Report of the Supervisory Board
In our role as the Supervisory Board, we supervise the definition and achievement of objectives, the strategy, the long-term value creation, the policy of the Management Board and the operations in general at Alliander. In addition, we offer the Management Board solicited and unsolicited advice. We also serve as the employer of the Management Board and maintain contacts with internal and external stakeholders. In this report, we take accountability for our supervision in the past year and discuss the key aspects in which the Supervisory Board was involved.
Key aspects in 2018
The Supervisory Board supervises the manner in which the Management Board pursues long-term value creation. In our meetings, we therefore regularly discuss the strategy, the implementation and status of the strategy and the principal attendant risks. Social, economic and financial sustainability is essential for the achievement of long-term value creation. For this reason, the Sustainable Development Goals are integrated into the strategy and impact measurement is used as a key instrument. Balanced choices need to be made, taking account of the interests of all stakeholders.
In 2018, we reviewed and tweaked our strategy. The Supervisory Board, together with the Management Board, paid extensive attention to the strategic focus, also during the annual strategy session. On this occasion, we reviewed the results achieved by Alliander in the past years. Other topics that were discussed at length included relevant trends, developments and innovations in the energy transition, the ongoing digitisation and the associated changes in our energy system as well as the future role that the network operators (Liander) and the network company (Alliander) have to play in this respect. We acted as the Management Board’s sparring partner in the process of tweaking our strategic focus.
The coming years will see Alliander operating in a rapidly changing context. The upcoming Climate Agreement, the energy transition, the rapidly growing Dutch economy and the shortage of engineers will all present considerable challenges for Alliander. For this reason, certain themes require more focus than in the past years. For this reason, the company has opted to reorganise its activities according to five strategic focal themes:
completion of work package
energy transition portfolio
cost-conscious and efficient operations
knowledge and tools for customers and network colleagues
During the reporting year, we regularly met with the Management Board to speak about and discuss these strategic themes and found that major progress had been made on all themes. In addition, attention was devoted to our ability to finance all these developments in the medium term.
Sale of Allego
The Supervisory Board was deeply involved in the plan to sell our subsidiary Allego. The Management Board decided to sell because the fast and vigorous growth that Allego is currently undergoing is no longer consistent with the risk profile of a public network company.
After a careful assessment of the strategic, financial, operational and social aspects and taking account of the interests of all stakeholders, the Supervisory Board – based on a positive recommendation from the Audit Committee – approved the sale of Allego to Meridiam, a French investment company specialising in sustainable infrastructure projects. This international long-term investor makes an excellent fit with Allego’s activities and perfectly positions the company for its next phase of rapid international growth (and the associated investments).
Achievement of corporate objectives
Each year, Alliander draws up an integrated business plan in which the strategic objectives are translated into concrete and measurable operational corporate objectives. The specific corporate objectives that Alliander sets itself in a year are defined in measurable financial and non-financial KPIs. Each quarter, the Management Board reports to the Supervisory Board on the interim results achieved in relation to these objectives. This enables the Supervisory Board to closely monitor the progress on the objectives and make adjustments where necessary. The Supervisory Board has established that some of the objectives for 2018 were achieved. We are critical about the objectives that were not achieved and explicitly challenged the Management Board on why the objectives were not, or only partly, achieved.
Internal risk management and control systems
The Supervisory Board (and the Audit Committee in particular) discussed the findings from the internal audits as well as the actions taken in response to these findings. The Supervisory Board monitors the progress of these actions based on the in control reports from the Internal Audit Department. We found that the business units acted in a rigorous and diligent manner on the findings in 2018. One of the effects was an improvement of the internal control of the materials procurement process.
