to cover grid losses for its own portfolios, 50Hertz acts on the electricity market exclusively with the objective of covering its own needs. Using physical and financial contracts on the electricity market gives rise to general cover risks and also credit risks and liquidity risks in connection with market partners. These are countered by internal control measures.

Eurogrid finances itself on the bank and capital market. Based on a long-term plan, the Group’s financial requirements are calculated and, whenever needed, targeted capital market measures and the necessary capital market communication are used to ensure long-term access to the financial markets. Risks from financing bottlenecks are limited by means of a line of credit that has been secured for the long term.

A lower rating could raise the financing costs in future and limit access to funds. Potential risks relating to follow-up financing of investments in future could arise from unforeseeable bottlenecks stemming from government financing in Europe and the high volatilities on the capital markets.

The interest rate risk is countered by means of constant market observation and targeted capital market communication. Counterparty risks from investing in time deposits are combated by means of a careful and diversified investment strategy, constant market observations and strictly ensuring that the investment policy is adhered to.

Decisions and actions taken at companies where 50Hertz only holds a non-controlling interest and therefore does not have the power to exercise control at these companies, could lead to higher costs and lower revenue or to a lower profit margin from these companies.

Overall risk situation

50Hertz’s ability to continue as a going concern was not jeopardised by individual risks or its aggregated risk position in fiscal year 2020. The coronavirus pandemic did not have any negative effects on the total operating performance of the Group. There are also no such risks for 2021 after taking ongoing measures into account.

1.9. Accounting-related internal control and risk management system

So that 50Hertz can successfully operate as a group in its complex economic environment, it has created an effective and integrated internal control system, which, in its entirety, contains all relevant business processes. This system regulates the identification, recording, evaluation, documentation and reporting of risks and is integrated into the strategy, planning and budgeting processes as well as the Company’s management and reporting systems.

The internal control system is an integral part of the risk management system. This system comprises preparing reports for the supervisory board of 50Hertz Transmission GmbH, for the supervisory board of Eurogrid, which at the same time constitutes the audit committee in accordance with Sec. 324 HGB as well as the respective management, and is tailored to company-specific requirements in terms of its scope and structure.

Key elements of the internal control system with regard to the financial reporting processes are the consistently applied dual control principle, an auditable voucher system and the strict segregation of duties between/within the specialist departments of 50Hertz Transmission and between 50Hertz Transmission and Eurogrid. The processing of data in the accounting system is organised uniformly for all companies included in Eurogrid’s consolidated financial statements and is based on uniform processes regarding the allocation and processing of invoices and vouchers. There is also a uniform method for preparing the financial statements regarding the compilation process and deadlines.

The standard commercial software used for accounting purposes is subject to an annual review regarding the compliance of the IT procedures applied including the structures and procedures of the system in use, taking into account the requirements of an effective internal control system. There is an adequate authorisation concept in place to ensure compliance of accounting and a reduced risk of fraudulent activities. This is applied universally. The business transactions of the Eurogrid group companies are processed centrally in the accounting/tax department at 50Hertz Transmission.

For consolidation at group level, guidelines on accounting and preparing the financial statements are taken as a basis to ensure a uniform application of the recognition, measurement and presentation of the items in the statement of financial position and the income statement taking into account the content and period-based presentation of regulatory issues significant for the transmission system operator business. Furthermore, the plausibility controls performed during each monthly reporting process between financial reporting, controlling and regulatory management alongside the reporting process as well as observing all relevant commercial and tax law standards and the corresponding energy provisions as well as IFRS standards ensure compliance of its accounting and financial reporting in the separate and consolidated financial statements.

Measures to limit accounting-related risks primarily include the clear allocation of responsibilities, graded release strategies, data access rights established according to the principle of segregation of duties and the application of uniform regulations on organisation and setting deadlines as well as the assessment of business transactions. The effectiveness of the internal control system is checked by the internal audit function when needed or using an audit programme coordinated with the shareholder boards. Moreover, the supervisory board of Eurogrid and the supervisory board of 50Hertz Transmission continuously monitor that the Company is being duly managed. The boards base their assessment on regular reports and analyses of the management of 50Hertz Transmission, on the findings of the audit procedures performed by the internal audit function and the audit of the financial statements of the group companies. Furthermore, the group companies and their risk areas are recorded and assessed as part of risk management.

1.10. Corporate governance declaration

Increasing the female representation quota in management positions

The female representation quota on the supervisory board of 50Hertz Transmission increased year on year from 17% to 33%. The female representation quota in the extended management remained unchanged year on year at 17% on 31 December 2020.

On 7 August 2017, the management of 50Hertz Transmission had resolved that the female representation quota at the first and second management level (division and department heads) below the general management was to reach 10% and at the third management level below (team heads) 16% by 30 June 2022. As of 31 December 2020, the 10% target for the first and second management level below the general management was in fact significantly exceeded at just under 21%, while the 14% for the third management level fell slightly short of target.

50Hertz fosters diversity and equal opportunities. This is why 50Hertz’s management voluntarily agreed on 1 December 2020 to increase the female representation quota in the workforce as a whole and in management to 30% by 2030.

Berlin, 10 February 2021

The management

Financial statements of 50Hertz Transmission GmbH, Berlin

Translation from the German language as of 31 December 2020

2. Statement of financial position

ASSETS

EUR m Note 31 Dec 2020 31 Dec 2019

Fixed assets (1) Intangible assets 62.3 61.1 Property, plant and equipment 3,071.2 2,705.5 Financial assets 2,446.0 2,196.0 5,579.5 4,962.6 Current assets

Inventories (2) 3.5 4.4

Receivables and other assets (3) Trade receivables 1,642.3 946.7 Receivables from affiliates 229.4 19.9 Receivables from other investees and investors 0.0 0.1 Other assets 26.6 34.2 1,898.3 1,000.9

Cash and cash equivalents (4) 3.2 434.0 1,905.0 1,439.3 Prepaid expenses 8.2 3.3 Special loss account from the recognition of provisions (5) 2.2 2.3 7,494.9 6,407.5

EQUITY AND LIABILITIES

EUR m Note 31 Dec 2020 31 Dec 2019

Equity (6) Issued capital 200.0 200.0 Capital reserves 3,010.8 1,840.8 3,210.8 2,040.8 Special item (7) 79.3 80.1 Provisions (8) Pensions and similar obligations 23.0 18.3 Tax provisions 0.0 0.0 Other provisions 953.6 1,397.6 976.6 1,415.9 Liabilities (9) Prepayments received on account of orders 71.8 71.8 Trade payables 510.1 527.6 Liabilities to affiliates 2,392.7 1,991.3 Liabilities to other investees and investors 0.5 0.9 Other liabilities 43.1 5.6 3,018.2 2,597.2 Deferred income (10) 210.0 273.5 7,494.9 6,407.5

