Report of the Supervisory Board
The Supervisory Board has both a supervisory and an advisory role. We also serve as the employer of the members of the Management Board and maintain contacts with internal and external stakeholders. This report clarifies the way in which the Supervisory Board performed its supervisory role and the most significant topics addressed in 2022.
In 2022, the Supervisory Board discussed topics that touch on the nature and implementation of the strategy and long-term value creation programme of Alliander at almost every meeting. This led to constructive dialogues that helped clarify the understanding of the topics. Actions to tackle network congestion, district heating network developments, cost control, the structural redesign of the IT landscape, customer service and the integrated approach to labour shortages were some of the topics that the Board discussed at length. The challenge of financing the energy transition was also a frequently discussed topic (see below under ‘Long-term financing of the energy transition’).
The annual strategy day of the Supervisory Board and the Management Board was held in November. The strategy day was an opportunity to come to a shared view of the future energy supply in the longer term (2030 and through to 2050). The Boards also assessed what this could mean in terms of the energy system, what network management should involve and the implications for the network companies in general and Alliander in particular.
The strategy day was arranged at the Apeldoorn-North location. During the day, the Supervisory Board also visited Apeldoorn-Noord business park, where Firan and Liander are working to create a local energy system in collaboration with companies based at the site.
Safety and tracking safety performance is a topic that appears on the Supervisory Board’s agenda with great regularity. Last year, the Supervisory Board was informed in detail about the major power outage that occurred in Flevoland on 2 September 2022. This incident had a significant impact in the region, on customers, but especially on Alliander's employees. The Supervisory Board would like to express its appreciation for the initial assistance and follow-up care provided by and for the employees involved. This incident once again illustrated the importance of safety within Alliander.
All Alliander’s organisational units attained rung 3 on the Safety Ladder in November 2022. With this achievement, Alliander demonstrates that safety is high on the agenda throughout the organisation and that all organisational units demonstrate a strong sense of responsibility in this regard. We also monitor accidents that lead to absence, using the quarterly reports. Regrettably, 88 accidents resulting in injury occurred at work in 2022 (2021: 69). These incidents mostly involved falls and trips, traffic accidents, impacts and working with electrics. Unfortunately, two incidents resulted in serious injuries. Furthermore, the Supervisory Board – in the presence of the Director of Safety, Environment & Quality – discussed the ‘Everyone Safely Home’ policy document at length. This presents a clear vision of how to further improve safety within the organisation and at the same time achieve a permanent change in behaviour. The Supervisory Board strongly endorses the importance of further improving the level of safety.
Attention was also given to personal safety. The Supervisory Board was informed about the actions taken within Alliander to improve personal safety and prevent transgressive behaviour. The Supervisory Board emphasises that transgressive behaviour in any form is inadmissible.
Kenter sale process
The Supervisory Board supports the Management Board's decision to start the process to sell metering company Kenter and endorses the strategic reasoning underpinning the sale. The restrictive laws and regulations that apply to Alliander as a public network company are the reason for the sale. Kenter can realise its potential more effectively in the commercial market. In addition, Alliander’s major task of increasing work output, responding faster to developments and working with partners to design the energy network of the future means that Kenter is not getting the attention it deserves within Alliander. In the coming period, Alliander will enter into discussions with interested parties in the market. The objective is to have completed formal decision-making on the sale of Kenter in the summer of 2023.
Long-term financing of the energy transition
Additional equity will eventually be needed to guarantee Alliander's ability to continue to invest in a future-proof energy network while maintaining a healthy financial position. Strengthening equity is a crucial precondition for continuing to make investments in the energy transition at an acceptable cost to society.
Alliander, Stedin and Enexis and a representation of their shareholders have been in discussion with the Ministries of Finance and Economic Affairs and Climate Policy since the summer of 2021 about a possible future role for the State in strengthening the capital base of these three large regional network companies. The Supervisory Board has received frequent updates on the progress of these discussions. The three major regional network companies and a delegation of their shareholders have come to a negotiated outcome in the form of a Framework Agreement. This Framework Agreement is a crucial step towards achieving a structural solution to the capital needs of the regional network companies.