In addition, the report on the 2018 interim audit and the management letter from our external auditor Deloitte, containing the 2018 interim audit findings on the internal controls (and the management’s reaction to these findings), was discussed with the Audit Committee and the Supervisory Board in the presence of Deloitte. During the interim audit, the auditor observed a further improvement in the internal controls compared to the previous year. Deloitte found no material misstatements. However, Deloitte did make specific recommendations that have been, or will be, acted on by Alliander. Aspects for further improvement include the review of the BCF controls as part of the BCF process and the customer quotation process in the unregulated domain. The Supervisory Board was delighted to find that Deloitte is working with Alliander to expand the use of data analytics in the audit of investments.
Based partly on the reports of Deloitte and Internal Audit, the Supervisory Board and the Management Board are of the opinion that the internal risk management and control systems operated effectively. These provide reasonable assurance that the financial reporting of Alliander contains no material misstatements.
In addition, the risk management reports were discussed. These reports provide insight into the status and development of the management of the top risks Alliander is exposed to. Topics discussed in this context included the changed design of the risk matrix and risk management in relation to safe working practices. In the opinion of the Supervisory Board, the company pursues a balanced risk policy and keeps the Supervisory Board adequately informed of risk-related issues. For a description of the principal risks, see the Risks chapter in the Report of the Management Board.
The Supervisory Board discussed the annual report and the financial statements 2018 at length, including the accompanying Board report, in the presence of Deloitte. During 2018, the Management Board provided the Supervisory Board with quarterly reports in which the actual financial results were set out and compared with the 2018 budget, the 2018 outlook and the results for 2017. Issues raised included developments in costs, rising investments and financial ratios.
In addition, we discussed Alliander’s 2018 half-year report, including Deloitte’s report of findings. Finally, we discussed and approved the 2019-2023 financial plan and the operational year plan 2019. The Audit Committee of the Supervisory Board carried out intensive preparatory work on all these matters. We are of the opinion that the financial reporting is adequate and presents a realistic picture of the company’s financial position and financial performance.
The Supervisory Board was happy to find that the credit ratings of Standard & Poor’s (AA-/A-1+ with stable outlook) and Moody’s (Aa2/P-1 with stable outlook) were reaffirmed in 2018. We see that, alongside a sound financial policy, shareholders and other investors are increasingly focusing on sustainability performance. Oekom Research, a leading sustainability ratings agency, has awarded Alliander a Prime B+ rating. Both the credit ratings and the sustainability rating reflect Alliander’s strong creditworthiness. This is important as the rating influences our finance costs and facilitates our access to the different financial markets.
Safety is a top priority for Alliander, both for its own employees and the employees of the contractors working for Alliander, and we, as the Supervisory Board, endorse this. Based on the quarterly reports, we monitor accidents that lead to absenteeism and the safety culture within the company. In addition, the Management Board regularly informs us about safety issues and incidents with dangerous materials that pose a potential health hazard and, even more importantly, about the measures taken or to be taken.
Culture and behaviour
In 2018, we again devoted extensive attention to the envisaged culture, standards and values with a view to long-term value creation. The Supervisory Board acknowledges the important role that an open, transparent and sufficiently self-critical culture has to play in the achievement of the corporate objectives. One of the tools in this context is Alliander’s Code of Conduct. The Audit Committee of the Supervisory Board supervises compliance with the Code of Conduct. Suspicions of abuse can also be reported via the Whistleblower Policy.
In view of the strategic developments, an Alliander-wide leadership programme has been initiated. We were informed about this programme as well as the nature of the Alliander-wide leadership days that centre on the development of the right leadership qualities. The Supervisory Board will continue to devote extensive attention to the ‘Leadership’ theme next year. In addition, we received an update on the outcomes of the employee satisfaction survey, which measures such aspects as how employees rate our culture. Internal Audit and the external auditor also communicated their findings on culture and leadership to us. Our consultations with the Works Council and with managers form an important element for testing where we stand regarding our culture.
Alliander is engaged in a major cost-cutting operation. We received an update on cost savings in a separate session, while also being continuously informed of the progress made. To achieve the cost savings, it is vital to make cost awareness and cost-conscious practices an integral part of Alliander’s culture.