3. Income statement

1 Jan to 1 Jan to EUR m Note 31 Dec 2020 31 Dec 2019

Revenue (11) 11,095.0 10,718.9

Decrease (prior year: increase) in work in process -1.0 0.4

Other own work capitalised (12) 42.0 36.7

Other operating income (13) 20.8 13.5

Cost of materials (14) -10,621.6 -10,307.5

Personnel expenses (15) -133.7 -116.2

Amortisation, depreciation and impairment (16) -115.4 -106.6

Other operating expenses (17) -50.1 -42.1

Investment result (18) 80.5 98.1

Interest result (19) -21.6 -18.6

Income taxes (20) 0.0 0.0

Profit after tax 294.9 276.6

Other taxes (21) -1.7 -1.5

Expense from profit transfer (22) -293.2 -275.1

Net income for the year 0.0 0.0

4. Statement of cash flows

1 Jan to 1 Jan to EUR m 31 Dec 2020 31 Dec 2019 Net income for the year before profit/loss transfer 293.2 275.1

Impairment of fixed assets 115.4 106.6

Decrease in provisions -437.2 -573.1

Other non-cash income -2.6 -2.6

Loss from the disposal of non-current assets 1.6 0.2

Decrease (prior year: increase) in inventories 0.9 -0.8

Increase (prior year: decrease) in receivables and other -674.3 53.3 assets

Decrease in liabilities and other equity and liabilities -27.5 -28.8

Interest expenses/income 21.5 18.6

Income tax expense 0.0 0.0

Income tax payments 0.3 0.2

Cash flow from operating activities -708.7 -151.3

Cash received from disposals of property, plant and 0.6 0.6 equipment

Cash paid for investments in property, plant and equipment -493.8 -303.4

Cash received from construction cost subsidies 1.7 0.8

Cash paid for investments in intangible assets -15.7 -13.5

Cash received from disposals of non-current financial assets 500.0 0.0

Cash paid for investments in fixed financial assets -750.0 -153.1

Interest received 33.1 37.1

Cash flow from investing activities -724.1 -431.5

Cash received from investment subsidies 0.0 17.3

Cash received from shareholder loans 918.9 0.0

Cash repayments of shareholder loans -500.0 0.0

Cash received from equity contribution 1,170.0 0.0

Cash paid for profit/loss transfer -293.2 -275.1

Interest paid -46.7 -50.5

Cash flow from financing activities 1,249.0 -308.3

Change in cash and cash equivalents -183.8 -891.1

Cash and cash equivalents at the beginning of the period 414.3 1,305.4

Cash and cash equivalents at the end of the period 230.5 414.3

5. Statement of changes in fixed assets

Acquisition and production cost Impairment/write-ups Carrying amount

EUR m 1 Jan 2020 Additions Reclassifications Disposals 31 Dec 2020 1 Jan 2020 Additions Reclassifications Disposals 31 Dec 2020 31 Dec 2020 31 Dec 2019

Intangible assets

Purchased software, licenses, other plant rights 132.7 14.7 -0.2 - 147.2 71.6 13.3 - - 84.9 62.3 61.1 132.7 14.7 -0.2 - 147.2 71.6 13.3 - - 84.9 62.3 61.1

Property, plant and equipment

Land, land rights and buildings, including buildings on third-party land 250.1 3.0 0.6 2.5 251.2 56.2 3.4 - 1.7 57.9 193.3 193.9

Technical equipment and machinery 3,694.6 91.9 70.1 16.7 3,839.9 1,835.4 76.1 - 15.4 1,896.1 1,943.8 1,859.2

Other equipment, furniture and fixtures 182.6 17.6 6.6 3.1 203.7 94.5 22.6 - 3.1 114.0 89.7 88.1

Prepayments and assets under construction 564.3 357.2 -77.1 - 844.4 - - - - - 844.4 564.3 4,691.6 469.7 0.2 22.3 5,139.2 1,986.1 102.1 - 20.2 2,068.0 3,071.2 2,705.5

Financial assets

Shares in affiliates 933.0 750.0 - - 1,683.0 - - - - - 1,683.0 933.0 Loans to affiliates 1,240.0 - - 500.0 740.0 - - - - - 740.0 1,240.0 Securities classified as fixed assets 19.9 - - - 19.9 - - - - - 19.9 19.9 Investments 3.1 - - - 3.1 - - - - - 3.1 3.1 2,196.0 750.0 - 500.0 2,446.0 - - - - - 2,446.0 2,196.0

Fixed assets 7,020.3 1,234.4 0.0 522.3 7,732.4 2,057.7 115.4 - 20.2 2,152.9 5,579.5 4,962.6

6. Notes to the financial statements

6.1. General

50Hertz Transmission GmbH (“50Hertz Transmission”) with registered offices in Berlin is registered in the commercial register of Berlin-Charlottenburg district court under HRB no. 84446.

The financial statements of 50Hertz Transmission were prepared in accordance with the provisions of the HGB [“Handelsgesetzbuch”: German Commercial Code] and the supplementary provisions of the GmbHG [“Gesetz betreffend die Gesellschaften mit beschränkter Haftung”: German Limited Liability Companies Act] also taking into account the EnWG [“Energiewirtschaftsgesetz”: German Energy Industry Act]. All amounts are in millions of euros (EUR m). In the interest of clarity, some items from the statement of financial position and the income statement have been combined and disclosed separately and explained in the notes. For the same reason, we have also indicated in the notes whether individual items are related to other items and “thereof” items. The income statement was prepared using the nature of expense method.

50Hertz Transmission qualifies as a large corporation in accordance with the size criteria under Sec. 267 (3) HGB and has prepared the financial statements in line with the requirements for this size.

50Hertz Transmission is included in the consolidated financial statements of Eurogrid GmbH (“Eurogrid”), with registered offices in Berlin, and in the consolidated financial statements of Elia Group NV/SA with registered offices in Brussels, Belgium. The consolidated financial statements of Elia Group NV/SA with the largest group of companies can be obtained from Elia Group NV/SA, Boulevard de l´Empereur 20, 1000 Brussels, Belgium. The consolidated financial statements prepared by Eurogrid cover the smallest group of companies and can be obtained from the Bundesanzeiger [German Federal Gazette] (www.bundesanzeiger.de). The Company is registered in the commercial register of Berlin-Charlottenburg district court under HRB no. 130427 B. As a result of being included in the consolidated financial statements of Eurogrid, there is no separate obligation to prepare consolidated subgroup financial statements comprising 50Hertz Transmission and 50Hertz Offshore GmbH (“50Hertz Offshore”).

A profit and loss transfer agreement was concluded between Eurogrid and 50Hertz Transmission effective 1 June 2010. At the same time, a consolidated tax group for income tax purposes was formed with Eurogrid as the parent of the tax group.

As a result of the domination and profit and loss transfer agreement in place between 50Hertz Transmission and 50Hertz Offshore, 50Hertz Transmission acts as the interposed parent for 50Hertz Offshore. There is a consolidated tax group for income tax and VAT purposes in place between these two companies.