The Supervisory Board has approved the conclusion of the Framework Agreement. The Supervisory Board believes that a good, balanced negotiation outcome has been achieved. In this negotiation agreement, the State makes it clear that it stands shoulder to shoulder with the regional network companies and their existing shareholders, to work on achieving the energy transition on the basis of shared responsibility and trust. The next step is further decision-making on the part of the shareholders at the Annual General Meeting (AGM) on 19 April 2023. After a positive decision by the shareholders, the Framework Agreement can be signed by the company.
In line with normal practice, the Supervisory Board discussed the 2021 annual report and the financial statements, including the accompanying audit report, in the presence of the external auditor Deloitte, after which the 2021 annual report and the financial statements were approved. During the year, the Management Board submitted quarterly reports to the Supervisory Board for the purpose of comparing actual financial performance to the budget for 2022, the annual forecast for 2022 and the results achieved in 2021. One topic that was discussed at length in this context was the sharply increased procurement costs associated with network losses due to the increase in energy prices. In the view of the Supervisory Board, Alliander handled this well and appropriately by entering into discussion on this issue with the ACM along with the other regional network operators. In addition, the Supervisory Board discussed the 2022 six-monthly report, including the accompanying report of findings by Deloitte. The Supervisory Board concluded that the quarterly and six-monthly figures contained sufficient information to assess the actual financial results.
The Supervisory Board also discussed and approved the 2023–2027 business plan, including the 2023 budget. The Supervisory Board endorses the frameworks formulated by the Management Board with regard to the strategic principles underpinning the policy. The Supervisory Board’s Audit Committee carried out intensive preparatory work on all these matters. The Supervisory Board believes that the level of control over financial reporting within Alliander is of a high standard.
Internal risk management and control systems
The Supervisory Board (and the Audit Committee in particular) discussed the Internal Audit department’s findings and recommendations from the internal audits as well as the status of actions taken in response to findings from previous audits. In addition, the report on the 2022 interim audit for the six-monthly figures and the management letter from our external auditor Deloitte were discussed with the Audit Committee and the Supervisory Board in the presence of Deloitte. The Supervisory Board concludes that the consultations between the auditor and the Management Board about the management letter and follow-up actions were productive and led to appropriate progress being made in further improving internal control. Compared to 2021, progress has been made on most issues, including the IT findings. The Supervisory Board also notes that the auditor again found no significant shortcomings in relation to the 2022 financial year. The Supervisory Board endorses the conclusions of the Management Board about risk management and the control systems as expressed in the ‘In Control Statement’ in the Report by the Management Board.
In addition, the company’s main risks (including control measures) are discussed every six months. We also discussed the comprehensive IT, Privacy and Security risk report on Alliander’s exposure in these areas and the strategic risks identified for these areas (including control measures). The Supervisory Board is of the opinion that 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 chapter on Risks in the Report by the Management Board.
Culture and behaviour
The Supervisory Board wants Alliander to be a diverse and inclusive organisation where everyone feels at home. Alliander attaches great importance to integrity and having an open, honest culture within Alliander.
In 2022, Alliander won the SER Diversity at Work Award. This award is given annually to companies that have made an outstanding effort to increase diversity and inclusiveness in the workplace. In addition, Alliander and E-Care Reverse Logistics won the 2022 Inclusive Entrepreneur of the Year Award for their joint work-learning programme, which gives people with poor job prospects an opportunity to develop further in technical subjects.
Culture and behaviour were discussed in the light of the results of the 2022 Central Employee Barometer. The Supervisory Board notes to its satisfaction that the vast majority of employees are highly satisfied. Furthermore, the six-monthly report on the findings and observations regarding the operation of and compliance with the Code of Conduct, reports received under the Whistleblower Policy (no use was made of this facility in 2022) and the results of the surveys was a good source of information to track and assess culture and behaviour. The Supervisory Board also made working visits and held informal lunch meetings with talented employees and with directors/managers, which helped the Board come to a better understanding of daily affairs and developments within the company. Talks with the Works Council are a significant opportunity to assess cultural issues. The observations contributed by Internal Audit and the external auditor also provide valuable information for monitoring culture and behaviour.