We are aware of the importance of the tone at the top. In the relations between our board members and the relationship with the Management Board, there is sufficient room for debate, differences of opinion and discussion of sensitive issues. In addition, behaviour and culture form part of the annual assessment of the Supervisory Board and Management Board.
Corporate Social Responsibility
Corporate Social Responsibility (CSR) is an integral part of Alliander’s strategy and its day-to-day operations. Alliander takes responsibility for a sustainable society, with a particular focus on the interests of the generations coming after us. The Supervisory Board sees three key CSR priorities for Alliander:
Ensuring that the transition to renewable energy is realised in a controlled manner so that the energy system of the future remains affordable, reliable and accessible to everyone on equal terms
Ensuring that our operations are sustainable
Ensuring that we operate as a good corporate citizen
More information on the many sustainability initiatives being undertaken can be found in the report of the management board. We support these initiatives which, in our opinion, contribute to long-term value creation.
Composition of the Management Board
The composition of the Management Board remained unchanged in 2018. The Management Board consists of Ingrid Thijssen (CEO) and Mark van Lieshout (CFO). At the end of 2018 it was announced that Mark van Lieshout would leave the company in the course of the current year. Although he will step down on 1 March 2019, his services will continue to be available to Alliander until 1 July 2019. In his role as CFO since 2010, Mark van Lieshout has helped make Alliander become the organisation it is today. The Supervisory Board is extremely grateful to him for this. The procedure for finding his successor has been set in motion.
Contact with the Works Council
Members of the Supervisory Board attended consultative meetings with the Works Council in different compositions. In addition, the full Supervisory Board meets with the Works Council once a year during a joint meeting. Topics discussed in 2018 included the completion of the work package and behaviour and culture. The Supervisory Board regards the consultation with the Works Council as constructive and valuable.
Relationship with shareholders
Barring the General Meeting of Shareholders, the Supervisory Board has limited contact with the shareholders in its official capacity. The Management Board does hold regular consultations with the major shareholders. In 2018, informal consultations were held with major shareholders on five occasions. Topics discussed included the updated strategy, the sale of Allego and the upcoming Climate Agreement. The Supervisory Board was consistently kept informed of these contacts.
In addition, the Selection, Appointment and Remuneration Committee consulted twice with the Committee of Shareholders about the implementation of the remuneration policy of the Management Board and about the departure of Mark van Lieshout.
The Supervisory Board considers it important to maintain good relations with shareholders and is of the opinion that the shareholders’ interests were served in a constructive and careful manner in 2018.
No conflicts of interest
In 2018, no transactions led to potential conflicts of interest that are of material significance to the company and/or the relevant management board members, supervisory board members, shareholders and/or external auditor.
Other subjects that received special attention in 2018 were:
the progress of the talks on the upcoming Climate Agreement
the preparation of the annual meeting of shareholders
the developments at Alliander Telecom concerning optical fibre and wireless services
our operational strategy for Germany
the strategy for digital solutions in the energy system of the future
employee development and succession planning (including Management Board positions)
the approval of the issuance of a new perpetual subordinated bond for € 500 million and the buy-back of a perpetual bond issued in 2013
the approval of the Internal Audit year plan 2019
Committees of Supervisory Board
The Supervisory Board has set up two committees that advise the Supervisory Board on specific tasks and prepare its decision-making. These are the Audit Committee and the combined Selection, Appointment and Remuneration Committee. The task of these committees is to prepare the decision-making for the Supervisory Board in their field of expertise and to advise the Supervisory Board. Their most important considerations and conclusions were shared with the Supervisory Board, where the formal decision-making takes place. The activities of both committees are reported on below.