6.2. Accounting policies

ASSETS

Fixed assets

Purchased intangible assets are recognised at acquisition cost and amortised on a straight-line basis over their estimated useful lives.

Property, plant and equipment are stated at cost less depreciation. Production costs for internally produced assets include appropriate pro rata overheads in addition to the directly attributable costs. Borrowing costs are not included.

Items of property, plant and equipment acquired or produced before 1 January 2008 are depreciated using the declining balance method. A transition to the straight-line method is used as soon as this results in higher depreciation amounts. The straight-line method is used for items of property, plant and equipment acquired or produced as of 1 January 2008.

The useful lives are based on the useful lives accepted by the Federal Network Agency in order to better take into account the increasing regulatory accounting needs and to increase the informative value of the financial statements with regard to the applicable regulatory framework. The use of calculatory accepted useful lives appropriately reflects the actual depletion of the fixed assets. Amounts in the statement of financial position resulting from the opening statement of financial position in DEM were not included in this valuation change, but instead rolled forward based on the “1990 revaluation”.

Impairments are only recorded when the asset needs to be written down to a lower fair value. Write-ups of property, plant and equipment are recorded if the reason for earlier impairment no longer applies.

Financial assets are recorded at the lower of cost or market and in accordance with the requirement to reinstate original values.

Impairments are not recorded for temporary impairment in value. Write-ups to the fair value are recorded if the reason for earlier impairments no longer applies.

Loans are recognised at their nominal value and, where appropriate, discounted to the reporting date.

Separately usable moveable fixed assets costing less than EUR 250 that have a limited life are recognised immediately in profit or loss. Assets costing between EUR 250 and EUR 1,000 are posted to a collective item pursuant to Sec. 6 (2a) EStG [“Einkommensteuergesetz”: German Income Tax Act] in the year of acquisition, also for the statutory accounts. The collective item is written off in instalments of one fifth in the year in which it ishttp://www.steuerlinks.de/ - # recognised and each of the following four years.

Current assets

Inventories are measured at acquisition and production cost using generally accepted simplified valuation methods and applying the lower of cost or market principle. Inventory risks arising from decreased usability are covered by adequate allowances.

Receivables, other assets and cash and cash equivalents are stated at their nominal value or the lower fair value. All recognisable individual risks and the general credit risk are accounted for by appropriate allowances.

Prepaid expenses

Prepaid expenses refer to expenses of the reporting date, insofar as they concern future periods.

Special loss account from the recognition of provisions

A special loss account from the recognition of provisions pursuant to Sec. 17 (4) DMBilG [“DM- Bilanzgesetz”: German Act on Opening Balance Sheets in German Marks] is recognised on the assets side for provisions that had to be recognised in the opening statement of financial position in DEM in connection with the first-time application of Sec. 249 (1) Sentence 1 HGB on 1 July 1990. The special loss account changes according to the utilisation and reversal of the underlying provisions recognised in the opening statement of financial position in DEM, which only include provisions for eliminating ecological burdens. This account is continued up until the complete utilisation or reversal of the provisions recognised in the opening statement of financial position in DEM in the amount originally recognised at nominal value as a result of the DMBilG.

EQUITY AND LIABILITIES

Equity

The issued capital is measured at nominal value.

Special item

Investment subsidies and grants received are recorded in the special item. The items are released to income in accordance with depreciation of the subsidised assets.

Provisions

In the calculation of provisions, all recognisable risks and uncertain liabilities were taken into account as required according to prudent business judgment and recorded at the settlement value necessary. Other provisions with a term of more than one year are discounted at the average market interest rate prevailing over the past seven fiscal years for instruments of similar terms that is issued and published by Deutsche Bundesbank in accordance with Sec. 253 (2) Sentence 1 HGB. Pursuant to Sec. 253 (2) Sentence 1, provisions for pension obligations were discounted at the average market interest rate of the past 10 fiscal years.

The projected unit credit method was selected for the actuarial measurement of pension obligations and long-service bonuses. In accordance with Sec. 253 (2) Sentence 2 HGB, discounting was calculated at a flat rate using the mean market interest rate of 2.30% p.a. (prior year: 2.71% p.a.) for a remaining term of 15 years in accordance with the RückAbzinsV [“Rückstellungsabzinsungsverordnung”: German Ordinance on the Discounting of Provisions]. The interest rate of 1.60% p.a. (prior year: 1.97% p.a.) was used for the measurement of obligations from working lifetime accounts. The calculations are based on the 2018 G mortality tables of Prof. Dr. Klaus Heubeck. Future wage and salary increases were set at 4.00% p.a. (prior year: 3.75% p.a.). Expected pension increases were taken into account at rates between 1.00 and 2.00% p.a.

Provisions for the company pension plan recorded under the Company’s congruent pension obligations are covered to a large extent by employer’s pension liability insurance. An amount of the provisions corresponds to the amount of the covering assets. The fair value of the covering assets corresponds to the fair value on the reporting date communicated by the employer’s pension liability insurance. Provisions for employee entitlements from working lifetime accounts are fully protected against insolvency. In accordance with Sec. 246 (2) Sentence 2 HGB, the respective covering assets are netted against the provisions for the company pension plan and working lifetime accounts; interest expenses from unwinding the discount on provisions are netted against interest income from topping up the covering assets.

The interest portion from the increase in personnel-related provisions is recorded in the interest result.

Liabilities

Liabilities are recognised at the settlement value deemed necessary.

Payments from customers collected in connection with the examination and preparation of grid connections (connection approvals) in accordance with Sec. 4 KraftNAV [“Kraftwerks- Netzanschlussverordnung”: Ordinance for Regulating Grid Connections] are disclosed as prepayments. Customer payments are also recorded in connection with the installation of jointly used facilities. Subsidies received are recorded as prepayments until the underlying project is completed.

Deferred income

Construction cost subsidies received are recognised as deferred income and released on a straight-line basis. Until 31 December 2002, construction cost subsidies received were released to income over 20 years unless a shorter term had been agreed. Since 1 January 2003, construction cost subsidies received have been released to income over the useful life of the asset.

Amounts paid to 50Hertz Transmission in prior years from cross-border congestion management are recorded as deferred income. These are used for investments for maintaining or expanding connection capacities. In return, 50Hertz Transmission must pay a consideration for the amounts received, which it recognises as a subsidised construction loan under equity and liabilities. The deferred horizontal grid income is recognised over 30 years (years up to and including 2012) as determined by the Federal Network Agency. For the years 2013 to 2019, a regulatory refund exceeding the revenue cap has been made with a small time delay; from 2020 onwards, a regulatory refund exceeding the revenue cap has been made without a time delay.

In addition to the income from congestion management, other income generated in connection with additional voluntary commitments was also recognised as deferred income. Here too, the deduction is also performed by taking the network user charges in subsequent years into account.