The Supervisory Board considered the approach to cybersecurity risk management and the cybersecurity measures within Alliander. During these discussions, Alliander’s CISO updated the Supervisory Board on external threats in the area of cybersecurity. The number of ransomware attacks is increasing and they are becoming more professional. Computer viruses are also on the rise, and the war in Ukraine and increased geopolitical tensions have further increased the cybersecurity threat level. CISO also explained the risk-based cybersecurity approach. This approach, which focuses on both actions to tackle to external threats and internal processes and practices, underpins Alliander's cyber resilience. The Supervisory Board was also briefed on the various collaborations in the field of cybersecurity. For example, Alliander maintains close contacts with the National Cyber Security Centre and with the security teams of fellow network companies and other parties to ensure collective monitoring of (rapidly emerging) developments and appropriate joint follow-up action.
Social, economic and financial sustainability, the SDGs and impact measurement are an integral part of Alliander’s strategy and day-to-day operations. Stakeholders increasingly value the sustainable character of Alliander. More information on sustainability initiatives can be found in the Report by the Management Board. We support these initiatives which, in our opinion, contribute to long-term value creation.
One important achievement worthy of mention is that, for the third time in a row, Alliander finished first in the Erasmus Corporate Impact Index, a ranking of companies with the greatest social impact. In addition, Alliander's 2021 annual report finished in the top three of the FD Henri Sijthoff Prize, a prestigious award for the best annual reports in the Netherlands. The Supervisory Board compliments the organisation on this excellent performance and encourages Alliander to continue the course it is pursuing. In addition, the Supervisory Board approved a green bond issue in 2022. This aligns well with Alliander’s strategy to contribute to making society more sustainable.
Other important matters
Other important matters that demanded the attention of the Supervisory Board in 2022 included:
important court judgments in which Alliander was involved and new legislation and regulations relevant to Alliander (including the draft Energy Act, the draft Collective Heating Supply Act and the Temporary Framework for Hydrogen Pilot Projects);
people development and succession planning;
ancillary positions of the members of the Management Board and Supervisory Board;
approval of the legal separation of the Almere and Duiven/Westervoort district heating networks from Liander;
approval of the renewal of the Management Board's authority to issue ordinary shares and to limit or exclude the statutory pre-emptive right of existing shareholders in the issue of shares in connection with a possible conversion of the €600 million reverse convertible hybrid bond loan arranged in 2021;
approval of the issue of a green bond for an amount of €500 million;
approval of the 2022 Internal Audit annual plan.
Composition of the Supervisory Board and retirement schedule
A Supervisory Board member is appointed for a period of four years, after which he or she can be reappointed, once only, for a further four-year period. At the end of that term, the Supervisory Board member may be reappointed again for a term of office of two years, renewable thereafter for a maximum of two years. Reappointment after a period of eight years must be reported and explained in the report by the Supervisory Board. The retirement schedule is shown below.
2020 - 2024
2019 - 2023
2019 - 2023
2021 - 2025
2019 - 2023
There were no changes to the composition of the Supervisory Board in 2022. In accordance with the retirement schedule, Bert Roetert, Supervisory Board member and chair of the Selection, Appointment and Remuneration Committee, will step down at the end of the AGM in 2023 as this date marks the end of his second four-year term of appointment. In anticipation of this resignation and to ensure continuity, the Supervisory Board chose to initiate early action to fill this vacancy. The Supervisory Board therefore prepared a job profile and started the recruitment process. The Supervisory Board has engaged an executive search firm for this recruitment. The recruitment and selection process was still ongoing at the end of 2022. The Supervisory Board intends to nominate a new supervisory director for appointment at the AGM on 19 April 2023.