In 2018, the members of the Audit Committee were Ada van der Veer (chair), Govert Hamers (member) and Coby van der Linde (member). Ada van der Veer fulfils the role of financial expert, as set out in Article 2(3), concluding sentence, of the Decree on the appointment of audit committees. The Audit Committee extensively discussed the financial statements, the Report of the Management Board, the interim and quarterly figures, the external auditor’s half-year review report, the management letter, the financial 2019-2023 plan, the operational year plan, the risk management and internal control framework and the internal and external audit plans with the CFO, the Internal Audit Manager, the Business Control Manager, the Corporate Control Manager and the external auditor. Furthermore, the Audit Committee discussed the Fraud & Incidents Reports, which report on fraud, theft and embezzlement as well as on disclosures under the Whistleblower Policy and the Alliander Code of Conduct and the actions taken in response.
In 2018, the Audit Committee devoted specific attention to the top fraud risks within Alliander and the controls that are in place to mitigate these risks. In addition, attention was devoted to IT risk management during the year. In this context, the Audit Committee also gave due consideration to the risks of cloud storage, measures to manage the security risks of outsourcing and the requisite security level for Alliander. The Audit Committee found that progress had been made towards the mitigation of the most important IT risks. In addition, the Audit Committee dedicated considerable time to the sale of Allego.
In line with other years, the Audit Committee devoted attention to the financing policy, tax planning and status of the tax returns, impairment testing, position papers and the impact of new reporting standards.
The Audit Committee held one meeting in private with the external auditor. The Audit Committee believes that the relationship with the external auditor is satisfactory. Finally, the Audit Committee was involved in the appointment of the new Internal Audit Manager.
Selection, Appointment and Remuneration Committee
In the year under review, the members of the Selection, Appointment and Remuneration Committee were Bert Roetert (chair) and Annemarie Jorritsma (member). Some meetings were attended by the chair of the Management Board and the HRM Director.
In 2018, the Committee prepared the reappointment of Bert Roetert. The Committee carried out preparatory tasks for the Remuneration Report and the annual remuneration meeting between the Selection, Appointment and Remuneration Committee and the Committee of Shareholders. Furthermore, it was informed about the outcomes of the Internal Audit Department’s audit of the Management Board’s expense claims. Finally, the Committee devoted attention to the developments surrounding the Public and Semi-Public Sector Executives Pay (Standards) Act and conducted the annual performance appraisal interviews with the Management Board members.
Supervisory Board: composition, independence and diversity
Composition and independence
The composition of the Supervisory Board remained unchanged in 2018. The composition is as follows:
Year of first appointment
Year of reappointment
Year of retirement
Annemarie Jorritsma (chair)
2020 (eligible for reappointment)
2020 (eligible for reappointment)
Coby van der Linde
2021 (not eligible for reappointment)
2019 (eligible for reappointment)
Ada van der Veer
2020 (not eligible for reappointment)
All members of the Supervisory Board are independent within the meaning of best practice provisions 2.1.7, 2.1.8 and 2.1.9 of the Dutch Corporate Governance Code. Owing to her supervisory board memberships at Wintershall Nederland B.V. and Wintershall Noordzee B.V., Ms Van der Linde is not independent as prescribed in the Dutch Electricity Act 1998 and the Dutch Gas Act. All other members of the Supervisory Board are independent within the meaning of these Acts. This means that none of them has a direct or indirect connection with an electricity or gas producer, supplier or trader.
Other positions held by Supervisory Board members outside the company are reported in advance to the Supervisory Board and are disclosed in the annual report. No Supervisory Board members hold a position outside the company that is in conflict with their Supervisory Board membership at Alliander. In addition, no Supervisory Board members hold more than five supervisory positions at Dutch listed companies or other large Dutch companies (public or private companies or foundations), where a chairmanship counts as two supervisory positions. During the year under review, the other positions of the Supervisory Board members were discussed once (Article 2.4.2 of the Dutch Corporate Governance Code). The number and nature of the other positions of each Supervisory Board member are such that a proper fulfilment of the tasks is assured.