Other amounts also primarily relate to deferred income from long-term contractual relationships which are only recognised in profit or loss in subsequent periods. Grid-based settlement

When preparing the annual financial statements, expenses and income and the corresponding receivables and liabilities in the area of grid-based accounting were determined based on preliminary data provided by third parties and partly based on forecasts.

This primarily relates to the settlement of the surcharge processes, the accounting of the balancing groups, grid utilisation as well as the accounting of system services. For a final statement on the actual expenses and income incurred, external data of each partner are decisive, in particular the actual electricity volumes, some of which are only confirmed when the respective attestation has been issued.

As these data are by nature not available in their entirety when the financial statements are prepared, the corresponding items in the financial statements were estimated using the data available and taking into account the information available at the time of preparing the financial statements.

Deferred taxes

50Hertz Transmission GmbH is included in the consolidated tax group for income tax purposes of Eurogrid GmbH. Deferred tax is calculated at the level of the controlling company for the temporary or quasi-permanent differences between the carrying amounts under the German commercial law for assets, liabilities, prepaid expenses and deferred income and their tax bases or for tax loss carryforwards. Any net deferred tax liabilities remaining after netting are recognised at this level.

FOREIGN CURRENCY TRANSLATION

Foreign currency assets and liabilities are translated using the mean spot rate on the reporting date.

6.3. Notes to the statement of financial position

(1) Fixed assets

The breakdown of the fixed asset items summarised in the statement of financial position and their development is shown in the statement of changes in fixed assets.

Under financial assets, a contribution to the capital reserves at 50Hertz Offshore totalling EUR 750.0m as well as a repayment of a shareholder loan totalling EUR 500.0m by 50Hertz Offshore are reported in the fiscal year.

The investments contain shares of 6.7% in TSCNET Services GmbH, Munich, and shares of 4.0% in JAO Joint Allocation Office S.A., Luxembourg (“JAO”), and 7.9% in CORESO SA, Brussels, Belgium. In addition, 10.4% of the endowment funds of the Kurt Sanderling-Academy Foundation of the Konzerthaus Orchestra Berlin, Berlin, is disclosed. Only shares in European Energy Exchange AG, Leipzig (“EEX”), are recorded under securities classified as fixed assets (EUR 19.9m).

List of shareholdings

The shareholdings of 50Hertz Transmission break down as follows:

Shareholding Equity Gain/loss % EUR m EUR m 1. Affiliates

50Hertz Offshore GmbH, Berlin 100.0 1,683.0 - 1) 2. Investments Elia Grid International NV/SA, Brussels, 49.99 5.7 0.1 4) Belgium Kurt Sanderling-Academy Foundation of the 10.4 - 5) - 5) Konzerthaus Orchestra in Berlin, Berlin

CORESO SA, Brussels, Belgium 7.9 3.2 0.4 2)

TSCNET Services GmbH, Munich 6.7 6.8 0.5 2)

JAO Joint Allocation Office S.A., Luxembourg 4.0 6.5 0.3 2)

3. Securities classified as fixed assets

European Energy Exchange AG, Leipzig 5.4 516.8 67.3 3)

1) Profit and loss transfer agreement 2) Financial statements as of 31 December 2019 3) Consolidated financial statements as of 31 December 2019 4) Financial statements as of 31 December 2020 5) Endow ment funds amount to EUR 0.1m

(2) Inventories

EUR m 31 Dec 2020 31 Dec 2019 Change

Raw materials, consumables and supplies 3.2 3.1 0.1

Work in process 0.3 1.3 -1.0

3.5 4.4 -0.9

(3) Receivables and other assets

thereof due thereof due EUR m 31 Dec 2020 > one year 31 Dec 2019 > one year

Trade receivables 1,642.3 - 946.7 -

Receivables from affiliates 229.4 - 19.9 -

thereof from shareholder 227.9 - 0.6 -

Receivables from other investees and investors 0.0 - 0.1 -

Other assets 26.6 - 34.2 -

- - 1,898.3 1,000.9

Trade receivables primarily comprise compensation claims from the surcharge processes. These relate to claims from the settlement of the EEG [“Erneuerbare-Energien-Gesetz”: German Renewable Energy Act] of EUR 1,379m (prior year: EUR 650.0m), from the KWKG [“Kraft- Wärme-Kopplungsgesetz”: German Combined Heat and Power Act] of EUR 75.2m (prior year: EUR 53.0m) as well as from the settlement pursuant to Sec. 19 (2) StromNEV [“Stromnetzentgeltverordnung”: Ordinance on Electricity Network User Charges] of EUR 40.8m (prior year: EUR 58.0m). Moreover, there are trade receivables from grid use of EUR 16.5m (prior year: EUR 80.9m).

Receivables from affiliates primarily include a receivable from the shareholder from the cash pool with Eurogrid of EUR 227.3m (prior year: none). All other receivables from affiliates, including receivables from the shareholder, and investees relate to trade receivables.

Other assets contain receivables from the tax office from VAT of EUR 24.1m (prior year: EUR 12.7m).

(4) Cash and cash equivalents

Cash and cash equivalents comprised cash on hand as well as bank balances on the reporting date.

(5) Special loss account from the recognition of provisions

The development of the special loss account from the recognition of provisions occurs in line with the development of the nominal obligation of the provision for ecological burdens. This nominal obligation amounted to EUR 2.2m (prior year: EUR 2.3m) as of the reporting date.

(6) Equity

The Company’s issued capital of EUR 200.0m is fully paid in and is held in full by Eurogrid.

By shareholder resolutions dated 2 June 2020 and 11 December 2020, two contributions totalling EUR 1,170.0m were made to the capital reserves in the fiscal year, causing it to increase to EUR 3,010.8m (prior year: EUR 1,840.8m).

The net income for the year of EUR 293.2m was transferred in full to Eurogrid.

(7) Special item

The special item for investment subsidies and grants amounts to EUR 79.3m (prior year: EUR 80.1m).

(8) Provisions

The provisions for pension obligations arise from the settlement amount of the liabilities offset of EUR 31.9m (prior year: EUR 27.1m) and the fair value of the assets offset (covering assets) of EUR 8.9m (prior year: EUR 8.8m).

As of 31 December 2020, the difference pursuant to Sec. 253 (6) HGB came to EUR 4,506,239 (prior year: EUR 3,411,310).

The tax provisions of EUR 27,000.21 (prior year: EUR 7,538.36) relate to periods not yet covered by the tax group for income tax purposes.

Other provisions break down as follows:

EUR m 31 Dec 2020 31 Dec 2019 Change Outstanding EEG invoices 453.1 607.5 -154.4

EEG balancing energy 2.1 342.1 -340.0

Additional surcharge processes 84.0 86.1 -2.1

Network user charges 358.8 308.5 50.3

Personnel-related provisions 23.5 18.6 4.9

Litigation risks 3.3 4.7 -1.4

924.8 1,367.5 -442.7

Sundry other provisions 28.8 30.1 -1.3

953.6 1,397.6 -444.0

Other provisions primarily include obligations from the surcharge processes, particularly from the settlement of the EEG.

