Note 12 Equity
The company’s authorised capital is divided into 350 million shares of €5 nominal value. As at year-end 2019, 136,794,964 shares were in issue (2018: 136,794,964).
Subordinated perpetual bond loan
In 2018, Alliander announced the intention to issue a new subordinated perpetual bond loan. At the same time, an offer was made for all the outstanding bonds of the €500 million perpetual bond loan bearing the coupon interest rate of 3.25% issued in 2013, conditional upon the successful issue of the new loan. Subsequently, on 30 January 2018, €500 million in new subordinated perpetual bonds was successfully issued at a coupon rate of 1.625% and an issue price of 99.144%. The bonds issued in 2013, with a carrying amount of €496 million, have thus been redeemed. As a result of this transaction, including paid surplus and expenses, equity has decreased by €1 million in 2018.
This subordinated perpetual bond loan is treated as equity. Alliander does not have any contractual obligation to repay the loan. Any periodical payments on the loan are conditional and depend on payments to shareholders. As and when resolutions are passed making distributions to shareholders, the Management Board will also pay any arrears of the contractual coupon rate to the holders of the subordinated perpetual bond loan out of other reserves. The annual amount of the interest payable is €8 million.
The revaluation reserve is connected with the bond investments. Following the implementation of IFRS 9, the revaluation reserve ceased to be applicable with effect from 1 January 2018.
In line with Alliander’s risk management policy, Alliander has taken measures to mitigate the interest rate risk attached to the new EMTN financing of €300 million in mid-2019. For this purpose, two forward starting interest rate swaps were entered into in the run-up to the bond issue. When the bond loan was issued, both the interest rate swaps were settled. As a result, the interest rate risk was mitigated to a large degree in the run-up to the bond issue. The loss on the settlement totalling €3 million has, after deducting deferred tax, been recognised in the hedge reserve in equity. The resulting hedge reserve will be released in the income statement over the term of the EMTN (up to 24 June 2032).
The other reserve includes an amount of €1 million after tax relating to a defined-benefit pension plan for employees of our activities in Germany. The hedge reserve and the subordinated perpetual bond loan are not freely distributable.
On 10 July 2012, Alliander acquired a 95% interest in Indigo B.V. This company is a partnership between Alliander and the City of Nijmegen (which has an interest of 5%) to construct a heat transport pipeline from the regional waste-to-energy plant Afvalverwerking Regio Nijmegen (ARN) to the district heating network of Vattenfall N.V. As at the end of the reporting period, the shareholders’ equity of Indigo BV amounted to €3.4 million. In accordance with the basis of Alliander’s consolidation, Indigo BV has been consolidated in full with separate disclosure of a non-controlling interest in the consolidated equity. In 2016, Alliander acquired a 95% interest in Warmtenet Hengelo B.V., a company which is developing a district heating system, the first phase of which was commissioned in 2017. The shareholders’ equity of this company as at year-end 2019 amounted to €0.5 million negative. In 2017, Alliander acquired a 75% interest in Warmte-Infrastructuur Limburg Geothermie B.V. As at the end of 2019, the shareholders’ equity of this company amounted to €0.9 million negative. Given the size of these non-controlling interests, they are not visibly accounted for on the face of the balance sheet as at year-end 2019.