Procedures and meetings
In 2022, the Supervisory Board convened eight times, with five regular scheduled meetings and three additional meetings. The regular meetings were preceded on each occasion by a closed session with just the Supervisory Board. The broad outcomes of the closed session were subsequently shared with the Management Board during the plenary part of the meeting. The complete Management Board attends the Supervisory Board meetings. The external auditor and senior managers also attend the meetings when invited to do so. Whenever a Supervisory Board member was unable to attend a meeting, the member in question submitted his or her input beforehand. Outside the meetings, the Management Board kept the Supervisory Board abreast of relevant subjects in writing. Sander Oosterloo (to 1 September 2022)/Bram Sieben (from 1 September 2022) and Miranda de Bliek were the Supervisory Board’s secretary and deputy secretary respectively in 2022. The secretary prepared the Supervisory Board meeting agendas, liaising with the chairpersons of the Management Board and the Supervisory Board.
Three additional meetings of the Supervisory Board were held, two in connection with the formal decision-making for entering into the Framework Agreement regarding the conditions for a possible future capital contribution by the State as a new shareholder in Alliander, and one meeting in connection with the intention to start the process for selling the metering company Kenter.
Supervisory Board committees
The Supervisory Board has two committees: the Audit Committee and the (combined) Selection, Appointment and Remuneration Committee. The committees each prepare decisions within their individual fields of action for adoption by the Supervisory Board and advise the Supervisory Board accordingly. During the committee meetings, the members explore the meeting topics in depth. In principle, the committees meet ahead of a scheduled Supervisory Board meeting. In the plenary Supervisory Board meeting, the committee chairs give a verbal summary of the discussions and the findings so that carefully considered decisions can be taken. Decisions are made by the full Supervisory Board. The draft and approved minutes of the committee meetings are made available to all members of the Supervisory Board.
Composition of the committees
Selection, Appointment and Remuneration Committee
The Audit Committee met six times in 2022 in the presence of the CFO, the Director of Corporate Control, the Internal Audit manager and the external auditor. Internal specialists also attended some meetings and reported on relevant topics in their capacity as experts. Relevant topics requiring the approval of the entire Supervisory Board were submitted to the complete Supervisory Board along with a recommendation drawn up by the Audit Committee. During the year, the chair of the Audit Committee bilaterally discussed topical issues with the CFO. The Audit Committee held one meeting in private with the external auditor. This was a constructive and open discussion and the Audit Committee believes that the collaboration with the external auditor is productive and transparent. The chair of the Audit Committee also held one meeting in private with the Internal Audit manager. Based in part on a periodic review of Internal Audit quality conducted by an external independent expert party, the Audit Committee rates Internal Audit's work as good.
The agenda included regular topics such as the periodic internal and external financial reports, the business plan, taxation, (long-term) financing, management of the main business risks, fraud, treasury, the internal auditor’s periodic reports and a review of the annual internal audit plan, the external auditor’s audit plan, the 2021 annual report including the 2021 financial statements, the management letter and the auditor’s report.
There was also specific focus this year on a number of topics including the issue of a green bond, project management and the plan of action for the tender and selection process for a new external auditor as of financial year 2024.
Selection, Appointment and Remuneration Committee
The committee met on three occasions in 2022. In addition to the committee members, the CEO and HRM director also attend the meetings. Topics of discussion in 2022 included the recruitment and selection of a new Supervisory Board member, leadership development and talent development. The results of the Central Employee Barometer were also discussed. The committee noted with satisfaction that the scores were good. The HR dashboard, which provides information on human resource developments, was also discussed. The committee additionally carried out preparatory tasks for the Remuneration Report and the annual remuneration meeting with the Committee of Shareholders. Finally, on behalf of the Supervisory Board, the committee conducted the annual individual performance reviews with members of the Management Board. This was done this year in line with the organisation-wide Personal Result and Development system, using both feedback from colleagues and direct reports and the Management Board’s own reflection on performance as input for discussion. The progress made relative to collective and individual goals and personal development were discussed.