(9) Liabilities

31 Dec 2020 31 Dec 2019 Total Due in Total Due in < one > one > five < one > one EUR m year year years year year

Prepayments received 71.8 71.8 - - 71.8 71.8 -

Trade payables 510.1 510.0 0.1 - 527.6 527.5 0.1

Liabilities to affiliates 2,392.7 817.7 1,575.0 665.0 1,991.3 526.3 1,465.0

thereof to the shareholder 2,384.0 809.0 1,575.0 665.0 1,986.0 521.0 1,465.0

Liabilities to other investees and 0.5 0.5 - - 0.9 0.9 - investors

Other liabilities 43.1 42.1 1.0 - 5.6 5.1 0.5

thereof for taxes - - - - 2.5 2.5 - thereof for social security 2.5 2.5 - - 1.6 1.6 -

3,018.2 1,442.1 1,576.1 665.0 2,597.2 1,131.6 1,465.6

At EUR 2,392.7m (prior year: EUR 1,991.3m), liabilities to affiliates relate almost exclusively to a loan with the shareholder of EUR 2,384.0m (prior year: EUR 1,965.0m). As with liabilities to other investees and investors (EUR 0.5m), the remaining amount relates to trade payables (EUR 8.7m).

Other liabilities, if they do not fall under social security, relate in particular to liabilities to authorities of EUR 17.9m (prior year: EUR 2.8m). Furthermore, margin payments of EUR 16.8m (prior year: none) at European Commodity Clearing AG, Leipzig, for grid loss procurement were recognised on the equity and liabilities side of the statement of financial position.

There is no collateral for liabilities at the level of the Company.

(10) Deferred income

EUR m 31 Dec 2020 31 Dec 2019 Change

Investment-related construction cost subsidies 48.1 50.3 -2.2

Income from congestion management as well as amounts for 148.2 204.6 -56.4 future offsetting from voluntary commitments

Other deferred income 13.7 18.6 -4.9

210.0 273.5 -63.5

The sharp decrease in deferred income is mainly attributable to refunding sums from the voluntary self-commitment to system services.

6.4. Notes to the income statement

(11) Revenue

1 Jan to 1 Jan to EUR m 31 Dec 2020 31 Dec 2019 Change Revenue from the surcharge business 9,040.6 8,586.6 454.0

Services for third parties 645.5 823.6 -178.1

Cost-matching income 9,686.1 9,410.2 275.9

Network user charges 802.2 815.1 -12.9

Offshore regulation 300.0 329.1 -29.1

System services 219.0 157.3 61.7

Balancing group management 27.7 18.2 9.5 Compensation for network user charges in different 13.1 -46.3 59.4 periods Other revenue 46.9 35.3 11.6

Revenue from grid business 1,408.9 1,308.7 100.2

11,095.0 10,718.9 376.1

Revenue from the surcharge business includes revenue from levying the EEG surcharge, the surcharge for KWKG, from the settlement pursuant to Sec. 19 (2) StromNEV, and the surcharge for interruptible loads. EEG income relates to income from selling renewable energies on the electricity exchange, the agreed EEG surcharge as well as deliveries to other transmission system operators to offset the burdens on the transmission system operators from the implementation of the EEG. Services for third parties include the business for selling EEG electricity as well as the procurement of grid losses for other grid operators.

In addition to network user charges, revenue from the grid business contains all revenue generated by the Group directly in connection with grid operations.

Income from system services mainly includes the areas of operational management as well as frequency and voltage control. The income from balancing group management represents the cross charging of balance energy costs to all balancing group customers operating in the balancing zone. The compensation for network user charges in different periods includes effects arising with a time delay as a result of the current regulatory framework. These relate to network user charges both from earlier periods and subsequent periods.

(12) Own work capitalised

Own work capitalised includes costs from the fiscal year included in production costs as part of the Company’s investment projects.

(13) Other operating income

1 Jan to 1 Jan to EUR m 31 Dec 2020 31 Dec 2019 Change Income from the release of construction cost subsidies 2.3 2.7 -0.4

Income from the reversal of special items for investment 2.6 2.6 0.0 grants

Income from the reversal of provisions 3.4 1.4 2.0

Income from disposals of fixed assets 0.6 0.6 0.0

Sundry other income 11.9 6.2 5.7

20.8 13.5 7.3

Income from the reversal of provisions stems from the adjustment to the valuation of external obligations and the associated reversal of various provisions.

Sundry other operating income mainly comprises income from contractual penalties of EUR 6.9m (prior year: EUR 0.0m).

There were otherwise no significant or extraordinary effects from other periods recognised under other operating income in fiscal year 2020. Income from currency translation amounted to EUR 0.0m (prior year: EUR 0.0m).

(14) Cost of materials

1 Jan to 1 Jan to EUR m 31 Dec 2020 31 Dec 2019 Change

Expenses from the surcharge business -9,040.6 -8,586.6 -454.0

Grid and system services -527.0 -483.3 -43.7

Expenses relating to the offshore regulation -300.0 -329.1 29.1

Other energy services -648.7 -826.0 177.3

Cost of materials and supplies and purchased goods -4.2 -4.3 0.1

Cost of purchased services -49.3 -39.6 -9.7

Other third-party services -51.8 -38.6 -13.2

-10,621.6 -10,307.5 -314.1

Expenses relating to the offshore regulation contain chargeable grid connection costs of EUR 253.5m (prior year: EUR 251.6m).

Cost of materials contains non-profit items:

1 Jan to 1 Jan to EUR m 31 Dec 2020 31 Dec 2019 Change Electricity procurement surcharge business -9,040.6 -8,586.6 -454.0

Services for third parties -645.5 -823.6 178.1

Income-matching costs -9,686.1 -9,410.2 -275.9

Expenses for the grid business -935.5 -897.3 -38.2

-10,621.6 -10,307.5 -314.1

For reasons of clarity, the classification format used was different to that specified in Sec. 275 HGB. Additional expense categories were listed to improve the presentation.

(15) Personnel expenses

1 Jan to 1 Jan to EUR m 31 Dec 2020 31 Dec 2019 Change Wages and salaries -107.6 -93.7 -13.9

Social security -17.5 -15.3 -2.2

Expenses

for pension costs -7.9 -6.5 -1.4

for other benefit costs -0.7 -0.7 0.0

-133.7 -116.2 -17.5

Annual average number of employees

1 Jan to 1 Jan to 31 Dec 2020 31 Dec 2019 Change Technical staff 802 720 82

Office staff 371 325 46

1,173 1,045 128

In addition, an average of 27 trainees were employed in fiscal year 2020 (prior year: 22 trainees).

(16) Amortisation, depreciation and impairment

Amortisation, depreciation and impairment in the fiscal year correspond to the normal depletion of fixed assets; there was no cause for impairments.