Supervisory Board members are selected on the basis of a profile describing their required professional background, experience, skills, diversity and independence. In 2017, a diversity policy for the composition of the Management Board and the Supervisory Board was adopted with the following aims:
a good gender balance in both the Management Board and the Supervisory Board: a target percentage of at least 30% women and at least 30% men
a complementary composition regarding experience and professional background
a balanced mix of ages
The Supervisory Board consists of three women and two men, which is in line with the target percentage. Regarding the areas of experience and knowledge identified as relevant for Alliander in the profile of the Supervisory Board, there is insufficient experience and knowledge in the field of ICT. In addition, the Supervisory Board seeks to bring about more age diversity. In 2018, there were no vacancies in the Supervisory Board, so that no further action on diversity could be taken. The Supervisory Board has the firm intention to seek further diversity whenever vacancies, excluding reappointments, occur.
Each year, the Supervisory Board carries out a self-assessment of its performance, the performance of the separate committees and that of the individual Supervisory Board members outside the presence of the Management Board. This self-assessment also takes on board the working relationship with the Management Board. In 2018, the self-assessment was performed with the aid of an external adviser. Intake interviews were held with the members of the Supervisory Board, the members of the Management Board and various management members. The findings from the interviews were discussed during a dialogue session with the Supervisory Board.
The subjects addressed in our self-assessment included: the Supervisory Board’s performance in its role as supervisor, employer, advisor and sounding board, long-term value creation, succession planning and interpersonal dynamics and communication style. The general picture that emerged from this self-assessment is positive. The relations within the Supervisory Board and between the Supervisory Board and the Management Board are good. The level of involvement is high, as is the mutual respect and trust. In addition, we are satisfied about the committees. The thorough preparatory work of the committees increases the efficiency of the Supervisory Board meetings. Regarding the relationship between the Supervisory Board and the Management Board, the Supervisory Board is satisfied about the openness and transparency. A lot of information is shared, documents are well-prepared and good agendas are set in consultation with the chairman.
The most important recommendation to come out of the self-assessment concerns the need to play a stronger role as advisor and sounding board alongside the role as supervisor and employer. We will review how we can reinforce our role as sparring partner and adviser of the Management Board even further. In this context, we want to give particular attention to the long-term strategy, while also devoting more attention to the succession planning for our Supervisory Board members.
Meeting frequency and attendance
In 2018, the Supervisory Board convened ten times: eight of these were scheduled meetings and two were additional meetings in connection with the sale of subsidiary Allego. The first half hour of each Supervisory Board meeting takes place in private without other participants. Other participants in the Supervisory Board meetings are the members of the Management Board and, upon invitation, the external auditor and management members.
The Supervisory Board has two committees: an Audit Committee and a combined Selection, Appointment and Remuneration Committee. The Audit Committee met seven times in 2018 and the Selection, Appointment and Remuneration Committee held two meetings. The attendance record of the individual Supervisory Board members is given below.
Selection, Appointment and Remuneration Committee
Coby van der Linde
Ada van der Veer
Recommendation on the financial statements for 2018
The Supervisory Board puts the financial statements as prepared by the Management Board to the General Meeting of Shareholders for adoption. The financial statements were audited by Deloitte Accountants B.V., which issued an unqualified opinion. The members of the Management Board and Supervisory Board signed the financial statements.
We recommend that the shareholders adopt the financial statements for 2018 at the General Meeting of Shareholders on 10 April 2019 as well as the dividend proposal for 2018. Furthermore, we propose that the General Meeting of Shareholders discharge the members of the Management Board and the Supervisory Board from responsibility for their management and supervision, respectively, in the 2018 financial year.
Word of appreciation
We express our appreciation for the results achieved and thank all employees and the Management Board for their contribution and commitment. We want to thank the shareholders for their support and trust in Alliander.
Arnhem, the Netherlands, 15 February 2019
Annemarie Jorritsma (chair)
Coby van der Linde
Ada van der Veer