Developments in 2022
Funding the energy transition
The increasing demand for electricity, resolving capacity bottlenecks in the network and implementing expansions have led to a substantial growth in network operators’ work packages in the Netherlands. Alliander is no exception: compared to the previous year, investments rose by 21% to €1.2 billion in 2022. The expected rise in demand for energy will lead to even higher investments in the coming years. In addition, we have to deal with considerable price rises as a consequence of the scarcity of technical staff, external contractors and materials. The TenneT procurement costs will also remain high due to the growing work package.
Furthermore, the higher energy prices, caused in part by the war in Ukraine, have caused the cost of our network losses to increase by about a factor of three, putting them at over a quarter of a billion euros in 2022. On the other hand, the abolition of the municipal sufferance tax offset these increases to some extent. The increase led to substantially lower profits for 2022 (€198 million; 2021: €242 million).
The sharp growth in investments in combination with lower profits led to a substantial funding shortfall, which could not immediately be covered by a change in the tariffs because of the regulatory framework. Although a proportion of the higher costs of network losses is reflected in our tariffs for 2023, this is not sufficient to cover the rise in expenditure. In the current system, all investments by the network operators are funded in advance and are only recouped through the tariffs over a period of 40 years on average. Particularly in the current situation of rising investments, this leads to funding shortfalls and thus an increase in the debt position. Net debt rose by over €800 million in 2022.
As a means of absorbing funding shortfalls, Alliander issued a green bond with a face value of €500 million at the beginning of September 2022. In addition, the State and the network companies of Alliander, Enexis and Stedin came to a negotiation agreement at the end of 2022 about the conditions under which the State will be able to contribute capital in the future, and thus become a shareholder in the network companies. These conditions were recorded in a Framework Agreement and sent to the Lower House of the Dutch parliament by the Finance Minister, Sigrid Kaag, and the Minister for Climate and Energy Policy, Rob Jetten, in November 2022. Reinforcing the networks companies’ equity is a crucial precondition for being able to continue making investments and to avoid even more pressure on investments in the gas and electricity networks. Should the State decide in the future – at the request of the network companies – to become a shareholder, this will be subject to certain conditions. The Framework Agreement describes these conditions, such as the time required for an accession request and agreements about governance. The Framework Agreement serves as a basis for a possible participation contract in which more detailed arrangements will be recorded if and when the State’s accession as a shareholder becomes a real option. The Framework Agreement will be put to the shareholders at the General Meeting of Shareholders on 19 April 2023 for their decision.
Developments relating to associates
On 10 January 2022, Alliander sold its shares in the contractor Stam Heerhugowaard Holding B.V. (Stam) to the Van Gelder Group. On 31 December 2022, Alliander also sold InfraSignal GmbH, which incorporates activities related to traffic management systems in the city of Berlin, to a subsidiary of the German federal state of Berlin. The announcement was made at the beginning of December that the associate Kenter will be sold in 2023. Accordingly, it is classified as ‘Held for sale’. Among other things, this means that Kenter’s assets will not be depreciated as of that date. Alliander expects to complete the sale and be able to present the buyer in 2023.
Additions to the reporting scope
Reporting obligations in line with EU taxonomy – as set out in the EU’s Sustainable Finance Action Plan to make the European economy more sustainable – were extended in 2022. Alliander’s reporting had to comply with the first two requirements in 2021.
Alliander's financial policy is explained in further detail in this chapter. Furthermore, the financial results and position in 2022 in terms of the cash flows and financing are also presented, followed by taxation, regulatory developments and the EU taxonomy. The chapter ends with a look ahead at the results expected for 2023.