(17) Other operating expenses

1 Jan to 1 Jan to EUR m 31 Dec 2020 31 Dec 2019 Change Services -12.6 -11.8 -0.8

Legal and consulting fees -11.2 -7.7 -3.5

Rent and leases -6.2 -5.9 -0.3

Insurance premiums -4.3 -3.6 -0.7

Sundry other expenses -15.8 -13.1 -2.7

-50.1 -42.1 -8.0

There were no significant effects from other periods or from extraordinary effects recognised under other operating expenses in fiscal year 2020. Expenses from currency translation amounted to EUR 0.0m (prior year: EUR 0.0m). (18) Investment result

1 Jan to 1 Jan to EUR m 31 Dec 2020 31 Dec 2019 Change Income from profit and loss transfer agreements with 80.5 98.1 -17.6 affiliates

80.5 98.1 -17.6

Income from the profit transfer from affiliates relates fully to 50Hertz Offshore.

(19) Interest result

1 Jan to 1 Jan to EUR m 31 Dec 2020 31 Dec 2019 Change Income from securities and loans classified as fixed financial 0.9 0.8 0.1 assets

Other interest and similar income 32.2 36.3 -4.1 thereof from affiliates 32.2 36.3 -4.1

Interest and similar expenses -54.6 -55.7 1.1 thereof to affiliates -46.2 -50.5 4.3

-21.5 -18.6 -2.9

Under interest and similar expenses, an amount of EUR 7.9m relates to the discounting of provisions and unwinding the discount on provisions (prior year: EUR 4.0m). In accordance with Sec. 246 (2) Sentence 2 HGB, interest expenses are netted against interest income of EUR 0.9m (prior year: EUR 0.1m).

(20) Income taxes

A marginal loss contribution (prior year: marginal profit contribution) from income from capital gains tax was recognised under income taxes.

(21) Other taxes

Other taxes of EUR 1.7m (prior year: EUR 1.5m) relate to property tax, vehicle tax and electricity tax.

(22) Profit transfer

The net profit for fiscal year 2020 of EUR 293,195,368.91 (prior year: EUR 275,133,602.88) was transferred to Eurogrid on the basis of the profit and loss transfer agreement. 6.5. Other notes

Notes to the statement of cash flows

The statement of cash flows is prepared under consideration of GAS 21 and the recommendations of the German Accounting Standard Committee e.V.

The cash and cash equivalents at the end of the period of EUR 230.5m (prior year: EUR 414.3m) consist of cash in hand and bank balances of EUR 3.2m (prior year: EUR 434.0m) as well as a receivable from the cash pool with Eurogrid of EUR 227.3m (prior year: liability of EUR -19.7m).

Financial instruments

To hedge price fluctuations on the short-term spot market, 50Hertz Transmission obtained Phelix Futures, financial derivatives, from the forward market of European Energy Exchange AG (“EEX”) for grid losses expected in the future. The hedging relationship is accounted for via so-called contract portfolio monitoring pursuant to IDW RS ÖFA 3.

In accordance with Sec. 10 StromNEV, German transmission system operators may take into account procurement expenses to cover physical grid losses for the calculation of grid costs. According to FSV (voluntary commitment) grid losses, expenses relating to the annual amount of energy required to cover grid losses are compared with the respective annual budget figure. The difference between the annual budget figure and the actual annual costs is offset by the regulatory account pursuant to Sec. 5 ARegV, with the exception of bonus/malus.

Other financial obligations

On 31 December 2020, there was a purchase obligation for investments and maintenance measures of EUR 1,039.3m (prior year: EUR 509.2m). Of this, EUR 25.9m (prior year: EUR 34.8m) relates to a purchase obligation towards other investees and investors and the remaining portion towards third parties.

Offshore expenses (ARegV until 31 December 2018), costs to ensure security measures (Sec. 13g EnWG) and costs relating to the capacity reserve (Sec. 13e EnWG) between 50Hertz, TenneT TSO and Amprion from the horizontal settlement give rise to financial obligations for 50Hertz in future periods. The total amount of these future cumulative amounts comes to EUR 10.5m and will be reflected in 50Hertz’s network user charge calculations in the next few years following the corresponding billing by TenneT TSO and Amprion.

Contingent liabilities Eurogrid borrows funds on the capital market to finance the Group’s investment activities and passes these on to 50Hertz Transmission and 50Hertz Offshore in the form of shareholder loans or equity contributions.

50Hertz Transmission and 50Hertz Offshore are entered as guarantors in the documentation of the debt issuance programme for all bonds issued by Eurogrid. The guarantors are irrevocably, unconditionally and jointly liable for the punctual payment of all amounts Eurogrid has to make for the bonds.

As of 31 December 2020, the liabilities from Eurogrid’s bonds break down as follows:

Nominal volume Issue date Coupon Term EUR 500m 2 Jun 2015 1.875% p.a. (fixed) 2025

EUR 750m 3 Nov 2015 1.625% p.a. (fixed) 2023

EUR 140m 4 Nov 2015 2.625% p.a. (fixed) 2030

EUR 750m 18 Apr 2016 1.500% p.a. (fixed) 2028

EUR 750m 15 May 2020 1.113% p.a. (fixed) 2032

EUR 200m 20 Nov 2020 0.875% p.a. (fixed) 2040

On 24 March 2015, 50Hertz Transmission and 50Hertz Offshore entered into a syndicated loan agreement, with maturity until 24 March 2022, after the second option to extend was exercised, as additional guarantors between Eurogrid and ING Bank, a branch of ING-DIBA AG, as syndicate leader for a volume of EUR 750.0m. As of 2016, the facility agent is Commerzbank Finance & Covered Bonds S.A.

On 9 December 2011, 50Hertz Transmission and 50Hertz Offshore issued a maximum guarantee to BNP Paribas S.A., Frankfurt am Main branch, totalling EUR 126.0m to hedge a short-term overdraft facility of Eurogrid. The maximum guarantee was increased to EUR 157.5m by first addendum dated 15 July 2013.

In connection with Eurogrid issuing the registered bond of EUR 50.0m on 3 December 2014, 50Hertz Transmission and 50Hertz Offshore were named as additional guarantors. The guarantors are irrevocably, unconditionally and jointly liable for the punctual payment of all amounts Eurogrid has to make for the registered bond.

50Hertz Transmission and 50Hertz Offshore were named as additional guarantors in connection with the loan borrowed by Eurogrid of EUR 150.0m on 23 December 2016. The guarantors are irrevocably, unconditionally and jointly liable for the punctual payment of all amounts Eurogrid has to make for the loan agreement.

50Hertz Transmission submitted a directly enforceable maximum guarantee to UniCredit Bank AG, Munich, for the loan borrowed (EUR 400.0m) by Eurogrid on 15 May 2020.

50Hertz Transmission submitted an independent letter of indemnity to the public institution Landesbank Hessen-Thüringen Girozentrale, Frankfurt am Main, as collateral for the overdraft agreement (EUR 151.0m) of Eurogrid dated 29 October 2020.