Members’ attendance percentages for Supervisory Board and committee meetings in 2022 were as follows:
Supervisory Board (5)
Audit Committee (6)
Selection, Appointment and Remuneration Committee (3)
Independence and conflicts of interest
The Articles of Association and the Supervisory Board’s by-laws contain provisions on independence and conflicts of interest. The composition of the Supervisory Board is such that the members are able to operate independently and critically vis-à-vis one another, the Management Board and any particular interests involved. All members of the Supervisory Board are independent within the meaning of best practice provisions 2.1.7 to 2.1.9 of the Dutch Corporate Governance Code. They also all operate independently within the meaning of the Electricity Act 1998 and the Gas Act, meaning that none of them has a direct or indirect connection with an electricity or gas producer, supplier or trader.
Any external positions which members of the Supervisory Board hold must be reported to the Supervisory Board beforehand and specified 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. None of the Supervisory Board members holds more than the maximum number of supervisory positions with large Dutch companies or major foundations. The number and nature of the other positions of each Supervisory Board member are such that a proper fulfilment of the tasks is assured.
No material transactions involving potentially conflicting interests of Supervisory Board members took place in 2022.
The Supervisory Board supports the view that diversity contributes to effective management and supervision. In addition to expertise, competencies and background, diversity also relates to aspects such as gender and age.
As a ‘large legal entity’, the provisions on the balanced allocation between men and women of seats on the Management Board and Supervisory Board pursuant to the Dutch Act on the appointment quota and target ratios (‘Diversity Act’) have applied to Alliander since 1 January 2022. The Supervisory Board observes a diversity policy for the composition of both the Management Board and the Supervisory Board, which gives consideration to the following elements:
a balanced gender ratio with a target percentage of at least 33% women and at least 33% men;
a complementary composition in terms of experience and professional background;
a balanced age structure.
The composition of the Management Board remains unchanged relative to 2021 and represents a good balance in terms of diversity of knowledge, background, experience and age. The gender ratio in the Management Board is 25% women to 75% men, meaning that the target has not been met.
The composition of the Supervisory Board is also unchanged relative to 2021 and is in line with the established profile. The Supervisory Board believes itself to be sufficiently diverse in composition, both in terms of expertise and experience, and in terms of the age structure and the gender ratio. The gender ratio in the Supervisory Board is 40% women to 60% men, meaning that the target has been met.
When selecting members of the Management Board and Supervisory Board, Alliander strives to choose the most suitable candidate. When filling future vacancies in the Management Board and Supervisory Board, diversity is an important consideration and attention is given to all aspects that are part of the diversity policy. For each vacancy, we discuss what is desired in the context of diversity. If candidates of equal suitability are found and the gender ratio target has not yet been met, preference will be given to the candidate that brings the composition in line with or closer to the gender ratio target.
When recruiting and selecting members of the Management Board and Supervisory Board, Alliander uses the services of specialised consultancies in addition to its own network. The close attention given by the Management Board, the Supervisory Board and the Selection, Appointment and Remuneration Committee to the recruitment and selection procedures and the professional guidance from external agencies are the main safeguards ensuring selection of the most suitable candidate.
In accordance with the Dutch Corporate Governance Code, the Supervisory Board evaluates its own performance at least once a year without the Management Board being present. This evaluation takes place once every three years under external guidance. As the 2021 evaluation was performed with the support of an external consultant, the Supervisory Board conducted the evaluation itself this year without external guidance. This included discussion of the performance of the Supervisory Board as a whole, the two committees and the individual Supervisory Board members. The collaboration between the Supervisory Board and the Management Board was also evaluated. The Management Board provided prior input for the evaluation of its collaboration with the Supervisory Board.
First, the Board reflected on the points requiring further attention identified in the 2021 self-assessment. These points concerned making a limited set of performance targets more measurable and transparent, thinking in terms of scenarios for achieving long-term value creation, enriching the Management Board’s evaluation process, having a better overview of talent in the organisation, the composition of the Supervisory Board’s committees and the incisiveness of the questions posed by the Supervisory Board. We found in 2022 that these points had been addressed specifically, resulting in further improvements in our effectiveness as a supervisory body, adviser and employer.