50Hertz Transmission submitted an independent undertaking to pay to MUFG Bank (Europe) N.V. Germany Branch, Düsseldorf, as collateral for the term loan agreement (EUR 150.0m) of Eurogrid dated 9 October 2020.

There is still an obligation of EUR 4.2m resulting from issuing a guarantee to 50Hertz Offshore, which is not currently expected to be utilised.

We currently do not expect any risk of claims relating to the above contingent liabilities to arise.

Off-balance sheet transactions

As of the reporting date, there were no off-balance sheet transactions.

Audit fees

The disclosures for the total auditor’s fee calculated pursuant to Sec. 285 No. 17 HGB are made in the consolidated financial statements of Eurogrid GmbH.

Related party transactions

In the reporting period there were no transactions with related parties which were not conducted at arm’s length.

Substantial transactions in accordance with Sec. 6b (2) EnWG

In accordance with Sec. 6b (2) EnWG, substantial transactions with affiliates and associates or with companies which belong to the same shareholders must be presented. Apart from the financing transactions mentioned in the notes to the financial statements, 50Hertz Transmission did not enter into any transactions outside of its operating activities.

Activity-based financial statements in accordance with Sec. 6b (3) EnWG

The activities of 50Hertz Transmission belong exclusively to the field of electricity transmission. An immaterial amount of EUR 84k (prior year: EUR 90k) was recorded under other operating expenses for the operation of measuring points and is not deemed significant enough to constitute a separate activity outside of electricity transmission. For this reason, the activity report to be prepared in accordance with Sec. 6b (3) EnWG corresponds to the Company’s annual financial statements.

Subsequent events

No significant events occurred in the period between the reporting date and the preparation of 50Hertz Transmission’s s financial statements.

Ratification of the prior-year financial statements

The prior-year financial statements were ratified by the shareholder meeting on 27 February 2020.

Disclosures on company boards

The members of the supervisory board and management are presented in a separate list, included as an attachment to the notes to the financial statements.

Expenses for management remuneration amounted to EUR 2,760k in the reporting period (prior year: EUR 3,365k). It consists of fixed remuneration, performance-related remuneration and other fixed components.

Pension obligations of EUR 2.0m (prior year: EUR 1.5m) relate to former members of management; a total of EUR 0.6m of this is covered by employers’ liability insurance.

The members of the supervisory board of 50Hertz Transmission received EUR 21k for their activities (prior year: EUR 26k).

Berlin, 10 February 2021

The management of

50Hertz Transmission GmbH

signed Stefan Kapferer

signed Dr. Dirk Biermann

signed Sylvia Borcherding

signed Dr. Frank Golletz

signed Marco Nix

7. Company boards

7.1. Members of the supervisory board

Christiaan Peeters Chief Executive Officer Elia Group NV/SA, Zemst (Belgium) – Chairman –

Peter Hausmann* Member of the general executive committee of Industriegewerkschaft Bergbau, Chemie und Energie [“Mining, Chemical and Energy trade union”], Hanover (until 31 January 2020) – Deputy Chairman –

Karin Erhard* Member of the general executive committee of Industriegewerkschaft Bergbau, Chemie und Energie [“Mining, Chemical and Energy trade union”], Hanover (from 1 February 2020) – Deputy Chairman –

Markus Berger Chief Infrastructure Officer of Elia Transmission Belgium NV/SA, Braine-l´Alleud (Belgium)

Dr. Lutz-Christian Funke Secretary General of KfW Banking Group, Oberursel

Andrea Ludwig* Electrical engineer, Berlin

Dr. Lutz Pscherer* Electrical engineer, Berlin

*Employee representative

7.2. Members of management

Stefan Kapferer, Berlin – Chief Executive Officer –

Dr. Frank Golletz, Dresden – Chief Technical Officer –

Dr. Dirk Biermann, Berlin – Chief Marketing Officer –

Sylvia Borcherding, Cologne – Chief HR Officer –

Marco Nix, Berlin – Chief Financial Officer –

Translation from the German language

Independent auditor’s report

To 50Hertz Transmission GmbH

Report on the audit of the annual financial statements and the management report

Opinions

We have audited the annual financial statements of 50Hertz Transmission GmbH, Berlin, which comprise the statement of financial position as of 31 December 2020, and the income statement and statement of cash flows for the fiscal year from 1 January to 31 December 2020, and notes to the financial statements, including the recognition and measurement policies presented therein. In addition, we have audited the management report of 50Hertz Transmission GmbH for the fiscal year from 1 January to 31 December 2020. In accordance with the German legal requirements, we have not audited the information contained in section 1.10 “Corporate governance declaration” of the management report.

In our opinion, on the basis of the knowledge obtained in the audit,

• the accompanying annual financial statements comply, in all material respects, with the requirements of German commercial law applicable to business corporations and give a true and fair view of the assets, liabilities and financial position of the Company as of 31 December 2020 and of its financial performance for the fiscal year from 1 January to 31 December 2020 in compliance with German legally required accounting principles, and

• the accompanying management report as a whole provides an appropriate view of the Company’s position. In all material respects, this management report is consistent with the annual financial statements, complies with German legal requirements and appropriately presents the opportunities and risks of future development. Our opinion on the management report does not cover the content of the statement on corporate governance pursuant to Sec. 289f (4) HGB [“Handelsgesetzbuch”: German Commercial Code] referred to above.

Pursuant to Sec. 322 (3) Sentence 1 HGB, we declare that our audit has not led to any reservations relating to the legal compliance of the annual financial statements and of the management report. Basis for the opinions

We conducted our audit of the annual financial statements and of the management report in accordance with Sec. 317 HGB and in compliance with German Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Our responsibilities under those requirements and principles are further described in the “Auditor’s responsibilities for the audit of the annual financial statements and of the management report” section of our auditor’s report. We are independent of the Company in accordance with the requirements of German commercial and professional law, and we have fulfilled our other German professional responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions on the annual financial statements and on the management report.

Other information

The executive directors are responsible for the other information. The other information comprises the statement on corporate governance pursuant to Sec. 289f (4) HGB of the management report (disclosures on the quota for women on executive boards).

Our opinions on the annual financial statements and on the management report do not cover the other information, and consequently we do not express an opinion or any other form of assurance conclusion thereon.

In connection with our audit, our responsibility is to read the other information and, in so doing, to consider whether the other information

• is materially inconsistent with the annual financial statements, with the management report or our knowledge obtained in the audit, or

• otherwise appears to be materially misstated.

Responsibilities of the executive directors and the supervisory board for the annual financial statements and the management report

The executive directors are responsible for the preparation of the annual financial statements that comply, in all material respects, with the requirements of German commercial law applicable to business corporations, and that the annual financial statements give a true and fair view of the assets, liabilities, financial position and financial performance of the Company in compliance with German legally required accounting principles. In addition, the executive directors are responsible for such internal control as they, in accordance with German legally required accounting principles, have determined necessary to enable the preparation of annual financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the annual financial statements, the executive directors are responsible for assessing the Company’s ability to continue as a going concern. They also have the responsibility for disclosing, as applicable, matters related to going concern. In addition, they are responsible for financial reporting based on the going concern basis of accounting, provided no actual or legal circumstances conflict therewith.

Furthermore, the executive directors are responsible for the preparation of the management report that, as a whole, provides an appropriate view of the Company’s position and is, in all material respects, consistent with the annual financial statements, complies with German legal requirements and appropriately presents the opportunities and risks of future development. In addition, the executive directors are responsible for such arrangements and measures (systems) as they have considered necessary to enable the preparation of a management report that is in accordance with the applicable German legal requirements, and to be able to provide sufficient appropriate evidence for the assertions in the management report.

The supervisory board is responsible for overseeing the Company’s financial reporting process for the preparation of the annual financial statements and of the management report.

Auditor’s responsibilities for the audit of the annual financial statements and of the management report

Our objectives are to obtain reasonable assurance about whether the annual financial statements as a whole are free from material misstatement, whether due to fraud or error, and whether the management report as a whole provides an appropriate view of the Company’s position and, in all material respects, is consistent with the annual financial statements and the knowledge obtained in the audit, complies with the German legal requirements and appropriately presents the opportunities and risks of future development, as well as to issue an auditor’s report that includes our opinions on the annual financial statements and on the management report.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Sec. 317 HGB and in compliance with German Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer (IDW) will always detect a material misstatement. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these annual financial statements and this management report.

We exercise professional judgment and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the annual financial statements and of the management report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinions. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit of the annual financial statements and of arrangements and measures (systems) relevant to the audit of the management report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of these systems of the Company.

• Evaluate the appropriateness of accounting policies used by the executive directors and the reasonableness of estimates made by the executive directors and related disclosures.

• Conclude on the appropriateness of the executive directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in the auditor’s report to the related disclosures in the annual financial statements and in the management report or, if such disclosures are inadequate, to modify our respective opinions. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to be able to continue as a going concern. • Evaluate the overall presentation, structure and content of the annual financial statements, including the disclosures, and whether the annual financial statements present the underlying transactions and events in a manner that the annual financial statements give a true and fair view of the assets, liabilities, financial position and financial performance of the Company in compliance with German legally required accounting principles.

• Evaluate the consistency of the management report with the annual financial statements, its conformity with German law, and the view of the Company’s position it provides.

• Perform audit procedures on the prospective information presented by the executive directors in the management report. On the basis of sufficient appropriate audit evidence we evaluate, in particular, the significant assumptions used by the executive directors as a basis for the prospective information, and evaluate the proper derivation of the prospective information from these assumptions. We do not express a separate opinion on the prospective information and on the assumptions used as a basis. There is a substantial unavoidable risk that future events will differ materially from the prospective information.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Other legal and regulatory requirements

Report on the audit of compliance with the accounting requirements pursuant to Sec. 6b (3) EnWG

Opinions

We audited whether the Company complied with its duties pursuant to Sec. 6b (3) Sentences 1 to 5 EnWG [“Energiewirtschaftsgesetz”: German Energy Industry Act], which require separate accounts to be kept for activities for the fiscal year from 1 January to 31 December 2020. We also audited the activity-based financial statements for the activity of “electricity distribution” pursuant to Sec. 6b (3) Sentence 1 EnWG, comprising the balance sheet of the annual financial statements as of 31 December 2020, which also contains the balance sheet of the activity-based financial statements, and the income statement of the annual financial statements for the fiscal year from 1 January to 31 December 2020, which also includes the income statement of the activity-based financial statements. • In our opinion, the Company complied in all material respects with its duties pursuant to Sec. 6b (3) Sentences 1 to 5 EnWG, which require separate accounts to be kept.

• In our opinion, on the basis of the knowledge obtained in the audit, the accompanying separate activity-based financial statements comply, in all material respects, with the German requirements under Sec. 6b (3) Sentences 5 to 7 EnWG.

Basis for the opinions

We conducted our audit of compliance with the duties to keep separate accounts and separate activity-based financial statements in accordance with Sec. 6b (5) EnWG observing the draft revision of IDW Auditing Standard: Audits Pursuant to Sec. 6b (5) of the German Energy Industry Act (Draft IDW AuS 610 (Revised)). Our responsibilities under those requirements and principles are further described in the “Auditor’s responsibilities for the audit of compliance with the duties relating to the accounting system pursuant to Sec. 6b (3) EnWG”. We are independent of the Company in accordance with the requirements of German commercial and professional law, and we have fulfilled our other German professional responsibilities in accordance with these requirements. As an audit firm we apply the requirements of the IDW quality control standards: Quality assurance requirements of auditing practice (IDW QS 1). We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions on compliance with the duties relating to the accounting system pursuant to Sec. 6b (3) EnWG.

Responsibilities of the executive directors for compliance with the duties relating to the accounting system pursuant to Sec. 6b (3) EnWG

The executive directors are responsible for compliance with the duties pursuant to Sec. 6b (3) Sentences 1 to 5 EnWG, which require separate accounts to be kept. The executive directors are also responsible for the preparation of the separate activity-based financial statements in accordance with the German requirements under Sec. 6b (3) Sentences 5 to 7 EnWG.

In addition, the executive directors are responsible for such internal control as they have determined necessary to comply with the duties to keep separate accounts. The responsibilities of the executive directors for the separate activity-based financial statements are the same as the responsibilities for the annual financial statements described in the “Responsibilities of the executive directors and the supervisory board for the annual financial statements and the management report” section. Auditor’s responsibilities for the audit of compliance with the duties relating to the accounting system pursuant to Sec. 6b (3) EnWG

Our objectives are to obtain reasonable assurance about

• whether the executive directors complied in all material respects with their duties pursuant to Sec. 6b (3) Sentences 1 to 5 EnWG, which require separate accounts to be kept, and

• whether the separate activity-based financial statements comply, in all material respects, with Sec. 6b (3) Sentences 5 to 7 EnWG.

Our objectives are also to include in the auditor’s report a report containing our opinions on compliance with the duties relating to the accounting system pursuant to Sec. 6b (3) EnWG.

The audit of compliance with the duties pursuant to Sec. 6b (3) Sentences 1 to 5 EnWG, which require separate accounts to be kept, includes assessing whether the accounts were allocated to the activities pursuant to Sec. 6b (3) Sentences 1 to 4 EnWG in an appropriate and verifiable manner and the consistency principle was observed.

Our responsibilities for the audit of the separate activity-based financial statements are the same as the responsibilities for the annual financial statements described in the “Auditor’s responsibilities for the audit of the annual financial statements and of the management report” section.

Berlin, 10 February 2021

Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft

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Kausch-Blecken von Schmeling Ottenhus Wirtschaftsprüfer Wirtschaftsprüfer [German Public Auditor] [German Public Auditor]