Furthermore, the Supervisory Board noted that the collaboration between the Supervisory Board and the Management Board has again been strengthened. In addition, both the Management Board and the Supervisory Board experience the oversight as intensive but enjoyable. The year 2022 was an intensive one, requiring more consultation than usual with the Supervisory Board in view of the large number of internal and external developments. Another conclusion is that the shift made in the past year in the Supervisory Board meetings towards a greater emphasis on strategy and advice in discussions about current issues and important strategic tasks facing Alliander has led to an open, critical, in-depth and constructive dialogue with the Management Board. When approaching these tasks, the Management Board appreciates the added value of being able to call on the specific expertise of the Supervisory Board members in order to exchange ideas about solution directions and/or the development of a vision.
Contact with the Works Council
The Supervisory Board feels it important to maintain strong contacts with the Works Council; this contact gives us a feeling for what is really going on in the organisation. The new Works Council started in January 2022. Members of the Supervisory Board attend consultation meetings with the Works Council twice a year. The members of the Supervisory Board who were appointed on the basis of the Works Council’s enhanced right of recommendation have regular contact with the Works Council. The Works Council was also given the opportunity to make recommendations regarding the vacancy resulting from Mr Roetert stepping down in 2023.
In addition, the Works Council, the Supervisory Board and the Management Board came together for the annual theme meeting, in which they jointly discussed the main priorities of the new Works Council for the coming period in several rounds of talks at sub-group gatherings. Once again, cooperation between the Works Council, the Management Board and the Supervisory Board went smoothly this year. The Supervisory Board is pleased with the quality of the discussions and the open relationship with the Works Council and thanks them for this.
Contact with shareholders
The most important contact each year is the AGM, during which the Supervisory Board reports on how it has performed its supervisory duties. This is the ideal time to exchange ideas formally and informally. All the members of the Supervisory Board attended the AGM on 13 April 2022, which was chaired by the chair of the Supervisory Board. The meeting discussed the 2021 report of the Management Board, adopted the 2021 financial statements and 2021 dividend and granted discharge to the Management Board and Supervisory Board for the 2021 financial year. In addition, the shareholders were informed about Alliander’s strategy and the status of the talks with the central government on the capital requirements of the regional network companies.
Further contacts with the shareholders mainly run through the Management Board. The Management Board consults informally with the major shareholders on a regular basis. In 2022, the contacts with the main shareholders were intensified, mainly with regard to the talks with the government about a possible future role for the State in strengthening the capital base of the three large regional network companies. Other topics of discussion included strategy, relevant investment projects within the Alliander group and legislative and regulatory developments. The Supervisory Board was consistently kept informed of these contacts. In addition, the Selection, Appointment and Remuneration Committee consulted with the Committee of Shareholders regarding the implementation of the Management Board remuneration policy. The Committee of Shareholders was also given the opportunity to make recommendations regarding the vacancy resulting from Mr Roetert stepping down in 2023.
The Supervisory Board is pleased with the good relationship and collaboration with the shareholders in the past year and appreciates the time and effort they put into Alliander.
Advice to shareholders regarding the financial statements
The 2022 financial statements were drawn up by the Management Board and audited by Deloitte Accountants B.V., which has issued an unqualified auditor’s report. This report is included in the annual report under ‘Other information’.
Both the financial statements and the findings of the external auditor based on the audit of the financial statements were discussed during a meeting of the Supervisory Board and the Management Board in the presence of the external auditor. The members of the Management Board and Supervisory Board have signed the financial statements.
On 19 April 2023, the financial statements will be presented at the AGM for adoption. We recommend that the AGM adopts the 2022 financial statements, together with the dividend proposal for the 2022 financial year. A proposal will furthermore be made to the AGM to discharge the members of the Management Board from liability for the management policy pursued and to discharge the members of the Supervisory Board from liability for their supervision of the policy pursued during the past financial year.
Word of gratitude
In 2022, the employees, the managers, the Works Council and the Management Board again worked with huge commitment to fulfil Alliander's social mission, sometimes under difficult circumstances. The Supervisory Board would like to express its appreciation for everyone's efforts and the results achieved in 2022. In addition, we would like to thank the shareholders and other stakeholders for their contribution and input and for their trust in Alliander.
Supervisory Board, 6 March 2023
Annemarie Jorritsma (chair)